Mergers in Non-Profit Organizations
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A merger occurs when two or more organizations decide to join forces and become one organization. One or more organizations must dissolve for this to happen. Sometimes all involved organizations dissolve and take on a completely new name. Sometimes one organization survives, and keeps their name, while the dissolved organization(s) must fall into the surviving organizations business structure. In the for-profit sector, this latter situation would be considered an “acquisition”. However, in non-profit organizations, there are no owners. Therefore, since the ownership of another organization cannot be acquired, legally it would be considered a merger (Strategic Restructuring).
There are two types of mergers: horizontal and vertical. A horizontal merger is one that occurs when two or more organizations with similar goals, missions or interests merge together to create one organization. A vertical merger is one that occurs when two or more organizations with different missions come together. Usually, the services they offer can work together in some complimentary way. Horizontal mergers are more common in the non-profit sector (An Itch To Get Hitched).
The overall goal of a merger in the non-profit sector is to create synergy. This means that as a whole, the merged organizations will work more efficiently or with greater quality than the sum of its part did separately. Other goals for mergers may include strengthening services, pooling resources, reducing duplication, lowering costs, and establishing a larger geographical presence. Under the right circumstances, a merger could be very beneficial to a non-profit organization, and to the individuals they serve.
Probably the best reason to partake in a merger is to reduce duplication. There are currently close to 1.4 million non-profit organizations in the United States. It is difficult to believe that each organization has a different and unique mission. For that reason, it makes sense for some of these organizations to merge in order to help more people, and to prevent competition amongst each other. Competition is not a force that should be present in the non-profit sector, since the missions of each non-profit are designed simply to help people. Unfortunately, in order to do that, all non-profits need funding. While it is difficult, especially for smaller organizations to raise money, it is even more difficult to raise it if they are competing for funds with another non-profit. This causes both organizations to miss out on the potential to help more people (Commentary: Nonprofit mergers could help more people).
Mergers are being called a “hot-topic” right now in the non-profit sector. Organizations across the nation are either in talks, or rumored to be in talks, to negotiate a deal for a merger. However, this does not necessarily mean that many organizations are following through with the merge. It just means that many are thinking about it. Since a merger can be such an extreme change, it is not unlikely that manager and directors will begin the talks only to realize that this move is not the best idea for their organization at the current time. Still, it is important to note that they are being highly considered across the board. (McNamara 1).
Again, since mergers are such an extreme change in certain cases, they are not always right for certain non-profit organizations. For that reason, they should only be considered under the right circumstances. For a merger to work at all, the new proposed organizational structure should be designed to improve the non-profits ability to accomplish its mission. This new structure should also have room for the non-profit to grow, either in its range of services or its base of those it provides service to. The services themselves should also have the potential for growth. Additionally, the merger should make operations less costly and more efficient. Finally, the overall finances of the non-profit should be improved. If there is no potential for any of those conditions to take place, then the merger should not be considered. It would not be worth the time and effort without the promise of or potential for improvements (Mergers FAQ).
Non-profit organizations sometimes fear the idea of a merger because there are concerns that their original mission could be either diluted or lost within the new organization. This is not an unrealistic fear, as in most mergers one organization remains the dominant one. Although some may be trying to do their best for the new organization, those that have a sort of allegiance to their old position may favor only one side or sector of the new organization. This could lead to certain areas getting more attention than others, and the new goals becoming difficult to achieve. For this reason, it is important that all employees involved in a merger are kept aware and involved of changes, in order to make them feel like an important part of the new organization and to give them an identity in that organization (Making a Merger Go Smoothly for Nonprofit Workers).
Additionally, mergers can often be associated with lay-offs and other negative changes. Employees of an organization could become very stressed over the extreme changes a merger could bring their job, including the loss of salary or benefits, or just the loss of familiarity. This is another reason why it is important when considering a merger to keep the employees on either side informed of all occurring changes. This makes employees feel secure, and helps to prevent fueling the fire of gossip and rumors amongst co-workers. In stressful situations, employees will have many questions, and it is important that their managers provide them with answers before they get carried away (Making a Merger Go Smoothly for Nonprofit Workers).
Non-profits may also sometimes feel the need to stray away from mergers because they put their mission first, and put all other aspects of their organizations second. Those aspects may include costs and efficiency. In the for-profit sector, mergers are typically motivated by financial considerations. Usually, a company is striving