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Hello Everyone!

As you know, I have been active in the management of a Center for Independent Living.  The president of Scooters ‘N Chairs contacted me and asked if I would include the following scholarship opportunity for students with disabilities.  The scholarship is a $1,000 award for a deserving student who must write an essay about their strength and perseverance while pursuing their education.   I thank  Scooters ‘N Chairs Company  and commend them for their assistance to our community.

https://www.scootersnchairs.com/pages/2019-student-scholarship?msID=21b3a4f2-560b-4f42-80a8-7d2b147c8889

This is our Second Fundraising Gala at MOCEANS CIL Our event last year was a spectacular success. Please consider joining us on this special day. Help our organization provide needed help to a section of society that is so often neglected.

NFP Board Chairpersons  are often asked what information the Board would like to see on a monthly basis.  The resources in a small NFP are often limited, so the answer to this question must be practical but yet satisfy the fiduciary obligations of the board.  A board needs to be informed, but should also resist the inclination to ask for “everything”.   Obversely,  even the most dedicated board member also has limited time to devote to being a volunteer board member.  In short, the monthly reporting package must deliver necessary information efficiently and on a timely basis.

What is an example of  such a board package? An experienced financial manager can often realistically produce the following information for the board every month:

1. A complete set of financial statements, including balance sheet, income statement, and cash flow statement.  Available software often makes this extremely easy to do.   One problem often encountered is the board package does not get published in a timely fashion. Often  the  financial officer will not  like to make accrual and  reversing entries during the monthly close since this may require extra work.  It is important for the board Treasurer and Chairperson  to impress on the accountant the speed of producing the information will often outweigh the minor inaccuracy the use of accruals will produce.   Remember, financial information is meant to help run the company, ideally playing both scorekeeping  and predictive roles.  Waiting until all of the information is available and certain before sending out the financial statements reduces their  predictive value  and reaction time of management for correcting  problems.   The financial statements should include year to date  and  monthly financial information compared to prior year results as well as to the budget.
2. A short commentary on the financial information.  This is the equivalent of the “MDA” in a commercial company.  In a small NFP this can be done in one page and supplemented via verbal discussion at board meetings.
3. Supplemental Schedules.  Certain information is critical for directors. Cash flow information is one example.   While software such as Quickbooks can produce historical cash flow statements,  it is often a burden to produce a cash forecast on a continuous basis.   As a substitute, directors can receive:
   1. An aging of accounts receivable.  This information is extremely critical when  the main revenue sources are state and local governments.  Payment will often lag from these entities, so cash forecasting is critical.  GAAP net income is important, but at the end of the day the staff is paid with cash receipts, and not net income
   2. An  analysis of accrued expenses and accounts payable.   The board needs to know if liabilities are piling up or if they are being paid on time.
   3. A report on any major financial commitments such as employee bonus payments or capital asset acquisitions.
4. The Executive Directors’ Report.  This too can be a relatively short report.   More complete information may be presented at the next board or committee meeting. The ED should report  significant events that have occurred or are expected to occur.  The report should include all of the good news and all of the bad news of the month, as difficult as the latter is to report.  It should contain a report on significant initiatives management has undertaken, such as grant applications, potential new sources of revenue and  as well as potential deviations from the approved budget.   It is important to understand reporting these events to the board does NOT mean the board has approved either the reported initiatives or budget deviations.  For instance, a board may want additional information before the ED can finalize and file a grant application.  Grants will often come with obligations and  the board will want to  make sure any grant will not result in a loss to the organization.
5. Minutes of Committee Meetings.  Committee meetings are an integral part of board advisory, management, and oversight functions.  Board members are entitled to know what other board members are doing, especially because committee actions often result in issues the entire board needs to deal with.

Board packages will need to be tailored to the individual needs of the board and the organization.  The package described above efficiently delivers a lot of information very quickly.  One such example is a periodic reforecast of projected results for the year compared to the original budget. Other information can be added to this package from time to time. At the end of the day  though, it is the responsibility of management to determine what  it needs to report and how much detail is appropriate.

Sometimes things do not go as well as they could in the board room. Let’s look at the situation where a management proposal is defeated by the board. Management deems it critical the proposal be passed.  Perhaps it could be a bonus or salary issue. What happens then? 

Lets focus on the parliamentary aspects of this event. Most not-for-profit boards operate under Robert’s Rules of Order (RRO).  This is a somewhat unfortunate situation, but more on that in another post.  RRO offers several options:

1. A Motion to Reconsider.  This must be made at the same session (more about this later) and by a member of the majority group.  The intent here is very clear.  This rule prevents the majority from being harassed by frivolous motions on the same subject.  You do not want the meeting to bog down into senseless voting if slightly different motions asking the same thing  are continuously brought forth until the minority convinces the majority to change its mind.  Also,  some directors may need to leave the meeting early.  This somewhat underhanded strategy calls for the minority to wait until directors voting in the majority leave the meeting.  The minority could then reintroduce the motion and ask for a vote again. The rules for the motion to reconsider protect the rights of the majority by preventing such maneuvers. 
2. A Motion to Rescind.  This motion can be done in two separate ways.   The first is to provide notice to the board management intends to bring this  issue up for a vote again.  Board members are entitled to notice of meeting, so you  are effectively telling the entire Board the proposal defeated at the last session will be brought back again for a vote.  The second method is to bring the motion up from the floor during the meeting without notice.  This process is a little more complicated.  If a motion to rescind is made from the floor without previous notice, the vote to overturn the last action of the board must have a supermajority.  This supermajority can either be: (a) a majority of the entire board, and not just the quorum, and (b) two-thirds of the quorum following the usual rules for voting.  Again, the intent is clear.  The super-majority requirements prevent the board from rehashing the same material over and over again. 

There are several practical considerations the majority must be aware of:

1. On a small board, there may not be much of a difference between a supermajority and a majority.  For instance, on a ten person board, the quorum is six.  Two-thirds of the quorum is four, sufficient to pass the supermajority rule but less than the total number of directors who rejected the initial proposal.  Again, this may strike some as being somewhat less than politically expedient, given six members have already said no to the motion. 
2. The definition of a session can be tricky.  A meeting is a generally thought of as a subset of a session.  So for instance, a session of Congress roughly equates to one year.  When there are quarterly meetings, a meeting is generally thought to be one session.  When the board meets more than monthly, a gray area exists. The larger number of meetings need to be grouped into sessions at that point. 
3. One session of directors can’t tie the hands of future sessions of the board.  The bylaws or the articles of incorporation need to be amended to do that. So, a proposal defeated during one session of the board can be brought up again during future board sessions. 

At the end of the day, parliamentary wrangling is extremely unproductive.  It is hard to imagine a circumstance where management can’t accommodate the concerns of the board. If this can’t be done, then more drastic measures may be called for. 

Board members always appreciate an efficiently run meeting.  Here are some suggestions for effectively running a not-for-profit board meeting (or any other meeting for that matter):

1. Make sure you know  the board notification requirements.  Bylaws often require a notification period prior to  a valid board meeting.  The purpose  is to make sure board members are not “frozen out” of participation because of short notice.  Each board member has the privilege of being heard at a meeting.  This can’t be taken away from them except at risk of having an invalid board meeting.
2. Determine if  phone participation is allowed.  Many organizations still frown on this method of holding a board meeting.  Nevertheless, if you are going to allow a teleconference,  send out a notice to all the directors (not just those who ask for a conference call) with the phone number well ahead of time.  Follow that up with another  email notice the day of the meeting.  Directors often are busy people and won’t have time to find the original conference call details.  Many people receive a blizzard of email on a daily basis.  Sending the conference call details again on the day of the meeting usually puts the notification on top of their email listing
3. Circulate an agenda and board materials in advance of the meeting.  Realistically, this is not always possible.  However, as much of the material should be circulated in advance  as possible.  This will often facilitate active discussion at the meeting, and will keep the meeting time down.   Prepared directors will help the chair move the meeting along. Try and send the board materials in logical groups.  Do not send information piecemeal because multiple emails have a high propensity for being lost or ignored.  It goes without saying the chairperson and the executive director of the  organization should review the materials before they are sent out.  This will ensure they are familiar with the content and contain no errors.
4. Know the quorum requirements and make sure a quorum of members will attend.   It is frustrating to drive to a meeting only to find there are not enough members present to have a meeting. In the hallowed halls of Congress it is the responsibility of the “whips” to make sure members will attend.  In a board setting,  it is the responsibility of the chairperson to make sure a quorum will be present at the board meeting, or to cancel the meeting as appropriate.  Do a headcount the day before the meeting to make sure there are enough directors coming.
5. Strive for unanimity in any votes taken.  A simple majority rules for most board votes but you don’t want to have a 5-4 voting result on a major organizational issue.  At the end of the day, you want all the board members to buy into an action.  You want the entire board “rowing in one direction” in support of management.  A divided board will not accomplish this.  In such situations, a delay of the vote for more discussion may be warranted. Members in the minority should be allowed to express their opinions and reasons for voting against the proposal.  At the end of the day, the majority may not be able to persuade the minority.  When the minutes for the meeting are published,  the position of the minority should be described.. Publish the minutes of the meeting as soon as possible after the meeting while details of the meeting are still vivid in the members memory.  This will help ensure a careful record of the meeting and its actions are recorded. The minority will acknowledge the fair treatment they have received at the hands of the chairperson and will always appreciate it. Simple courtesy goes a long way.
6. Avoid marathon board meetings.  Sometimes it is not possible to cover all of the material in one meeting.  No one wants to come from work and attend a three-hour meeting. Prioritize the topics discussed. Use committees as much as possible.  It is always possible to schedule another board meeting.  Unanimous consents are another vehicle you can use to reduce board time.
7. Finally, it is always appropriate for the chairperson to thank everyone for their participation.  Not-for-profit board members are usually not compensated for their effort.  A thank you and recognition for their time is always welcome.

The control environment is the foundation for good internal controls for any organization,  whether for profit or not-for-profit.  You might call  the control environment the  “tone from the top.”  A control conscious executive management  will ensure proper internal controls are in place and are performing effectively.  Management that does not appreciate the need for internal controls or take  internal controls seriously courts serious trouble. The internal control system will not function as intended, no matter how good it looks on paper.  The result is a fertile breeding ground for financial fraud and irregularities.

Sadly, the lack of control consciousness is common  in the not-for-profit sector.  In the last blog, I looked at internal control breakdowns where malefactors were actively involved.  It is obvious to any onlooker what the problem is in such occurrences.   Unfortunately, organizations can end up in severe financial difficulty even when the executive management is well-meaning but has failed to implement adequate internal controls.

One example of this appears to be the Greek Orthodox Archdiocese in the United States.   The leader of the Archdiocese, Archbishop Demetrios is someone widely recognized for his erudition and his faithfulness.  He has been a mainstay on the American religious scene now for decades.   Yet, news began to filter out of the Archdiocese in 2017 of irregular financial transactions.

The genesis of the problem is a Greek Orthodox Church was destroyed during  the terror attacks in New York City in 2001.  Initially, the City refused to allow the Archdiocese to rebuild the church.  After taking the City to court, the Church was allowed to begin construction on the new church.   Funds were raised across the country for the new Church.  The estimated price tag of the new church was initially pegged at $30 million.

Unfortunately, the price of the church construction has soared to $80 million, a staggering $50 million above the original price.  Even more disturbing was the allegation $15 million was missing from the construction funds.  Federal authorities announced an investigation into the situation earlier in 2018. The results of the investigation are still pending.  Not surprisingly, many parishioners are up in arms. There have been demands the Archbishop step down and allow a new bishop to settle the entire matter.  Interviews with those familiar with the financial management of the archdiocese show the   chancery (office) of the archdiocese was  disorganized at best, and inept at worse.

While  the Archdiocese has many important things to do, such as looking out for the welfare of souls, it must also exercise stewardship over funds it has been given in trust. Sadly, if there had been rudimentary internal controls in place over cash, this entire  scandal may not have happened.  Professional managers do not claim to have any special knowledge about active ministry.  Perhaps it is time churches and other NFP organizations turn over financial management of their organization to professionals.

Sadly,  it is time to announce my nominees for the Not-For-Profit Hall of Shame.  These organizations or individuals have acted in harmful ways to  their members or extravagantly used their members’  funds to either enrich  management or for clearly inappropriate purposes.   There were many “worthwhile” nominees this year, such as the executive director who rigged the 50/50  fundraiser so she could win.  Unfortunately, there is a one organization standing out head and shoulders above the rest.

This year, the first nomination for the NFP Hall of Shame must go to the Catholic Church in the United States.  It pains me greatly to say such a thing since I am a loyal member of this church and part of its clergy.  Nevertheless, the facts are the facts. Any competent professional looking at the same facts would come to the same conclusions. There is something terribly wrong in the management of the Catholic Church of this country.  Again, I am not speaking about religious matters.  I am speaking purely as a student of management.

Let’s first look at the recent case of  former Cardinal, and now Archbishop Theodore McCarrick.  McCarrick served as a bishop in the Archdiocese of New York,  and then as Bishop of Metuchen, NJ,  Archbishop of Newark NJ,  and Archbishop of Washington D.C.  He was elevated to the “sacred purple”  (made a cardinal) when he was appointed Archbishop of Washington at the age of seventy.  McCarrick was a mover and shaker in not only the Catholic Church, but also on the national stage itself.  Recently, credible accusations surfaced he abused young men and children along the way.  It appears the statute of limitations has passed and the 88-year-old prelate can’t be criminally prosecuted.  Pope Francis recently accepted McCarrick’s resignation from the College of Cardinals, and from the active ministry.

Another recent scandal has broken open in the Byzantine Catholic Archdiocese of Pittsburgh and its suffragan dioceses over the last year. The Byzantine Catholic Church is in union with the Roman Catholic Church, but uses an eastern (Greek) form of worship.  Last year, the Pope appointed a European bishop to shepherd the diocese of Parma, after apparent  financial mismanagement.  This year, the Byzantine Catholic Diocese of Phoenix took the unusual step of suing its health insurance agent and the Archbishop of Pittsburgh, who was the administrator of the insurance plan.  In its filing, the Diocese of Phoenix alleged the insurance agent refused to refund money to it after terminating participation in the plan  and transferred funds to an offshore account in Bermuda.   Using a biblical injunction not to sue another bishop,  the Vatican sadly gave another bishop jurisdiction over the Diocese of Phoenix in order to stop the lawsuit.  Amazingly,  the insurance agent is still servicing at least two of the Byzantine Catholic dioceses as well as other Catholic diocese..  Any competent business person looking at this situation would be shocked by the lack of internal controls over the insurance agent.  This is a complex situation, and is worthy of its own blog entry later on.

In the McCarrick case, a powerful leader was able to abuse people across decades.  He inflicted harm on his victims, and no-one within the church hierarchy had the courage to speak out against the abuse.  His scandalous actions were an open secret within the upper echelons of the Church. The Catholic hierarchy simply closed ranks around one of their most influential leaders to squash any investigation.  The argument was they were doing it for the “good of the church”.  Beware of this Friends! When someone is doing something for the “good”of the organization, they generally mean we have to  do this to protect someone or cover-up some less than savory situation. Any publicly traded corporation would have acted decisively to report criminal activities or inappropriate behavior decades ago.   Controls would be in place to make sure someone inflicting such pain on the corporation would be removed from its ranks.  Sadly, this is not what happened with McCarrick . In fact, the opposite happened.

The financial irregularities  of the Byzantine Catholic Archdiocese are yet another example of clergy closing ranks around actions  that need to be thoroughly investigated.  From an accounting point of view, the control environment in the Church is fatally flawed.  Compliance with law and ethics starts at the top of the organization.  Controls such as finance councils, who are supposed to advise the Bishop work only when the Bishop is committed to make them work.  Often they do not and there seems to be no recourse to these actions.

The “closing of ranks” behind a member of an organization is not unique.  Look at the “blue wall” misguided policemen will sometimes form. Nevertheless, the financial and moral harm the Catholic Church has allowed to occur in the last year definitely propels it to the top of my list for the NFP Hall of Shame.

The  contentious testimony of  the now disgraced FBI Agent Peter Strzok before the House of Representatives is now fading into memory.  Contentious testimony might be too kind of a description for the day.  A better description could be the “Strzok Spectacle.” In retrospect no-one accomplished what they were looking to do on that day.  The testimony more closely resembled  spectator sport  than a Congressional hearing.

What are the lessons  we can take away from this event? How can we apply them to everyday management?  I think there are several “take-aways:

1. Have a smaller group do the heavy lifting. Strzok testified before the House Oversight and  Judiciary Committees.  The combined membership of these two Committees is over seventy representatives.  At one point, the camera pulled back surveying  the entire room.  It seemed Strzok needed binoculars to find the person asking the questions he was so far away.  It is hard to keep order in such a large meeting, and it is no surprise the hearing degenerated to a rabble at various points. The chairman lost control of the meeting rather quickly.  Social scientists have different perspectives on the optimum task force size or  committee.  The range is about  five to twelve members, and not seventy. The House of Representatives appeared  to want  a media moment rather than trying to accomplish its stated goal of gathering information aiding in its constitutionally mandated oversight of FBI activities.  Contrast this to the Senate Watergate Committee (circa 1973) consisting of seven members.  The Watergate Committee was an extremely effective group that certainly delivered the goods during its hearings.
2. Complicated parliamentary rules can bog down a meeting.  During the hearing there were several shouts by the minority for a point of order, and even a request for an  adjournment.  These were all gaveled  out of order by the chairman.  The minority then asked for a vote to overturn the chairman’s ruling.  That ruling was summarily overruled.   One purpose of the Congressional Rules is protection of  the rights of the minority.  Yet, it seemed the Democrat minority wielded parliamentary procedure more as a sword rather than a shield.  The use of complex parliamentary rules is not appropriate for smaller not-for-profit organizations.  The Strzok hearing shows just how tough it can be to run a meeting using a complicated set of rules even when a parliamentarian is available.  NFP boards and committees should invest time and effort finding a set of rules that fosters accomplishing  their objectives, and not tieing up meetings.
3. Be civil.  It didn’t take long before civility broke down at the hearing.  By  eleven a.m. the chair threatened  Strzok with a contempt citation,  Democrats were crying for points of order,  and personal attacks from  members and the witness were flying across the room.  Let’s look once again at the Senate Watergate Committee. This committee operated in a super-heated political environment as well.  I remember very few personal attacks (the most famous being an ethnic slur launched at Senator Daniel Inouye of Hawaii by an attorney) and a dedication to finding the truth.  It seemed the object of many members of the joint committee was stating their own opinion rather than gathering testimony from a witness.  Grandstanding, spiking the football, and personal humiliation do not aide in gathering information.  Ad hominem attacks and taking things personally are the sign of an amateur.  Don’t do it.
4. Try to remain open-minded.   We all bring our preconceived notions to any task we attempt.  It is only human.  However, actually listening to the other side of the discussion or debate gives you additional information to either buttress or change our view of a problem.  It didn’t seem anyone was listening at the meeting.
5. Be prepared for the meeting.  It is the job of the  chair to do his level best  to ensure the meeting goes smoothly and accomplishes its goal. The chair did a very poor job of preparing for and organizing the hearing.  As objection after objection was being raised, the chairman seemed to flounder with his responses.  There seemed to be no anticipation of the Democrat motions.  The chair could have met previously with  FBI Counsel to come to an agreement about what types of questions could be asked.  Although there was little possibility of total agreement, at least some of the differences could have been narrowed prior to the hearing.  Similarly, the chairman (the leader of the majority party)  could have focused and coordinated the questioning of each of the majority members.

All in all, a shabby job by all involved.

Some lessons are learned the hard way.  Here are some common mistakes I have run across (and made myself!) in NFP board organization and management:

1. Don’t use Robert’s Rules of Order.  Many NFPs automatically enshrine Robert’s Rules in their bylaws.  Theoretically, all meetings are run according to these rules. In fact, I have never seen a small NFP board of directors conduct a meeting according to Robert’s Rules. They are far too unwieldy.  If you really want to tie up a board meeting, insist Robert’s Rules be used.  A book on a simplified version of Robert’s Rules can run over one hundred pages.  This is far in excess of what is needed. Small board meetings tend to be run on a much more informal basis.  A small board should investigate and adopt other more informal guidelines such as Martha’s Rules.  These are much easier to use, and avoids the later potential challenge by dissenting board members Roberts Rules were not used to guide the discussion or the ensuing vote.

 

2. This is NOT the School Board. I applaud all those who have volunteered at the local school board or larger volunteer organizations.  Their service is invaluable. However, these board members may be  used to more formal procedures and can come to a smaller NFP board with preconceived notions about how the board should be run.  They are used to endlessly long meetings stretching into the wee hours of the morning where the board scrutinizes virtually every expenditure.  In a smaller NFP organization, this can be destructive.  I am not suggesting in any way the board shouldn’t perform its oversight function.  I am suggesting there are much more efficient methods of performing that activity such as monthly reports, updates, etc.  Small NFP board members volunteer their scarce and limited time.  It shouldn’t be spent in largely unproductive meetings.

 

3. Consider a staggered board.  There is nothing more daunting than trying to come up with an election  slate for the entire board at the Annual Meeting.  I have seen small organizations attempt to find directors to fill the entire board in one election.  This is an almost impossible task. Finding three directors for a three year term seems to be much easier than finding nine directors for a one-year term every year.

 

4. Use advisory boards where possible. Advisory boards can provide important information about the NFP’s market area. Advisory boards can be set up in many different ways.  One example is to set up geographic advisory boards.  The NFP I am associated with serves clients in two NJ counties.  Setting up an advisory board for each county seems to be a natural organization.  Another way of organizing an advisory board is by service line.  No matter how the advisory boards are set up, they provide an excellent way to train potential directors and give them a “test-drive”.  An NFP could require advisory board service prior to board service. That being said, do not create an advisory  board as honorary positions.  Make sure the advisory board meets on a regular basis and has a charter.  It should have clearly defined functions and regular communication with management and the board of directors.

 

5. Use emeritus board members. Small organization board members will often commit to a term of service and then move on to other endeavors. Sometimes there will be a change in circumstance in their lives such as a job loss or they will face pressures from other volunteer work they do.  They may be forced to relinquish their board seat.  It is a shame to lose the expertise these members have acquired over the years.   Consider creating emeritus board positions.  Emeritus board members have auditing rights (they attend meetings when convenient), the right to be heard at the meeting, and perhaps to cast an advisory vote.  They do not count toward the quorum, and their votes are simply advisory, as the title suggests.  Nevertheless, I have found this is an excellent way to keep retiring board members participating in the organization.  Emeritus members also appreciate the honor and recognition they are being given.

 

6. Ask board officers to “go through the chairs.” Many well-run organizations ask potential board officers to “go through the chairs.”  The first year the member serves as treasurer.  The following year he serves as secretary, the year after as vice-chairman, and then finally as chairman.  Going through the chairs provides excellent training for the board officer. It provides the board member accepting an officer position with some assurance he will not be required to hold that position for his entire board tenure. Doing the same work over and over again year after year can be demotivating and demoralizing for someone.  The downside to the “chairs” is its multi-year commitment by the board member.  The long-term commitment can deter many board members from serving as a board officer.  Nevertheless, a board can ask for voluntary compliance by making this a recommended step to holding office.

 

7. Set performance expectations.  In New Jersey, it is possible for a board member to be elected and then never be seen again.  As strange as that seems, a board member can be elected and there is no way to remove that person.  This is a potentially disastrous event, as the board seat must still be counted for quorum purposes and unanimous consent resolutions.  A great deal of flexibility in board operations is taken out of the hands of the board if this situation were to occur.  One method of dealing with this situation is to adopt a “three meeting” rule.  If a board member misses three meetings he or she may be asked to resign from the board.

 

8. Use technology to its fullest. There is no question face-to-face board meetings are required from time to time.   Board members are volunteers though.  Traveling to and from board meetings can be time-consuming, especially if the board meetings are during the day.  Board members will often need to sacrifice vacation days to come to board meetings.   The use of technology can partially alleviate the situation.  Conference calls and survey software can be used for many board or committee matters.  Board members will appreciate the time savings.  It is critical board minutes reflect the manner in which the board minute was held.

 

 

 

Mergers in the NFP World

By:  Mark Koscinski and Susan Hornak

Business combinations often cause a big splash.   They are reported on television and in the press. A merger of two small not-for-profit (“NFP”) organizations will never reach such glorious heights of journalistic coverage.   There are no easily accessible statistics on this subject, but anecdotal evidence indicates mergers of NFP organizations are relatively rare compared to business mergers.  Nevertheless, opportunities are out there.

Over  the last two years our  organization had at least two opportunities to combine with another NFP.  For various reasons these mergers did not work out.  Analyzing the circumstances around the potential combinations and why they never came to be  can be instructive.

The first opportunity was the direct result of complimentary mission, territory, and proximity of both organizations.  Another small NFP was headquartered one story above us in our  building.  That small NFP,  which we will refer to as “Target” (not the retailer of course!) had a small number of employees (just as we did),  trouble finding adequate talent (just as we did) and struggled to find funding (just as we did.)  Target performed services for the public we did not, but these services fell within our organizational vision.

The first reason we considered this opportunity was  Target had difficulty securing executive management. It had gone through several interim executive directors in a short period.  Our executive director was strong enough to manage the additional workload and certainly had the time and “band-width.”  We had  “hired-up”  when we offered her the job, hoping opportunities like this would appear. An obvious advantage of any merger was the fixed cost of our executive director would have been split over two similarly-sized organizations at a substantial savings to both. Common functions such as payroll, accounting,  and IT also could have been easily consolidated. There were other intangible benefits as  well. The staff would  have opportunities to be cross-trained, adding to their skill set and job satisfaction.  A combined organization would have been financially stronger, better able to attract funding.

The second merger opportunity was to consolidate into our operations a new line of business one of our directors had become expert in.  This fee-for-service line was something we had previously become interested in going into, but we had a much slower start than our director in her business. This was of course due to the lack of financial resources and available talent.  We looked at a proposed merger  as a chance to jump into the service line quickly, avoiding the pain and expense the learning curve always brings.   As we write,  the director’s  organization now has about twice the case load (and twice the billing) as our organization.  The combination of our organizations would have produced a powerhouse in the fee-for-service field, ensuring sufficient cash flow for our organization.

Why did both mergers fail?

1. Lack of bandwidth of our board and management.  We are a small NFP, where there is not much time to spare for strategic thinking.  Management sometimes has all it can do to keep daily operations ongoing.  It was not committed to an acquisition because it could not see how it could accomplish the  acquisition.
2. Lack of articulation of the benefits of a merger.  At key times we could not articulate the benefits of such a merger to the satisfaction of management.   When preparing for something like this in the future, it is critical the person championing the merger be able to clearly define what its advantages are.  A clear answer to  “What’s In It for Me?” can go a long way to accomplishing  the merger.
3. Lack of perseverance by the deal champions.  At the end of the day, we judged it was not worth the effort to push this through management.  We respected management’s position.  Yet, sometimes it is worth the effort as a board member to respectfully push back on management.

Board members, remember your management team can often be stressed by the lack of resources in running the day to day operations of the organization. They need your help with strategic operations such as a merger.  Be prepared to explain its benefits, and ready to roll up your sleeves to help.  We are hoping more opportunities will come our way in the near future.