Post by BVU Staff: Brian Broadbent, President & CEO
Two-and-a-half years ago Cleveland-based Business Volunteers Unlimited (BVU) and Akron-based Center for Nonprofit Excellence (CNE) merged into one organization, BVU: The Center for Nonprofit Excellence. Looking back, this was a positive step for our organizations due to the strengths of each. Although the merger process was not easy, we are enjoying the fruits of a vision led by our boards. The CNE board reached out to BVU’s board to get the ball rolling. A small task force of both boards and senior staff drove the process by openly discussing any roadblocks. Because of its success, we have been asked to speak on the subject and help other organizations through the process. Many community leaders want to see mergers happen but sadly they are a rarity.
Why are boards and staff resistant to explore options? The Chronicle of Philanthropy published an article last month, “Mergers Might Happen More Often If Nonprofits Focused on Workers’ Needs,” authored by Katie Smith Milway and Maria Orozco. This article gives valuable insights to what we have seen. While the Great Recession of 2011 led corporations to pursue mergers at a fast pace, the nonprofit world did not follow suit. They cite two facts: 1.) Few organizations exist to make matches between prospects, and 2.) Little money is available to ensure that the senior staff have financial incentives in that they may lose their jobs. In 2009, Denise Zeman, President & CEO, St. Luke’s Foundation, and Deborah Vesy, President & CEO, Deaconess Foundation, invited 80 nonprofits in Northeast Ohio to discuss the spectrum of collaborations. They were concerned about the decreasing availability of dollars from funders and the need to consider alternatives, one of which is mergers. These foundations offered to provide consulting support to nonprofits interested in exploring collaborations. The foundations’ leadership opened dialogue on a sensitive topic which resulted in three mergers and one consolidation. However, since then it has been quiet.
Why the unwillingness to open this type of discussion? Is it the loss of leadership roles for board and staff? The daunting amount of work? Anxiety in negotiating with funders to prevent cuts in funding when two entities are combined with no loss of services? Founders’ (board and staff) lack of flexibility? Name, mission, and branding of the new entity? All are emotionally charged issues. An unwanted outcome is that mergers could be reactive due to a depletion of cash reserves and lack of capacity — rather than being a proactive step.
In the next 10 years, hundreds of baby boomer nonprofit chief executives will retire. This is an opportunity for new leadership to consider a merger or collaboration. When conducting strategic reviews, we must always ask the question, “Are there better ways to advance our mission by working with another organization? If so, what are the possibilities in aligning ourselves more effectively?” It is up to the board and chief executive to determine if it a merger or collaboration is warranted. Remember that the act of an initial investigation does not equal commitment to moving forward.
Considering a merger or collaboration? Where do you start? Best practice is to look at complementary organizations serving different geographies or finding a continuum of services that could be expanded with the same constituency, with both leading to savings in administrative costs. There are three stages of review.
1. Feasibility – looking at the ‘fit’ of mission, service offerings, board structure, staff organization, geographic reach and culture.
2. Due diligence – financial sustainability, HR policies and benefits, by-laws, etc. This is where the attorneys and accountants need to be involved.
3. Pre and post-merger integration – all of the steps that help the board and staff to integrate.
BVU and CNE addressed 66 integration steps. Although daunting at the time, our merged organization has supported us in growing and delivering on our mission. A valued, but unanticipated, outcome has been the respect of the community.