Lessons from the Merger Culture War

by N. Paul TonThat, Associate, Interim Executive Solutions

A Vision/Mission statement for an organization undergoing transition and/or merger is that most exquisite and powerful of commodities. If it is focused, precise

N. Paul Ton That

and singularly inspiring, it will almost define entirely alone the new or changing organization’s program and governance. On the other hand the mission statement is bound to fail if the focus is overly broad, the standard of services is undefined, and the definition of success is left unspecified.

An Uncomfortable Truth

Organizational merger is first a contest of power, will and influence before it is an exercise about increasing organizational efficiency

and effectiveness. If this contest is to be fair and result in improvement for the merger partners, there must be a singularly inspiring principle – the vision/mission thing – by which all events and decisions are judged. The inspiring principle must be unassailable and be held valid and self-evident by all parties to the merger.

Program metrics must also align to the unassailable and self-evident ‘truth’ or principle. Otherwise historically more powerful departments with more forceful programs and presentations will win the contest for validation over weaker departments and less evident programs, even if those departments and programs offer more relevant services for the merged nonprofit’s client base. The same hold true for staffing. The staff left standing after the merger will be those most ‘wired’ to decision-makers rather than those with less political currency but most capable of delivering services related to the vision/mission.

Governance is Not Immune

Much written has been written about board process and how leaders emerge in mergers and transitions. In our experience when two boards merge there is immediately a ‘negotiation’ between the established ‘champions’ of the respective legacy boards. This is followed by a subsequent negotiation between the team of victor’s emerging from the initial negotiation and the remaining board members. For these board negotiations to be most productive, and not destructive to the merger, the primary reference must be the focused vision/mission thing. Again, it must be precise and singularly inspiring to empower and guide the inevitable board negotiations and emerging power delineations.

Judgments on Leadership Also Impacted

Leadership of the merged organization, and its legitimacy and power currency, must be aligned with the self-evident vision/mission statement as the merger occurs for it to emerge empowered with increased effectiveness. Department and program leadership judged instead on historical loyalties or other factors will only add to the challenge management has later on reformulating the new organization’s structure, retaining superior staff and continuing and strengthening the most effective programs. It may be possible to refocus an organization and change staff leadership later but it will demand precious managerial time and resources better left focused elsewhere. The best time to act on leadership is as the merger is being designed and implemented.

The Opportunity Envelope

One peculiarity that has been observed is the pause in expectations from donors, funders, competitors and customers during a merger or transition process. This pause, and accompanying suspension of critical judgment, is longer for a merger and shorter for a transition. It’s imperative that merger designers determine the precise length of this permission envelope. At the conclusion of the pause, stakeholders will evaluate the success or failure of the merger/transition. Therefore it’s also important to determine what factors constituents will use to define ‘success’ for the new endeavor. If merger/transition leaders know these success criteria they can craft a process that meets them. It’s crucial to meet or beat those success expectations before the opportunity envelope closes and evaluation commences. A merger or transition judged “successful” positions the new organization programmatically, organizationally, and functionally at the optimum level in the stakeholder eyes. There is a considerable body of evidence demonstrating a funding/fundraising dip immediately after a merger or transition. If the merger/transition candidate can be positioned as successful within the acceptable timeframe, this fluctuation in fundraising can be minimized.

The New Choir

When organizations change, so do the populations who support them. This is especially true for organizations undergoing mergers and transitions. When nonprofits merge to expand their geographic reach or program scope, leaders are often surprised to discover that many who supported the singular-focused or more local and smaller original organization do not support the new and allegedly improved organization. Not everyone can be counted on to support the revised vision/mission. There will always be those who prefer local focus and simple mission. When merger and transition designers plan to expand beyond local and original mission, they need to reach out to those who will embrace the larger vision. A changed organization must develop a ‘new choir’ comprising new voices as well as old singers. In the end the new organization’s financial health will depend on the ability of its leaders understand its historical base, to adapt their message to appeal to new supporters who can see the potential of the future, and to move new donors into a fuller capacity to give. This supporter building work must be done within the opportunity envelope discussed earlier. Focus must be on the rate of new support ‘infusion’ exceeding the rate of inevitable original supporter ‘drop off’ by those whose vision the organization has outgrown.

A Few Rules for the Merger/Transition Road

If nonprofit transitions and mergers were easy, there would more of them happening every day. There aren’t. But there are some hard lessons learned that can maximize the chances for success:

  1. Develop a powerful, focused vision/mission statement and use it to judge every decision
  2. Expect conflict and negotiation – change is about power and competition. Use the vision/mission statement to keep the process fair and effective
  3. Act early to manage leadership choices
  4. Seize the opportunity envelope to position the new organization for success
  5. Build a supporters choir combining new and old voices, new givers will be needed to replace those who chose to retire