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Interview: Walking Your Donors through a Merger

By Tom Watson on March 14, 2007No Comment

ConversationInterview: Walking Your Donors through a Merger
By: Kevin Allan, 3/14/2007
 

In 1935, when Norma Jean Baker took up residence at Hollygrove (also known as The Los Angeles Orphans Home Society) nobody knew she’d grow up to be Marilyn Monroe. Nobody knew, either, that Hollygrove a residential treatment center for abused and neglected children would evolve from a center able to house up to 68 children on its Hollywood campus, to a statewide outpatient community-based mental health service agency providing services to more than 6,600 children and family members in 20 counties.
 
onPhilanthropy talks to Jeanne Barry, CFRE, Hollygrove’s Vice-President of Development about donor stewardship in this time of change.
 
Q: Tell us about the changes at Hollygrove.
 
Jeanne Barry: Well, we’ve gone through two transitions. For most of our history we were a residential center for children who had been removed from the custody of their families by the court. Hollygrove would provide a welcoming environment where children could learn and grow while receiving therapeutic services. However, there is now a strong emphasis on treating these same children in a more traditional family home environment, as opposed to an institutional environment. In 2005, we closed our residential program to concentrate on providing services to children in their permanent and foster homes, and in their community. The challenge for us was to communicate to our donors why we decided to close our residential program and go outside Hollygrove’s gates to reach children in need.
 
Q: How has your donor community responded?
 
Jeanne Barry: Helping donors understand the reason for the shift in programs was a challenge.  We explained how we are now reaching children in their communities, their homes, and at their schools.  Some donors still have a difficult time understanding the change while others are excited about our new directions.  Some really get it.  We had a grant for a residential-based program we couldn’t spend out. We spoke to the foundation about our transition and they were so excited by what we were doing that they let us convert the grant and apply the funds to serve our community based children.  Many of our donors are realizing we’re still doing great things, they just look different.
 
Q: What was your second transition?
 
Jeanne Barry: As we shifted to our new model we looked at other agencies that had experienced a similar shift. EMQ Children & Family Services in the Bay Area was very similar to ours. Through the “wraparound model”, which they introduced to the State of California, EMQ focuses on the individual strengths of the child and the needs of members of the family. As we got to know them better we realized the synergy between our two agencies.  We also understood that donors were asking hard questions, and that economies of scale sometimes make sense. Our boards began discussing a merger. As discussions progressed, we found it made more and more sense. Last year, we became Hollygrove: An EMQ Children and Family Services Agency and are now part of a much larger network providing services to children throughout California.
 
Q: And is it working?
 

Jeanne Barry: Yes, and we knew it would. Both Hollygrove and EMQ did their due diligence and at the root of the merger was the fact that our vision and philosophy was the same; without that it wouldn’t have made for a happy marriage. The merger of development operations started 6 months prior to the actual merger date.  We held a series of transition/integration meetings with both staffs.  We learned from one another and adopted a philosophy of keeping an open mind and making decisions based on what would work best for the new combined team.  As for merging our database we used a consultant.
 
Q: How did you talk about the merger with your supporters?
 
Jeanne Barry: We communicated! That was the key. We talked about what we were doing and why were doing it. Also, we decided that Hollygrove should retain its identity locally. With a 126-year history we are an important part of the community. Little things, like updating our logo from three kids in one color to five kids in varied colors, gave us opportunities to talk to our donors about what this logo change meant….growth and bright new beginnings.
 
Q: Did donors voice concern?

Jeanne Barry: Individual donors were confused and didn’t understand why we wanted to merge, especially with an agency in northern California.  To the contrary, foundations were glad we were looking at these things. We visited with our major supporters, both individual and foundation, and explained the process and the goals we were trying to achieve. We listened to their questions and answered them. Some foundations even stepped up and provided us with financial support to pursue discussions and implement the merger.

Q: Have donors based your new ‘economy of scale’ as a basis for reducing their gifts?

Jeanne Barry: No, we tell them we need their support even more! We now can reach deeper into our community and serve many, many more children.  We are stronger and can bring added benefit to the children and families who depend on Hollygrove.

Q: Do you find donors are concerned that their money will not stay local?

Jeanne Barry: Yes and No.  We have added database solicit codes to ensure money will be spent where the donor directs the gift. In this way we can accommodate donors who want to support our regional work, but we can also attract a wider range of funding from foundations and donors who are looking to make an impact statewide.
 
Q: Words of caution?
 
Jeanne Barry: If you do begin to think about a merger, you must remember it’s a long process. We entertained the idea for six months before beginning any kind of formal discussions. Keeping my enthusiasm and excitement for our mission during a time of significant transition was the most difficult part for me.
 
Q: Any last words of advice?
 
Jeanne Barry: Never be afraid of taking a new look at things; that’s how positive change happens.
 
——
 
Sometimes a merger is a solution for a nonprofit facing funding challenges. At other times an organization will explore a merger because of changes in the need they exist to serve. If their organization falls into the scope of another organization’s mission, a merger with that organization can bring the resources and expertise needed to ensure continued relevancy.
 
Other organizations, as was the case for Hollygrove, merge more proactively. By merging, they can accomplish more and increase their capacity to fulfill their mission, both through service delivery and economies of scale. These organizations are looking more broadly to reveal another “merger motivating” factor: Competition for dollars is increasing exponentially with each passing year; can philanthropy sustain the number of organizations in the sector? And will Organization A and Organization B have a better opportunity to compete if it becomes Organization AB? Will donors see this new efficiency as a smarter way of doing business and will it lead to greater rewards? Some are saying yes.
 
The merger process is a time consuming and expensive one, and often fails to get beyond the initial partner identification and discussion phase. Negotiating the merger, getting two boards to approve it, taking care of the necessary legal requirements, and developing the merger implementation plan come next. Then the hard part: implementing the plan; integrating not only programs, but finances, human resources and development as well; addressing staffing issues; and blending two organizational cultures.
 
Thinking about a merger? These resources can help:
 
The Nonprofit Mergers Workbook: The Leader’s Guide to Considering, Negotiating, and Executing a Merger by David La Piana and Vincent Hyman (Wilder Publishing, 2000)
 
Forging Nonprofit Alliances by Jane Arsenault (Jossey Bass, 1998)
 
Nonprofit Mergers: The Power of Successful Partnerships (Aspen’s Nonprofit Management Series) by Dan H. McCormick (Aspen Publishing, 2001)
 
Strategic Restructuring for Nonprofit Organizations: Mergers, Integrations, and Alliances by Amelia Kohm and David La Piana (Praeger Publishes, 2003)

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