Author: Matt Jakubowski
Prior to the COVID-19 pandemic, social service agencies were frequently having discussions about mergers and affiliations. Concepts like "efficiencies," "duplicate services" or "overlapping missions" led to boards and executives keeping their ears open to consolidation opportunities.
COVID-19 certainly slowed down due diligence projects and shook up the groundwork for this continued collaboration; however, the challenges that led to these discussions still exist. In fact, the pandemic has furthered some of these challenges and is continuing to create an environment where these unique transactions need to be pursued.
For years, social service agencies could remain small and independent while successfully achieving their mission. Recent history, however, has led to major increases in fixed costs, regulations and program oversight while funding has stayed stable or, in some cases, decreased. Organizations will need to grow to survive and a strategy to do that is joining forces with peer organizations. At a minimum, considering collaborative partnerships to fill voids in the community is on the minds of top performing social sector leaders.
This pressure to consolidate needs to be tempered with a thoughtful approach.
- Are we still committed to the communities we exist to serve?
- Does this consolidation put our reputation at risk?
- Is our base strong enough to grow so quickly overnight?
- Are there opportunities to expand our reach with complementary services and capabilities?
- Have we contemplated the effects this could have on all key stakeholders?
- Are we entering these transactions for the sake of being bigger or for the sake of greater impact?
The name "nonprofit" can be misleading — while these organizations are tax exempt and do not answer to shareholders, they still require margins. Nonprofit management leader Peter Drucker could be heard often saying, "why do we call ourselves nonprofit when we need to make a profit?" Some are heard saying, "no mission, no money," and "no money, no mission." Moving into the future, the competition will continue to get fiercer and nonprofit executives will need to continue to adopt a growth mindset in new and different ways — part of the re-imagining coming out of this life-changing pandemic.