Taking A Closer Look at Mergers

pic_mergerA consensus is building around the idea that mergers, in these economically challenged times, can help the Jewish world “do more with less.” Pooling resources and sharing costs can indeed stretch scarce dollars, but there are some serious pitfalls too, starting with why mergers are contemplated in the first place.

In the for-profit world, companies merge to accomplish a strategic objective like consolidating market share, increasing shareholder value, or improving operating efficiency. These are medium- to long-term goals that respond to a marketplace opportunity. When mergers are touted for Jewish nonprofits, however, the reason is usually short-term economies like sharing overhead. That kind of short-term thinking is both unwise and unrealistic.

First, as a practical matter, overhead isn’t greatly reduced simply by combining accounting or fund-raising staffs, or by sharing space. The staffing still needs to be adequate to perform the tasks of the combined organization, and there still needs to be enough space for the combined staffs. Successful mergers are based on complementary strengths, not on cutting administrative duplication. And, crucially, they work only if the organizational cultures and leadership styles are compatible.

Most of the recent talk about mergers has centered on what seems like common sense: bringing together organizations with similar missions, often in the same city. Whether it’s synagogues or schools or other communal service institutions, the notion is that a shared future brings greater efficiency, strength, and security. That can certainly happen, but not by melding departments and cutting costs. It’s the intangibles that count.

For two nonprofits to join together successfully, they need to share core values – not platitudes or a superficial resemblance, but a concrete belief in why they exist and what they want to accomplish. Their organizational cultures also have to be compatible: hierarchical or participatory, formal or informal, fast-paced or slow-paced. The leadership styles need to be able to mesh as well. A charismatic leader sets a very different tone from a highly-organized, efficiency-driven manager. On the board level, some are very involved in operational issues; others deal largely with policy matters.

Finally, there needs to be an explicit plan for integrating the entities that describes the transition and the desired outcomes, and that plan has to be shared with and accepted by the constituencies affected by it. A clear strategic vision, communicated transparently to everyone with a role in making it happen, is not just desirable: it’s essential.

In the end, it’s all about people. Merged organizations are seriously vulnerable to divergent expectations, clashing egos, poor communication, and differing workstyles. That’s why so many mergers fail to accomplish their stated purposes. So let’s think twice before reflexively urging challenged organizations to join forces. It’s one bit of conventional wisdom that isn’t so wise.

Bob Goldfarb, a senior adviser with the Arts Consulting Group, is an occasional contributor to eJewishPhilanthropy. He is the president of the Center for Jewish Culture and Creativity.