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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Jay Love

Jay Love

Co-Founder & Chief Relationship Officer at Bloomerang
A 30+ veteran of the nonprofit software industry, Jay Love co-founded Bloomerang in 2012. He currently serves on the board of the Center on Philanthropy at Indiana University and is the past AFP Ethics Committee Chairman.
Jay Love
By |2017-06-10T18:55:25-04:00June 8th, 2015|Nonprofit Sector|

4 Comments

  1. Richard Freedlund June 8, 2015 at 12:46 pm - Reply

    Jay,

    I read your post with delight. I have been asking the same question for a number of years.

    Here is an example of what I saw when I lived in the Portland, Oregon area. In just one county west of the city, there were at least a half dozen small animal rescue organizations doing the exact same thing, all competing for the same dollars for support. I found that very inefficient and troublesome. If they consolidated their efforts, more animals would be saved and more people would find companion animals to share their lives.

    Once again, a great post!

  2. Kari Skloot June 8, 2015 at 4:26 pm - Reply

    Jay – I think this is spot on! One of the first things development staff hears when talking to a prospective donor is “what is your overhead”. While I’m not at all a fan of that line of thinking (see TED Talks), the reality is that very small agencies have a hard time keeping overhead low, so combining efforts (your economies of scale position) makes perfect sense to donors. Not sure why it doesn’t seem to make that much sense to the organizations.

  3. Cynthia Chovan June 11, 2015 at 11:15 am - Reply

    Jay – Well said. I, too, have been saying the same thing for a number of years. Yet, the number of nonprofits continues to grow – I feel like everyone is starting their own nonprofit. Within my circle I know of four people who are starting their own nonprofit, and while two of those are definitely addressing an unmet need, the other two are duplicating services provided by other organizations. Can’t we all work together to address the problem? Your post really spells out why we should.

  4. AJ October 28, 2017 at 3:58 pm - Reply

    Great article. I’ve always wondered especially in the wake of recent environmental disasters in the US, why can’t these major non-profit disaster assistance organizations partner together under one name and reap the benefits of a common donor pool.

    Speaking of which, Jay, has your company consolidated with another nonprofit with similar ideals and goals?

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