At a recent meeting of Boston nonprofits, a community leader announced that a committee of concerned citizens was seeking to help multiple nonprofits to think about mergers.
Until recently, small social agencies successfully provided programs with a combination of state funds, private donations and foundation grants. Today, state contracts are rapidly shrinking, private donors have less capacity, and foundations cannot fill the gaps.
The community leader said his foremost concern in these times is constituents, not that organizational boundaries be preserved. If you are considering a merger, your first question should be: “Will our clients be better served by a merger?” The next question is “What will make the merger process work?”
In our experience with merger projects, Management Consulting Services (MCS) has learned a number of lessons. We would like to share our lessons with you if you are looking for a merger partner.
Important Features in a Merger Partner
In the past, organizations seeking a merger partner would have the luxury of a long courtship period, followed by lengthy negotiations leading to a prolonged implementation period. Today, the new partners are likely to be on a schedule more like speed dating. They must select the right partner and move quickly to realize the expected benefits.
Success will most likely occur if the merging agencies have certain commonalities. These are a shared mission, common values, similar constituencies, and programs that will be strengthened by the merger. In addition, the expected benefits should be understood by both sides. It also helps if you have worked with your future partner on common programs in the past. A recent merger client of MCS had co-presented an educational program. Through working together, the two staffs knew they would be able to cooperate as part of the same agency.
Involve Both Agencies in Planning on an Equal Basis
Partners in a merger are sometimes equal, but often times one is much stronger than the other. In either case, the merger will be successful only if both agencies are fully involved in the planning. If the Boards and staffs are not equally engaged, the new organization will be dysfunctional. All committees should have equal representation from each partner, and the decision-making process should be transparent and owned by both sides.
Plan First, Act Second
A well thought-out plan, with specific goals and dates, is essential. MCS designs a detailed plan which is shared with all parties. Project management against agreed upon deadlines is a key to success.
Appoint the Executive Director at the Beginning
MCS recently worked with three agencies in a merger. The merger plan called for a prolonged search for an executive director. While all three agencies were equally represented in planning, each valued its own programs and methods above the others. With an executive director on board, decision making would have gone more smoothly. Many decisions were placed on hold until the search was concluded. Others had to be redone when the new executive was finally in place.
Commit to Continuous Improvement after the Merger
A merger is a very complex process. If the parties do share mission, common values, similar constituencies, and a good plan, they can go ahead with the merger. They should definitely expect to continue with infrastructure planning and decision making afterwards.
One MCS client merged in a two part process. First, the organizations implemented an operational merger sharing office space, administration and technology. In the second phase, they selected the surviving agency and focused on strategic planning. To support the strategic planning effort, MCS conducted research regarding organizational models, funding opportunities, competitive organizations, service gaps, and program priorities. The newly integrated Board, armed with information which supported decision-making, created a new strategy for moving forward. This allowed them to continue to offer model educational programs at selected schools, while also adopting an advocacy initiative to persuade the state to expand programs for a broader population than they were reaching. They were stronger in combination with the potential for greater impact for many more school children.
MCS worked with another post-merger client on future planning. Now that agency had accomplished the tactical aspects of a merger, the Board actually had the time to focus on key issues about the future. After conducting an assessment of the new operations, MCS facilitated a two-day Board retreat where significant decisions were made.
Every new agency finds glitches. Using technology, MCS was able to help the staff of a merged organization to work together more collaboratively. Initially the new organizations planned to relocate to a single site. For reasons that made financial sense, they had continued to operate at two sites but needed to function more like a single entity. Although the staff had good personal relationships, the merger had left them in “silos” with regard to email, calendars, documents, and other capabilities. The MCS solution was to implement a “Cloud Computing” technology plan. Using Google Enterprise, each site is developing collaborative capabilities not available in their old, separate technologies.
Culture is Strong
MCS has also learned that the initial year after integration can be very rocky for people. The “not invented by us” syndrome can affect operations and even the most committed Board members. Staff can resent new ways of working. It there have been layoffs, they may think their colleagues were more skilled than their new ones.
We have known of Board members who felt their concerns were not being heard at all in meetings. Excited by the potential power of the merger, Board members may be surprised by their own conflicted feelings.
If time allows, the staffs and boards can meet get to know each other and to discuss concerns and expectations before the merger. Facilitated meetings which focus on mission, but also surface such concerns, can be powerful. Such meetings are also powerful after the merger. At this point, idealism has been somewhat replaced by recognition of underlying issues. Facilitated meetings, preceded by confidential conversations between participants and facilitator, can provide an agenda for meaningful discussion.
Lessons Learned
Working with our clients, MCS has learned that partner selection, co-involvement of organizations, careful planning, early selection of the new executive are important to success. We have confirmed that a merger is not complete on day one. We also recognize that bringing two cultures together will result in friction, and that mission directed meetings will help here. Over the first year, the newly integrated organization will continue to find opportunities for improvement, while striving to serve constituents better and more efficiently. Be flexible and even handed, and you will find solutions.
