Columbus Takes Notice of Merger Fever

Human service groups are trying different forms of merger, and some small groups retain their public identity after combining with larger organizations. 

Once again, the Columbus Dispatch is ahead of other newspapers in reporting on nonprofit trends.  A story by Rita Price sheds light on the trend toward mergers among social service agencies (Mergers Offer Nonprofits a Boost).  Mergers are perhaps the most obvious solution to the demographic crisis facing small organizations, but there are reasons why it is not the first choice of charities.

Previously we have picked up the Columbus Dispatch stories on the end of a moratorium on doctor-owned specialty hospitals and on home down payment assistance charities.

The focus of the article is the group On My Own (EIN 31-1130661 Form 990), which assists mildly disabled adults, and its impending merger with Goodwill Industries of Central Ohio (EIN 31-4379448 Form 990).  The seven member staff will continue to operate under its current name after the merger into Goodwill, which has more than five hundred employees.  Looking at the Form 990, it seems to me that one factor facilitating the merger is the fact that the current director Louise Alluis has a modest salary of $53,997.  Marjory Pizzuti of Goodwill has a salary of $189,964 (and just for comparison the Governor of Ohio makes $144,831.)

The Goodwill Form 990 seems to have some problems with correctly presenting the proceeds of special events and retail sales, and there is a problem with showing over half a million dollars in Other Expenses.

Encouraging the merger is the United Way of Central Ohio (EIN 31-4393712 Form 990), which has set aside $233,000 to assist organizations who want to merge.  (For perspective, UWCO head Janet Jackson receives $239,667 in compensation.)  On the other side, there is a quote from Audrey Alvarado, head of the National Council of Nonprofit Association (EIN 52-1689643 Form 990), who notes the interest in nonprofit collaboration (she avoids the use of the m-word) but also says that smaller organizations are better at identifying local needs and that bigger is not necessarily better.

The article notes some other local mergers.  LifeCare Alliance (EIN 31-4379494 Form 990) already combines under one corporate roof a Meals-on-Wheels program and visiting nurse services.  A few years ago it absorbed Project Open Hand (EIN 31-1423983 Form 990), which delivered meals to people with HIV and AIDS, using a staff of just three, but over 5,000 volunteer hours a year.  More recently it took over the Columbus Cancer Clinic (EIN 31-4379446 Form 990).  The clinic paid its executive director $105,507 and Project Open Hand paid its head $25,225 in the year prior to the merger (2003 Form 990).  LifeCare pays its CEO Charles Gehring $167,626, for running a $12 million program with 282 employees. 

In another merger, Direction for Youth and Families (EIN 31-4407642 Form 990) succeeded Crittenton Family Services and Directions for Youth.  The current operation has a staff of 121 and pays its director just $108,462. 

Maybe it's just a hunch, but I believe that the relatively modest salaries for the heads of these organization is one factor that facilitated their merger.  It seems to me that mergers are less likely to occur when CEO of the acquired organization earns far more than the rest of the staff, because post-merger the former CEOs salary would not fit with those of the surviving organization. 

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It seems to me that mergers are less likely to occur when CEO of the acquired organization earns far more than the rest of the staff, because post-merger the former CEOs salary would not fit with those of the surviving organization.

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