The Nonprofit Leader's Guide
We want to bring you the thoughts of some of the most impactful leaders in health and human services. Their real-world experience in driving growth and impact and leading in hard times might be just the extra dose of motivation and common sense you need to bring to your organization whether you are an Executive Team member or the Board President. We think that leading the conversation about the nonprofit business sector and what nonprofits should think about now is part of our mission, “Building A World that realizes the boundless potential of all people.”
Our purpose in this podcast is to make your mission, our mission.
The Nonprofit Leader's Guide
Either at the Table or on the Menu: Survival Tactics for Nonprofits
Nonprofit organizations face unprecedented challenges in today's uncertain environment. With financial pressures mounting and workforce shortages continuing, many organizations are exploring strategic partnerships as a path forward. But what separates successful nonprofit mergers from failed ones?
The answer lies in mission alignment. The most effective mergers begin not from financial desperation but from a shared vision of expanding impact and improving service quality. As one expert puts it, these partnerships create situations where "one plus one equals three" - allowing organizations to serve more people, improve quality, expand reach, and innovate in ways they couldn't accomplish alone.
Take the case of three small IDD providers in Maine who recently merged to become the state's largest provider organization. By combining forces, they've retained their local community presence while upgrading technology, improving benefits, and enhancing service consistency. This exemplifies how thoughtful mergers can preserve and strengthen an organization's mission rather than diminish it.
Getting there requires navigating complex human dynamics. Boards must transition from routine oversight to strategic leadership, which means creating focused task forces, providing education about the merger process, and ensuring members don't let personal fears derail progress. Staff communication presents equally delicate challenges – share information too early, and you risk unnecessary anxiety; share too late, and you undermine trust essential for successful integration.
Outside expertise proves invaluable throughout this journey. Beyond technical specialists in legal, financial, and HR matters, strategic advisors who understand nonprofit culture can keep everyone focused on the mission when tensions rise. They serve as both architects and confidants, providing CEOs a safe space to express concerns they can't share with their teams.
As we navigate this challenging landscape, remember: "You're either at the table or you're on the menu." Having a growth strategy isn't optional anymore. The most successful organizations proactively seek partnerships that allow their missions to flourish beyond any individual leader's tenure. Join us to learn how your organization can approach mergers as strategic evolution rather than surrender.
Welcome everyone to the Nonprofit Leader's Guide podcast. I'm your host, scott Light. Our theme for this episode In these uncertain times, what can organizations do to improve their chances of success in a potential merger? Now, to partly answer that, I'm going to tee up an article from the Nonprofit Times and it's titled 10 Keys to Success for Nonprofit Mergers. The keys range from trust, being mission-driven to paying attention to culture and doing your homework, so we've got a lot to dive into. I've got two terrific expert guests today joining me and joining you.
Speaker 1:Stacey DiStefano is the founder and CEO of Consulting for Human Services. That's a national advisory firm guiding providers and investors through strategic growth, mergers, market intelligence and modernization in the behavioral, health and IDD sectors. A trusted thought partner to C-suite leaders across the country, stacey brings deep expertise in system transformation, organizational sustainability and values-driven expansion. Karen Carlone is the director of Boundless Advantage. Her former roles include chief executive officer of Southern Maryland Community Network, chief operating officer of Cornerstone Montgomery and vice president of market intelligence at Open Minds At Boundless Advantage. She brings over 30 years of diverse experience in health and human services. Boundless Advantage. She brings over 30 years of diverse experience in health and human services and also in her role here. She ensures merger transitions are smooth and mission centric, so we're certainly going to talk about that as we go. First, welcome to you both. It's good to have you here.
Speaker 2:Good to be here, thank you. Thank you so much.
Speaker 1:Boundless has developed all kinds of strategies and resources to support partnerships with like-minded organizations. So let's jump into this. I'm going to come back to parts of that top 10 list that I mentioned off the top here and we're going to kind of thread that through the conversation. So I've got a quote that I love for both of you to kind of, you know, touch on this right out of the gate, and it's this quote the most successful mergers are mission driven. That sounds simple, but we know it is very complicated. So in your expertise, stacey, why don't you start us off here? In your experience, your expertise, what does that look like? What does a mission driven merger look like, and can you provide some examples of mergers that indeed improved mission?
Speaker 3:Yeah, certainly the most successful merger that I've seen support organizations that really start from that place of mission alignment, not from financial desperation and not from looking at a P&L.
Speaker 3:So a mission-driven merger really just means that the organizations involved, they sort of see a clear path to doing more of what matters to them and that could be serving more people, could be improving quality, expanding their reach or innovating in ways that they couldn't do alone.
Speaker 3:And a great example, just a press release this week I'm working with three small IDD providers in Maine and they've got long, proud histories in their community but all of them individually kind of struggling with that workforce shortage, you know Medicaid issues that we're all dealing with now, leadership transitions and rather trying to wade through that crisis individually. What they did was come together, you know, with our support, to form a more unified organization. So they are going to be merging into one which will create the largest provider organization in Maine and by doing that they've retained their local presence. But they've upgraded things like technology and you know different insurance benefits, things for the folks that they hire and certainly the folks they support. And I think the most important thing there is the quality of life for the people they serve really improve because now they can offer a more consistent, coordinated support and lower, you know, administrative overhead. So it really makes sense and it's an area where one plus one makes three.
Speaker 2:Well, I certainly agree with Stacey's perspective on how mergers can really grow the organization's capacities in so many ways.
Speaker 2:I think successful mergers are an opportunity for an organization to deeply engage with its mission and the value that that organization brings to the community, both now and in the future. Engaging with a larger or more stable organization can sometimes offer the chance to achieve possibilities that a smaller organization might not be able to do on their own. And for my part, I would give an example. In my previous role as the CEO of a small semi-rural behavioral health organization, we had grown in size, we had doubled our revenue and tripled our service area, but we were not able to achieve the goal of developing integrated services. We had a number of different capacity and financial issues in meeting that goal and we chose to merge with a certified community behavioral health clinic in another county and that gave us the opportunity to offer integrated services and grow our scale. And then, as a smaller organization, we brought some specific areas of expertise to the joint organization, and that organization is thriving to this day.
Speaker 1:That is terrific perspective out of the gate. Let's dive in a little deeper to that article I mentioned and I'll come to this. And it said said boards and board chairs have to be advocates in order for the merger to be successful. So what are the best practices here? What are the do's and don'ts here when it comes to boards and board chairs?
Speaker 3:Well, I can jump into that. I think the board is always the wild card. You know, we we have about eight transactions in play right now here at CFHS and every single one of them has a different board dynamic. Some organizations you know the small legacy nonprofits who have folks on there 30 years, family members in service, all the way up to multi-state you know very sophisticated, high business acumen boards. It changes the dynamic as you walk forward. It changes the dynamic as you walk forward.
Speaker 3:So during a merger, boards of any size really need to evolve from an oversight to more of a strategic leadership role.
Speaker 3:And that's difficult for some, but I think the best ones are the ones that can get educated early, that can stay mission focused and don't negotiate from a place from fear, but really stay focused on that place, from vision.
Speaker 3:And if they can do that, the board really plays a critical role in the success or the failure, to be honest, of a nonprofit merger. So I would say, based on that, one of the best practices that I can think is making sure the board understands their role during that merger process. The CEO is taking them on a journey, the CEO is leading and the board is supporting there, so they move from that routine governance you know, quarterly, monthly, whatever it is that they're meeting to being more strategic decision makers and really I would say, culture stewards and ambassadors for that change. And in order to do that, it really requires the education up front. So some boards just don't have any experience with M&A and it's a good CEO who gives them that opportunity for education, to learn about that M&A process, including the risks, but really focus on the potential and what success looks like. And I do have a couple of do's and don'ts from experience. Do you want me to outline them?
Speaker 1:Sure.
Speaker 3:I would say do create a clear board task force or some kind of working group so that decision-making is nimble. You know you don't want 17 board members having to find consensus for every decision. So some kind of a task force, you know, giving them the tools, data, metrics, real-world examples, but having a focused group of board members who are really acting as champions of the transaction and don't let board members kind of negotiate from their personal fear. I've had lots of instances where a board member had an experience in their day job of a merger went bad and they carry that into the transaction for the organization. So we've got to really carve that out and give those some boundaries so they keep those out of that experience.
Speaker 3:I've also seen post-merger problems because board concerns weren't voiced early enough. So I'd say have those hard conversations first and boards you know really need support like staff. Do. So if you bring in an outside advisor or somebody to guide them through the process, give some perspective, even a coach sometimes can you know, individually help members get there as far as being on board with the decision, that can really help make all the difference.
Speaker 1:Okay, karen, go ahead.
Speaker 2:I agree with everything that Stacey is saying and I think that you have an opportunity to set the stage for a successful process with your board by thinking about your board recruitment, development and communication early on. I would say the do's around recruitment is recruiting a board with a wide variety of professional and lived experience and being intentional about filling roles that will support that strategic process later. And then, in the area of board development, making sure that you're regularly sharing briefings with your board from state associations and industry experts to set them up for strategic discussions when a partnership is on the table and a little don't to throw in is don't expect your regular cadence of board communication to be enough during merger discussions. Like Stacey's saying, I think you need a task force and it's an efficient way to keep the board abreast of what's going on throughout the process to answer those questions, so that you don't end up with some of those post-merger pains that she's talking about. Yeah, good advice there.
Speaker 1:Yeah, so a little bit for both of you and our audience here has heard me talk about my former media days. So I was a journalist for nearly 30 years and my next question is about when staff starts to hear, or maybe something is publicized about a merger and are bringing up in. With my old experience, I would say from about the year 2000 to 2020. And 2020 is when I left the media. But over those 20 years there was probably more media consolidation in those two decades than there had been in the last 100. And I can remember, you know, being at a particular station and you would.
Speaker 1:Something would go public, You'd hear something on a business channel or something like that, that you know station XYZ is being bought by Acme Broadcasting and it could go one of two ways and it did over those years where, if Acme Broadcasting is a really good broadcaster, then you know, then you get excited and you're like, OK, this could be good. You know, then you get excited and you're like, OK, this could be good. But then if Smith Broadcasting Company is not so great of an owner, then, boy, you want to talk about morale tanking and the deal is not even done Right, it's just what you're hearing, and again something that may be publicized. So let me ask you that, whether it's mergers or that pre-merger talk, we'll say that's sensitive stuff and staff can't be brought in until the last minute or even after the deal is done. So what are the pitfalls here? I probably outlined a couple, but can we get into the pitfalls of getting staff buy-in? Karen, would you start us off on this one?
Speaker 2:Absolutely. I've had the opportunity to observe communication going both ways, both too early and too late in transactions, and what happens when it happens too early is number one. There's the risk of the deal not happening at all, which has a lot of implications around trust and culture and then even future deals and whether those will go well once you've had a disappointment, and in one situation I'm familiar with, staff was brought in too early and that resulted in a lot of unrest and an inadvertent impression among staff that the merger was going to be voted on or approved of by staff and, needless to say, that made the transaction that much harder. The transition to integration were very difficult and then, in the case of when that communication comes too late, that also can undermine the trust of staff and make integration harder. You're not able to have the kind of communications you need to have among some of the leaders until the 11th hour and it just makes things so much more difficult.
Speaker 2:I think there are a few different ideas for successfully working with staff in a purposeful manner. Number one Boundless does a cultural assessment pre merger which helps them plan messaging and foresee potential issues, and I think that that is a very good tactic for that situation, and Boundless also often uses a pre-announcement quiet period where the deal is closed but behind the scenes communication can be going on and then the stage can be set for a positive impression of the partnership among staff and leaders. And I'm sure Stacey has even better suggestions than I do from her experience.
Speaker 3:No, I think that's spot on. And for me, you know, look, the reality is, no matter how much you trust people, no matter how much you trust your team, even if you go from a place of best intentions, you know Folks always tell the person who swears they'll never tell anyone else and at some point it becomes the world's worst kept secret, and that's just how it goes right. So you can't always bring in staff right from the start, but I think once the merger is underway, the key absolutely is that transparency, inclusion and then empathy Based on the stakeholder group you're talking to. You know people support what they helped to build and I think you have to honor that process. But also, on the flip side, even good changes bring some kind of, you know, grief.
Speaker 3:Folks have been here a long time. They're attached to the name, their leaders, their logo, their teams, whatever it may be. So you know, I think once that decision is made to move forward, really honoring how staff become involved is just as important as the merger itself. So, just like Karen, I've seen situations where the news was held too close to the vest, too soon, and I've also seen, you know, where I think that was premature, because then you have things played out and, in the absence of facts and information, people build their own story and that can be sometimes detrimental to what you're trying to build. So you know, I think acknowledging that change is hard, even when a merger is positive, it can mean you know the end of a familiar chapter and honoring that, but also rallying folks around the excitement of what you're building together. I think that's really key to successful cultural integration.
Speaker 1:Let me follow up on Stacey, what you said. It could, you know, end up being the worst kept secret or again, if pre-merger talks are, you know, come out in the media, right? So at that point do you tell or do you advise the CEO to get the staff together and, just again, be transparent. Hey, there's some stuff out there. There have been some news stories about us and you know there's a lot of chatter. Here's what we can tell you and we'll be as transparent as possible. But just know there are some legal things and other things going on behind the scenes that we can't share. But again, we'll be as transparent as we possibly can be.
Speaker 3:Absolutely. Look, there should be a communication plan that exists where 90% of it is never used. So all of those types of press releases and emails to staff and emails to funders or family members, all of those things should be teed up, agreed upon by both parties and in this communication plan that's held tight for those kinds of situations exactly. So, like I said, you hopefully may never need 90% of those, but the time to develop that language and plan is not after the news is out. You know you have to think about that as you're going through the very early stages of this diligence process of if this happens, here's what we'll say and here's how we'll respond, and so all of those things having pre-discussion, critically important as part of the diligence timeframe.
Speaker 1:Boy, that is a great tenet too of crisis communications. Right, you've got to have that plan in place, even if you think you're not going to use it. But you know, it's usually not a matter of if, it's a matter of when, and that's right and it's a good conversation to have, even if it's not shared broadly.
Speaker 1:It is, it is. I want to come back to that nonprofit article, and there was just a real blunt statement in it and it said most successful mergers rely on outside experts as well. We're talking attorneys, accountants and specialists. Okay, so I've got bear with me here. I've got about a three-part question on this one, because we can dive into this. What kinds of outside experts should you engage? When should they be engaged, and then how do you select them?
Speaker 3:Well, listen, I'm a little biased on this one because I'm a consultant and our firm does a lot of M&A support. So of course I believe you should hire an outside expert immediately, engage sooner. But truly I think an outside expert can make or break a merger process, and the most valuable ones really go beyond the technical skills. So, yes, you know you certainly need legal, financial, hr expertise, things like that on a block and tackle perspective. But just as critical to me is having an advisor who can really keep everyone focused on the end game when the tensions rise. So I like to joke.
Speaker 3:This is where my solution-focused therapy background comes in handy. You know mergers can get emotional and there's legacy fears, leadership dynamics, uncertainty you know all of those moments. So I think a steady outside voice that has navigated this path before can really help leaders stay grounded in the mission and in the future potential. So you know, I always recommend engaging a strategic advisor early. So when you're thinking about doing a growth strategy, you want to think this through with someone who has experience leading organizations through that. I also think someone who understands nonprofit culture really can facilitate difficult conversations, isn't afraid to name the harm things.
Speaker 3:Nonprofit M&A has a twist to it. That's different than a for-profit transaction, and so for me it's someone who understands that nuance. But the best advisor really serves as kind of the architect and the confidant, kind of helping to map the process. But, real importantly, having someone who can sit with the CEO or the board chair during a tough meeting and ask afterward kind of how are you doing? You know how did we feel about that, where are we aligned in the process? The CEO is lonely In those times. They can't turn to their team or their board and express frustration or fear. So having that advisor that you align with, I think that's really critical and I'd love to hear Karen's experience on that. I know you've gone through that on both sides.
Speaker 2:Yeah, I certainly believe that that confidant aspect is vital and I think that in that role there can be some support from consultants in some things that you did not plan for. So one thing that comes to mind is we were having a moment within my merger process where people were getting increasingly unsettled and I think the work was getting burdensome and worries were creeping in. And because we did have an outside consultant, we had someone with that external focus who could step way back and come up with some tactical strategies. That really got us over the hump is on a path where they believe they're going to be doing a number of mergers, acquisitions, affiliations, partnerships. It can be really helpful to form a small group of consultants that you use a lot. It creates a kind of shorthand when they already know you and the organization really well.
Speaker 2:If you are a CEO of a smaller organization, I think an underrepresented kind of outside help comes in the form of contract support, fractional support for departments that might be overburdened during the merger process. I'm thinking of particularly human resources, finance, it, some people that can keep regular operations running so that the leadership of those departments can focus on the merger. And I'll throw in a quote from a board member and mentor of mine. He said you still have to run the business while a merger is taking place. That's right, that's right.
Speaker 1:I've got another quote and when I was watching this interview with this particular leader, I thought all right, I'm definitely going to pose this to Karen and Stacey, so tell me what you guys think about this one I was watching this interview, and this C-suite executive said this there are people who are dishwashers and there are those who let the dishes soak overnight, and sometimes you need both overnight and sometimes you need both.
Speaker 1:And you know I think he was kind of getting to that fact of you know some deals out there do require that robust, that quick action, and then others if I could extend the metaphor take a little time to scrub through the details here. So let's go with that. I'd love to hear your thoughts on that and then maybe again permit me to layer onto it a final thought or two that you'd like to leave our listeners with.
Speaker 3:Well, both of those things get your hands dirty, so let's start with that.
Speaker 1:Oh, that is just rim shot right there, stacey, excellent.
Speaker 3:So I think you've got to be prepared, you know, to roll up your sleeves and put the gloves on, whether you're doing them that moment or afterwards. So yeah, I think that's a great analogy. I may steal that in some way, but yeah, I mean I think you do. Regardless, the dishes have to get washed however. You do it right. So I think that goes along with a saying that I like to. It's sort of a level set with boards and teams, and some folks don't like it, just like we don't like washing dishes, but it has to be done. But the reality is the saying I like is that you're either at the table or you're on the menu. So I guess we're still in the dishes and the table theme here, love it, love it.
Speaker 3:But the reality is, what that means is that you are either thinking about a growth strategy and looking about the industry, on who your potential options or partners or acquisitions target may be, or someone is doing that for you, about you, and so if you don't have a growth strategy, that doesn't mean a growth strategy will not happen to you one way or another. And especially in 2025, right, the market disruption right now, the political uncertainty, all the financial pressures with Medicaid. It's incredible. This is probably the most challenging time I've ever experienced in my 30 years in human services, and with so many small legacy providers that are under $25 million in revenue, the reality is you've got to wash the dishes right.
Speaker 3:Standing still isn't an option, and so when organizations align around a shared mission and they understand that a growth strategy is critical, they can serve more people, they can improve the quality, they can build something stronger together than they could alone. And a mission-driven merger is not about giving up your identity, right, so we often hear that it's about preserving and expanding it through thoughtful collaboration. So to me, the best kind of final thought is to not think about M&A or acquisition as a failure or a rescue, but it is a strategic evolution and when the leaders really take a seat at that table and make choices that allow your organization's good work to grow, that's a win-win and it's something that lives on beyond your tenure as a leader, and that's really the most important thing for me.
Speaker 1:Stacey, by the way. You can take that quote and run with it. I always say as a comms guy when it comes to ideas, amateurs borrow them, professionals steal them.
Speaker 3:It's considerate stolen.
Speaker 1:Karen jump in here.
Speaker 2:I think that Stacey really brought home the point that it's vital for healthcare nonprofits to move in a broader and more creative direction to meet the demands that are placed on them right now working, and that's just where we are. So, to get where they need to go, they really might need to consider merger, affiliation, some type of formal partnership to build the capacity to offer the clinical quality to attract and retain the workforce. This is just where we are and I can't imagine right now. Ballas is going through a strategic planning process right now and it gave me pause to think that organizations who did their strategic plan only a year or two ago may as well put it in the trash can at this point. That's right. I think that where we are as a sector is we are going to need to put our collective heads together to think about how we're going to survive and how we're going to serve our stakeholders, and that's what Boundless is doing through this podcast is letting other leaders come in and put their collective heads together along with Boundless.
Speaker 1:That is a great note to end on. That is just fantastic, Karen Stacey, thank you both for joining us today.
Speaker 2:Thanks for having me. Thank you.
Speaker 1:Again, thanks to our guests and thank you for joining us today. This is the Nonprofit Leader's Guide podcast brought to you by Boundless. Thank you.