For the right reasons: Lessons from an Irish NGO merger

The latest merger in the development NGO sector has created one of the largest agricultural international nongovernmental organizations in the United Kingdom and Ireland — and the secret to making it work, it seems, was simple. “If there are three things to getting it right, it’s communication, communication, communication,” said Ray Jordan, CEO of Gorta Self Help Africa, which was formed in July by uniting two Irish agricultural development organizations: Gorta and Self Help Africa. He’s speaking from experience. The latest merger is the third joining of forces that Jordan, former CEO of Self Help Africa, has overseen in seven years. In 2008, Harvest Help and Self Help Development International joined to form Self Help Africa; in 2011, that organization took charge of parts of U.K.-based NGO Africa Now, including an ethical business services division that became a rebranded subsidiary of SHA. So what has the CEO learned from these processes? Being clear with all stakeholders — staff, beneficiaries, partners and donors — is crucial, Jordan told Devex. But getting everyone on board is also important. The latest merger was agreed unanimously by all directors of both organizations, which he sees as incredibly positive. In the lead-up, those directors had the courage and took the time to explore options “in a very professional way” and to “make a recommendation to members that this was in the best interests of both organizations.” It’s also a question of careful management and timing: The process of uniting Gorta and SHA, from initial agreement through due diligence to ratification, took around six months. “If the core, the real value and the ethos of the organizations are similar, [merging] is a relatively seamless process to manage.” --— Ray Jordan, CEO of Gorta Self Help Africa “You need to stick to a process that will give you the right amount of time to analyze it, but not leave uncertainty in an organization for too long. Because obviously these things do have the potential to destabilize the core of what you’re doing ... to [make you] take your eye off the ball,” Jordan said. Open doors Gorta Self Help Africa — funded largely by institutional donors including Irish Aid and the U.K. Department for International Development — will invest close to 19 million euros ($25.5 million) in rural development projects this year. Previously, SHA employed 20 people in Ireland and more than 170 overseas, mostly in Africa. Gorta, which worked exclusively through local partners, employed 24 full-time and 15 part-time staff members in Ireland and just three in Africa. The new entity will have around 40 to 45 full-time employees in Ireland and 170 to 180 overseas; that team and its local partners are aiming to work over the next 12 months with more than 500,000 rural farming families — reaching 3 million people. Its reach may expand even further in future. Jordan, who previously worked in the Democratic Republic of the Congo and South Sudan, would personally like to see them applying their combined 80 years of experience in post-conflict and crisis environments. “Our door is open and we’re extremely interested in positioning ourselves for whatever types of partnerships in the future,” he said, stressing a particular interest in ambitious organizations ready to adopt new ways of working and committed to the opportunities offered by the converging of business and nonprofit sectors. That openness has been an ongoing attitude within his organization. “I suppose we’ve been on the journey these last seven years — finding people and people finding us ... And saying [to ourselves], ‘Surely there’s a better way of doing this, than us all rowing our little canoe, maybe to create a bit of a bigger boat and strike out for greater challenges ahead.’” Rather than merging for the sake of it, though, Jordan emphasized the importance of a shared ethos. SHA, created some 30 years ago, and Gorta, which would have turned 50 next year, both focused on boosting the income of small-holder farmers in Africa. Both were founded in a country with its own history of famine and, today, with a strong agribusiness sector that contributes to Ireland’s overseas focus on agricultural development and tackling hunger. The challenge for nonprofit directors, Jordan noted, is always to “remember where you came from, but also throw the shackles off and make yourself very relevant for the future.” Partnering up is one way to remain relevant. And, according to Jordan, “if the core, the real value and the ethos of the organizations are similar, [merging] is a relatively seamless process to manage ... If they are genuinely aligned, the entire thing flows from there.” Many mergers fail, Jordan said, when the parties “feel it isn’t a meeting of equals ... That’s a very fundamental issue — it needs to be up there at the front so that people don’t feel there’s one organization being taken over by the other.” Without trust and respect between the two — at governance and management levels, between individuals and organizations — “you’re dead in the water,” he warned. Savings, skills and staffing In Ireland, where recent years have seen public outcry over certain charities’ poor financial management, as well as successive cuts to the government budget, much was made of the potential savings — estimated annually at 600,000 euros — achieved by this latest merger. There are also other potential financial benefits, thanks to complementary sources of funding. Gorta, Ireland’s oldest overseas development organization, brings to the partnership a strong national brand and a long history of fundraising from the public, including through its charity shops. SHA’s fundraising has focused on institutional donors, including the Irish and U.K. governments, the U.S. Agency for International Development and the European Union, as well as on large-scale charity events. So, while just 16 percent of SHA's total income in 2013 of 11.85 million euros came from the general public, trusts and foundations, with the remainder from institutional sources, more than 90 percent of Gorta's income (around 5 million euros) was donated by the general public. This increased access to public donations means the new entity has a “proportion of restricted versus unrestricted funding [that] is extremely good — it gives us a lot of flexibility to be a really innovative organization,” Jordan explained. Untied funding, he said, would allow them to “take risks and try new things,” such as investing in research into “how the barriers to market access can be broken down with good knowledge, good ICT and strong local organizations.” While merging has reduced back office costs, it has also strengthened overall human capacity, Jordan said. “We now have one colleague specifically dedicated to looking at strategic partnerships for the future — as two individual organizations, we wouldn’t have been able to do that.” “It wasn't a desperate move but rather a forward-looking strategy, borne not out of necessity, but out of a desire to do what the nonprofit sector should always do — to look for new ways to increase impact.” --— Dóchas Director Hans Zomer on the SHA-Gorta merger The merger also managed to get away with “very few redundancies” and none in Ireland, partly because there was “little crossover of skillsets” due to differing operational models and also because roles that were vacated while the merger was under discussion were not filled. Overseas, some of the difficult work had already been done when SHA shifted from being a direct implementation organization to working through local partners. That led to the nonrenewal of more than 100 fixed-term contracts as projects ended — but these were offset, according to SHA, by the expansion of the organization’s work over the same period, prompting its African partners to recruit widely for work generated by their increased collaboration. The impact question The Gorta–SHA partnership is only the latest in a number of NGO mergers that have been pulled off in recent years. To date, though, many of these have occurred because one organization is in a position of weakness, according to Morgana Ryan, global organizational strengthening lead at Accenture Development Partnerships and co-author of a recent book on iNGO management. In the corporate sector, conversely, mergers are more likely to be strategic, with one strong organization looking for another strong one to become even more competitive. One of the more high-profile cases was the joining of Save the Children and Merlin in 2013, a move driven partly by Merlin’s struggling finances. But generally speaking, Ryan said, “merging just to cut costs is not a great idea, unless you know it’s a good strategic fit ... Both factors are important, cost and strategic. But the nonprofit sector tends to put more weight on the cost factor.” “Merging is often considered a last option; that’s obviously the wrong time to do this,” said Hans Zomer, director of Dóchas, the Irish association of development NGOs. SHA and Gorta, though, were both in sound financial positions. They did well, he said, because they didn’t wait for a crisis. “It wasn't a desperate move,” Zomer noted, “but rather a forward-looking strategy, borne not out of necessity, but out of a desire to do what the nonprofit sector should always do — to look for new ways to increase impact.” Increasing impact, though, might also mean using other, less publicly visible ways to collaborate, Zomer said. This may include umbrella networks like his own, or other thematic groupings, such as the U.K.-based People in Aid, which focuses on personnel issues, or others that bring together staff working within a particular sector. Nor is greater impact necessarily achieved through growth: The clout of an aid agency does not come from size, Dóchas insisted in a blog post last month, “but from the strength of their bond with the people they are trying to help.” Jordan also sees size as quite apart from the question of impact. His organization may well partner with a much larger international NGO in future, but they would continue to position themselves as technical specialists in their core area of agricultural development, as a valuable complement to those working across multiple sectors. In the meantime, the CEO knows there’s work to do. “People will be looking, over the next three to five years, to see whether it delivered on the potential ... By merging [you] create an opportunity to deliver real significant scale and impact of results — but it’s only an opportunity until you actually go and do it.” Many more mergers? Will the latest announcement prompt other NGO chiefs to consider following suit? Jordan himself is “a hundred percent” in favor of more collaboration in Ireland, a country that counts more than 8,000 registered charities and at least 50 development NGOs as members of Dóchas. “The cost of compliance, of transparency, of accountability, of raising the game for the entire sector — everybody has to pick up these costs. There’s surely a better way of doing it than 20 like-minded organizations all lining up together, all saying ‘we’re the solution’ ... You might be a part of it, but surely there’s a better way to be more effective, to give better value for money.” Zomer, though, echoed Jordan’s own warning to avoid mergers for mergers’ sake, saying we should be wary of false assumptions. That two organizations do the same thing, for instance, is not argument enough to unite. We should “value their diversity,” just as we do in our media, and in any case two NGOs may have very different constituencies — faith-based or secular, for instance. Similarly, he said, people assume that two international NGOs working in the same country are overlapping, but they may be working with communities located hundreds of miles apart. But does that mean CEOs shouldn’t consider the option? Not according to Ryan, who said that mergers between NGOs “could be beneficial” in certain circumstances and that NGOs everywhere “should definitely be thinking about them.” “The barriers to entry to the sector are quite low,” she told Devex. People are “very passionate about their view of theory of change” and more often inclined to start their own organization than to join an existing one. That means more and more small NGOs are created — while many of the larger, existing entities are “becoming so big they are struggling to manage more complex operations with historical systems and ways of working.” That situation seems unlikely to change rapidly. There are still clear barriers to many more mergers happening, Zomer said, not only because the legal process is extremely expensive, but also because it’s “difficult for the culture” in a nonprofit. And while Ryan said she wouldn’t be surprised to see more of them in the NGO sector, these are likely to be among small or medium organizations facing financial challenges, whereby the main reason for a merger is simply “their survival.” Check out more insights and analysis provided to hundreds of Executive Members worldwide, and subscribe to the Development Insider to receive the latest news, trends and policies that influence your organization.