Funders encourage two social service agencies to merge in Boston, while Silicon Valley community foundations eye integration as part of a leadership transition.
Consultant and author Thomas McLaughlin of the accouning firm Grant Thornton laid it on the line in a recent Christian Science Monitor article: Nonprofit mergers, he said, "used to be an 'm-word' I didn't dare say in public." (This from the man who literally wrote the book on the subject.)
But things are changing. The Boston Globe reported back in April on the merger between the Women's Union (EIN 04-1983390 Form 990) and Crittenton (EIN 04-2104046 Form 990), two organizations with a long history of assistance to women and families. Both organizations have annual expenses of about $5 million and a staff of about 100, and in many respects it appears to be a merger of equals. Without saying so directly, the Globe article implies that local funders encouraged the merger as a way to reduce the number of organizations making appeals for similar causes.
Yet mergers remain difficult. A study back in 2000 on strategic restructuring surveyed 192 organizations about their restructuring experiences. The biggest concern voiced by organizations was "loss of autonomy," "building trust," "staff adjustment to new roles," and "conflicting organizational cultures." (The full study is available on the linked page, but registration is required.) Because of the autonomy issue, sometimes the best time for a merger is when an executive leaves.
That's what could happen in Silicon Valley, according to Sal Pizarro of the San Jose Mercury News. Sterling Speirn, the CEO of Peninsula Community Foundation (EIN 94-2746687 Form 990), was tapped to lead the W.K. Kellogg Foundation (EIN 38-1359264 Form 990 32Mb(!)) in Michigan. Peter Hero has led the Community Foundation Silicon Valley (EIN 77-0066922 Form 990) since 1989. The 62-year-old Hero is reportedly looking for a way to transition out. So the two organizations are talking merger.
The Peninsula group is a good bit larger than CFSV in assets ($565 million in December 2004 vs $375 million in June 2004), grants ($109 million vs. $59 million) and staff salaries ($3.8 million vs $2.3 million). But Mr. Hero earns in the mid-$300,000s and Mr. Speirn in the low $300,000s. A merger along with retirement of Mr. Hero could be a way to find a new director (reducing search costs) and fund and justify a severance agreement.
Mergers may be the best solution to the excessive number of nonprofit organizations, but the personnel issues mean that someone has to be in a position to push for that kind of strategic move at the right moment.
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