Merger as Opportunity for Change

Notes by Elaine O'Brien

Panelists: Jeanne Anderson, Foundation for Early Learning; Rick Friedhoff, Compass Center; Amanda Madorno, Roan Consulting

This educational session gave a thorough review of the issues faced by non profits considering mergers. Amanda Madorno of Roam Consulting, Rick Friedoff of Compass Center, and Jeanne Anderson of the Foundation for Early Learning reviewed the essential pros and cons mergers present to organizations in our sector, as well as the obstacles and concerns to consider before and during the process. 

Many of the workplace issues in a non-profit merger are similar to those faced by any company.  Mergers are an attempt to help two (or more) businesses improve and broaden impact in the area in which they serve.  For our sector, the merger is less influenced by a board aiming to fatten wallets of “stockholders” and more on expanding and improving the positive social impact on our respective stakeholders ( such as individual clients, communities, and staff.) 

 When organizations Jeanne is consulting face serious problems, there are three major options for action that she gives them:

1. hire a new executive director

2. close

3. merge with another organization. 

Most companies immediately write off the second two options, she tells us, but in many cases a merger is beneficial to consider.  A larger stronger organization with the ability to serve more people and/or a broader community is definitely possible.

Mergers are definitely sticky processes, though, which should never be jumped into.  For example employee morale during a merger can be a major issue, especially if left unaddressed.  Both Ms. Anderson and Mr. Friedoff said a cumulative staff turnover of 90% is not unusual during a merger.  Jeanne experienced this in a successful merger of Big Brother and Big Sisters.  Although it was a lengthy and difficult process to get through she described how they are now a stronger organization with more services and impact.  Rick added that sometimes this huge staff (and often board) turnover is what is required to “get rid of the baggage” and become a better organization.

Organizations must be the right fit for each other for a merger to work.  Amanda at one point joked finding an appropriate organization to merge with was like the dating process.  There are even ways to make yourself “more attractive” to prospective partners, which was also explained in some detail by Ms. Madorno.  Amanda emphasized that in the end, a merger’s success is highly dependent on the trust level between the businesses involved. 

Further complications and decisions (whose location to unite in? whose accounting software system will be used? legal suits? insurance considerations, and many more must be faced.)  Straightforward advice was given, such as Jeanne explaining that the higher salary and benefits between the organizations must be matched unless you want 100% turnover.  If you are considering a merger there is much to be learned about the process, but all the hard work and preparation can lead you to become a stronger and healthier organization for the effort.