The nonprofit sector is under tremendous stress due to Covid-19. In March 2020, Imagine Canada projected  “the economic downturn associated with COVID-19 will cause charities to lose $9.5 billion and layoff more than 117,000 employees…” Similar to other sectors of Canadian society, charities are facing severe financial constraints but unlike the post 2008 economic recovery, limping along will not be an option.  This time, the breadth of impact leaves no room for delaying decisions about closure. Desperate boards and staff are seeking alternatives; fortunately, they exist.

Mergers have been tested and completed by nonprofits and charities for more than two decades when looking for solutions to financial, staff or service delivery problems. By returning to their roots and focusing on client needs, a number of nonprofits have successfully merged to combine strengths and assets and improve their social impact.

When a merger is perceived not as closure but as continuation, miracles can still happen in the nonprofit sector. In 2019, the Boys and Girls Club of Calgary began a  merger with the Aspen Family and Community Network. Now nearing completion, the Executive Director, Jeff Dyer credits the boards. “They told us, ‘Put family at the centre of the story and prove that the merger is better for those we serve’.” There has been a marked improvement in service delivery for families, not just individuals and the organization has grown, not shrunk, during the pandemic. As mentioned in a CBC article, Jeff Dyer shared, “We took a serious look at the Alberta economy and knew that it was going to put major pressure on our core funders and our donors, and so we either needed to prepare for major cuts or dream big and merge.” This work preceded Covid and has allowed the organization to flourish at this time, both through donors and government contracts.

For over 15 years, Cathy Jordan was the Executive Director at the Western Ottawa Community Resource Centre. She completed two successful mergers and attempted one other.  After retiring, she went on to oversee two more mergers. With four successful mergers in the past two decades, Cathy agrees that a ‘focus on clients, not the organization’, is the key to success. She believes that strong teamwork between the ED and the Board Chair smooths the way for tough conversations and necessary actions and facilitates the lowering of resistance. From the outset, trust must be built as part of capacity building where skills are uncovered, and strengths utilized. This allows people to come together to do even better after the merger is completed.

Bob McGaraughty has been the Chairman of the Board through one successful merger and one that did not progress. Today, he is pressing on toward a second merger set to occur in 2021. His first merger occurred at a small agency serving seniors, where staff were at capacity. Service delivery could not improve, despite demand for more and better service. From 2007-2009, their organization merged with a larger centre with financial stability and the capacity to integrate their staff and programs. Services improved with almost no turnover in staff, similar to the Boys and Girls Club of Calgary. A new process was developed that improved intake for all programs post-merger and while cost savings and efficiencies were found, Bob emphasized, “The improvement to programming proved to be the success of the merger”. He also believes that individual board members must NOT ‘protect the flag’. Mergers must be about opening to new and better ways to serve clients.

What happens when a merger is not successful? Lee Herrin of the Scale Collaborative has been involved with four mergers but only one completed. He agrees that when there is no ego involved, mergers progress. Mergers halt when individuals focus on themselves and not clients. Outside influencers like funders and banks can interfere in the process as volunteer board members try to wade through the complexity. Mergers are not easy but when they succeed, the clients benefit and that should be the point for any nonprofit.

How do we judge if a merger was successful? “When considering a merger, there should be a measurable improvement in social impact,” says Ash Hasan, a leading social impact evaluator in Canada. While many charities are still not committed to measuring and improving their impact, being able to prove to funders that you are delivering the best service to clients means that you do what you say, and that your organization is committed to the level of transparency required for social impact work.

A new type of merger, the Emerge Process, views an organization’s assets as financial, physical, social, staff and IP.  From this broader inventory, an organization can discover that it has more value than what its’ balance sheet would indicate. When considering merging with another agency, an organization can look for complementary assets and a way to solve issues without the heavy investment of time and money needed to pilot new approaches.

For a nonprofit to evaluate a merger against closure, they must focus their primary concern on meeting the needs of their clients – Canada’s most vulnerable populations. To assist them, foundations such as the Ottawa Community Foundation and the Trillium Foundation are supporting charities to use funding to explore re-organization. Trillium’s Resilient Communities Fund will supply up to $150,000 for applications submitted by Dec. 2, 2020.

Like any organizational restructuring, agencies will need to look at financial renewal through new revenue generating processes. If two organizations coming together means better service, then new revenue streams should be examined, including social finance mechanisms involving guarantors, community bonds or even a private fund. Can a new population be served? Is there capacity to innovate on processes? Can data be generated to improve decision-making? A merger lays open the opportunity to evolve, to emerge stronger, more cohesive and with new social value. Canadians need more and better services in the post-Covid 19 recovery and the nonprofit sector should be there to supply them.

Tina Crouse is the Founder and CEO of ANSWER.it, a platform of decision-making tools for government, foundations and non-profits to strengthen the charitable sector using data and machine learning. Their first product, the Emerge Process, was developed for post-Covid recovery.