Three nonprofit CEOs walked into a bar, and only one walked out:  the one taking the helm when they finalized the merger of their organizations.

If this sounds like a nightmare to you, I understand.  I’ve been a nonprofit CEO, in no great hurry to give up my chair. 

Yet CEO leadership is a necessary condition in the vast majority of successful nonprofit mergers.  With the looming retirement of hundreds of thousands of baby-boomer CEOs, this might be exactly the right time to get the job done.

But why merge?  In the big picture, there are several reasons. 
  • Fragmentation of the sector.  Did you know there are more registered non-profits than lawyers  in the U.S.?  (~1.45m v. ~1.23m) Most nonprofits have annual expenditures of under $100,000, but all have at least a handful of board members and infrastructure expenses, often including (underpaid) staff. 
  • Unsustainability. Shrinking funding sources are spread too thin. The U.S. government reports that 38 percent of nonprofits ended 2012 with a deficit.  More than half of the nonprofits responding to a 2013 Urban Institute survey had cut or frozen staff salaries in response to funding cuts, and 42 percent covered deficits from reserves. Yet only 11 percent cut any programs.
  • Burnout.  Younger staff experience the resulting burnout firsthand, witness the toll it takes on leaders, then hesitate to step up to shoulder endemic problems in the sector.
We talk often about competitive threats, but why not turn “competitive threat” into “collaborative opportunity” – or even merger potential?

Outstanding resources are emerging to help nonprofit leaders assess the viability of mergers, and tackle the complex operational and emotional terrain involved.  I have recently written about a few of these resources.  I hope you will take a look at my blog posts on why to mergepitfalls to avoid, and characteristics of successful mergers, and let me know what you think.

Until next time, all good wishes,
Theresa
 


Comments

11/24/2015 4:43am

Looking for the old, familiar Nonprofit FAQ? It has a new home at the National Center for Charitable Statistics:

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08/06/2016 2:08am

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