Charitable Mergers: A recipe for change, challenge and opportunity

Here’s a recipe we should all be thinking about… Take thousands of charities, dozens of great causes, and bring to a boil through limited financial resources and increasing demand. Blend in a desire to leverage for-profit best practices around mergers and you have the potential for a tasty dish to serve many new stakeholders. But how do you ensure that the dish ever even gets made, and if so how do you ensure it doesn’t boil over to make a huge mess?

Corporate mergers often fail. And charities that have been poorly merged have failed too. Moreover, the same passion that is at the core of every successful charity can actively resist the kind of change required for a merger. Worse yet, very real issues of maintaining donors and ensuring long-time supporters don’t leave can scare off even veteran Boards and charitable leaders.

Here are three top ways to help make this process less intimidating and more likely to succeed.

First, seek what is common in the charities in question as opposed to strictly what is different. Craig Dearden-Phillips’ article http://www.guardian.co.uk/society/2010/feb/17/charity-merger-journey
sheds light on this perspective.

Second, seek engagement from corporate funders in particular early in the process. With the growing trend towards Collective Impact http://www.ssireview.org/articles/entry/collective_impact/ corporate funders are beginning to "reward" organizations that are considering ways to "do more" with combined resources.

Finally, consider all your stakeholders and communicate a vision that underscores benefits (even if it may only be survival) for all concerned. Collaboration, transparency and openness have helped other organizations achieve success http://www.insidetoronto.com/print/43149 and are the key ingredients of successful corporate mergers as well.

Not undertaken lightly or without risk, a charitable merger – even of one function or via shared space – might be worth your consideration on the menu at least as “food for thought”.

Of Stars and Charities

Every year well meaning people start up new charities, some of them stars who have the ability to donate large sums or use their fame to encourage others to do so. For example (albeit not a Canadian one), you may have heard about Madonna’s costly exploits in Malawi where £2.4 million has been spent, but her school project has not even broken ground (www.guardian.co.uk/world/2011/mar/25/madonna-malawi-charity-squandered-millions). Perhaps this is an example of what can happen when a well-intentioned star takes up a cause or starts an organization without any real understanding of charitable processes or what’s required to deliver programs.

However I believe that even stars who create well-run, impactful and successful charities may be inadvertently undermining their own potential results. Unless there is truly no other organization addressing the need that the star’s new charity seeks to address, however different the new group may be it is (by definition) adding a new set of costs and infrastructure to address their cause.

One example is Guy Laliberté’s One Drop (http://www.onedrop.org/). Having visited their website and read their Annual Report it seems to be a wonderful organization, supporting much-needed work supplying fresh water and related project work in many parts of the world. In 2009, One Drop raised over $10 million. And of note, the "Founder’s Contribution" was over $7 million – generous and wonderful indeed! However, notwithstanding the One Drop partnership with Oxfam, One Drop also spent almost $2 million on Fundraising Costs and Administration. Don’t get me wrong, One Drop seems to be a lean and apparently efficient organization, so I’m not suggesting almost $2 million is too much to spend on the operational side.

But it is $1,900,000 that could have gone towards another, already existing organization that pursues the same mission, and not added the incremental costs of this new organizational infrastructure. There are already lots of charities that seek to improve water availability around the world – 3.7 million hits to a Google search under "charity clean water". Imagine the influence (and impact) stars like Guy Laliberté could have if they focused this kind of support and passion on an existing, effective and efficient, organization, and simply generated the full $10 million to support one of them...

In the end, perhaps our stars should first consider if there isn’t a way to achieve their vision through partnership or being a spokesperson rather than through creating something entirely new.

Many more social ventures for many more Charities?

Saturday's Globe and Mail newspaper in Toronto had an article discussing social enterprises (a.k.a. social ventures).  Examples ranged from a bakery that employs people "at the edges of society" to a group helping aboriginal carpenters get experience towards full-time work.  You can read the article at the Globe and Mail on Social Enterprises.

Let me state for the record that the concept of social enterprises is one that I support, and as a business-person I can certainly appreciate the benefits that can accrue to employees and the organization from a well run operation. What struck me about the article however was what was not covered in detail.

First, the article certainly mentions declining donations and government funding.  And it's clear this is already an impetus for charities to seek out new revenue streams.  But I'd hate for charities to see social enterprises (or any other "business model" that raises funds) as a saviour and charge into the fray unprepared.  While the article touches on "bumps along the way", business can (and sadly do) fail every day, and already overstretched charities are poorly equipped to try something as challenging as a start-up business. At least not without lots of expert advice or conversely very modest expectations...

But the article also mentions the 150+ social ventures that are in Toronto today, with "half of them [having been created] in the last 5 years".  So in addition to the risk mentioned above, we are already seeing a trend towards creating more social enterprises. I offer that with 80,000+ charities (and over 150,000 not-for-profits) in Canada we need to be seeking synergies, efficiencies, and ways to deliver on charitable "Mission" that don't create yet more new entities.  Maybe there's room in Toronto for thousands more new social enterprises, but what I'd really like to see is far fewer such a projects, and each one run by multiple charities in a collaborative fashion.

The overlap in charitable Missions and still growing numbers of charities combined with declining revenues is creating a perfect storm.  Charities that come together, spread the risk and cost among them, and cooperatively seek the support needed to launch a successful business, would be a model worth replicating across the country.  For my money that would be truly newsworthy!

A bit of a Fool but No Joke

An early morning meeting this week reminded me that as specialists in our respective fields we can forget or even be unaware of how big and/or complex other sectors may be.  But I am guilty (and maybe you are too) of assuming that I know lots about the sectors I know best.  And we all know the saying about people who assume things...

So I'm always pleased (but not entirely surprised!) to find great new resources and tools that shed light on the charitable world.  In particular the blog below has the added benefit of a variety of links to other resources and bloggers.  If you'd like to learn more about Corporate Social Responsibility (CSR) and sustainability I suggest you take a look.

http://makingsenseofresponsibility.com/

So it may be April 1st, but there's no joke here!

For Profit Best Practice or Charitable Frivolity?

The last couple of weeks I’ve been pondering a simple question: are all for profit sector “best practices” applicable to the charitable sector? What has spurred my musings has been the recent case where Toronto Community Housing Corporation (TCHC) has been vilified for some of their spending on celebrating successes and team motivation.

I’m not going to defend any of TCHC’s spending habits (many seem to be rightly questionable and needing of better controls), and I’m very clear TCHC isn’t a charity in most aspects. However, one thing they did do as a public agency is something charities have been dabbling in, and they’ve received a lot of heat for it.

What I’m talking about is their following of a for-profit best practice of giving employees morale-building holiday parties and modest incentive gifts. In the Consumer Packaged Goods world where I grew up there are (to this day) major “Sales Conferences” where big bucks are spent to motivate the troops. And the level of “team building” only gets more expensive and crazy in the Pharmaceutical world… Pick your sector, most every for-profit organization spends money on celebrating with (and thereby building or motivating) the team

You might argue that this spending is wasted or misguided, and you might be right. But for profit companies large and small keep doing it, so surely there must be some payback or rationale for the spending? And would that rationale/benefit apply to the charitable world?

You might argue that it really is only done for the sales team. Maybe, but then would that apply to only the Fundraisers on the charitable side receiving the same motivation?

For once I don’t have an answer. But what is clear is that charities that seek to motivate or team-build using the same best practices as their for-profit peers do so at their peril.

Barbarians at the Gates

Imagine you’ve spent the last 10 or 20 years working very hard in your role, delivering great results with extremely limited resources, and someone who’s never even worked in your sector comes along saying, "move over, I’ve arrived to fix what you’ve been doing." You might be just a little put-out and resistant, no?

Sadly, that can be the unspoken attitude from some folks in the for-profit world as they explore career opportunities in the charitable world.

Or imagine you’re the same hard-working charitable leader, and applicants say, "I’ve reached a stage in my life where I’m thinking of retiring, but first I think I’d actually like to give back." Is that code for:

• I’ve made my money (all while you were making much less), so now that I’m at a stage where I can afford to make less money, I’d like your job?
• I’m ready to slow down (but not fully retire) so now I’d like to come and work in your sleepy little world?

Of course it’s not usually code for either message, but can you imagine how your charitable audience might infer these messages?

There are plenty of horror stories in the charitable sector about for-profit folks who simply don’t fit, or fail for any number of other legitimate reasons, but it does fuel fears about why "outsiders" just don’t "get" the sector.

All this to say that if you’ve heard that breaking into the charitable world can be tough, there are both real historical reasons (e.g. previous failures) and perceptual reasons (e.g. attitude for joining the sector) that exist for resistance. And also to say that for many reasons the charitable world really needs the talents, new blood and passion "outsiders" bring.

Just bear in mind that if you’re one of those "outsiders" eager to get inside the charitable world, do think carefully about your motivations and your messaging, or you’ll be treated like a barbarian at the gate.

Communications 101

Whether working for a charity or for profit, and whatever the sector, good communication skills are a vital element.  A million years ago when I started with Procter & Gamble as a Salesman we were drilled on communication skills - so some of the techniques have actually stuck with me!

For your use prior to your next performance meeting with one of your staff, an introductory meeting with a prospect, or just at the dinner table tonight, I offer what we were trained on...

This aspect of communication skills was all about eliciting more input from the "buyer" and had five elements, and they went from techniques that were "least sensitive" to potentially "most sensitive":
1/ General Lead (e.g. "go on", "say more", even "yes...")
2/ Pause (a little more sensitive since it could lead to an awkward silence)
3/ Restatement (in my old world that would be something like the Buyer says "it's not selling", and you reply with "it's not selling?")
4/ Probe (e.g. "how is that selling?")
5/ Interpretation (e.g. "so when you say it's not selling, you mean the Marketing plan isn't working?" or something like that...)

Learning more about prospective donors, buyers, or just one another is always helpful, so maybe this will make your next conversation just that little bit more productive!