A recent New York Times article distilled nonprofits’ mission in the time of Coronavirus down to one word: survival. From health and human services to arts and education to environmental conservation, our nation’s nonprofits now share this common objective. Their basic ability to deliver essential services – and to raise the funds required to provide them – are being put into jeopardy by the pandemic and its induced economic coma.
According to a 2019 Johns Hopkins report, nonprofits are the third largest employment sector in the United States, with 10 percent of the workforce on payroll. Yet according to the Nonprofit Finance Fund 2018 survey, three-quarters of nonprofits only have cash on hand to survive six months or less. Organizations fortunate to receive CARES bill Small Business Administration loans to help keep staff on the job are getting short-term assistance, but these funds will not be nearly enough to keep our country’s diverse array of nonprofits alive. We need to explore creative approaches that might previously have been unthinkable or unpalatable to staff, boards, and supporters.
For like-minded groups with shared missions and strategies, now could be the time to consider mergers. Even before the pandemic, mergers were a strategy to help organizations gain strength and stability, particularly in a crowded (or sparse) philanthropic market, and where multiple organizations serve similar or overlapping missions and geographies. Now, nonprofits should view mergers as a tool in their arsenal and explore potential marriages before financial situations become dire. In the for-profit world, acquisition of a distressed asset may bring financial benefit. The same does not apply in the not-for-profit sector.
Foundations and other funders have an important role to play here, beyond providing emergency grants or loans to help groups stay afloat. In the Baltimore region, a group of foundations supported a multi-year effort resulting in the merger of five watershed groups into a new, stronger force for clean water: Blue Water Baltimore. As Executive Director Jenn Aiosa reports, “We realized that we could be stronger than the sum of our parts.”
The Blue Water Baltimore merger took several years of relationship-building, research and negotiations to accomplish. There are ways to hasten the process, and best practices for success. Organizational mergers can be divided into an exploratory phase, negotiations phase, and implementation phase. The Blue Water Baltimore groups’ reflection on their merger process identified four success factors:
- Sound reasons for merging
- Compatible organizations and inter-staff relationships
- Shared organizational awareness of long-term needs
- Encouragement from grantmakers
The merger team enlisted a facilitator, strategic analyst, and legal counsel. Bringing in a neutral, outside “matchmaker” can provide objective research and analysis to ensure the marriage will be a good one; surface more subtle issues ranging from culture to management style; and help set a sound governance, strategic, operational, and financial path forward. (Interested in a deeper dive? Check out Blue Water Baltimore’s case study.)
B&W has served nonprofits at various steps along their merger journey. In the health sector, we supported the GO2 Lung Cancer Foundation, a merger of two organizations with complementary missions. B&W worked with GO2 to identify the combined organization’s overarching goals and theory of change for how best to achieve those goals. As a result, GO2 is investing in a more focused set of programs and priorities to track its success. Our team has also helped two smaller Parkinson’s disease organizations that could not sustain themselves financially as they merged into a new group, the Parkinson’s Foundation. We worked with the new organization to position it well in the marketplace relative to its largest competitor, take advantage of the two merged organizations’ strengths, and eliminate programs with low strategic value. The result? The Parkinson’s Foundation has doubled in size in three years.
To be, or not to be – that sadly may end up being the question for far too many nonprofit organizations. In many cases, it could be better to be in a marriage of strength with like-minded partners than to cease being altogether. Your mission, people, and communities served depend on it.