The M word. Often suggested by funders recognizing the abundance of nonprofit organizations doing similar work in a community, and equally feared by nonprofit leaders doing that work. Over the last few years, mergers have become a hot topic in the philanthropic world, bringing both their negative connotation of failure, as well as their assumption of ease and necessity.
Should all like nonprofits merge? It’s often not that simple to decide, according to Erin Suwattana and Genevieve R. Megginson, of Child Care Networks and Chatham County Partnership for Children. The two organizations officially merged in 2016, after a lengthy process that ensured the stability of their missions and their clients in the community.
“We were lucky to have the right mix of situation and people. That didn’t make a merger easy, it just made it possible,” said Suwattana. “You can’t just take two nonprofits and put them together. It has to make sense on so many levels, to the boards and the staff, and you have to be doing it for the right reasons, for your clients.”
For Child Care Networks, the motivation to merge was born out of major events, some stemming from a place of crisis. The long-term executive director retired in 2012, leaving room for change within the organization. In 2013, the nonprofit lost a major contract with the Department of Social Services that provided child care subsidy, leaving the organization scrambling to make up a third of its revenue. In 2014, one of the programs provided by Child Care Networks was in a serious deficit, and even though they were able to fundraise to meet the needs of their clients, the board was weary and looking for ways to secure the stability of the services they provided to a very large population.
“At that time, after we had struggled through these events, we started looking at creative ways to move forward,” said Suwattana. “We had a close relationship with Chatham County Partnership for Children already, and our missions were very closely aligned. This allowed us to approach their board to explore a merger.”
At the end of the year in 2014, the organizations applied for a Youth Literacy assessment grant through Triangle Community Foundation’s Capacity Building Partnership program, and they were awarded the funding to complete an assessment in 2015. Their goal? To determine whether a merger or shared services was something that could work, and be sustainable for these two organizations.
“We thought the concept of shared services was interesting but it did not offer the promise of stability and cost savings that we were looking for to sustain and grow. We realized through the assessment process that we could save money by merging and eliminating duplicative administrative positions and that that would give us the support we needed to potentially grow our services, the ultimate goal after all is said and done,” said Megginson of the decision to merge.
So the organizations moved forward. They applied for additional capacity support from the Foundation and were granted funding to being merger negotiations. These negotiations took place over three months, and included the two directors and four board members (two from each organization) to dig into issues including logos, benefits, supervisory roles, board makeup, mission, pay rates, organizational cultures, and more.
“We did not agree easily on all these issues,” said Suwattana. “I wouldn’t want anyone to think otherwise. But we had two executive directors and boards that respected each other, and were strong in their passion for their missions, and ultimately that allowed us to come to a place of real compromise.”
“We were driven by a strong sense that we could be much better together and that became our mantra throughout the process,” said Megginson. “It was hard at times and required very strong commitment from the get go.”
In October of 2015, the two boards agreed to the merger, and approved it as of the first of the year. Child Care Networks became a part of Chatham County Partnership for Children, and the two staffs combined to offer services to clients under a unified mission. But that doesn’t mean it was all seamless. Once the merger was official, the combined organization had to re-apply for two of Child Care Networks major contracts with their funding partners, the partnerships that allow them to provide the services they do, and until they official merged, they didn’t know if they’d win those bids again.
“The unknown was disconcerting, for me, and for our program staff,” said Suwattana. Not only did we want deeply to continue to provide these very necessary programs, but the loss of any of these contracts would have meant loss of staff. So it was definitely a risk, for us and for our clients, and those months were challenging for everyone.”
The bids were eventually won, leaving this merger story with a happy ending. The day to day operations are still being worked out, and growing pains are something that will iron themselves out over time, but the two women are very hopeful about the continued success of the combined nonprofits. No staff members from Child Care Networks have left, and that’s good news for everyone.
“Change can be scary,” said Suwattana. “But in the end, after this very long and hard process, I think we both are very happy with the success we’ve had through this process and the stability to provide the necessary services in the future for the folks in Chatham County.”
The Foundation believes in the importance of building strong nonprofits in our community, and funds merger explorations in addition to other capacity building assistance through Our Focus in the arts, community development and youth literacy. These two organizations used the reference tools “The M Word” and “Merge Minnesota” throughout their exploration and assessment, and recommend them to organizations looking for tools.