It looks good on paper. Your organisation blended with theirs would give the resulting entity a broader reach and the ability to deliver an enhanced range of services more efficiently to more clients. What could possibly go wrong?
Quite a bit, in fact, unless you think it through and plan ahead. Like any major business decision, you need to have a robust process in place to realistically assess both the potential rewards and the risks of an amalgamation. Here are some guidelines for developing your plan.
Firstly, you must be crystal clear about why you’re doing it. This might seem obvious, but if your reasoning isn’t rock solid, it’s going to be hard to convince your board and staff. A good starting point is to assess the potential benefits against your organisation’s strategic objectives.
Will this move enhance or detract from those objectives? Will it improve or diminish your service delivery goals?
Consider the cultural and operational ‘fit’ of the prospective partner organisation. If they’re not on the same page as yours, there could be real heartache ahead. Confirm that both parties are willing and open to the merger. Without a clear commitment to the concept, this can turn out to be a costly and time consuming exercise.
Identify the Key Stakeholders who will be impacted by the decision. These will include the service users, the partner organisation, the broader community and, of course, your staff. Engage Key Stakeholders in the process.
Consider setting up a mechanism for assessing and communicating the impacts of the change. This could involve an existing or new management/board sub-committee. Define the key steps in the process. What are the timeframes and costs? What can you handle internally and in what areas do you need expert assistance? Clarify responsibilities. Who will manage and co-ordinate the process? Who will assign tasks to staff involved? Do your Due Diligence.
This is an important component of risk management and a vital process in the overall plan. It involves reviewing the operations of the merging entities to assess potential risks and to ensure all potential issues are identified, considered and resolved or accepted.
Consideration should be given to:
- The expectations of both entities, board composition and organisational structure.
- The financial position of the entities.
- Funding contracts – obligations and assignment conditions.
- Available assets pre and post amalgamation.
- Any litigation or accreditation risks.
- Compatibility of systems and processes.
- Employee contracts and entitlements.
- Insurance coverage.
By adopting a systematic approach to assessing the pros and cons of an amalgamation, both the benefits and the risks will be quickly identified. As a result, you can ensure that your resources are only committed to genuine opportunities likely to improve your organisation.
For more articles by Mark O’Conner, check out Cutcher & Neale’s annual NFP Focus Newsletter.