More on Mergers, Ms. Miller!

This entry to the One Post Challenge comes from Jean Butzen. Jean runs Mission Plus Strategy consulting, specializing in mergers and alliances in the Chicago area.

By Jean Butzen

More on Mergers, Ms. Miller!

“Let’s go for two, Clara Miller,” I said to myself, paraphrasing the famous words of legendary Cubs first man Ernie Banks. Ms. Miller, CEO of the Nonprofit Financial Fund and featured speaker at a luncheon sponsored by the Donors’ Forum of Illinois, was advocating for one change: foundations should stop funding line items on nonprofit budgets and start funding results. I agreed with Ms. Miller but that one change wasn’t enough. A second change she could have added was: foundations should start funding alternative strategies to increase results. One strategy I particularly believe that foundations have over-looked is nonprofit mergers and alliances.

Nonprofits that wish to grow their social impact may be able to do so much more efficiently and effectively through a well-targeted merger with another nonprofit, than staying as a stand-alone writing grant after grant. Foundations know this. So why aren’t we seeing a growing trend in funding the costs of nonprofit mergers and alliances? I believe it’s because of two reasons: 1) the sector does not have sufficient knowledge of the potential of the strategy to increase results; and 2) foundations do not understand how to underwrite and sell these types of strategies to their boards. It’s been my experience that foundation staff fully agree with the need to fund nonprofit mergers, but it is foundation boards that find mergers and their costs (i.e., due diligence) antithetical to the mission of foundations.

But why would that be? If foundations are truly interested in outcomes, then the strategies utilized by nonprofits to achieve these results would not matter. Whether the approach is fundraising to double the output of a well-executed employment program or merging two aligned employment agencies together, the important issue is: Did they get the intended results?

Nonprofit merger strategy is still in the dark ages despite the efforts of pioneers such as David LaPiana and Thomas McLaughlin. The lack of dedicated funding for merger costs, professional training in merger strategy, and (most importantly), public knowledge about completed mergers translate into a lack of infrastructure to support this useful strategy. Without the infrastructure, nonprofits will not be able to utilize the strategy to its maximum potential.

We need two changes in the philanthropic sector: start funding results and start funding new strategies to get more results. Foundations need to step up to the plate and create dedicated funding for nonprofit mergers and alliances and help build an infrastructure to support the strategy.