ARTICLE
4 Reasons Why More Nonprofits Should Consolidate
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Just recently, one of our customers contacted us about an upcoming merger with two other similar nonprofits in their part of the country and their desire to combine their databases. During the discussion, they explained why this consolidation was happening. It made all of the sense in the world!
Why doesn’t this kind of thing happen more often in the nonprofit world?
Rarely does a single day go by in which your local business news or the national business news does not announce a corporate acquisition and/or merger.
Does the commercial sector know something the nonprofit sector has yet to discover?
Perhaps there is a tendency to stick close to the status quo. It’s easy to just adjust the previous budget by a few percentage points and play it safe for another year.
Such “safe” practices seldom leads to breakthroughs in achieving the mission or worse yet in EXCITING any major donors.
Let’s explore a few reasons why more nonprofit consolidation can and should take place:
1) Economies of Scale
This is perhaps one of the most obvious reasons to many people. No matter whether you are a $100,000 charity or a 10 million dollar charity you will only have one CEO, one chief financial person, one head of fundraising, one phone system, one CRM system, one accounting system, one HR person, etc.
The economy of scale card is played as the first card whenever a commercial business merger or acquisition is announced. It is more often than not overstated, but nonetheless usually amounts to significant savings.
In the case of the nonprofit world, one would hope the savings in dollars; manpower and other resources could be used for furthering of the mission!
2) Overlapping Missions
Whenever I see multiple organizations serving nearly the virtually same need in the exact same area or adjacent areas of the world, I wonder how they keep from bumping into each other. More importantly, I wonder if they are hurting their ability to raise funds, recruit board leadership and truly fulfill their mission.
Even if the missions of two or more organizations only overlap a small amount, it should be worth having the discussion about what combining them could bring to the table. Perhaps the resulting combined or more narrowly focused mission will resonate with funders and donors.
Add to the above facts that the consolidated staff might be able to operate more efficiently or provide even more service than before.
3) More Efficient Fundraising
In the case of the example used at the beginning of this article, the consolidated fundraising team can now have specialists in such key areas as Planned Giving, Major Gifts, Special Events, Annual Fund and others. The specialization should allow each area to be taken to a much higher level.
The combining of the databases allowed a large number of duplicate accounts to be eliminated and all communications structured to avoid redundancy. This should also allow the quality of every communication offering to be elevated.
If one or more of the organizations being combined was considering a capital or endowment campaign, the focus can now be on a single campaign. This should allow the case statement to be stronger and a wider base of prospective donors to be approached.
4) New Leadership Possibilities
In any consolidation there will be multiple boards and standing committees involved. The extra individuals can be used to create exciting new committees to address previously ignored issues.
The discussions leading up to any consolidation allow the very best of your to emerge. Such strategic discussions are what the board, if comprised of the right individuals, is best at. The top leaders from the separate organizations will almost always rise to the top of consideration for the board of the new organization.
Creating the new board allows for timely pruning of any previous members from the separate organizations not pulling their weight or worse yet, causing difficulties in some manner.
Your goal with the brand new board of the resulting combined organization is to be comprised of superstars who can lead you into even higher successes!
Should your organization be considering this option? Can you think of a few more reasons for – or even against – consolidation? Let me know in the comments below!
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AJ
Cynthia Chovan
Kari Skloot
Richard Freedlund