While mergers between not-for-profit organisations are difficult and not always the best solution, collaboration may be an alternative that achieves many of the benefits without the pitfalls.

    In any case, mergers in the sector are rare but they are on the increase and there appears to be a growing number of successful collaborations, says Duncan Peppercorn, executive director of Social Ventures Australia.

    In fact, collaboration between organisations may be "a very effective first step" on the path to integration, he says. It’s ‘trying before buying’, in effect.

    The challenges of merging or collaborating include a lack of clarity about the benefits, uncertainty about how to go about it and discomfort with the idea of the changes required, says Peppercorn.

    What are the benefits?

    Mergers or any form of collaboration in the NFP sector should be all about performance improvement. This might include improvements in effectiveness or influence, funding, capital requirements and efficiency.

    Previous NFP mergers have shown that back-office savings have been small, says Peppercorn, and do not necessarily justify the effort and costs.

    "NFPs are typically very lean already and the biggest cost of operating – people – cannot easily be rationalised without compromising service quality."

    Meanwhile it’s difficult to forecast and quantify benefits in the quality or reach of services, or in influence and advocacy, he says.

    "A recurring strategic issue for NFPs is a lack of clear metrics for social purpose outcomes, and uncertainty about needs, funding and behaviours."

    How is it done?

    Nonetheless, if a board believes a merger is worth it, how would you go about it?

    Peppercorn notes that the lack of a ‘market’ for NFP mergers means there are few resources and little experience available to assist organisations.

    "There are no deal-makers and brokers looking for opportunities to bring organisations together," he says.

    "This isn’t to say it can’t be done, but it should be acknowledged and understood that specific resources need to be allocated to the effort and that, in the NFP climate, these resources aren’t readily available."

    What do your people think about it?

    An important consideration in planning a merger is the emotional element.

    "In the NFP sector, boards and management as well as staff and volunteers are usually passionate about the organisation and their roles," says Peppercorn.

    "We ignore this passion at our peril. The sector relies on the goodwill of staff and volunteers to work above and beyond the call of duty.

    The culture, mission and values of an organisation are its lifeblood, so any changes from a merger must be given critical consideration," he says.

    "If a merger or collaboration opportunity exists you will have to ask yourself honestly: is this a way to improve possibilities for my organisation to have impact? Will consolidation actually benefit this organisation I care about and the people that we seek to help?"

    In other words…

    • NFPs should be clear about the benefits of any mergers or collaborations because financial savings may be small.
    • Appropriate advice is difficult to find.
    • Don’t overlook the passion of your directors, staff and volunteers.

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