Nonprofit Mergers Can Be Like Dating

Nonprofit mergers can be a bit like dating. Sometimes, as both parties get to know each other better, they discover that they are not well suited for a long-term relationship. In other cases, the parties might feel they’ve met their soul mate and, therefore, they decide to spend the rest of their lives together.

My last blog post looked at why the merger plans by Abington Health and Holy Redeemer Health System failed, ending with the alienation of the entire community. With this post, I want to explore the successful merger on July 1 of seven United Way chapters in Pennsylvania and New Jersey.

Why did the United Way merger come together while the Abington and Holy Redeemer effort failed?

I spoke recently with Jill Michal, President and CEO of United Way of Greater Philadelphia and Southern New Jersey. While Michal would not compare the United Way merger with any other nonprofit merger, successful or unsuccessful, she was willing to provide insights about what she feels allowed the United Way merger to come together so well.

In short, she indicated that the merger was made possible because of shared values and enormous trust.

Given that each of the organizations in the merger were all United Way chapters, it’s easy to understand that they certainly held common values. Unfortunately, while Abington and Holy Redeemer both operate hospitals, the core values of each system are quite different; Abington has secular values while Holy Redeemer has Roman Catholic values. Sadly, the leadership of those organizations did not seem to anticipate how this would lead to controversy.

The United Way chapters developed trust in one another in a variety of ways. For more than a decade, the United Way chapters in the region engaged in collaborative efforts. Volunteer leaders and staff knew many of their counterparts and had worked collaboratively with them.

The merger exploration was not rushed; Michal says it took two years of work to explore a merger and craft an agreement. The time allowed each of the chapters to become comfortable with the merger idea and to work through the many details.

Early on, the merger discussions involved key staff and board members. As the talks became more focused and serious, the United Way discreetly reached-out to other stakeholders, according to Michal. This engagement also helped further build trust.

Susan J. Alston is a development professional who wrote an interesting research paper while in graduate school at Bay Path College. Fundraising Data Analysis and Stakeholder Communications: Considerations Prior to a Nonprofit Merger looks at the role that communications play in nonprofit mergers:

Orchestrating timely and hierarchal communications about the impending merger with stakeholders (state and private funders, past board members, major donors, and other key volunteers, staff) in an effort to encourage positive and supportive engagement will retain loyalty to the mission and purpose of the newly merged organization.”

I thank Alston for sharing her paper with us.

The United Way seems to have understood the link between effective communications and trust that Alston explored.

3 Easy Steps to Alienate a Community

Abington Health and Holy Redeemer Health System, both operating hospitals in suburban Philadelphia, announced their formal intent to merge into a regional health system.

The joint announcement came on June 27.

By July 18, the deal was officially declared dead. Along the way, Abington Health managed to anger medical staff, donors, and the community it serves.

If your organization wants to alienate its entire community in a matter of days, follow these three simple steps embraced by Abington Health:

1.  When making an organization-altering change, do not engage stakeholders.

When the merger announcement was made, most people on staff at the hospitals and in the communities served were caught by surprise. While the boards of both organizations formally authorized the signing of a letter of intent to merge, staff and the general public were left largely in the dark. Neither the community nor staff had much, if any, idea that merger talks were taking place. Even after the announcement was made, the public was presented with little justification for the action.

With a reported operating loss of $2.8 million for the nine months ending in March, it’s easy to understand why Holy Redeemer was looking for a merger partner.

However, with a reported operating surplus of $16 million for the fiscal year that ended June 30, it’s more difficult to understand why Abington Health pursued the merger.

Unfortunately, neither organization did a good job of explaining the value of the merger, either leading up to the announcement or following it.

You can read the press release from June 27 by clicking HERE. You’ll notice that the announcement is full of generalities and platitudes while being very short on specifics.

A news report revealed that 150 Abington doctors held an emergency staff meeting following the merger announcement to voice their opposition to the move. According to PhillyBurbs.com, Dr. Philip Rosenfeld, with Abington for over 40 years, said, “[The meeting] was very passionate; not one doctor was in support of the merger.”

Of the hospital’s quiet negotiations over the merger, Dr. Rosenfeld said, “It’s been a terrible slap in the face.” He added that the Abington administration showed “complete disregard for the staff.”

While letters, emails, social media messages, and telephone calls deluged the Abington administration, a community group was quickly organized. Stop the Abington Hospital Merger gathered over 4,000 petition signatures.

Clearly, the secretive merger talks and the tight-lipped post-announcement response from administrators set off a firestorm among medical staff and the community.

2.  Cease being true to the organization’s and community’s values.

Secrecy was trouble for the merger. The failure to engage stakeholders was a problem. And, the lack of effective post-announcement communication made matters even worse. However, even if the merger talks had gone public, even if the rationale was solid and clear, the merger was probably doomed from the start. 

The core problem for the merger involved the abortion issue even though Abington performed fewer than 50 in the past year. Holy Redeemer is a Catholic institution while Abington is secular. As a result of a merger, Abington would have ceased to provide abortions. And, questions arose about how the adoption of some Catholic values would impact other medical services as well.

Lisa Kelley, one of the petition organizers, said it simply: “We don’t want a Catholic influence, we want Abington to stay secular.”

Without staff and community input, Abington officials planned on a radical change to the organization’s core values. Officials planned on abandoning at least some secular values and replacing them with Catholic values. For the diverse community, this shift in values was hugely problematic.

Members of the community and staff voiced concerns not only about the abortion issue, but how the adoption of Catholic values would impact a variety of other medical services including end of life issues. Sadly, officials did not preempt concerns with solid information and did not adequately respond when the issues were raised.

One of the chief responsibilities of a nonprofit board is to vigilantly guard the institution’s mission and values. Changing Abington from a secular hospital to a secular hospital with Catholic values would be a fundamental change to the organization.

A nonprofit organization should not dramatically shift its values without a consensus from its stakeholders.

The Jewish Social Policy Action Network noted, “It would be ironic if an attempt to make the hospital more financially secure leads to financial hardships for such a highly regarded medical center.”

Yet, the damage has probably been done. Abington alienated the medical staff and the pro-choice members of the community with its plan. Now that the merger is off, Abington has alienated the anti-abortion members of the community as well.

Open Letter to My Readers Outside of North America

I’m honored to have thousands of readers who visit my blog site each month. I thank you all for your interest. I also appreciate your comments.

I recently did a readership analysis and discovered that I have a large number of readers from outside of North America. And, I’m not just talking about countries where English is the official language. I’m delighted to have a diverse group of readers.

While I invite all of my readers to contact me through a blog comment or by email, I’d especially like to hear from my international readers:

 

Avoid These Mistakes in Your Next Fundraising Ad

I recently heard from my friend Ligia Peña, CFRE, Senior Development Advisor at Canada World Youth in Montreal, Canada and Fundraising Coach at Diversa Consultants. She Tweeted me a snapshot of a fundraising advertisement that appeared in her alumni magazine. Her message read:

#PlannedGiving marketing #fail from my alma mater @concordia Leaves me cold & I know what PG is!! cc: @MLInnovations”

Before I even peeked at the photo, I knew I was in for a treat. First, Ligia used not one, but two, exclamation marks. Second, she made a point of copying me so that I’d be sure to see the message. She wouldn’t do that without a good reason. Third, she struck an unusual, harsh tone in her Tweet. Fourth, I know she’s a sharp development professional with interesting insights.

When I opened the photo (presented at the right), I immediately understood Ligia’s reaction to the ad. It is a wonderful example of how not to write and design an ad.

For starters, the headline shouts “planned giving” with the word “giving” in boldface. There’s a good chance that readers won’t know what the term means. As I reference in my book, Donor-Centered Planned Gift Marketing, The Stelter Company commissioned a survey that found that only 37 percent of Americans over the age of 30 are familiar with the term; I doubt that the stat is much different in Canada. Even if readers don’t know what “planned giving” means, they certainly know about “giving.” Why would anyone read an ad that they know is going to ask them to give? Rather than drawing in the reader, the headline rebuffs them.

I was going to write a critique myself until I learned that Ligia intended to so. I couldn’t wait to read her analysis. So, I pestered her for it. While she plans to post her critique to her own blog site, she’s kindly given me permission to share it with you now:

 

Last week, I received my alma mater’s summer magazine filled with interesting articles on recent studies conducted by students and professors, news from other alumni and what the university is planning for Homecoming. Ah, happy memories of Homecoming!

Until I get to page 17, and what do I see? A full page advertisement on planned giving. That’s expected. After all, this is the alumni magazine, and the advancement department should raise awareness among alumni on ways we can contribute to the future of the university.

However, if you’re a fundraising professional, you can see how this advertisement falls short on many fronts. 

According to Frank Minton and Lorna Somers, Canada’s foremost experts on the matter and authors of Planned Giving for Canadians, using a current publication is an ideal way to promote planned giving. To be successful they recommend using a “donor testimonial that includes interesting details about the donor’s background, relationship to the institution and reasons for making the gift, describe the gift vehicle and the benefits to both the donor and the charity” (p. 380).

While this advertisement uses a donor testimonial, it has left me cold for various reasons:

Two Major Factors that Demotivate Donors

I recently spent a fair bit of time teaching graduate students, in my “Advanced Fund Development” class at Drexel University, about what factors motivate major and planned gift donors. Much research has been done and much has certainly been written on the subject. I even felt strongly enough about the topic to have devoted a full chapter to it in my book, Donor-Centered Planned Gift Marketing.

While it is critically important to understand what motivates people to donate money and, more specifically, to make major and planned gifts, it is also necessary to recognize how individuals can become demotivated.

While an organization’s being polarizing (see my previous post about The Salvation Army), self-centered, or running afoul of the factors that motivate people will certainly demotivate prospective donors, there are two particular demotivating factors that are especially noteworthy. The George Washington University discovered the two factors in a focus group study it commissioned involving university alumni.

Taking care of family is a primal need.

One of the biggest deterrents to making bequest commitments is the universally held belief:

Family comes first.

That’s to say, family comes before any nonprofit organization. The priority for most individuals is to take care of their loved ones. This often means keeping wealth within the family. To respond to this concern, organizations need to show prospects how a meaningful gift can be made, at a minimum, without asking loved ones to suffer. When possible, prospects should be shown how a planned gift can actually benefit loved ones. Consider this example from the Smithsonian Institution that was shared with me by John B. Kendrick:

When I first arrived at the Smithsonian Institution as Director of Planned Giving, a colleague recommended that I contact Cliff, a person who had responded to a [Charitable Gift Annuity] advertisement in Smithsonian magazine a few months before. Cliff wanted to make sure the Smithsonian was strong financially. At age 96, he was still incredibly alert mentally, and he wanted to provide a lifetime income for his wife, who was nearly 20 years younger.

He appreciated the Smithsonian, but frankly was more concerned about the safety of her guaranteed payments than supporting a particular charitable purpose. A consultant to the Smithsonian had traded more than 20 e-mails with Cliff, who originally inquired about a $10,000 CGA.

As he became convinced of the Smithsonian’s financial strength, he quickly increased his inquiry to a CGA for $1 million. But no one had ever called him—they had simply been trading e-mails! I telephoned Cliff, and the discussion quickly progressed; within another two months he sent in stock certificates to establish a $500,000 CGA for his wife. Over the next year, he created two additional $500,000 CGAs for his wife—for a total of $1.5 million.

But that’s not the end of the story.

He had a son who was not strong with money management. Cliff still actively managed his own finances and made periodic distributions to his son. I suggested setting up a CGA or Charitable Remainder Trust now for the son, but Cliff insisted that he wanted to manage his money outright for as long as possible. We agreed, however, that a testamentary CGA for his son would meet his desires. I provided sample language, and Cliff’s lawyer modified his estate plan to include a $2 million testamentary CGA.

From a $10,000 inquiry, we received $3.5 million in gifts because we took the time to show Cliff how we could help him take care of his family.”

The other major demotivator discovered by The George Washington University is: