Recommendation: charity mergers

Mission statements are gospel to their authors: they are the indivisible, fundamental and distinct expressions of a non-profit agency’s purpose.

It is no wonder, then, that most non-profit staff and leaders bristle at the very thought of joining forces with another agency. To work in partnership with another organization when missions overlap is one thing, but to actually combine philosophies, methodologies, donor support, and administrative structures into a single entity?

How horrifically corporate.

Initially it was hoped that the current financial collapse might somehow bypass the charitable sector. But bad things happen to good people.

The situation has clearly become more grave. Reports indicate that large scale philanthropy is on the decline, and even some foundations--with their shrinking endowments--are agreeing only to fund past commitments. Mal Warwick and Associates offers a perspective that direct mail donors were also less responsive in 2008, especially in new donor acquisition programs.

There are, admittedly, a few visionary donors and funders who know that the charitable sector MUST increase services in times of economic hardship. The MacArthur Foundation, for one, has indicated it will remain actively granting in 2009.

What is the charitable sector reponse? Some are reducing services, laying off staff, closing branch offices, and managing within their even leaner than usual means.

But, what about merging with a similar organization?

Even a casual review of the proliferation of charities in the last decades makes it all-too-clear: It is not that there isn’t enough money to support charitable causes, it is that there are too many charities doing similar work. It is dog eat dog between fundraising departments, and that competition costs money and time.

The beneficiaries are collateral damage in the escalating war for market share.

In the US, for example, one estimate indicates that before the economic downturn, 115 new non profits were started each day. In Canada, there are now more than 83,500 registered charitable entities.

1 charity for every 400 Canadians. Seems pretty extravagant.

Some might argue that more charities can offer more services, but common sense forces us to at least consider that there may be economies of scale if there were fewer, but larger, charities.

For example, there are 687 charities dealing with “Protection of Animals” in Canada, according to the Canadian Revenue Agency. By merging some of these worthy organizations, the infrastructure, staff, administration, and overhead costs could be reduced considerably.

Donors implicitly understand that giving larger amounts to fewer organizations means that less of their total annual charitable contributions will pay for overhead and fundraising expenses.

I assert that eventually donors will demand this change, especially as they get requests from organizations with similar mandates through the typical policies of list trading within the direct marketing prospecting world.

Heresy, you say?

Well, there have been success stories. VSO International and CUSO merged as of November 1, 2008 to become the largest volunteer sending agency in Canada. They had very different working environments, volunteer recruiting procedures, staff, and pedigrees; nonetheless, they have managed to merge to better serve our community. In their words:

A merged CUSO and VSO Canada can also learn from the best practices of the two agencies. We want to have greater development impact overseas, and better promote global citizenship at home.

The Bridgespan Group did a longitudinal study over 11 years to determine that in the US, about 1.5% of non-profit organizations merge each year (which is comparable to corporate figures of 1.7%). Most of these mergers affect the small charities.

There is even a term that is being coined to describe the vertical integration of direct service providers, advocacy organizations, coalitions, and government involved in a given field: social movement innovation

Donors and funders, I assert, are rational actors whose motivation to give is based in part on a desire to see their contributions affect the greatest change. The challenge, then, is for charities to seek more efficient ways to fundraise, and to spend less time on marketing to differentiate their “brand” from their closest competitors.

Perhaps most important, once the mission statements are reconciled, the beneficiaries of the charitable work will be served better. This would be a just change in focus.

After all, the beneficiaries--not the donors, and not the staff--are the purpose of charity.