Merger has long been on the list of taboo terms among polite company in nonprofit circles. That’s because it can be threatening. When one person (say, the leader of a relatively large organization) suggests it as a means of building focus, scale and improved community services, another individual (let’s say, a leader of a smaller organization in the same field) hears “takeover,” “domination,” or “self-serving attempt to co-opt the competition.”

Unlike for-profits, which can acquire or sell companies as a pure business transaction, nonprofits must reach mutual agreement, including the consent of the boards of directors of all parties involved. That’s why nuances and language can be so important. Any reason, including mistrust of the other party’s motives, can prevent a potentially worthwhile conversation from happening or derail a discussion that has just gotten started.

This is unfortunate, because merger can be a powerful mechanism for improving organizational effectiveness. A well-conceived, well-executed merger creates a new whole stronger than the sum of its parts. But that is not to say that merger is always the right solution to a problem. Further, the most familiar concept of merger (which we call the “common merger”), is not always the right idea to put on the table.

Organizational partnership is a time-tested mechanism for nonprofits to attain many benefits of scale. In fact, there are many flavors of partnership, most of which are not widely understood.  

It reminds me of my childhood, growing up in a small town in Pennsylvania. Our only ice cream shop had three flavors – vanilla, chocolate and strawberry, pretty much the same selection you found in the grocery store. Vanilla was a good fallback, you had to be in the right frame of mind for chocolate, and strawberry was only for very peculiar people--really not a serious proposition.

Then, one day the world changed. Baskin Robbins opened a store, and all of a sudden the world appeared in Technicolor, with 31 options. If I’m to be completely honest, I still considered vanilla and chocolate to be top 5-caliber strategies, but the actual decision depended on the context, and the presence of alternatives made all the difference. Choice actually made the old standby classics look even better when they held up under scrutiny.

This is what I’m talking about: nonprofits have choices.

PIMG has issued a new white paper that details two particular interesting options for nonprofits that may not find conventional ideas of “merger” appealing. It’s titled, fittingly enough, Emerging Nonprofit Partnership Models: Two Alternatives to Traditional Merger.

We call the alternatives “Consolidation with Local Autonomy,” and “Strategic Alliance of Independent Organizations.” Both partnership models can potentially bring benefits of scale, such as efficiency, stability, financial sustainability, and improved outcomes. Both enable organizations to maintain degrees of self-sufficiency and involvement in future decision-making. Both models are themselves scalable – they can work with two or more nonprofits, and can grow over time if desired. And both have multiple successful examples, which we reference in the paper.

Neither of these models, however, is widely understood. We hope to change that, and thereby broaden the potential discussions among organizations with complementary missions. The choice of words or general concepts should not be obstacles to substantive dialogue. And the process of discussion can clarify which models may make sense to consider in depth.

If you get a chance, give the paper a read, and let us know what you think. In 2015, PIMG worked with nine clients on structural partnerships. Interestingly, not one of these projects was a “vanilla” merger. We anticipate this trend growing in the nonprofit world.

By the way, our White Paper Series will continue to explore timely topics in nonprofit management. Upcoming topics will include an evaluation of the Charity Navigator rating system, a practical approach to guiding organizational culture change, and a fresh approach to leadership renewal. Stay tuned!

 

Posted
AuthorScott Schaffer