Collaboration and Merger
Merger or other forms of collaborative working can make better use of charitable resources and provide better services for beneficiaries.
The past few years have been difficult for many of us. For some charities survival may depend on doing things differently. A lack of resources or increased demand can sometimes be best addressed by joining with another charity so that they can access additional resources and achieve mutually beneficial goals. It is much easier to forge new funding relationships when a charity is not duplicating the work of other organisations. Potential donors are often more willing to support one charity and one cause wholly, instead of splitting their donations between two different organisations that are working towards a similar.
Another benefit can be an increase in efficiency of a charitable organisation. In the case of two, very similar charities, they often fund the same research projects.
There are many complexities at all stages of a merger, however, there are a few key points.
- If a merger is going to be right for a charity it is vital that a charity first understands itself. At the outset of considering a merger a frank look at the purpose, mission and values, both current and anticipated is needed. Doing this early will greatly assist the decision process when looking at possible fits.
- One of the biggest barres to a merger is personal and emotional attachments to individual organisations.
- Embarking on a merger can be a costly process and a charity must take this into account as part of any wider cost-benefit analysis in advance of embarking upon a merger.
Understanding the different approaches
A major difference between a merger and collaborative working is in the number of charities that result. In a merger, two or more charities combine to become a new and separate entity. The new charity will have a new board of Trustees and might have a different name. However, in collaborative working, two or more charities combine and share their resources for the purpose of pursuing a common goal. The original charities remain as separate entities.
The choice to merge or establish a collaborative working agreement with another charity depends on the individual charity’s goals. In general, a merger creates opportunities for growth. The consolidation of assets into one entity increases performance and revenues while decreasing overall costs.
Similarly, in a collaborative working agreement two charities come together to give each other a boost in impact or the availability of resources, but each charity benefits separately. Attempting to expand a charity by engaging in research or developing services is a risky undertaking. However, in a collaborative working agreement risk is shared and spread among the members, thereby reducing the overall risk for everyone involved. Additionally, charities are able to share the costs of their joint projects as well as mutually enjoy the benefits. Each charity agrees to a percentage of how much it will contribute and receive as part of the initial agreement.
Getting the fit right
Charity cultures and management styles vary so when a merger occurs, personnel must adapt to potentially conflicting methods. New procedures may take the place of familiar practices, and employees must remain flexible, as they adjust to how things are run within the new structure. However, some employees may not be able to retain their positions, as mergers often are accompanied by job cuts.
Likewise, a collaborative working relationship may experience difficulties with communication between the charities. Information and directives must travel across multiple channels, and misunderstandings or delays could potentially result. However, these communication difficulties do not need to be a permanent concern, since collaborative working agreements are often temporary setups. Unlike in a merger, in which the relationship is fixed, a collaborative working agreement can be formally dissolved once the short-term, targeted goal has been reached. The charities may choose to continue working together if it would benefit each entity to do so.
KPMG and Macquarie (supported by The Young Foundation, The Prince’s Trust and Business in the Community) published a report that said “whilst researching the paper and conducting interviews it became apparent that engaging an external facilitator to oversee the merger process can make a real difference. Whilst a facilitator cannot make formal decisions relating to the merger, they can play a pivotal role in engaging and co-ordinating the key elements of the process, ensuring that momentum is maintained at each stage.”
If you are thinking about more effective ways of delivering your charitable objectives and would like help to consider the advantages/disadvantages, the questions you should be asking yourselves or your potential partner or even need help in project managing the process then we can help.