When reading this week's article, "Seven Ways to Fail Big" by Paul Carroll and Chunka Mui, I was reminded of the popular trend of merging in the nonprofit world. Rising costs and diminishing contributed income are among the biggest reasons for troubles within nonprofits, especially in the last five years of recession. There are less and less resources trying to support a still growing sector of nonprofit organizations. Many nonprofits have chosen to merge with hopes in decreased administrative costs and an overall larger presence resulting more financial resources. Although this is a good idea in theory, there are many ways in which merging can fail. The following three problems are what I believe to be the biggest issues in a nonprofit merge.
1.) Clashing Organization Cultures and Customers
Just like in for-profit mergers, nonprofits can face difficulties when their organization cultures and/or customers clash. For example: The Carnegie Museums of Pittsburgh (CMP) is made up of the Carnegie Museum of Art, Carnegie Museum of Natural History, Carnegie Science Center, and more recently the Andy Warhol Museum (AWM). The Andy Warhol Museum joined CMP in 1994 and has been a successful museum. However, there are challenges having two very different museums under the same organization. The AWM is more cutting edge and at times controversial when compared to CMA. Problems occur when donors are offended by AWM and stop their donations to CMP, which means less money to CMA. It is extremely important to consider if the organizations wishing to merge complement each other and don't confuse that with clashing. 1
2.) Different Goals
This may seem like a no-brainer, but there are plenty of times when the goals of merging organizations don't match up. This can cause major problems when deciding on a strategic plan, market placement, etc. Consider the Kelly Strayhorn Theater and Dance Alloy. These two Pittsburgh performing arts companies went through a merge last year. Overall they have been successful. However, I predict that there will be future problems due to differences in long term goals. Part of Kelly Strayhorn Theater's long term goal is to help revitalize the community of East Liberty. Dance Alloy still has a studio outside of East Liberty where they do most of their dance classes. Education is a large part of both of their missions, but if the classes are happening outside of East Liberty, Kelly Strayhorn may have difficulty achieving their long term goal. 2
3.) Less Administration but Larger Workload
Merging and reducing administrations does not necessarily mean long term savings. The thought is that when two nonprofits merge, they can reduce and share one administration. Nonprofits are already strapped when it comes to human resources. Sharing one administration with double the work load will not be sustainable. Instead, organizations should concentrate on efficiency vs. administration size. A more efficient administration is a money saving administration. In fact, a smaller administration that is overworked may end up costing more in the long run with overtime costs, turnover, and mistakes made. 3
1.) "About Us." Carnegie Museums of Pittsburgh. N.p., n.d. Web. 02 Dec. 2012. <http://www.carnegiemuseums.org/section.php?pageID=102>.
2.) "Dance Alloy, Kelly-Strayhorn Theaters to Merge." Pittsburgh Post-Gazette. N.p., n.d. Web. 02 Dec. 2012. <http://www.post-gazette.com/stories/local/breaking/dance-alloy-kelly-strayhorn-theaters-to-merge-319730/>.
3.) "Stanford Social Innovation Review : Informing and Inspiring Leaders of Social Change." Merging Wisely. N.p., n.d. Web. 02 Dec. 2012. <http://www.ssireview.org/articles/entry/merging_wisely>.