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Considering a merger?

Introduction

In today’s difficult financial climate mergers (defined as two or more separate organisations coming together to form one organisation) between voluntary organisations are being encouraged by interested parties such as the Charity Commission, government and other funding bodies.

A number of high profile charity mergers have taken place in recent years and debates about the pros and cons of mergers are a recurrent feature in the voluntary sector press.

In this environment an increasing number of voluntary organisations in Kensington and Chelsea may start to consider the idea of merger. As with any change process the issues that may arise need to be fully considered before embarking on that change.

This paper aims to outline some of the key issues that can arise when locally based voluntary organisations engage in merger by drawing on a piece of research that was undertaken in the summer of 2010 by a member of the KCSC staff team as part of an MSc at Birkbeck, University of London.

The study consisted of interviews with eight senior staff and trustees/ex-trustees of six locally based voluntary organisations that had been through different types of mergers. The organisations in the study were based in a variety of different local areas (ie this was not a Kensington and Chelsea specific study) and worked with a range of different client groups. The interviews explored the experiences of deciding on and then going through the process of a merger and focused on the key issues that arose.

Reasons for merger

The study found a wide variety of drivers that led organisations towards merger, these included:

  • concern about survival
  • proactive reasons of preparing the organisation for the future, such as to become more competitive in a new funding environment and be able to better meet the needs of users by joining services together and sharing expertise
  • a belief that sharing backroom functions and a chief executive would reduce costs
  • pressure from other agencies such as a local authority or ‘head’ body in a federation

Interestingly in half the cases organisations had different drivers to their merger partners with often one organisation in a weaker position than the other leading to imbalances of power in the ‘partnerships’.

Key issues that arose during the merger process

Identity and organisational culture

Concerns about loss of identity were prominent in four of the mergers in the study. Interviewees felt that over years their organisations had developed a strong sense of who they were and the merger was causing them to feel concerned about losing this.

For two of the mergers this issue arose strongly when trying to agree the name of the merged organisation. One interviewee described a sense of emotional attachment to their organisation’s name: ‘it was the history...what it represents’ and how difficult it was to give up when they agreed to take on the name of the other organisation.

Another interviewee from a small organisation that merged into a large national one described how he had to fight to keep the name of the project as he felt retaining its identity was important to the service. He was concerned that other small organisations that had merged into the large one had had their brands ‘completely disappeared’.

Many interviewees also commented on the challenge of bringing organisations with different cultures together. For example, in one merger one organisation had more of a ‘grassrootsy...community development feel’, was ‘more quick and flexible’, whereas the other was used to more structure and was more risk averse.

One year on the chief executive of the merged organisation commented that they are slowly developing a culture that it is a blend of the two but that it is taking time.

In another case there were clear cultural differences at board level with one organisation taking much more of an ‘activist’ approach than the other. Some interviewees felt this led to confusion about what the new organisation’s role was and
that it lost its way for a while after the merger as a result.

People issues

‘you know you can get very sucked into the process of mergers...I think you have to think about the people as well’.

Issues to do with people involved in merges came out strongly in the research. Some organisations found their users had a number of questions and concerns about the change. One interviewee commented on how important communication with users was and that often they just needed reassurance that they would still be getting the same service.

There were also many issues arising with staff. Interviewees spoke of their mergers bringing big changes that staff had to come to terms with. One said there was ‘concern of we’d done things this way in the past, is the culture going to change..are we comfortable with that’.

Some interviewees commented that they felt they had underestimated the impact the merger would have on staff, many of whom were feeling anxious about the change and what it would mean for them and their roles. In a number of cases there was resistance to the idea of merger from some staff and an increase in the number of staff leaving around the time of the merger.

For some mergers in the study blending staff teams and trustee boards from different organisations also brought real challenges. One manager spoke of having to work on building her staff teams’ communication and understanding of each other’s roles to ‘break down the barriers’ and combat feelings of ‘us and them’.

Another impact on the people involved in the mergers was the amount of time and work required. Many interviewees spoke of the stress involved and of processes taking longer than they envisaged with huge amounts of tasks to complete, some of which proved very complicated such as bringing different financial systems together.

The effect on senior managers also arose as a strong theme. One chief executive found herself working long hours and described it as ‘exhausting’, another said she found there was ‘such a lot on my shoulders.. it was really stressful...a huge, huge workload’. Senior managers spent a great deal of time supporting other staff but expressed that they too needed support. One was able to have a mentor and the other two would have liked one, especially as they felt their boards were not that supportive. One commented that boards are ‘not there all the time, they can’t be...it does mean that my role is quite an isolated one’.

Three organisations in the study had a chief executive who left before the merger and an interim chief executive was appointed to see the organisation through the period. With two organisations the chief executive leaving was actually a catalyst for merger as without the issue of which chief executive would take the position in the new organisation it was seen as a good time to pursue the idea.

However one interviewee challenged this thinking expressing that it is not wise to ‘merge from a position of weakness where you are led by a consultant’ who is not ‘rooted’ in the organisation. Furthermore, the interviewee felt it was not right when in one case there was ‘an indecent haste to rush headlong into merger to solve a short term problem of having just lost your director’.

Others commented that having an interim chief executive there to focus primarily on the merger was hard for the staff: ‘they found that quite difficult...if you’ve got a leader who doesn’t see themselves as working for you, people feel less safe and less comfortable’.

Power dynamics between organisations

Power imbalance was a feature in four of the mergers, with some interviewees even occasionally using the term ‘takeover’.

One example was a case where a smaller organisation merged into a larger national one. Some staff were resistant to the merger because of an aversion to the large organisation taking over many smaller organisations: ‘it’s almost like globalisation, big brand swallows up all the small fry’. They felt the larger organisation: ‘want to be the biggest and the best...eating up all the competition’ and taking money away from smaller groups.

When the merge happened the large organisation did exercise its power. The manager gave an example: ‘what fundraising made quite clear from day one was we were not allowed to accept any donations from anyone without asking them first’. They stopped them asking for donations from a shop saying: ‘no you can’t do that, we have a relationship with them we don’t want you to complicate things’. He also commented that the larger organisation sold off their building: ‘where the money went I do not know..the project didn’t see a penny of it’.

Growth issues

Issues about growing into larger organisations also featured strongly in the research. There were some feelings of sadness: ‘we liked being little...we liked the feel of it’ and emotional responses from staff: ‘I don’t wanna work for a (name of organisation) small is beautiful...we’re getting too big for our boots’. There was recognition from one trustee of the advantages of being a larger organisation but concern to not get too big and lose local focus: ‘it’s needing to find the right size to do both, to both keep your local quality and get the contracts’.

A chief executive spoke about how becoming a larger organisation has impacted on her role: ‘before I just knew what was happening in such detail. With a staff team of 35 on three different sites I just don’t have that kind of grasp of what’s happening...all of a sudden I had to think through how I was going to manage. I tried to manage the same way, I was completely exhausted’.

She has since been building a senior management team and delegating more and governance has become more formal. She also commented that their relationship with smaller local voluntary organisations has changed: ‘some of them feel slightly different about us...and I think I’m not quite as accessible..I’m out at so many meetings...we’ll have to keep working on us being on the street, known, easy to reach, supporting the small groups’.

In another organisation the staff felt insecure about moving from a small organisation where they knew everyone: ‘in a small organisation you have more of a sense of belonging and of being looked after’. The manager had to work on creating ‘a one organisational feel’. She also found that as a larger organisation they needed more systems and infrastructure, so despite hopes that sharing backroom functions as a merged organisation would cut costs ‘ironically I don’t think we saved a lot of money’. She also felt before as a smaller organisation things could be much more informal.

For the small organisation that merged with a large national one the change was difficult: ‘the nature of the work changes an awful lot when you become part of a large charity...there’s such an infrastructure, so many different departments...really different feel’.

The manager commented that his role requires more time spent on strategic matters, networking and going to meetings and less on users’ needs and managing the team. He also commented that being part of a larger organisation does not always necessarily help bring in more funding as some funders prefer to fund smaller organisations or might not fund the service if they are already funding something in the large organisation.

He also felt that as just a small part of the large organisation they were sometimes ‘underlooked and undervalued’ and had to fight to ‘keep the project on the agenda’.

He expressed that he was torn about the benefits and disadvantages of merging with a large organisation feeling that with the professionalisation of the sector it is hard for small organisations to complete but ‘small organisations are really important, they often have a better understanding of local culture than larger organisations do who are sometimes out there trying to be the biggest and the best’.

Location/local focus issues

Issues to do with location or keeping a local focus were mentioned by all interviewees in the study. In two cases this was a particularly thorny issue. The first was a case where a branch was pressured to merge into the London-wide organisation. There were worries about losing ‘a local resource’ and local control of the charity, that good work in the local community ‘was under threat’ and about losing links with the local council which could affect chances of accessing money for the local area. Furthermore the interviewee felt the London-wide organisation was coming from a very different perspective: ‘if you are working at Greater London Authority level you think that that’s what matters’.

The other case in which local focus was a major issue was a merger between two organisations in different parts of the same borough that had distinctly different identities. Here each organisation was concerned to retain focus in their local area. One ex-trustee commented that he was concerned that the organisation would continue to keep its ‘feet within the community’ and its values based on ‘what you are getting direct from people locally’.

Things ‘polarised’ at board level over where to locate the merged organisation, an issue complicated by the fact that the areas were difficult to travel between: ‘it was just a fiasco...couldn’t find a place to be’. There was ‘a lot of animosity’. A compromise was suggested of situating the base between the two areas and this was finally agreed, though it caused problems after the merger due to it being inaccessible and expensive.

Interviewees from other mergers also commented on the importance of retaining local focus. One when reflecting on becoming a larger organisation, competing with national providers, expressed concern about keeping in touch with local users’ needs. Another speaking about another merger proposed with three organisations in different parts of the borough said she was resistant because ‘we don’t want to become a chain, we are individual and local and that’s what makes us special’.

Two organisations commented on needing to ensure users ‘did not feel disenfranchised’ when they moved premises. For one there were issues about where senior managers would be located: ‘to avoid the idea that it was a takeover by one
organisation’.
This was solved by retaining outreach centres in the different boroughs with senior managers spread across the locations. For the small organisation that merged with a large national one the merge led to them moving into the national organisation’s offices in a different area. The manager had concerns that the building was less accessible and welcoming for users: ‘very corporate...completely different environment’. When they moved it was seen as significant by some users who perceived that they were closing down. Although they provided outreach services in the same area it took ‘a long time to convince people that we actually still exist’. This highlights how important the original building and location was to users feeling they were able to access the service.

Learning points

Here we outline some tips for a successful merger building on the learning points arising from the research study:

  • Ensure you take into account cultural differences both before and during the merger process and be aware of the time it will take to blend cultures
  • Take time to discuss and be clear about what kind of organisation you want to be after the merger
  • Don’t get too sucked into the process of mergers, think about the impact on the people involved just as much
  • Ensure good communication with staff and users to limit anxiety about the change 
  • Spend time on team building activities to help to blend staff teams
  • Factor in the time it will take to complete all the tasks in a merger process 
  • Ensure that the senior manager is getting the support at he or she needs
  • If going through a merger after a chief executive has left be aware of the difficulties this could bring 
  • As you grow as an organisation be careful to ensure you keep your local focus and ear to the ground and retain your responsiveness and accessibility to users as well as to other smaller voluntary and community groups 
  • Be aware that processes and management structures may need to be adapted to work well for a larger organisation 
  • Be careful not to overestimate the savings of sharing backroom functions as larger organisations often need more complex systems 
  • If moving locations be careful to fully consider the impact on service users 
  • Always keep focussed on the ultimate reason for the merger – to ensure continued and enhanced services for your users 

 

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