The advantages and disadvantages of mergers

Not-for-profits tend not to look at mergers unless they're in diabolical trouble. If a group can survive on their own, they generally want to do that. However, they'd rather like to cut back on their costs, if they can; they'd like more resources: they'd like to be able to apply for large grants. And, especially after the Abbott government's cuts, quite a few NFPs are in diabolical trouble.

What are the advantages of merging?

There certainly are advantages of scale for NFPs. It's easier for a larger group to get grants, for one thing, both from government and from the private sector. Grantmakers want to know that your organisation can fill out its forms, that it can spend its money, and that it's going to be around indefinitely, and being big helps put out that vibe. If your group gives good office, you'll find it easier to gain the trust of the big boys. And, in theory, if you're big it's easier to have an efficient office without starving the client contact end of the enterprise.

What are the disadvantages?

Mergers are very difficult to pull off, and quite easy to stuff up. Even in the commercial world, where things are a lot more straightforward, only somewhere between 50% and 20% of mergers actually work.

Mergers can harm organisations by taking a lot of time and effort and sucking up all the management. They can promote uncertainty, anxiety and rebelliousness among the staff and lead to increases in absenteeism and job turnover. Expected savings often don't materialise. Any actual savings involve staff layoffs, something community groups tend to shy away from. It can be difficult to blend differing enterprise cultures - and the culture makes up a much larger part of an NFP than of a standard commercial enterprise.

What are your options?

If you can't bring yourself to merge, there are halfway houses.

• Informal Cooperation: Small associations with small needs - a room, a hall, a sportsground - can share with other groups without too much difficulty. Even here, however, problems can arise. Insurance, in particular, can be a sticking-point, and arrangements for security need to be talked through. Draw up a written agreement; it avoids bad feeling later.
• Formal Cooperation: If you're talking about sharing functions - accounting, payroll, joint operations - you're going to have to agree on joint funding, and you are going to have to negotiate. Details need to be settled, in writing.
• Auspicing: A new group may have trouble getting its bona fides accepted, and could take a while to get any tax concessions; and it may seek to get that respectability and those tax breaks by being taken under the wing of an established group. This is known as auspicing. If your work could get a grant from government or a foundation if you had tax certification, you may be able to funnel the grant through a group that has it.Get to know your neighbours in the sector, and think about whether you'd be better off under one roof. Don't let ego or inertia stop you doing what's best for your mission.