Platt Perspective on Business and Technology

Leading a nonprofit 18: when nonprofits merge 2

Posted in career development, job search and career development, nonprofits by Timothy Platt on January 11, 2013

This is my eighteenth installment in a series on leading a nonprofit (see my Guide to Effective Job Search and Career Development – 2, postings 267-283 for Parts 1-17.) And this is also a direct continuation of Part 17 in which I began a discussion of mergers in the nonprofit context. More specifically, I discussed the rationale behind nonprofit mergers, and something of the criteria by which that would make sense, citing a quickly sketched case study as a working example, involving a larger American organization and smaller but robustly successful Canadian organization.

• They had compatible missions and visions and
• Each brought resources and capabilities to this merger that the other lacked and needed, and that they each could not simply develop in-house, within anything like an acceptable timeframe or level of cost-effectiveness.

So in Part 17, I discussed nonprofit mergers per se as a joining of organizations. Here I discuss making those mergers work, where that calls for particular leadership skills and effort. And as I noted at the beginning of Part 17, this is a situation where everything that goes into determining leadership best practices for nonprofits, comes into sharp focus.

1. I will assume at least initially and for purposes of this discussion that both of the nonprofit organizations entering this merger are financially sound and well run, and with effective leadership for meeting their ongoing needs.
2. I will come back to reconsider that set of assumptions in follow-up discussion, where I will consider mergers where one of these organizations has problems that its leadership cannot effectively address, at least to the level of finding long-term solutions. And I add here that this can be a reason why a merger, or more properly an acquisition might or might not make sense.

But I begin this part of the overall discussion of this series considering mergers of nonprofits that are functioning as effective businesses, and that are in fact making significant efforts toward fulfilling their missions and visions. And for this, and as general background references regarding mergers per se, I cite two postings that I added to an earlier series on leading through a merger or acquisition:

Transitioning into senior management – Part 15: M&A leadership – 1 and
Transitioning into senior management – Part 16: M&A leadership – 2.

When two nonprofits merge their leaderships have to do so as well, and with resolution as to who will take what positions in the post-merger senior executive team constituting a significant part of that. In the case study example I cited beginning in Part 17:

• The chief executive officer of the larger nonprofit involved stayed on as CEO for the enlarged organization that resulted from that merger, and most all of the senior executives of the larger organization retained their titles and positions for the newly combined overall organization too. They brought new levels of organizational and operational strength to their new partners so this made sense to preserve the specific sources of value that they brought to the table.
• The smaller, Canadian nonprofit’s CEO became a key member of the senior executive team for the overall organization with a senior vice president title, and his executive team going into this all stayed on, retaining local oversight and managerial control over all Canadian operations and offices.
• Boards of directors, I add, were also combined and in this case most everyone was kept on there too – nonprofit boards can be very large and still work, as noted in Boards of Directors and Nonprofits and Joining, Serving On and Leading a Board of Directors – 5: joining nonprofit boards.

The important point is that this was not decided strictly to the benefit of the leadership of the larger, stronger organization entering this merger or at the allowed expense of the smaller.

• When duplications occur with two executives carrying the same level and type of responsibility and title, and only one is going to be needed to continue in that position, the best fit for meeting current and anticipated needs for the merged, larger organization should be selected,
• And with a secondary, though still significant goal of ending up with both executive teams represented.
• And the overall goal should always be to capture and retain the sources of value that each of these joining organizations bring to the table.

Yes, that can mean competent, dedicated people having to move onto new career opportunities and new jobs elsewhere and certainly if they are to retain their old title and responsibilities moving forward. From the organizational perspective though, this should be all about retaining and combining sources of value and strength, so the newly combined organization starts out much stronger than either of the nonprofits going into this merger could have reached on their own.

• And out of all of this, the new CEO for the newly combined organization has to embody the mission and vision of this new combined entity,
• And for all of its employees and from both original nonprofits that entered this merger,
• And for the now larger, combined communities that this newly enlarged organization supports, and that it connects to for its own support.

I have written in this series of the role that a leader carries within a single ongoing organization. Here these same skills and experience are called upon but with numerous new and emerging complications faced. Yes, most of these operational and process complications and resource access and allocation issues, and personnel issues will probably arise as the “little details”, but those are the ones most easily overlooked and taken for granted in pre-merger planning. Leadership has to be there for the whole newly combined organization, and as the kinks and details of the merger and its consequences come to light and need resolution.

• An effective leader of a newly merged organization never comes across as playing favorite towards those who they led prior to the merger. They never take steps that raise the question as to whose leader they really are.

And resolving all of this and coming together as a single, coherent organization takes time, and this process of finding and resolving issues in and of itself has to be allowed for in operational and strategic planning, with extra funds, for example, allocated in budgeting infrastructure expense in support of this transition.

And with that I turn to the second numbered scenario listed towards the top of this posting where one of the organizations entering into a proposed merger has problems or brings significant sources of weakness with it.

• Under these circumstances an effective leader of a newly merged overall organization has to reassure employees and other stakeholders internal to the organizations merging that they are being listened to
• And they have to reach out to and both speak to and listen to members of the now combined external community that they turn to for support and that they in turn support too. An effective leader coming out of a merger agreement in combining two nonprofits has to reassure their now larger community of stakeholders that their concerns and problems are understood and that they are listened to as solutions are found and implemented. Communications skills are crucial here.

Some weaknesses and problems can simply be addressed through the merger process itself where one organization shares resources and capabilities with the other to fill gaps, where it brings real in-depth strength and the other has faced real unmet need. As a simple example there, consider two healthcare-oriented nonprofits where both provide professionally vetted booklets and brochures and online web and blog-based content related to the medical conditions addressed by their missions. And one of the merging nonprofits has had real problems securing the help of high level, well recognized medical authorities to write and review content for their informational offerings. The other has real strength in depth for that with close ties to several renowned medical schools and key faculty there. The merger itself resolves this problem when this font of expertise is now shared.

Some weaknesses and problems are much less easily resolved, and here I cite as example a situation where one of the organizations seeking to merge carries large financial debt that it cannot simply, easily pay down. Consider loss of office equipment and other resources not covered fully by insurance during a fire or as a result of a natural disaster as an example there. If this merger is to take place, that decision has to be arrived at as an outcome of a coldly dispassionate review and evaluation of feasibility and of process for making it work. And as a matter of leadership, any issues that would challenge the feasibility of a merger will have to be addressed in the midst of all of the rest of the change that takes place with any merger, and at all levels throughout the combining organization. I will simply add in this context that leadership has to mean setting aside the emotionality of mission and vision to consider realistic feasibility too, and it always has to be remembered that not all potential mergers can work. That possibility highlights the fact that “strategy as what you decide not to do”, can be as significantly valid an approach as “strategy as what you in fact do.”

So I end this posting by noting that leadership of a nonprofit with its idealism and the drive that engenders, can mean making hard choices and difficult decisions as with any other type of business. And that definitely holds for nonprofits entering mergers.

I am going to finish this series at this point though I am certain to come back to further discuss issues raised and touched upon here. Meanwhile, you can find this and related postings at my Guide to Effective Job Search and Career Development – 2. I have also posted extensively on jobs and careers-related topics in my first Guide directory page on Job Search and Career Development. You can also find this and related postings at Nonprofits and Social Networking.

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