Join or die: Why nonprofits must consider mergersDecember 4, 2017 Category: Column, Featured, Funding, Medium
Tivoni Devor’s “Getting Good Done” column focuses on new models of enacting impact.
Join or die.
Ben Franklin knew it, and we are still not ready to hear it.
If you’ve been paying attention, you know these three pretty depressing things:
- Philly is the poorest big city.
- Philadelphia is among the least generous metros in America.
- Fewer than 40 percent of nonprofits can be characterized as financially strong.
These factors are all interrelated, co-dependent and contributing to a self-perpetuating negative cycle. Add on the looming budget issues at the federal and state level and you have the beginnings a potential superstorm that could decimate Philadelphia’s nonprofit sector.
One stat of note from that infamous Philadelphia Foundation report: “A 5 percent reduction in government funding (if evenly distributed across the sector) would result in nearly 20 percent of nonprofits that currently earn a surplus moving into deficit.”
There is no safety net for nonprofits that house the homeless, treat the addicted and protect the battered. These organization’s collapse will negatively harm the city. The organizations that provide Philly’s critical social services are too big to fail. If a shelter or treatment facility closes from lack of funding, there is no one waiting to take its place.
As bad as it truly is, most nonprofits will never admit that they are in dire straights, as to do so may impact the meager funding they are already getting; the funder and donor class doesn’t want to give to organizations that may be on their way out.
From our Partners
Mergers, not money, will help the sector dig itself out of the hole we are in.
The only way orgs can achieve sustainability without an infusion of cash (which doesn’t exist) is through consolidation. They need to merge at an administrative and legal level which will reduce their relative overhead, freeing up cash that can be used to invest in infrastructure that can put an organization on a growth trajectory.
This is, frankly, a governance issue. Boards must begin to see that in this environment, nonprofit mergers and consolidations should be part of their growth strategy, not their strategy of last resort. The two-year-old Nonprofit Repositioning Fund, with a mission to advise and fund organizations going through mergers and closures, tackles this issue exclusively.
In its short existence, it’s found that too many orgs come to them when it’s too late: Sadly, too many organizations were too fragile to compete for funds.
Board members need to start to recognize mergers as both a growth strategy and a mission strategy. No nonprofit alone creates lasting impact. Only the boards of nonprofits have the power to approve mergers, yet they are not driving this strategy.
Boards need to be asking their staff: Why aren’t we merging with another organization? Can you justify why not merging better fulfills our mission and helps the people we serve?