There has been much written recently about changes in funding in the disability services area, especially with the advent of the National Disability Insurance Scheme (NDIS) and how Western Australia will fit in with the new national system.
When the NDIS was first suggested, one of the first reactions was that there would be rationalisation in the sector including organisations in the sector looking to merge to ensure that they remained competitive and sustainable in the new regime. There was a trigger, and there was a reaction.
This is the case for any merger, especially in the NFP space: there is invariably a trigger to merge. That trigger can be caused by a number of factors, including:
- Changes in government legislation (eg. the introduction of the NDIS).
- Retirement of long-standing board members and/or management, without the likelihood of adequate replacements.
- Increased competition for the donor dollar.
- Reductions in government funding creating a need to reduce expenditure.
- The desire to expand services and reach.
- Increased regulation making it difficult for smaller NFPs to comply.
A recent example of a three-way merger in the NFP sector is the merger of Volunteer Task Force, Community First and Care Options. This merged group has recently been launched as Chorus.
Each of these organisations operated to assist people of limited financial, social and physical capacity live with safety, amenity and comfort in surroundings of their choosing. This included people with mental illness, disabilities and those that are aged or frail.
According to Chorus’ Head of Finance, Nigel Jones, who was instrumental in the merger process, each of these organisations had a strategy for organisational change, which included the requirement for heavy investment in areas such as IT. The desire of each organisation was to find partners who shared that strategy and who, as a combined group, would be able to commit to that strategy with combined strength, and Chorus was officially launched in October 2017. The success of the new organisation will obviously be assessed in years to come, however if the merger process itself is any guide, Chorus is destined for big things.
Learning from the Chorus experience, the following are factors that will lead to a successful merger:
- A strategy by each of the organisations to expand their services, and to do so with greater strength through alignment with other like-minded organisations.
- All board members of each of the three organisations should leave their egos at the door.
- The values, strategies and culture of each of the organisations need to be similar.
- The recruitment of an external facilitator to lead initial discussions.
- The appointment of a project manager to oversee the merger.
- Equal representation from each of the organisations in the initial discussions (including the involvement of as many board members as possible in the process).
- The establishment of a timeline with specific action plans of what to do and by when.
- As much communication as possible to staff and other stakeholders at the earliest possible opportunity.
- Development of the legal structure.
- Preferably, the involvement of someone who has had NFP merger experience.
- Development of the management structure, with proper and fair consideration of duplicated roles.
- Respect for what each of the organisations has achieved individually.
- Focus on the people in the organisation.
NFP mergers should not be contemplated simply because others are doing it. There needs to be both a trigger and a strong desire to merge for the right reasons.
I have no doubt that we will see further mergers in the NFP sector – not only in the disability services area, but across the board. The advent of the Australian Charities and Not-For-Profits Commission (ACNC) has seen numerous organisations that are unable to adhere to stricter guidelines disappear. Others have been forced to review their structure and governance, and make changes in order to operate more effectively in an increasingly regulated environment.
In his recent Commissioner’s Column on the ACNC website, acting ACNC Commissioner David Locke wrote about mergers and collaborations and the different challenges facing charities including declining membership, a changing funding landscape, disruption from new entrants to the market and new technology. Mr Locke mentioned that, as a matter of course, all Boards should ask at least on an annual basis whether the manner in which the charity is run is the best way to deliver on that charity’s purpose.
Mr Locke also suggested that whilst many charities may not decide to merge, all should consider collaborations with others. This could take many forms, including the sharing of back office services, sharing accommodation space, joint campaigning on common issues, running joint training, using joint purchasing power, or even sharing staff or equipment.
The ACNC website has a search facility where charities can find other charities in their region with similar charitable purpose by using the advanced search function on the ACNC’s Charity Register at: acnc.gov.au/charityregister.