This article is part of our Strategic Thinking During a Pandemic series.
Last week I was invited to participate in a panel on how to support the nonprofit sector through the pandemic. We have worked in both the nonprofit and commercial sectors since founding Focused Momentum in 1999, so I thought I had a reasonably good understanding of how to approach this topic. But, being the geek that I am, I spent two hours reading through recent issues of my favorite philanthropy and nonprofit publications and then jumped into Google to refine my research.
It did not surprise me that much of the content I read was on fundraising, nor to read the reports on the dramatic shifts in revenue over the last six months (both favorable and unfavorable). Arts and cultural institutions have seen the most significant decrease in revenue and that health and human services are seeing growth. Resources are limited, and it is natural to prioritize the support of our community's efforts to fight the spread of the coronavirus and to help those most vulnerable to the physical and economic threats it presents.
It was also not shocking to read the challenges leadership teams are facing during the Shelter-in-Place restrictions. Every business in our community - especially those in the hospitality sector - are struggling with the same issues. However, I was bewildered to read in one study that only 23% of those nonprofit organizations surveyed are considering mergers.
I have seen this resistance before when conducting strategic planning with a nonprofit leadership group. At times I have had to advocate for the inclusion of a merger scenario in strategy development, only to see this option dismissed. Although generally viewed as not the most favored strategic alternative in the commercial area, I have never seen a for-profit leadership team dismiss it. Although I have never researched it, I believe nonprofit leadership views a merger as a defeat rather than a better way to serve its mission.
But, today, in these unprecedented times, with what we all know will be a protracted recovery, why are so few nonprofit leaders considering a merger?
They are not alone. The public sector is just as reluctant. In the San Francisco bay area, where I live, there are no fewer than 27 official transit agencies (by one count, there are over 150 transit organizations). One of the largest of these agencies, Bay Area Rapid Transit or BART, was struggling with a decrease in ridership even before this pandemic. But, since the Shelter-in-Place orders in March, it has dropped 89%. Are these agencies actively working to find ways to consolidate? No, they are resisting the calls from advocates, policymakers, and officials. Why? Where do they think the funds are going to come from to rescue and restore their operations?
The only option for the nonprofit and public sectors is to act now to explore consolidations in earnest with a keen eye on the mission. What leadership should not be blinded by now is fear. Fear of losing staff or their jobs, those positions may be more at risk without exploring mergers. There is often a fear of sharing an organization's coveted donor relationships. That is pre-COVID thinking. Your donors are not yours; they are your communities. There is also a fear of protecting assets so crucial to operations. There are ways to complete a merger and safeguard assets. Explore.
The leaders that embrace the possibility of mergers and consolidations early will showcase their strategic thinking skills and may just preserve their organization for a post-COVID existence.
For those of you in positions of leadership, advocate for the exploration of consolidations and a possibility of a merger. Work in earnest to investigate the opportunities available now, before the best are taken.
Does your organization need help to explore merger or consolidations options? We can help. Set up a free consultative call to outline your first steps.