Fairfield County nonprofits may be collaborating more now than ever, but the partnerships are not always resulting in cost savings, according to a new report.
In most instances of nonprofit partnerships or mergers, the goal is for increased services, and not necessarily cost savings, said Elaine Mintz, director of the Fairfield County Community Foundation”™s Center for Nonprofit Excellence.
“The good news is that most of the organizations are reporting that they”™re increasing the quality and scope of their programming as a result of collaborating,” said Mintz, author of the March report.
Of the 104 nonprofit executive directors who contributed to the report, “Trends in Nonprofit Mergers and Collaborations in Fairfield County,” 8 percent said their company merged with another nonprofit in the past three years, 10 percent said they shared back-office functions with another nonprofit organization and 57 percent said they collaborated on specific programs with other groups.
Among the organizations that chose to merge with another nonprofit, only 14 percent said they experienced cost savings, while 29 percent said they did not see any cost savings and 57 percent said it was too soon to determine.
“Research indicates that at least with mergers, there”™s not necessarily a financial benefit,” Mintz said. “Especially if you”™re combining two large organizations, there”™s so much effort and work that goes into aligning their financial and data systems.”
More than 60 percent of the executives who said their organizations shared back-office services with another firm reported cost savings, while less than half of the nonprofits that participated in programmatic partnerships reported cost savings.
In each of the three categories, however, at least two thirds of the respondents reported a positive change in the quality of services provided as a result of the collaboration.
“Sometimes it”™s just having a bigger geographic reach. … And I think (they) address duplication of services, when two organizations are doing the same things in the same communities. That”™s where you get the economies of scale,” Mintz said.
The responding organizations had annual operating budgets ranging from less than $250,000 to more than $5 million.
The report preached caution and prudence for organizations considering a formal merger.
Among those who said their organizations considered mergers, the top reasons for doing so were to increase and improve the quality of services, to improve the financial strength of a nonprofit, and to cut down on the duplication of services.
About 21 percent of the executives who responded to the survey said their organization considered a merger with another nonprofit, but just over a third went through with their plan.
For those who chose not to carry through with potential mergers, the reasons included organizational cultures that were too different, a lack of evidence that there would”™ve been a financial benefit from joining together and personnel considerations.
“For nonprofit mergers to be successful, it is essential that the organizations share a similar mission and vision, that all parties buy into the benefits of the mergers and that the culture of the two organizations is aligned,” Mintz said.
