Submitted by Jean Butzen on November 26, 2007 - 13:22

Are nonprofit mergers an ethical way to grow?

Nonprofit mergers are getting more press coverage these days, both positive and negative. Two of the latest to receive attention are The Points of Light Foundation and the Hands On Network.  They recently announced the completion of a merger which took effective Oct. 1, 2007. The two boards set ambitious goals for the merged entity, including tripling their National Service Member impact resulting in 30 million national service volunteer hours.But why seek a merger when the two organizations were doing so much good as stand-alone nonprofits? In an article about nonprofit mergers published Nov. 1, 2007 in The New York Times, the former CEO of Hands on Network, Michele Nunn (who is now the new CEO of the merged organization), said,  "We both could have continued along the route we were on, growing incrementally, but I believe neither of us would have achieved the kind of exponential change we wanted...very few organizations have the scale to tackle the big problems we are all trying to address."But is growth through a merger an ethical way to increase social results?  Not according to The Nonprofiteer, a blog by a fellow Chicago-based consultant to the nonprofit sector, Kelly Kleiman.  According to Kleiman, today's merger activity appears to be motivated by "ultra skeptical, entrepreneurial donors who expect not an ounce of fat on their trophy charities." The Nonprofiteer goes on to insinuate that mergers are a lazy person's way of growing a nonprofit--that, instead of sharpening their pencils and doing the hard donor work to achieve fiscal stability, some nonprofit executives would rather cut staff from a merged entity.
In my experience, mergers are rarely sought for fiscal solvency.  Many are sought in order to ""get to scale" because sometimes size really does count. Leslie R. Crutchfield and Heather McLeod, authors of a new book, Forces for Good: The Six Practices of High-Impact Nonprofits, argue that the era of simply focusing on management best practices within individual nonprofits is just not good enough to get to any kind of scale on the very serious social problems facing the world today.
But how does a nonprofit get to scale in this capital-starved environment? Certainly good business practices and close attention to marketing and fundraising are important. But another way to reach for scale, which is perhaps quicker or more efficient in the long run, could be through mergers, consolidations and alliances.
Are mergers for everyone? Of course not. Can a merger between two organizations that are aligned in terms of mission, programs and strategy be a tool for social good? There are very real social benefits that a merger strategy can produce for people and communities. In the right hands, mergers may produce more results than nonprofit leaders can achieve by simply sharpening the pencil and doing the donor calls.

What do you think?  I invite you to share your thoughts in the comments section below or to email me with your opinion.