Mergers and Affiliations
Many funders encourage and support consolidations in the nonprofit sector. Mergers and alliances are legitimate management options. When needs are increasing and resources diminishing, more efficient use of resources may call for fewer organizations with separate infrastructures. Mergers, however, are difficult to complete successfully and require extensive time on the part of the senior management and the boards of both agencies. Impediments to a successful merger include:
- Incompatible organizational cultures.
- Misaligned expectations.
- Lack of preparation and planning.
- Insufficient financial resources
- Lack of communication with key stakeholders.
Issues and questions specific to potential mergers include:
- Identity: What will the new organization be known as? Will both entities retain their name recognition?
- Power and leadership: Who will be the executive director? Who will be on the board? What percentage of board members from each organization will be on the merged board? What will be expected of board members in the newly merged organization? Whose culture and practices will dominate?
- Financial stability: Will each organization bring assets or debts to the new organization? Will current funders continue to fund both organizations' programs? Can services be offered at different levels or in different ways, to reduce costs while maintaining quality?
- Compatibility of services: Does each organization's staff have expertise that the other's lacks? Is there synergy among the programs? Are some services outside the realm of either organization's abilities? Would new services be a drain on existing ones?
- Infrastructure: What will the impact of the merger be for the accounting department, the physical facilities, technology usage and senior management? Are personnel practices compatible? How will benefits need to change to bring them into alignment?
Board Benefits Leading an organization through the decision-making process related to new opportunities helps boards:
- Build confidence in their ability to lead and organize themselves into meaningful work groups.
- Revitalize and re-engage willing board members in wholly different ways.
- Provide members who are less committed with an opportunity to exit the board.
- Become more familiar with the environment in which their organizations operate.
- Learn to use outside expertise effectively.
For Roles in Moving Forward, click here.
For How Outside Expertise Can Help, click here.
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