Governance Articles

Mergers: Look Before You Leap!

During these difficult economic times, members get skittish about paying association dues, particularly when there is more than one association representing the field. The voluntary leadership soon develops the urge to merge. The advantages seem apparent: greater efficiency, elimination of duplication, a unified voice to government and the media.

The urge is often aided and abetted by the imperial aspirations of the chief volunteer officer, who may envision the unification of the field as his or her ticket to immortality. After all, most people who make it to the top of the highly political association world aren't exactly shrinking violets.

There are many instances, particularly when one association agrees to be taken over by another, when a merger makes perfect sense. Even in these cases, however, it pays to look before you leap. Mergers, like marriages, are generally more complex than they appear when both parties are starry-eyed with love. And like a marriage, the merger is more likely to be successful and lasting if there is a reasonable period of courtship to determine whether the two parties are, indeed, compatible. Most difficult is to merge two organizations that regard themselves as equals and have a stake in preserving their way of doing things.

Here are some tips for determining whether a merger is right for your association, and how to go about doing it if it is.

    Don't try to marry a dog and a cat. Most mergers, like most marriages, break down because of incompatibility. Full of high expectations when they enter the partnership, the parties want to accentuate the positive. They have a vague hope that whatever differences there are can be worked out after the marriage if both parties want it to work. The truth is that organizational cultures are so strongly inbred that it is extremely difficult to modify them unless one organization absorbs the other and imposes its way of doing things.

    Even with the best of intentions, it is not possible to marry a dog and a cat. Both are equally valuable on their own terms, but there is no way to mate them successfully. So it is with many associations.

    Don't merge now and work out the details afterward. Daunted by the many details of merging two very different organizations, the easy answer is generally to merge right away and let the new board of directors work out the details. The danger is that you may be trying to marry the dog and the cat (see above).

    Do try to form joint ventures before merging. If the two associations are indeed compatible, it should be relatively easy to test the relationship. Try cooperating in several areas first. For example, if both associations do government relations, set up a central data bank and reporting system on legislative issues. The two associations can take separate positions on individual issues, but both will have access to the latest quality information at less cost. Other examples are joint sponsorship of a foundation, joint educational and scholarship programs, joint sponsorship of a trade show, etc. If this won't work, a merger won't work, either.

    Remember your fiduciary responsibilities. Whether you are a volunteer leader or a staff executive, your obligation to your association comes first. Advocates of a merger will often try to win support by claiming that it is in the best interests of all the people in the field. You are not responsible for all the people in the field. You have been entrusted with the assets of your association, and your first responsibility is to safeguard them. For example, if your association has a surplus in the bank and your prospective partner has a net deficit, you are not looking after your fiduciary responsibilities by agreeing to a board where each association gets 50% of the board seats. You are bringing all the money to the table but they get half the say on how it is to be spent. Check with your attorney before embarking on merger negotiations. Be sure you meet the requirements of the three elements of fiduciary responsibility: the duty of care, the duty of obedience and the duty of loyalty. Anyone who fails to live up to these responsibilities may be personally liable for damages.

    Retain an independent facilitator. Facilitators are an extra expense, but they can be the best investment you will make. An independent facilitator will tend to the process while you deal with the substance. Without a facilitator, it's easy to get distracted by side issues. It is also particularly helpful to have the ongoing counsel of someone who has been involved in merger negotiations before.

    Separate the people from the problem. During merger negotiations differences of opinion are rapidly personalized. Without a facilitator, the discourse can get nasty. Empower your facilitator to be the impartial judge who will keep the official record and bring the parties to a decision based on facts, not emotions.

    Have a communications strategy before you negotiate. Agree that negotiations will take place at the bargaining table, not in the trade press or the mass media. Nothing poisons the negotiation atmosphere more rapidly than planting stories with the media or starting rumors among the membership. Agree in writing before negotiations begin that nothing will be said about the negotiations unless both parties approve the language.

    Find out what your members want. It's unwise to begin merger discussions unless you have a clear mandate from your membership. It's particularly important to find out what terms your members will accept. Will they expect reduced dues? How much? How soon? Do they expect to absorb the other association? Be absorbed? Create an entirely new association? Do they favor a membership association? A federation? It's important to find out before you start investing an enormous amount of financial and human resources in merger negotiations.

    Jointly adopt a statement of negotiating principles. Before you start negotiations, the boards of the two associations should agree on a framework for the discussions as well as a yardstick against which to measure success. These should be reduced to writing and should serve as the guidelines to be enforced by the independent facilitator. For example, the two negotiating teams might be charged to identify a compelling reason why the associations should merge instead of staying independent; develop a vision, mission, goals, objectives and strategies; define the programs and services that will be offered; define the new governance structure that will carry out the new mission; develop a consolidated balance sheet for both organizations, and a pro forma operating budget for the new one. Progress can be measured against this charge, and if negotiations fail, the specific reasons will be readily apparent. This will make it easier to report to the membership.

    Agree that there will be no sacred cows. Negotiations frequently deadlock over such issues as the name of the surviving organization, its logo, the fate of its prestige-laden offices and who gets to be president during the transition period. These are often deal-breakers. Agree in advance that everything is on the table. If you cannot come to consensus, agree that an impartial third party will be authorized to make the decision for you. For example, if one association believes its Washington lobbying office is a priceless pearl while the other believes it is a beached whale, there is little chance the two sides will resolve the issue. A better solution is to retain a respected expert to do an impartial audit of the government relations operations of the two organizations and recommend the most cost-effective structure to meet the agreed-upon goals.

    Learn from the example. Many other associations have tried to merge before you have. Do your research. Learn what they did that worked. Avoid the pitfalls that snagged them.

    Keep your members posted. Keep the issues within the negotiating process, but let your members know how you are doing. Are you making good progress? Are you on schedule? What's happening next?

    Avoid rigid deadlines. Good, well-thought out decisions are rarely made under the gun. Take all the time you need to think things through and arrive at an outcome you won't regret later.

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