Making sure NFP mergers meet expectation

There’s no doubt the not-for-profit (NFP) landscape in Australia is in the throes of perhaps its most significant change in decades, driven largely by the ongoing expansion of the National Disability Insurance Scheme  (NDIS).

And there’s no doubt that mergers are high on the list of board actions undertaken to, mostly, make the organisations more attractive to funders and more compliant with greater governance requirements.

But mergers – in the commercial world as much as in the NFP sector – bring their own challenges.

They’re seldom if ever a solution in themselves; rather they’re just one of a number of tools at our disposal, that we can call on and utilise to arrive at the solution.

I was reminded of this transforming – and at times tricky – terrain by a most insightful piece I recently came across in Pro Bono Australia, where the author, Charlotte Sandell of HLB Mann Judd, notes that any successful NFP merger must provide real value to the clients, the community and the members of the merged organisations.

Ms Sandell stresses the need for the boards of the merging entities to consider the value proposition of the newly merged organisation, arguing that potential cost savings from shared administrative functions is not enough as these may well take time to filter through.

The questions they should be asking should centre on the value the merged organisation provides compared with what’s offered by the standalone organisations – and the ‘value’ needs to relate to their clients, communities and members post the merger.

She also highlights the importance of both boards appreciating that undertaking a merger is not a strategy in itself and needs to be seen for what it is – a tactic that may assist an organisation in executing its strategy.

Ms Sandell goes on to flag the need for the boards to give ample consideration to whether a merger is, in fact, the best tactic to address the challenges faced and calls on them to be clear and convinced that the merger will enable the new organisation to capitalise on a strength, improve an area of weakness, make the most of an opportunity or manage a threat.

Finally, she says that unless the key issues of governance and leadership of the merged entity are identified, consulted on and resolved early in the piece, there’s every chance they’ll become significant hurdles; perhaps even potential derailments either during the merger talks or once the new entity is up and running.

We need only think of the structure of a merged organisation, its name and who’ll serve on the board to appreciate how important this is.

Again, Ms Sandell reiterates that any decision in relation to the ongoing governance and leadership of a merged organisation must consider how it will benefit the clients, the community and the members of the organisation.

So while mergers may well allow us to broaden our reach, deepen our level of expertise, increase our policy influence with government and enhance our attractiveness to donors, there’s a crucial rider – we must make sure they also meet not only financial expectations but, equally importantly, those of a cultural nature.

 

Until next time,

Kate.

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