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Successful Mergers and Partnerships: More than the Numbers

By Jan Breiner Frazier, Planning Plus, LLC

Throughout our 30-plus year history as consultant professionals, we have worked with the leadership teams and boards of nonprofits as well as owners of for-profits who were engaged in various forms of collaborations — whether for a merger, a formal association or a strategic and documented partnership.

Unfortunately, we are often called in after the due diligence is complete and the merger has started down the road — only to experience a rocky start. The cause? More often than not, the numbers may work but the cultures do not.

During due diligence activities, leaders focus on a number of factual components for creating a “new” organization — including financial statements; current contracts; programs, services and other deliverables; competition; legal constraints; and competencies of the management teams. But all too often, they overlook the cultural issues within each of the entities that can quickly derail any progress.

When merging two or more nonprofit boards, it is critical to understand the operational environments. Are they structured, disciplined, forgiving, siloed, collaborative or innovative? Will the strengths of each organization complement or clash? How will individual company lifestyles mesh?

Perceptions by stakeholders about how or why the discussions took place must also be discerned. Neither organization wants to be viewed as “taken over” because that may be perceived by the community as a sign of weakness. Both organizations generally assure their staffs that the outcomes will be beneficial for everyone involved as they sell the idea to their teams. Yet, those driving the process often discount the emotional toll of going through organizational change as staff members have their own assumptions about their roles — which may change by necessity.

Several years ago, we worked with a merger of two organizations where it all made sense on paper. Both parties agreed the merger would benefit the community and result in a better financial position. There also was consensus on who would serve as the executive director. However, there was still a struggle with the organizations’ boards about equal representation, how to merge the staffs and which organization’s managers would be in charge. Fortunately, the executive director, with whom we had worked before, recognized that the board needed time and assistance in working through those issues. He dedicated time and resources to sponsor several sessions to work through the challenges. The organization continues to thrive today.

In another case, three organizations asked us to help them reach a merger agreement. The potential financial benefit was tremendous, since they no longer would have to support three leases, three executive directors, three IT systems and other overhead costs. But it all fell apart because no one could agree as to who would be in charge, whose name would be on the building, and how it would be communicated to the public.

In today’s uncertain environment, nonprofits may no longer be able to stand alone, particularly as funding becomes more precarious than ever before. As beneficial as mergers and other types of strategic partnerships can be, they are always messy. If you are considering any type of collaboration, here are a few things to consider in your discussions:

  • How do we describe the existing cultures, what are the key differences, and how do we mutually move to the culture dictated by the mission?
  • How do we identify who will be in charge — who is at the top and responsible for the success of the organization?
  • How do stakeholders — external and internal — view the proposed collaboration? How do we get everyone on the same page?

If you are entering the merger waters, we would be more than happy to help!

Jan Breiner Frazier, the managing member of Planning Plus, LLC, has been a consulting professional since 1988. She has designed and facilitated strategic, annual, and operational planning sessions for a multitude of organizations. Her work with non-profit boards and associations has included strategic planning, board development, and committee structure.

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