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For discussion

September 2012

Nonprofits in post-recession times: rebuilding; merging; thriving

By Paul Mattessich, Minnesota Compass and Wilder Research

 

Paul Mattessich

Hull House in Chicago, the iconic model of a nonprofit multi-service agency, the original “settlement house” founded by the Nobel-prize-winning social worker, Jane Addams, closed its doors abruptly in 2012 – succumbing to the formidable social and economic challenges faced by contemporary nonprofit organizations.

Times are tough. We know that. Those of us who manage organizations serving the community and who have worked through demanding times before also recognize that, with creativity and hard work, we can persevere; we can succeed in continuing to meet the needs of the community.

A recent United Way conference, New Structures for New Times, reviewed the challenges which nonprofits face and shared findings from a new study by Wilder Research and MAP for Nonprofits that elucidates one approach potentially useful for some agencies to preserve and strengthen services.

Regarding the challenges, Sarah Caruso, Greater Twin Cities United Way president and CEO, identified a triple threat: First, the number of nonprofit organizations has increased, yet resources to support them have not. Second, social needs have increased. More people live in poverty. Third, funds to address needs will decline. Government funding will decrease, and private philanthropy (individual donors and foundations) cannot make up for that decrease.

Paul Grogan, president of the Boston Foundation, reiterated the same three threats in his assessment of the environment which presently surrounds nonprofit organizations. He warned the audience – comprised of over 500 people, mostly leaders of nonprofit agencies and foundations – that nonprofits currently focus too little attention on sustainability. They must realistically take a long term look at themselves.

Nonetheless, neither of these speakers became messengers of pessimism. Both remained resolute that we can overcome the challenges facing us. Grogan suggested that we must work to have the sector as a whole “be all that we can be.” Caruso emphasized that our goal is to meet needs, not to preserve specific organizations. Taken together, these remarks set up the discussion of one reasonable approach for some organizations to consider: Merge. Combine strengths with another organization in order to sustain community impact in the face of declining resources.

Greg Owen of Wilder Research outlined some factors which make mergers more successful. For example, having an “executive champion,” strong board involvement, and line staff involvement in the transition activities correlated positively with success. He pointed out that, even if mergers produce long term financial advantages, they can still have a negative financial effect in the short run. Putting into play the factors identified by the research can mitigate those negative effects and contribute to long term financial health.

Organizational mergers don’t offer the solution to all problems, but they can serve as an effective remedy for some problems. In appropriate situations, merger participants will find very practical insight that comes from this study.

 

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