Nonprofit mergers catch on in region
Correction: Because of an editing error, a Page One story yesterday about mergers and alliances between nonprofit organizations contained several spelling errors. Crittenton, a Boston women's charity that is combining with The Women's Union, was misspelled in later references in the story, and Globe staff writer Sasha Talcott's name was misspelled in the tagline.
The wave of mergers rippling through the corporate world is also washing into another sector: Nonprofits.
There have been several mergers and strategic alliances among Boston nonprofits in the last few years, including an agreement between two health centers in Dorchester to share resources, the combination of two after-school initiatives, and a decision by the Commonwealth Shakespeare Company, known for its free Shakespeare performances on the Boston Common, to join with the Wang Center for the Performing Arts.
One of the more striking mergers will be completed in July when two venerable Boston charities that help at-risk women and families, The Women's Union and Crittenton, combine. As in a corporate merger, they will take a new name -- The Crittenton Women's Union -- consolidate their administrative staff in one headquarters downtown, and condense their boards of directors.
Interest in mergers and alliances among nonprofits has become so hot nationally that a California firm specializing in the issue, La Piana Associates, Inc., has seen inquiries on the topic increase more than 50 percent over the last two years, said Bob Harrington, a senior manager who specializes in strategic restructuring.
''Originally, there were isolated pockets of interest on the West Coast and in the East -- now we're getting requests across the country," he said.
He said several organizations, ranging from the Girl Scouts to the YMCA, are looking at some form of consolidation, mostly by combining regional divisions.
Nonprofits face an increasingly challenging environment. In New England, a slow economy and cuts in government funding, as well as the consolidations in the region's major industries, such as financial services, have taken a toll on charitable giving. In addition, nearly 4,500 new public charities have set up shop in Massachusetts since 1999, bringing the state's total to 21,124. Since the mid-1990s, the number of nonprofits has increased by more than 50 percent. Those additional groups now are inundating the region's corporations and charitable foundations with requests for funding, stretching resources thin and increasing interest in mergers.
On a national level, a similar story is playing out: The number of nonprofits has increased 64 percent in the last decade to nearly 850,000. Contributions from individual donors have fallen, and some Americans have developed ''donor fatigue" after giving generously to people displaced by Hurricane Katrina and the tsunami in Asia, Harrington said.
Faced with the reality of a booming number of nonprofits and shrinking financial resources, several nonprofit leaders and analysts say the time is ripe for mergers, and they hope the Women's Union and Crittenton deal will encourage others to follow. The Boston Foundation, one of the city's largest charitable groups, is holding forums to discuss nonprofit mergers and inviting combined groups to share their stories with others.
''When you have lots and lots of organizations with overlapping missions, it can just make a lot of sense and result in a more efficient use of dollars," Paul Grogan, the foundation's president, said. ''It's just something that the nonprofit sector needs to be on the lookout for."
Some of the New England's biggest corporate funders are voicing support for nonprofit mergers as well. After Bank of America Corp. acquired FleetBoston Financial Corp. in 2004, the bank's chief executive, Kenneth D. Lewis, pledged to increase funding for New England's nonprofits. But in an interview with NECN, he added: ''Some need to be combined and run more efficiently."
The two groups consulted with Citizens Financial Group, which gives between $10,000 and $25,000 annually to both the Women's Union and Crittenton, before they merged, and bank executives offered their support. A Citizens senior vice president, Julie Connelly, said Citizens will leave it up to individual nonprofits to set their own strategies for the future, but that the bank encourages collaboration ''when appropriate."
''If they on their own determined that one plus one is more than two, we'd be supportive of that," she said.
The rapid growth of nonprofits is both a response to cuts in government services, and a sign of how much easier it is to form a new nonprofit than to restructure an existing one, said Rob Hollister, dean of the University College of Citizenship and Public Service at Tufts University. ''We've evolved a sector that is quite fragmented and doesnt have the financial base that is needed in order for it to thrive," he said.
The merger between the Women's Union and Crittenton came about as both organizations found themselves looking for new chief executives. The Women's Union, which has made big changes in recent years -- including closing its flagship store on Boylston Street -- found that its funders were putting increasing emphasis on measurable results for programs, and that executives had to work harder to attract the same amount of money. Also, the group wanted to grow in the future and spread its mentoring and training program to more people, which would be expensive, said Pamela Murray, its chairwoman. Both work to promote self-sufficiency for the poor, but the Women's Union excelled at research and advocacy while Crittenton actually houses poor families.
At the same time, Crittenton -- which houses more than 100 at-risk families in Brighton -- was trying to decide its future. Chairman Edward Pendergast said he and other board members spoke to business and political leaders last year and kept hearing the same question: ''Why are there so many nonprofits trying to accomplish the same thing?" Crittenton board members realized that the Women's Union had a similar mission of helping the poor become self-sufficient, despite their different approaches to it, and that the two could complement each other.
''This feels right, even though you have two very proud organizations," Pendergast said.
For some nonprofits, merging has brought far more success than either organization could have achieved as a separate organization. The two after school initiatives, Mayor Thomas M. Menino's 2:00-to-6:00 After-School Initiative and Boston's After-School for All Partnership, combined in 2004 to form a public-private partnership called Boston After School & Beyond.
Funders liked the new model so much that millions have poured in: Before the merger, the two initiatives had a combined operating budget of $500,000. Now, it stands at $3.5 million.
''It has been a good ride," said Stephen Pratt, the organization's president. ''We're attracting major investments nationally into Boston."
Two Dorchester health centers, the Codman Square Health Center and the Dorchester House Multi-Service Center, are saving money by combining administrative functions, including finance, information technology and development.
The success stories are persuading other nonprofits, which once would have dismissed the idea of mergers, to consider the idea, said Harrington, the La Piana senior manager.
''Now it's definitely becoming more of an accepted practice," he said. ''It's less threatening. Organizations are looking at it with a lot less skepticism."
Sasha Talcott can be reached at firstname.lastname@example.org.