Industry collaboration has been key to groundbreaking innovations in the nonprofit and voluntary sector around the world. As the number of nonprofit grows, demand for industry cooperation, consolidation and/or improvement becomes evident. Over the years, the nonprofit industry of Nepal has grown significantly in numbers. According to the Social Welfare Council (SWC), the number of non-governmental organisations increased from 313 in 1990 to 13,268 in 2001, 33,903 in 2011 and 46,230 in 2017. Comparing the data with the nonprofit sector of the United States, per the National Center for Charitable Statistics, the number of nonprofits increased from 1.16 million in 1998 to 1.30 million in 2011 and 1.57 million in 2016. In 2016, there were 1,571,056 tax exempt organisations in the U.S., serving a nation 67 times larger than Nepal and contributing visibly to global development projects.
Uniquely positioned in its market structure, the nonprofit industry too requires collaboration to update and stabilise for better impact. Nonprofit organisations in Nepal rely heavily on grants from larger international organisations or government entities. These grants are often directed towards more stable competent organisations that can create measurable impact. Henceforth, it is important for organisations to share their resources for better grant application, to design and implement improved programs and avoid “reinventing the wheel” syndrome. Further, as we move in the direction of enterprising nonprofits that are financially independent, sustainable and strong enough to avoid a donor-driven mission drift, sharing competencies for market successes would be crucial. Nonprofit merger, a practice where two different organisations become one, could be a form of collaboration to incorporate.
While merger is rare in the nonprofit industry of Nepal, the private sector has witnessed both desired and forced mergers. Desired mergers were for growth, efficiency and innovation whereas forced mergers were in response to government legislations. For example, the July 2015 mandate of the Central Bank of Nepal to raise the minimum paid-up capital by four times to Rs. 8 billion within mid-July 2017, led to 155 mergers between banks and financial institutions. The discussion about consolidation, collaboration and merger among nonprofits is more pertinent with the Nepal Government’s proposed National Integrity Policy to ‘systematise’ Nepal’s international and domestic NGOs. Through provisions to avoid corruption and conflict of interests in the development sector, it intends towards increased government scrutiny and control over nonprofits.
Over the years, nonprofits around the world have merged for different reasons. In 2016, Mission Plus Strategic Consulting and the Chicago Foundation for Women, carried out a case-study research on 25 nonprofit mergers that occurred in the Chicago Metropolitan from 2004 to 2014. While almost all the organisations agreed that a desire to grow strategically influenced their decision to seek a merger, 56% of them indicated that financial weakness was the major influence. Cowin and Moore researched on 13 nonprofits in 1996 to identify nine motives for a nonprofit merger agreement: rationalise resource usage, prevent overlap of activities, pressure from funders, develop a unified voice, improve service/reach more people, improve public image, address demographic changes, pressure from members and to reduce competition.
When United Cerebral Palsy (UCP) of Greater Chicago merged with Seguin Services, creating UCP Seguin Chicago in 2013, they were combining distinct competencies for their common cause – providing services to people with different needs and abilities. Seguin’s independent group and home services combined with UCP’s technological advantages resulted in massive growth in revenues and services for UCP Seguin. Three years after the merger, revenues had increased by 14% to $43 million and all of their programmes had grown significantly: for instance, the children’s foster care home-based care grew by 50% and 100% respectively. Likewise, the Eleanor Foundation (EF) and the Chicago Foundation for Women (CFW) merger of 2012 resulted in a 100% increase in assets and significant increases in donors, projects and clients for CFW. In 2014, CFW worked with more than 2,000 donors and partners to benefit 53,000 women and girls from four counties through 150 different projects.
In Nepal, Medication for Nepal (MFN), a volunteer-run initiative which delivered 9.5 tons of life-saving drugs to 15 remote districts of Nepal during the unofficial Indian blockade, merged with Nepal Share. The merger provides legitimacy to MFN’s fundraising efforts while their innovative data driven tactics to distribute medicines in rural communities supports in improving Nepal Share’s programs. Examples of these mergers, their influence on the growth of organisations and the resulting impact on beneficiaries can be an inspiration to the nonprofits of Nepal. Further, merger could lead a process to reduce duplication of efforts and improve fundraising efforts. However, as we discuss the prospects of nonprofit mergers, it is important to understand the process, possible challenges and strategies to curate the merger. Despite similarities in their missions, organisations can have completely different leadership styles, organisational cultures, policies, procedures, programs and impact assessment systems. Pre-merger due-diligence, assessment of compatibilities and investment in change management can help in effective transition to the newly merged entity, as supporting the merger is as important as creating it.
Kaushal Raj Sapkota is a graduate student of Nonprofit Management at the University of Oregon, USA and a non-resident graduate research fellow at King’s College Kathmandu. His areas of interests include branding, education, non-profit brand development, story based fundraising, social entrepreneurship and photography. He can be reached at email@example.com