Nonprofit Mergers: The Missing Ingredient

Retired four-star General Stanley McChrystal knows a lot about leadership. And this former Commander of the Joint Special Operations Command and US troops in Afghanistan has already shared his wisdom with the military, corporate clients, high government officials, and readers of his management book, Team of Teams.

But as we discovered first-hand last year, he has a lot to teach social sector leaders, as well. Leadership lessons from General McChrystal’s 34-year Army career are a big part of why three organizations successfully merged, and why Service Year Alliance (the resulting organization, which I lead) exists today, working to unite and expand the field of full-time service programs and recruit and inspire young adults to serve.

Interestingly, all of McChrystal’s valuable input essentially boils down to one major directive: Put your mission first.

This might sound obvious. After all, nonprofits are, almost by definition, mission-driven. When Peter Drucker wrote his seminal article, “What Business Can Learn from Nonprofits,” nearly three decades ago, “Start with the mission” was first message on his list. However, mission rarely motivates nonprofit mergers. Crisis and convenience are far more common catalysts. A study of 41 Minnesota nonprofit mergers by MAP for Nonprofits and Wilder Research found that “for 80 percent of the mergers, an executive director had recently left or was soon to retire in at least one of the pre-merger organizations.” And it is increasingly common for large nonprofits to acquire smaller nonprofits through mergers. Is it any wonder, then, as the SSIR article “Why Nonprofit Mergers Continue to Lag” explains, that many nonprofit mergers derail due to strategic, practical, and emotional factors, such as board alignment, roles for senior staff, and blending of brands?

By contrast, we didn’t merge because we had to or because any of our organizations were struggling. Rather, we put our individual brands aside and came together as one organization because it was the best way to advance our shared mission of making a year of service a common opportunity and expectation for young Americans. And that may be why we’re a strong whole today.

Our Case Study

In 2014, four nonprofits were working in parallel to expand national service in America. ServiceNation, a campaign of Be The Change, Inc., founded by Alan Khazei, focused on building a grassroots advocacy force and marketing campaign. The Franklin Project, founded by General McChrystal at the Aspen Institute with help from vice-chairs John Bridgeland and Alan Khazei, held convenings to expose influential thought leaders to national service and encourage the creation of new programs. The Service Year Exchange, which I founded and incubated at the National Conference on Citizenship, was the first-ever technology platform to certify service year programs and enable young people to find positions. Voices for National Service managed a membership-based coalition of service leaders focused on pushing federal national service legislation.

These four organizations had big goals and were making a notable impact in their own areas of expertise. However, seeing the potential for much greater collaboration, General McChrystal brought us together for a retreat. Two days of deep discussion led us to conclude that we were four organizations that shared one mission.

Given this shared purpose, we began to work more closely together and pursued joint funding opportunities. Then, motivated by a conversation with the Einhorn Family Charitable Trust (EFCT), we began to ask ourselves some serious questions. We were all working to expand service in America, but what would it really take to go beyond incremental growth and achieve real scale? And would we do things differently if we were actually accountable to each other?

With support from EFCT, we hired a consulting firm to help us answer those questions. For the next ten months, leaders of the four organizations met regularly to develop a strategic plan to scale service years. Together, we dissected trends in national service funding, market research, and field surveys. We talked to hundreds of practitioners, funders, and alums.

The result was a new vision and goals for our collective work, as well as a strategy to achieve it. We defined “service year” as a term and set a goal of 100,000 young people doing a service year in four years, 250,000 in a decade, and 1 million in a generation. We prioritized activities and identified areas where big bets were needed. We built rationales for all of these decisions.

These were positive steps. And we might have stopped there and gone back to business as usual: loosely partnering on big initiatives tied to our collective work, while in practice, running our own organizations, answering to our own boards, raising resources from our own funders, and—ultimately—moving in whatever direction made sense for our own organizations.

But instead, realizing that our shared mission would be best served if three of our organizations merged into a new entity, we bet on the power of joined forces. (The fourth organization, Voices for National Service, as a membership organization, elected to remain independent, believing its advocacy goals would be best served with multiple organizations pushing for the same policy outcomes.) The resulting Service Year Alliance, a nonprofit organization structured as a joint venture between Be The Change, Inc., and the Aspen Institute, officially formed in January 2016 with General McChrystal as its board chair and Alan Khazei and John Bridgeland as vice chairs. (The incubator of the third merged organization, Service Year Exchange, elected not to play a continuing role.)

Lessons From Our Merger

My greatest takeaway from our experience would be this: Keep mission front and center. Take ego out of the process and focus on what will have the most impact. This is where General McChrystal’s leadership was most felt. Many times, he expressed his unwavering dedication to seeing more young people do service years, and that was always his hard line in discussions. He was one of the first people to voice support for the merger, even when it meant the organization he founded would cease to exist. The other founders followed his leadership.

We also learned several other things about what it takes to merge organizations out of strength rather than weakness:

• Come to the table as equal players. Our organizations had wide-ranging budgets, histories, staff sizes, and brand equity. Despite these differences, we respected each other’s work and understood the unique perspective each organization brought to the conversation.
• Share information and make views and aspirations transparent. When we started, we did not know we were on a road to a merger. In fact, there were often competing viewpoints about the best path forward. But we worked to make sure we were all working off the same knowledge base and knew when one of us was acting on assumptions that needed to be discussed.
• Make sure you have an honest external broker. I doubt we could have so constructively entertained the idea of a merger without an independent consultant leading our process. She had no dog in the fight and consistently pushed us to evaluate what was best for the mission and vision we all agreed on at the beginning of our process.
• Tap an internal leader to drive the process. It’s easy for areas of disagreement—perceived or real—to stall talks. Jay Mangone, the director of the Franklin Project who led the merger progress, doggedly kept everyone moving and confronting the hard issues.
• Budget for the transition—and find the right funder. There are not only costs associated with external consultants but also significant investments of staff time needed to explore and play out alternative forms of the new entity, broker pieces of the agreement, set up and staff meetings, and share information. The EFCT team was an incredibly important asset to our overall process, not just for the resources they provided to support the process, but because they shared our willingness to see where the process took us. They understood their influence and did not push us toward any particular outcome. They let the process be ours, taking a check-in approach to our progress.
• Keep the boards involved. Ultimately the boards of each participating organization must approve a merger. We engaged board members each step of the way so that when the final decision needed approval, they were ready to give it.

Now, as we begin our next phase—advancing a strategy plan as a new organization—we can reflect back on our merger experience. Nonprofit mergers are no easy endeavor. They take commitment, dedication, patience, and perseverance. But if you believe that your mission can be better served by joining forces with other organizations working toward the same goals, Service Year Alliance is proof that merging is an idea worth exploring and might just land all parties in a stronger position to effect change. 

Read more stories by Shirley Sagawa.