Hearts Still Ruling Heads - Emotional and Strategic Barriers to Charity Mergers Remain
Norman Blissett
Chief People Officer at East Kent Hospitals University NHS Foundation Trust
Good Merger Index
Eastside Primetimers recently published their 2015/16 Good Merger Index. It's a comprehensive review of merger activity and lessons learned over the last year.
Their findings remain largely unchanged from previous editions. Namely, financial distress drives most mergers and they are very few in number. For those that have merged there is some evidence of long term benefits although the evidence is not clear.
Low Merger Activity
This low merger activity continues to be surprising. Given the number of charities, the overlap of service provision in many sectors and the increasing financial pressures you would expect more. They cite a number of reasons for this. Principally attitude, understanding, complexity and financial barriers.
Over the last few years, I've been enmeshed in a number of charity merger negotiations. I recognise the reasons for low merger activity cited by the report. However, in my experience, two barriers above all stop them happening.
- An emotional instead of rational analysis of the benefits.
- A lack of strategic insight.
Emotional & Strategic Barriers
The fact is many charities which would benefit most from mergers choose to exist hand to mouth. They possess a deep emotional attachment to the work and don't want to give up on it. Sometimes they lack the strategic vision to chart another course. Sometimes both emotional and strategic barriers exist.
Charting a different course need not mean giving up the name and work. But it usually will if the merger follows financial distress, the main driver for the few that happen.
All charity boards should ask themselves this simple question. "If we keep going as we are, where will we be in 3 years time?" For many a realistic and stark answer will be, "still struggling on," or worse, "no more!"
Still struggling in 3 years time is a strategic option. But other options will exist. A Board should weigh up the options. Then choose the one most likely to meet the long term interests of beneficiaries. Ploughing on with a medium to long term risk of financial distress is unlikely to benefit recipients. If that's you, transform the charity or seek a merger.
Raise Standards
The suggestion in the report for more support for charity mergers to happen is undoubtedly right. However, in my view, the priority should be to invest more in raising the standards of governance and strategic decision making. This would confer wider benefits for charities as well as helping them make better decisions on mergers.
A good first step would be to strengthen the provisions of the draft Charity Governance Code. The new Code should place a greater emphasis on the governance and strategic capabilities of the chair. In addition it should set out higher standards for trustee development in order to raise skills in these vital areas.
Better still, phase in a requirement for medium and larger charities to have an appropriately qualified and experienced chair. That bold move might just transform charity governance.
Artist, Founder and Curator
8 年Interesting piece. I think the deep emotional attachment to the work (by charities and their staff) and reluctance to let this go, as well as a lack of exposure to approaches in other sectors is, in equal measure, the essential strength of many charities and a major barrier to increasing their reach, improving delivery or efficiencies. I've worked in and with charities and met individuals (across all levels of seniority, including Board) who balk at the notion that those who have not worked for the lion share of their career in the charity sector "really get it", or have the necessary empathy to be passionate advocates of the work of charities. Does this resonate with anyone else?
Innovative Programme Manager
8 年In my view it is the IDENTITY of the Charity that drives many. In any merger, Charity sector or otherwise, the fear (concern) associated with the potential loss of this identity is foremost in people's minds.
Strategic Finance & Governance Leader | Trusted Advisor | Finance, Compliance, & Risk Management Expert
8 年I wonder if we can create suitable incentives to drive behaviour?
Strategy and Governance|Charities and SME Sector|Lifelong Liverpool fan
8 年I'm afraid that it is usually at Board level where the reluctance to consider merger comes from and it is usually a lack of strategic thinking at fault. Clearly employees of a charity would be fearful for their jobs but often they are more prepared to embrace change than the Board is. Len Jones is partially right in that the main merit of merging into a larger organisation is improved service delivery but efficient use of resources via a merger can also lead to expanded service delivery, partially by merger and partially by having more resources to attract diverse funding.