September 24, 2017
 
Mergers Can Succeed, But Careful Planning Is Required

By Rodney VanDerwarker

Rodney VanDerwarker
A year after Fenway Health and AIDS Action Committee merged, the combined entity is bearing fruit in the form of cost savings and programmatic efficiencies, but those gains, far from being automatic, resulted from work that began long before both organizations agreed to the strategic partnership.

Dramatic reductions in public investment in the fight against AIDS, as well as waning public awareness of the disease, led Fenway Health and AIDS Action Committee (AAC), two leading care providers for people vulnerable to or infected with HIV, to undertake separate strategic planning processes in 2011 and 2012. The goal was to figure out a way to sustain the clinical and community-based work needed to fight HIV/AIDS in Massachusetts.

Their announcement in July 2013 of the partnership—in essence, an acquisition of AAC by Fenway Health, even though ACC retained its own board of directors and 501c3 status—was the result of those deliberations.

Both report that merger yielded immediate cost savings through consolidation of resources by combining operations such as IT, database management, and communications. Prior to the merger, AAC, for example, outsourced its IT needs as well as its marketing and communications functions. Those tasks were brought in-house to Fenway after the merger, resulting in annual savings of approximately $200,000.

While more difficult to quantify, programmatic efficiencies are already being realized. Prior to the merger, both Fenway and AAC maintained drop-in centers for gay and bisexual men. Both locations offered on-demand HIV testing, peer support, and group and individual counseling. The centers were located in close proximity to each another and were targeting similar populations.

After months of planning, both programs moved into one location with no reductions in staff. As a result, there are more services now available for gay and bisexual men. With additional staffing at the combined location, capacity for additional outreach and community engagement activities has grown significantly, and hours available for HIV testing have greatly expanded. As a result, a more comprehensive strategy for HIV prevention targeting gay and bisexual men will be able to be put in place. Meanwhile, not having to maintain two locations will save $73,500 each year.

Based on the Fenway/AAC merger, nonprofits may want to consider the following:

Check your ego at the door.

There is no place for ego in nonprofit mergers. Instead of thinking "How does this merger affect me?" board members and senior staff must evaluate every merger-related decision by asking, "How does this enhance our organization’s ability to meet its mission?"

In practical terms, this was done by developing a set of criteria that required each organization to document how a merger would improve client quality of care and increase outreach work to people vulnerable to HIV infection.

Leadership roles must be resolved early in the process.

If the CEOs of the two organizations are competing for one top position, the process will break down. Difficult conversations about the post-merger roles, responsibilities, and reporting arrangements of the two existing executives must be had early on in the discussion as critical issues are identified.

The natural temptation will be to delay these discussions and decisions. But if leadership issues are left unresolved, they can derail final discussions. If necessary, hire an outside consultant to ensure that these discussions—and other difficult strategic decisions—are made in a timely fashion.

Make organizational culture a part of your due diligence process.

In many ways, this is the great intangible of merging two organizations. But you must consider whether there is real potential for the two workplaces to eventually mesh together. Ideally, the process of business, operational, and programmatic exploration will give each organization a feel for whether the two workplace cultures are compatible. In most cases, you will not get a definitive answer to this question.

At some point, you must ask whether mutual needs can be met. And if the answer is yes, you make that leap of faith and move forward.

Rodney VanDerwarker, MPH, is vice president of primary care, behavioral health, and institute operations for Fenway Health in Boston, the same position he held prior to the merger

January 2015

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