Organizational Leadership: Considerations for a Nonprofit Merger ~ Part 1

“No nonprofit organization can survive and succeed in advancing its mission while living independently of other nonprofits. Organizations gain information, political power, and personal and professional support from and in concert with other nonprofits. Thus, close working relationships, partnerships and even joint ventures between nonprofit organizations are a fairly natural occurrence.” ~ David La Piana

Organizational Leadership: Considerations for a Nonprofit Merger ~ © by James K. Lewis

TABLE OF CONTENTS *-in this blog
*Introduction
Current Nonprofit Environment
Context and Culture
-Founder’s Trap
-Organizational Reluctance
-Facing Reality & Awareness
Options for Change
Case Studies
Stewarding Change
-Resistance
-Responding to Change
Human Assets
Critical Considerations
-Analysis
-Decision
Conclusion
Bibliography
Appendix


INTRODUCTION
This journey began simply enough with a casual lunch as I met with a board member of a local nonprofit ministry. It was not the first time someone sought my advice, so this did not seem out of the ordinary . . . except that his ministry is similar to ours at Long Beach Rescue Mission (LBRM) and I performed a limited exploratory examination of it four years prior when I arrived in Long Beach. It is one of two smaller, somewhat struggling ministries to homeless persons in Long Beach, and both duplicate most, if not all, our services. Thus, my interest was piqued when asked to meet with X. I will refer to his ministry herein as “ABC.”

Following the usual queries on how we had reorganized our programs, repaired and expanded our public partnerships, and revitalized our fund development, I was surprised when he asked if LBRM would consider discussing the potential of a merger. He had thoroughly researched LBRM, and followed our progress since my arrival. His conclusion was that LBRM’s involvement was an opportunity for ABC to sustain its ministry. Honored and humbled that he felt we could carry this organization’s vision forward, I assured him that I would help in whatever way I could, even if it did not result in a joint venture – as ABC’s ministry was too critical for the community to lose. He agreed with me that obtaining permission from my board was necessary prior to moving forward with further investigation – which I acquired.

While the obvious challenges were there: rising expenses; falling income; liquidating assets to fund budgeted operations; aging infrastructure; focusing on core services; and increased isolation in the community, the result of our additional discussions and my subsequent assistance did not produce a positive result for ABC, or for the board member. I erred in assuming his position at ABC would carry weight and respect on the board. I also assumed too much in perceiving the culture and development of our respective ministry organizations as being similar, and in thinking that ABC’s tenuous financial situation would lead the board to look favorably upon his proposal. I recognized I had much to learn; thus my desire to further study the subject of mergers.

Although that process did not result in subsequent action with us on the part of ABC, through that process I recognized my lack of familiarity with, and knowledge of, the numerous issues related to mergers and acquisitions. It is my hope that this research will enable me to be more aware of the related issues, and thereby aide other organizations and their leaders in this process.

The focus of this project is developing sufficient knowledge and understanding of the elements of organizational development pertaining to the potential merger of nonprofit organizations in general, and more specifically with how to steward the process of considering joint ventures. My learning objective is that I would be able to form a plan from which an introductory assessment of an organization can be made to determine whether alliance, merger, acquisition, or dissolution is necessary, and how best to initiate such a plan for a successful outcome for both organizations – as well as develop curriculum for a workshop on mergers.

While researching the subject I found abundant material for the actual procedure of a merger plan; however, only a modest amount of discussion on analyzing the existing external environment and the internal organizational development and culture of those facing potential restructuring. In this discussion I will examine the context of organizational development and the existing culture which may necessitate a consideration for change in the delivery of services, or the future of the organization and its ministry. I will then briefly describe the options for this change and the initial considerations required in making the decision to pursue a merger. I will conclude with a discussion of several crucial elements of stewarding the change.

Due to the limitations of this discussion, and the abundant material available for aiding the actual process of a merger or acquisition, I will focus primarily on an examination of current organizational environment, culture, available options, and stewarding change. I will introduce only briefly an outline for the merger or acquisition process itself.