Here we go again: whose urge to merge?

Check out yesterday’s New York Times piece about a trend toward mergers among nonprofits.  Looks like deja vu all over again: in 1997 your faithful correspondent wrote about the selfsame trend for Chicago Philanthropy
(of blessed memory).  In the 1980s the United Way got credit for
pushing charities toward consolidation and its attendant efficiencies;
in the 1990s the pressure ostensibly came from the foundations.  Today,
apparently, the moving force is those new ultra-skeptical
entrepreneurial donors who expect not an ounce of fat on their trophy
charities.  The coverage is the same–only the names have been changed.

To protect the guilty, maybe?  Nonprofit executives have the same
motive to seek mergers and acquisitions as for-profit executives,
namely, to improve financial results without the bother of actually
improving what they’re doing.  It’s a lot easier to fire an extra
accounting department and trumpet your "efficiency" than it is to make
a new product people can’t live without.  And while you’re at it you’ve
eliminated a competitor whose efforts might have outshone yours, and
with him the likelihood that consumers will be able to find something
they prefer to what you’re offering right now.  So you’ve increased
profit and reduced financial risk without actually producing anything
of value.  No wonder M&A  people get paid so much: they make bricks
without straw.

If you run a nonprofit, you can do the hard work of persuading
people that what you do is worth supporting with their charitable
dollars, and the even harder work of offering your clients the best
possible service at the lowest possible cost to them and everyone else,
and the still harder work of determining whether those services or some
others would actually solve their problems and taking action based on
the outcome of that evaluation.  Or you can look around for someone
else’s accounting department to fire, and someone else’s Board of
Directors to poach; and your Board can continue its untroubled sleep
and your services can remain in their comfortable groove because
there’s no one left to challenge the way you do things.  And if anyone
complains?  Blame it on the funders.

Somehow the whole thing is made more delicious by the fact that the merger at the core of Stephanie Strom’s article is one between the two largest clearinghouses for volunteers (as the superseded name, Points of Light, recalls: "a thousand points of light . . .").
The original idea, of course, was that solutions to social problems
should come individually and locally; but the behemoth which will
result from the merger will "work[ ] with more than 80 percent of
people volunteering in America each year."

If someone proposed to take control of 80% of any other valuable
resource–oil, say, or bandwidth–the Antitrust Division of the Justice
Department would have something to say about it.  At what point does
"market dominance" in the nonprofit sector begin to pose a similar
danger to proper economic function?

You know those complaints we all hear about the difficulty of
finding suitable volunteer opportunities, on the one hand, or qualified
volunteers, on the other?  If that’s what the current system produces,
does it make sense to reduce the number of available alternatives?

It does if your goal is to be able to ignore complaints.  For, as
the great Lily Tomlin said about a monopoly of an earlier era, "We don’t care.  We don’t have to.  We’re the phone company."

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3 Responses to “Here we go again: whose urge to merge?”

  1. Russ Burke Says:

    Nonprofiteer:

    Once again you stoked up an issue that so easily eludes poeple when they think that efficency can always be bought by a reductionist strategy.

    Possibly, your POV can become one of the primary arguments for encouraging nonprofits to collaborate in service and program planning and expansions.

    Collaboration, in a sense, can allow for virtually all the positives of merging while provide for controlling the negatives…including restructuring or nullifying the collaboration if results aren’t as promised.

    BTW, I commmented on and shared a link to your article on the Creating Community blog out on Sustainable Nonprofit. You can see it here: http://www.sustainablenonprofit.org/blogs/creating_community/archive/2007/07/27/partnerships-are-priority.aspx

    Keep up the good and critical work!

  2. Rick Cohen Says:

    Dear Nonprofiteer: Hidden in the bowels of some mergers are interesting factoids. Who has been chosen as the new board chair of the merged Points of Life Foundation and Hands On Network? President Bush’s brother, Neil, known for his culpability in an S&L scam and a couple of interestingly dubious nonprofit deals (including getting his mom to ask Katrina donors to designate grants to a particular school district that would then be required to use the grant money to purchase educational software from Neil’s Ignite! corporation. I’ve written about Neil’s nonprofit questions in my Nonprofit Quarterly Cohen Report piece on Mitt Romney (since Romney was on the POLF board and gave the greenlight to Neil Bush as the incoming board chair of the new organization), if you want the link, let me know. It says something–not in a partisan way, but in a nonprofit accountability way–for the merged POLF/Hands On organization to make Neil its first action of governance.

  3. Nonprofiteer Says:

    Russ: Yes, I think collaboration is a great idea–and there are certainly areas of duplication in the sector. But I think here as elsewhere we spend too much time thinking about efficiency (how many inputs per output) rather than effectiveness (how much mission-accomplishment per output). As long as we’re preoccupied with efficiency, we’ll be sitting ducks for every snake-oil salesman who comes along, whether peddling outsourcing or mergers or junk bonds. H/t to the Nonprofit Finance Fund for the advice to keep eyes on output rather than in-.

    Rick: The Neil Bush story is more than an interesting factoid–it demonstrates that what I thought was a critique of nonprofits aping for-profits was actually a critique of someone’s effort to use a nonprofit for profit purposes. Please do provide the link: that information should be available as widely as possible and I’m happy to help spread the word.

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