Purpose key to merger question
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The Community Council for Australia (CCA) recently released a report on collaborations and mergers across the charities and not-for-profit sector.
With a focus on mutual learning from both success and failure, the report is the result of consultations and forums – supported by the Myer Foundation – with experts and more than 110 NFP leaders across Australia.
Not surprisingly, the report does not argue for or against mergers, nor does it propose an ideal size for a charity to obtain scale and efficiency. What it does is seek to shift the focus of discussion toward the most fundamental issue in any NFP – what is its purpose?
I regularly talk with CEOs of NFPs as part of my work with CCA. In the past three months, more than 10 CEOs have sought my advice about and input into proposed mergers. I have also been asked to speak about managing potential mergers – with five boards, and at meetings of finance directors (mostly CCA members who can obtain this service for free).
What emerges through these discussions is that many organisations have grown quite quickly without necessarily having done the work to ensure they have their own measures of success that reflect their purpose.
Measure of success
It is important to note that the activities of an organisation do not define its purpose. A ballet company may run a car park to raise money to support its artistic pursuits, but it is still a ballet company. The whole company would like to see an increase in the profitability of the car park, but only because any surplus will be directed toward better achieving their purpose. The measure of success is not the number of cars they get into the car park, but the extent and nature of their ballet program.
Within many NFPs, the distinction between purpose and activities is not quite as clear cut. A hypothetical charity, Cybersafe Australia (CA), for example, may run cyber-safety training on a fee-for-service basis, have some limited government funding for awareness training, and receive sponsorship from a software company specialising in internet firewalls. CA may also seek to increase cyber safety through advocating major policy changes such as tightening the responsibilities of Internet Service Providers (ISPs) when it comes to blocking scammers and criminal sites, and ensuring all school students have annual cyber-safety lessons.
What is the CA measure of success, and how would it know if it had achieved its mission?
The people involved in running cyber-safety training would probably see the purpose as providing training, but for the service providers in the organisation, success would mean CA winning more contracts and selling more training, thereby improving cyber safety. Those involved in policy and advocacy might measure their success by legislative changes increasing the responsibility of ISPs in cyber safety, providing more cyber-safety lessons in the school curriculum, increasing quality training (regardless of whether CA runs it or not), increasing media and community discussion about cyber safety, and widening options for software protections.
Is CA a service provider, a policy advocate or both? When CA meets with the relevant federal minister, does it push for more funding of its own specialist cyber-safety training, or does it push for regulatory reform that will have a longer and more sustained impact?
Need for clarity
Governments across Australia are increasingly asking if advocates from the NFP sector are presenting a case for policy change that will benefit the community, or a case that will directly benefit their own organisation?
Each situation varies, but what does not vary is the need for clarity and commitment to a purpose that is beyond just growing the organisation itself.
Some of the best NFPs of which I am aware provide high-quality services in specialty areas. This is their purpose and what they focus on doing well. They have the capacity to disrupt markets through innovation and outstanding service, which means their customers and clients value them more highly than other service providers.
When they go to see government or potential supporters, it is about demonstrating the quality of their services and competing to provide more. When people use their services, the community benefits, but their primary purpose is excellence at what they do.
Some NFPs are change champions, driving real policy reforms that create new opportunities and strengthen our communities. They tend to focus on changing systems and structures, building collaborations and strategic campaigns, and working with their communities to deliver long-term benefits.
Different skills
The skill set needed to drive national policy reform and systems change is different from the skill set needed to run good services. Even in providing services, the best managers are not always the best marketers or submission writers. Bias toward their own services often reduces effectiveness in responding to differing service requirements.
Surveys have shown that more than 50 per cent of NFPs have considered increased collaborations and possible mergers in the past 12 months. “Merger” is no longer a dirty word in the sector. More and more organisations are recognising that incremental change will not deliver as much as transformation.
Internationally data tells us that mergers driven by purely economic considerations – the notion that bigger is always better – are likely to follow the trajectory of most commercial mergers and fail. Mergers driven by the need to better achieve purpose are less common, but we have already seen some good outcomes in our sector.
The future of all NFPs depends upon honest discussions about purpose, measures of success, skills and income streams. As with most issues in our sector, collaborations and mergers are all about clarity of purpose.
To download a copy of the report, visit the CCA website, www.CommunityCouncil.com.au
David Crosbie is the CEO of the Community Council for Australia. This article originally appeared in the September edition of Third Sector magazine. Subscribe now.
