Managing Long Term – A space for mergers?
Charitable and not-for-profit organisations serve a unique function, offering public benefits through private and voluntary actions. Playing such an important and omnipresent role in the lives of so many of us here in Ireland and abroad requires this sector to operate in a manner as not to be wasteful with its resources and to achieve the greatest positive impact on behalf of its beneficiaries, donor, sponsors and patrons. These challenges have become more pronounced because of the recent economic collapse and consequential fall in fundraised income, and in part, due to the erosion of trust resulting from the failures within the sector. Coupled with this, a decrease in government funding, which previously had been a given and stable source of income, is now a new reality for many organisations. This is particularly poignant and ironic, coming at a time of greater need for the services offered by this sector.
With public perception of an overcrowded and highly competitive marketplace coupled with constrained public and private funding and the continuing public interest in how this sector is managed and funded, demands the sector to justify its effectiveness, fulfil its objectives and demonstrate its impact. In this period of great social, economic and regulatory change it is essential for organisations to assess their effectiveness and areas for improvement, to create more innovate flows of finance to secure their future and maintain public legitimacy and integrity.
By being viewed in the broad context of partnership and collaboration, articulating the value of mergers as a means of joint working could be an obvious answer, and part of the innovation to create value and an important means of making charities more effective by improving existing services, creating new benefits and saving money.
Mergers within this sector are not very common suggesting that the sector is not organised to maximise value. To help understand this we need to look at the structure of the sector and what defines the trends and behaviours around mergers, most being perceived as hostile and/or predatory, frequently driven by crisis but rarely seen as a means to growth. This defensive approach is in direct contrast to the growth seeking attitude that we often see in the ‘for-profit’ sector where acquiring companies is normal business creating value for shareholders. Charities worry that merging will reduce income and their ability to generate revenue often arguing that a merged charity will only attract one grant where two charities would normally get one each. Patrons, sponsors and donors prefer to fund projects rather than organisations so this reasoning should have no basis. A merger that is done well and reduces costs could be a powerful argument for attracting more funding.
Organisations managed as a single entity or formed by the amalgamation of two or more organisations is greater than the sum of its parts not only creating clear economies of scale but by consolidation: aligning mission, capital and impact strategies, will help to secure sustainability and growth whilst optimising efficiencies, ensuring long-term viability, funding growth opportunities and balancing risk. Each charity is unique and does a remarkable job given their size and budgets, but some have much in common. By coming together and retaining the best elements of both, organisations can boost what each has rather than compete for it.
But what of the opportunities for improving services for beneficiaries? What of the economic benefits, the opportunity that a hard Brexit could bring and the possibilities of mergers or alliances between Irish and UK charities?
The motivation for a merger needs to come from within with the broad support of trustees and staff and viewed as a strategic decision, driven by a desire to improve services for beneficiaries and achieving its charitable purpose. Foremost in the minds of trustees and executives should be the question ‘how can we achieve the most for the people we seek to help?’ Pursuing a charitable objective should encourage trustees and the executive to seek what is best for their beneficiaries, not what is best for their charity. Putting mission ahead of individual organisational interests should effect greater collaboration and an openness to merge.
It is time for those of us within this sector to find solutions to our recurring problems. Charities Institute Ireland does not advocate a merger without careful consideration or due process but does realise that an important obstacle to considering mergers and alliances is the availability of information thus making it hard to spot opportunities for collaboration and identifying potential mergers. Charities Institute Ireland, itself born of a merger, will over the coming months host a number of ‘Member Advisory Forums’ which will cover this important topic and discuss opportunities in greater detail.