Are there too many charities?
It is often said that there are too many charities doing similar or the same things competing for the same pot of money and the same beneficiaries. So naturally there should be many more mergers in the sector. I don't agree!
In my view this is a very public sector oriented view of the charity sector and one which fundamentally misunderstands what makes the charity sector work. We should challenge it robustly.
It is an argument based on an accountant's view of efficiency and fails to grasp the very real human factors that drive the sector. Many charities make a real difference for their beneficiaries not because they have the best ideas (though sometimes they do) but often because of the passion, dedication and loyalty of their staff, volunteers and supporters; people who go the extra mile because they care.
Mergers should not be forced
If mergers between charities are forced they often break that special bond of loyalty and commitment between a charity and its workforce. Too often I have seen this happen and quickly one of the merger partners ends up feeling disenfranchised, sometimes leading to a break away charity putting us right back where we started but with all the transaction costs of going round that loop.
Mergers should be "organic", with the idea emerging naturally from a deepening relationships between two or more charities (most often the relationship between the leaders, be they staff or Trustees). Trust is a critical factor in making mergers work, as is post merger integration (I'll say more on these issues in a future post).
The advantages of merging
Having said all that, I think there is definitely scope for more charity mergers. There are efficiency gains to be had in many cases but the real driver should be impact; making a bigger positive difference for beneficiaries. This could come in a number of ways, including:
- Bringing services together to offer a richer menu/package of support for beneficiaries.
- Generating new ideas through joint delivery and shared learning.
- Being able to support more beneficiaries as a result off make more efficient use of resources (through elimination of duplication of overheads).
Other advantages of merging (and being a bigger organisation) include:
- Being more competitive for funding and volunteers in an increasingly competitive environment.
- Having a stronger voice to influence policy makers and funders.
None of these outcomes from a merger are guaranteed, which is why I am a passionate advocate for mergers being an outcome that emerges from deepening relationships and for taking time to build trust and do it properly. if you do that your beneficiaries are much more likely to reap the rewards you seek for them. Moreover, the inevitable downsides to any merger (opportunity and actual cost, reputational risks etc.) are much more likely to outweigh the benefits.
Of course I recognise that some mergers happen from necessity (e.g. because one partner is struggling financially) and that in those cases they sometimes need to proceed quickly. That's ok but the risks inherent in such speed and necessity should be recognised by all involved and real care taken with post-merger integration work to maximise the chances of the merger being a positive benefit for everyone concerned, particularly beneficiaries.
I plan to write more in a future post on critical factors for successful charity mergers, including building trust and post-merger integration. Meanwhile, you can read more about our governance services or if you'd like discuss charity mergers in more detail please contact us for a free telephone discussion about your specific situation.