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.

The United Way explained to stakeholders that the merger was not designed to slash costs and shut down regional offices. Instead, the organization explained that the merger would allow a realignment of existing resources to allow people to be more effective. Michal explained, for example, that some back-office activity would be centralized to allow regional staff to better focus their efforts on donor outreach. The United Way also made assurances that regional offices would remain open. And, the merger agreement assured participants that funds would be distributed in the same proportion to each local community for the next three years to allow for a comfortable transition period.

The United Way also understands the importance of being donor-centered. The merger gives regional donors one point of contact instead of seven. This will make philanthropic engagement easier and less time consuming for regional funders such as area corporations.

Ultimately, the United Way anticipates that the merger will allow it to generate more financial support.

By contrast, Abington and Holy Redeemer never clearly articulated to stakeholders the benefits of their merger. Even now, confusion remains.

In the United Way case, the communications strategy helped avoid such problems and further earned trust. When the official announcement was made, there were no protests. And, Michal reports that no major donors were lost. Michal added, “The community has been incredibly supportive.”

Unfortunately, Abington was more secretive and did not communicate effectively with stakeholders. When news of the intent to merge was announced, protests erupted. Medical staff, donors, and the community were all deeply disturbed by the move.

Alston’s paper stresses the value of effective communication and indicates the downside risk of openness is minimal:

Regarding the communications aspects of a nonprofit merger: frequent communications with stakeholders during the due diligence merger process will typically not jeopardize the outcome of the merger, so secrecy is not an ideal objective in a nonprofit merger.”

Abington and Holy Redeemer mistakenly valued secrecy over openness. The health systems maintained secrecy throughout the process and were even reluctant to address stakeholders and the media even after the intent-to-merge announcement was made. By contrast, United Way was more open with stakeholders and the media. Remarkably, the President and CEO of United Way of Greater Philadelphia and Southern New Jersey even set aside time to speak openly to yours truly even though I certainly do not operate a major media outlet.

The United Way understands the benefits of shared values, trust, and openness. These are the three qualities that allowed the United Way merger to succeed. And, all nonprofit organizations can benefit by being true to its core values, building trust, and maintaining openness and transparency.

Time will tell if the United Way merger partners live happily ever after. For now, we know they’re off to a good start.

That’s what Michael Rosen says… What do you say?

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