This year marks the 10th anniversary of the publication of a great book about nonprofit mergers and partnerships: Forging Nonprofit Alliances, by Jane Arsenault. In honor of this anniversary, I decided to interview Jane about her work at FIO Partners (f-ee-oh, which is Latin for “become”), where she has facilitated two dozen mergers, networks, partnerships, and parent corporations during the past 15 years.
Mission Plus Strategy Consulting: How did you come to write Forging Nonprofit Alliances?
Jane: I was doing a lot of work in health consulting in the early 1990s, and during that period managed care was very big in the country and it was rolling over a large number of hospitals. Mergers and parent corporations became widely considered as the way to go and my clients asked me: Are we going to have to do this? How should we do this? I started looking around for resources to learn how to do nonprofit mergers and I couldn’t find much that was helpful so I went on a journey of discovery in the for-profit world learning about mergers there, and then trying to understand it from a nonprofit organizational development perspective as well as from a legal and fiscal perspective. I felt like I had to translate a lot of the information into nonprofit language and to understand the implications of the issues from a nonprofit perspective, as well. That’s what eventually led to the book.
Mission Plus Strategy Consulting: Have you primarily facilitated mergers, parent corporations, or both?
Jane: It’s really been a mix of both parent corporations and mergers. Looking back at my work over the past 15 years, there has only been one entity that utterly failed, or broke apart out of 23 or 24 facilitations that I’ve done. And the one that failed had more to do with several foolish choices by the CEO of the merged entity than anything else.
Mission plus Strategy Consulting: That’s a remarkable track record—one failed entity out of 24 facilitations. Do you feel that merger/partnership strategy is more or less relevant today than it was when you began this work?
Jane: In a funny way we’ve come full circle to the same place we were 15 years ago. At the time, managed care was the juggernaut that was supposed to roll over the healthcare industry and then keep going to the human services sector. But then that juggernaut slowed down and stopped in terms of its growth and didn’t really encroach on the mental health and human services sectors. At this point today, though, managed care is coming back because state governments are in such trouble. Something like 40 states are looking at Medicaid reform and several are considering capitated contracts for mental health, residential and human service programs. These changes are likely to affect providers of service to elderly, child welfare, and all forms of human services and is exactly what we had envisioned happening back in the 1990s. This is putting tremendous financial pressure on nonprofit agencies serving these populations to consolidate into networks and consider other models including outright mergers for smaller entities.
Mission Plus Strategy Consulting: If mergers are a good strategy for government-financed nonprofits, why aren’t we seeing more organizations merge, or hearing about the merger strategy more?
Jane: There are two problems I can see. First, mergers are an expensive strategy and I don’t see a lot of money on the table for organizations who want to merge. Funders don’t seem to want to help consolidate the sector by creating a pool of dollars for this purpose. Second, there just aren’t enough trained consultants to go around. We need more consultants trained in merger/partnership facilitation. The state of Rhode Island alone has instituted a 10 percent budget cut to human service agencies in 2007 and again in 2008, with no promises that there won’t be further cuts in 2009. That has caused tremendous stress on organizations so we now have groups of organizations coming together that want to consolidate in various ways (networks, mergers, parent corporations, and shared management services). Our firm is working hard to handle all the demand right now but we need more consultants trained in this work.
Mission Plus Strategy Consulting: What advice would you give to a human service nonprofit considering a merger or parent corporation strategy?
Jane: Third party facilitation is important. I’m familiar with a group right now that has been meeting for four months and going nowhere because they haven’t hired an experienced facilitator. A good merger/partnership facilitator should be able to help you design the process, the flow of the steps, and so on, so that’s the first step to take. The second thing to consider is to look for organizations where you have common ground around principles and values. Third, make sure that your vision is bigger than either of you. The outcome you are striving for—what you get, what the community gets—has to be compelling in order to make it worthwhile to change corporate control. You can’t do this for frivolous or inconsequential reasons. Keep your vision in front of you at all times. The process of consolidating is laborious, it takes time, longitudinally, day-to-day, and week to week, so you have to stay motivated.
Mission Plus Strategy Consulting: Jane, I’d like to thank you so much for your time and your many contributions to the knowledge of nonprofit mergers and partnerships. And congratulations on the 10th anniversary of the publication of Forging Nonprofit Alliances.
Jean Butzen, a consultant with Mission Plus Strategy, specializes in mergers and alliances in the Chicago area.