Why Emotion Can Derail a Nonprofit Merger

For nonprofit mergers to succeed, each party must strip away old loyalties and favor shared vision over sentimentality

John Pfeiffer and Andrea Ziel are describing the still-fresh merger of their respective nonprofits. Ziel, director of Skills for Good, starts to explain her organization’s name change. She pauses for a moment, apologizing for being a bit tired.

“I have chocolate!” Pfeiffer exclaims, fishing through his desk drawer. “I have the chocolate you gave me for Christmas.”

He proffers a few bars for Ziel to choose from, along with a couple of napkins. The generous give and take between the two is symbolic. On Jan. 1, Ziel’s organization, previously known as WomenOnCall, merged with Chicago Cares, where Pfeiffer serves as chief operating offIcer. From their telling and their effortless interaction — passing questions back and forth or reinforcing the other’s point — the tie-up has been fairly seamless. Their professional and interpersonal ease comes from months of careful planning.

The branding challenges that arise in mergers — often emotionally charged — can cripple their success. A 2016 Report from the Metropolitan Chicago Nonprofit Merger Research Project found the naming of a merged organization or its branding were cited as difficult issues in 44% of the cases studied. Excluding federal cases, 50% of the mergers involved difficult naming or rebranding issues. A study published in Stanford Social Innovation Review, “Why Nonprofit Mergers Continue to Lag,” examined nonprofit merger activity between 2007 and 2012 in Arizona, Florida, Massachusetts and North Carolina. The report identified three emotionally charged issues that are frequent stumbling blocks, one of which was “blending the brands.”

Name changes and other image-related tweaks can have a resounding effect for nonprofits. Studies show nonprofit brands can be leveraged for fundraising; driving long-term social goals; and strengthening internal identity, cohesion and capacity. For a nonprofit merger to succeed, stakeholders are often challenged with emotionally detaching the brand from its mission.

The Argument for Merging

The Chicago research report analyzed 25 nonprofit mergers that occurred in and near Chicago between 2004 and 2014. Perhaps the most compelling finding was that 88% of the nonprofits reported that after the merger their organization was better off in terms of goals achieved and increased collective impact. Despite this positive finding, report author Donald Haider wrote that mergers can seem alien to those in the nonprofit field.

“In some ways, it’s little wonder that mergers have so few champions within the nonprofit community,” wrote Haider, an emeritus professor of strategy at the Kellogg School of Management at Northwestern University. “They are often associated with leadership failure, financial distress and good intentions run amok.”

Instead, the Chicago report found nonprofit mergers can be used as a strategic tool to advance mission goals, improve services and expand impact. The merger of three suburban chapters of Big Brothers Big Sisters with the Metro Chicago organization “turned a largely insolvent operation serving 100 or so at-risk children in 2005, into a $4 million sustainable enterprise promoting high-quality services for 1,800 at-risk children in 2015,” Haider wrote.

In another example from the report, the Eleanor Foundation merged with the Chicago Foundation for Women in 2012 under their mutual mission to help female-headed households. After four years, the combined CFW organization doubled its asset size, increased its donor base and grew its projects.

Katie Smith Milway, a partner in nonprofit management consultancy the Bridgespan Group’s Boston office and co-author of “Why Nonprofit Mergers Continue to Lag,” says merger opportunities can identify themselves as inorganic growth options.

“Boards constantly talk about organic growth: How are they going to find the next funder? How are they going to get the current funders to give more?” Milway says. “Too rarely do they talk about inorganic growth, where you actually acquire growth. That conversation alone is a strengthening one to focus on what you should build, what you should borrow, what you should buy.”

She says nonprofits should consider a strategic partnership or merger when, for example, there’s a leadership transition or the organization wants to innovate. There may be another nonprofit already doing the work.

The Tax Cuts and Jobs Act of 2017 may convince nonprofits to consider mergers. With an increase in the standard deduction, fewer people are expected to itemize their taxes, meaning fewer taxpayers will be able to claim the charitable tax deduction. With fewer people able to benefit from the deduction, experts are anticipating a drop in charitable donations. According to estimates from the Tax Policy Center, these changes would reduce charitable giving by $12.3 billion in 2018, a 6.5% decline.

State and federal budget constraints may also nudge some organizations to pool resources. The number of registered public charities in the U.S. grew 28.4% between 2005 and 2015, according to IRS data. Crain’s Chicago Business reported in 2017 that Illinois has “too many nonprofits,” citing a 2015 study by the Nonprofit Finance Fund that found 73% of Illinois nonprofits reported an increased demand for their services, but only 53% said they had the​ funding to meet demand.

Roll Up and Reset

Illinois started 2018 with one less nonprofit, due to the merger of WomenOnCall and Chicago Cares. Each sought a partner to fill gaps in outreach and programming. WomenOnCall had shifted its focus from a national level to home in on the Chicago community. At the same time, Chicago Cares was bringing on additional program staff and considering its investment strategy.

“Both of us were at inflection points at the same time, without even knowing it,” Ziel says.

The conversations began as an opportunity for strategic partnership before morphing into merger discussions. WomenOnCall is an online network that connects professionals with skills-based volunteer opportunities. Chicago Cares’ approximately 20,000 volunteers typically engage in activities like painting schools or helping to combat isolationism at senior care centers.

“This (merger) allows us to offer a richer array of opportunities,” Pfeiffer says of Chicago Cares, which is 75% corporate-funded. “It speaks to companies’ interest in doing more of that skills-based work. And frankly, we just want to offer as many options to people as we can. Some people gravitate toward lending their knowledge or expertise to a nonprofit. Other folks want more of a social experience. They want to engage with people and do some roll-up-the-sleeves work. We want to offer the full menu.”

The Chicago Cares and WomenOnCall coupling was technically an asset transfer, although they prefer to use the term merger in the spirit of collaboration. When a larger organization absorbs a smaller one, the branding strategy is usually clear. With Chicago Cares’ $3.3 million budget and WomenOnCall’s $450,000 budget, the latter is now considered a program and sub-brand of the former.

The branding and naming decisions are less clear in other acquisition scenarios. For comparison, hospice nonprofit JourneyCare merged with Horizon Hospice & Palliative Care and Midwest Palliative & Hospice CareCenter in 2014. In 2013, JourneyCare and Midwest had similar revenues ($34.8 million and $33.2 million, respectively) and market share (each with 6%) while Horizon was a good deal smaller ($12.9 million in revenue and 2% market share). Because two of the three organizations were of similar size, there wasn’t a clear case for keeping the largest group’s name.

More than 300 names were vetted, including hyphenated mixes, but these options resulted in confusion or failed to register as hospice-type names. Other names were eliminated because they were already trademarked. The new board finally opted to use the JourneyCare name because members said it conveyed “excellence and innovation in care, expertise and leadership, and a responsiveness that the organization delivers to patients and facilities every day.” Rather than choose a new name that would be unfamiliar with the public, they opted for a known, trusted identity.

Mergers can also be an opportunity to rebrand if the new joint mission represents a shift from the legacy missions, as was the case for WomenOnCall. As it merges with the Chicago Cares brand, WomenOnCall is being renamed Skills for Good.

“We decided early on that Skills for Good would accept individuals of all gender identities,” Ziel says. “WomenOnCall has always enjoyed creating a community of female volunteers, but we knew that moving forward we would need to change the name so it would be open to all.” As WomenOnCall became a program under Chicago Cares, the team wanted its updated mission to be reflected in the name. The name Skills for Good, Pfeiffer says, makes the program’s goals clear.

The Chicago Cares brand also evolved during the merger in 2017. Pfeiffer says that although Chicago Cares is a well-known brand, its name is a little vague. A new tagline adds clarification: “Do more good: Volunteer.”

News of the Skills for Good rebrand and merger with Chicago Cares spread to the community mostly through digital platforms and local press. The merger was official on Jan. 1 but was marked with a kick-off at the Feb. 7 Meet and Match event, a signature program run by WomenOnCall for the last 11 years. It was an opportunity for the two communities to meet in person and move forward with their combined mission.

Combining, Waiting, Then Rebranding

Legacy nonprofit brands have to tread carefully when they merge. Milway’s research explored the merger of two legacy Boston nonprofits, Crittenton Inc. and The Women’s Union. The former was founded in 1824 and served women and families, and the latter formed in 1877 as an advocacy organization, conducting programs and research on social and economic issues faced by low-income women and their kin. Crittenton and The Women’s Union had more than 300 years of history between them, and donors would certainly notice if those brand names disappeared overnight.

“When they merged, they had a lot of equity in both of their brands,” Milway says. As such, they rebranded as Crittenton Women’s Union in 2006. The new name identified their deep roots and histories but didn’t speak as much to the future. Before the organization could rebrand with an identity that better reflected their vision, Crittenton Women’s Union proceeded slowly and cautiously. It hired a new executive director to combine the two organizations. As time wore on, the board naturally rolled over and members previously loyal to either Crittenton or The Women’s Union moved on. About one year ago, with fresh board members and about a decade of equity as a unified system, the organization changed its name to EMPath.

“They took the power of the research on the Crittenton side and the access to women and helping them with livelihoods on The Women’s Union side and pulled them together into an amazing resilience-focused effort moving women from economic dependence to independence,” Milway says. “They call it a path to economic mobility: EMPath.”

Separating Name and Mission

One of the greatest barriers to a successful nonprofit merger may be the emotional connections people have to the brands — especially those on the inside. The Chicago study found internal stakeholders care more about the naming than the external community. Chicago Cares’ Pfeiffer has punched the clock at other nonprofits and has seen this attachment firsthand.

“It’s human nature,” he says. “We’re all protective of our organizations, of our brands. We’re proud of them. It’s hard to truly be mission-first in orientation. It requires a little bit of detachment. You have to make decisions based on how you can advance the mission most effectively. That’s hard for people because it does mean they have to give up some personal attachment.”

Ziel credits WomenOnCall founder Margot Pritzker for imparting the need to sever emotional ties to the brand name.

“She continues to emphasize that if this is going to help us get to that end goal, we shouldn’t have pride of ownership,” Ziel says. “Our work is to continue to serve nonprofits and to help professionals find relevant volunteer opportunities. A colleague of ours said that ‘me’ is usually one of the biggest barriers in a merger.”

Milway found that nonprofit boards can confuse their stewardship of the mission with stewarding the organization, becoming married to the organization’s identity versus its impact. There’re also external attachment to brands, and nonprofits don’t want to lose the equity built up with donors and volunteers.

One of the simplest ways to maintain brand equity is to keep original names in some capacity — at least temporarily. Arizona’s Children Association (AzCA), for example, acquired seven organizations over a decade. Milway says AzCA kept each of the brands as programs or sub-brands — similar to Skills for Good under the Chicago Cares umbrella — so donors could identify the nonprofit to which they were loyal. Eventually, the sub-brand names were phased out as donors became familiar with AzCA. AzCA placed one board member from each of the acquired organizations onto its board of directors, thus shifting the members’ loyalty as well.

The keys to a nonprofit merger are humility and a focus on the mission over all else. Unless they are regrouping under an entirely new name, organizations should examine which brand has the best name recognition and best represents the future of the organizations and how they want to grow.

Chicago Cares and Skills for Good hired a consultant, who Ziel says helped guide and support the process, acting as a sounding board and brand expert. But what has helped seal the two organizations together was the mutual interest in their combined mission.

It’s still very early in their partnership, but Ziel and Pfeiffer are looking forward to upcoming roll-out plans and how each organization can support the other’s growth. Chicago Cares is an affiliate of the nationwide Points of Light network, and there’s an opportunity for the Skills for Good volunteer program to be replicated in other U.S. markets.

“We’re building more potential for Chicago, but also for the whole network,” Pfeiffer says. “In five years there could be versions of Skills for Good all across the country.”

Ziel chimes in: “We can easily see the amplification of our work and the ways that we can, together, be much stronger than we could be on our own.”

About the Author | Sarah Steimer

Sarah Steimer is a staff writer for the AMA’s magazines and e-newsletters. She may be reached at ssteimer@ama.org or on Twitter at @sarah_steimer.