Charities and collaboration
Where are all the charity mergers?
As we’ve seen from recent reports from the Charity Commission, despite feeling the effects of the economic downturn, very few charities are considering merging. Why?
There are a number of different reasons why this might be the case. In this article, we’ll look at the role of collaboration rather than merger.
Mergers can by costly, both in terms of financial costs and staff time, time-consuming and inevitably involve compromise of varying degrees. Whilst not disputing that any decision should be taken in the best interests of the charity concerned, there is still an element of turkeys voting for Christmas in order to avoid ending up with double the number of trustees, two chief executives, two finance directors etc.
Alternative to merger?
Collaboration is an alternative to merger allowing charities to pool resources and expertise without having to make significant adjustments across the full range of their operations. In addition, some of the more successful charity mergers have stemmed from a period of collaboration and joint working. Should a merger become desirable or an absolute necessity, this is easier to achieve with a charity partner that is already well-known.
For some charities and social enterprises, there are particular opportunities at present, perhaps allowing them to move into areas that were previously solely serviced by the private sector. Those opportunities may only be exploited by joining forces with another social enterprise or charity, whereas for others, it’s more a matter of strength and depth – sharing expertise and costs.
There are a variety of ways that charities or social enterprises may choose to work together. One option is an informal collaboration under an agreement to carry out services jointly, but great care is needed to demarcate risk and function.
Where more formality is desired, a joint venture company may be established in order to carry out the proposed activity. This option has the benefit of isolating the original ‘parent’ charity or social enterprise from risk so that if the venture fails, only the assets of the joint venture company are at risk, rather than the assets of the charities or social enterprises themselves. Alternatively, social franchising sees a successful delivery model being replicated through distinct, but separate, social enterprises.
Issues to consider
Trustees are required to act prudently in the best interests of their charity at all times. This is no different when considering collaborative working and therefore the trustees of each charity must be convinced of the benefits of proceeding with the collaborative working arrangements.
Before entering into a collaborative arrangement, the Charity Commission recommends that trustees:-
- Satisfy themselves that there will be adequate benefits to theirs users and beneficiaries, e.g. improvements to the quality of service and cost benefits;
- Identify the key success factors for the collaboration, e.g. compatible activities and organisational structures and a clear definition of each party is responsible and liable for.
Regardless of the size and complexity of the proposed arrangement, trustees should assess the risks involved in order to ensure that these have been sufficiently addressed.
To make collaboration a success, it should not be underestimated how much time, effort and attention to detail will be required. As with many things, the devil will be in the detail, in particular the legal agreements or contracts between the parties, not to mention the ethos and personalities involved.
Often discussions will focus entirely on the positive factors. However, in any collaboration, the proposed partners should consider what would happen if one of the parties was suddenly unable to meet its obligations. Would the remaining parties be able to continue with the working arrangement? Who would be liable to any failure to deliver under the contract? Issues of liability can have wider implications for the parties involved with repercussions for their assets but also their reputation – which can have more long lasting damage.
In identifying and evaluating the options available to your organisation, merger is not the only answer and collaborative working, when carefully considered and properly documented can provide a useful alternative.