The Three P’s in Nonprofit Human Service Mergers: Strategic Response to Coping with a Crisis

ABSTRACT

COVID-19 has heralded a health and socioeconomic crisis that has made it difficult for nonprofit human service organizations (NPHSOs) to play their social roles and achieve their goals. This article examines how the merger of NPHSOs can serve as a strategy for coping with an organizational crisis caused by external extreme events such as the COVID-19 pandemic. The study focused on eight mergers of Israeli NPHSOs. Using in-depth interviews and a survey methodology of senior managers and board members who have participated in the merger process, we explore the motives, challenges, and key processes characterizing these mergers. The findings are organized around three stages in the merging process – the Three P’s in human service mergers: Pre-merger, when the motives and barriers were examined; Process, where decision-making mechanisms, issues of belonging and identity, and coping with conflicts and trust-building were examined; and Post-merger, where attitudes toward the outcomes of the merger and its success in various organizational areas were assessed. The findings also point to a lack of proper preparation and orientation for the merger, ego struggles between managers and workers, and the need for socializing the employees to the merger. We conclude by discussing the importance of planning for and attending to the human capital in the merged NPHSOs, the need to build a shared sense of belonging, and the value of shaping a new and shared organizational culture. Implications to theory, practice, and policy are discussed.

Practical implications

• Executives of nonprofit human service organizations considering a merger in response to a crisis should prepare, orient, and socialize executives, board members, and employees before entering the merger process; part of this socialization should include emotional dimensions of trust building, respect, and empathy.

• Executives should establish mechanisms for shared decision-making and for coping with conflicts.

• Executives and board members should collaborate to plan the merger strategically (i.e. establish goals before initiating the merger) to make the process more efficient, effective, and adjusted to expected and unexpected events in the external environments.

• Umbrella organizations, infrastructure organizations, government agencies, and funders should develop knowledge and support systems to help organizations consider mergers.

• Funders should be engaged in due diligence to assess the organizations’ financial and economic resilience before the merger. They should also consider the synergies of the merger and its added value to the beneficiaries before entering the process.

KEYWORDS:

• COVID-19
• nonprofit human service mergers
• organizational culture
• pre-, process, and post-merger
• response to a crisis
• success and failure

Introduction

Nonprofit organizations (NPOs) in the first two years of the COVID-19 pandemic crisis were characterized by ongoing struggles for survival, operating in an unpredictable and uncertain environment, and coping with reduced resources (Kim & Mason, 2020; Neely-Barnes et al., 2021). Globally, NPOs had to adapt to the new situation: to respond to growing numbers of requests for support, provide immediate responses for new and changing needs, and adjust their operations to health and movement restrictions (Loomis, 2020; Macmillan, 2020; Schmid, 2021).

The situation was no different in Israel. In a series of surveys conducted by the umbrella organization of Israeli NPOs (Civic Leadership, 2020, 2021), 85% of the respondents reported negative effects of the pandemic on their activities, including reduced revenues, a delay or freezing of government funding (60% of NPOs), reduced donations (60%), and reduced volunteer activity (33%). Countrywide lockdowns and social distancing restrictions forced many NPOs to suspend their activities and reduce service provision to clients; 77% of the NPOs reported reducing their workforce by termination or unpaid leave at some point during the crisis. Thirty-nine percent of the organizations feared they might not survive, with the effects on smaller NPOs being more severe. Along with the mounting organizational and financial uncertainties, there was an increase in demand for NPO services, particularly from marginalized populations (Schmid, 2021). Recognizing these challenges, the government has offered some assistance to financially strapped organizations that meet predetermined criteria (Schmid, 2021), but this provided only a partial solution. Consequently, some of the NPOs had to take drastic steps such as terminating or furloughing employees, canceling programs, and delaying payments. Three years into the crisis, some NPOs still feel the brunt of these difficulties.

These crisis-driven organizational challenges and uncertainties of the COVID-19 pandemic, combined with growing competition for limited resources (D. R. Young, 2023; D. Young & Searing, 2022), have rekindled the interest in NPO mergers as a strategic response to health/external crises. Since the COVID-19 pandemic outbreak, we have seen an increased interest and demand for mergers (La Piana, 2020), because they can offer a response to extreme external events and organizational or financial uncertainties in the nonprofits’ political, socioeconomic, or technological environments (Norris-Tirell, 2001). For example, in a survey among US NPOs during COVID-19, nearly a quarter (23%) stated they considered merging; one director even suggested that the organization has considered merging for years. If mergers in the nonprofit sector were typically seen as “a last resort for survival in the intensive face of competition for resources” (Golensky & DeRuiter, 1999, p. 138), and reflected an assumption that “the principal purpose for which organizations come together is the need for resources” (Campbell, 2009, p. 370), we focus in this paper on mergers as a proactive, strategic response to global crises that could make the resulting nonprofit a more effective social change agent (Benton & Austin, 2010; Golensky & DeRuiter, 2002).

We examine in this paper how mergers of nonprofit human service organizations (NPHSOs) can serve as a strategy for coping with global or local crises (in the shape and size of the COVID-19 pandemic). In today’s world where global social processes have created “risk societies” (Beck, 1992) that are prone to major climatic, political, economic, military, or health crises, the need to examine nonprofit responses to global crises becomes relevant and timely as was the case in Israel in recent years (COVID-19 2020–2022; political instability 2018–2023). Such crises may lead to economic constraints forcing organizations to evaluate their programs, activities, and provision of services, and if necessary to restructure and adapt themselves to the changing environments to ensure their survival. Mergers are one such response.

Using a mixed method methodology, and adaptation of Benton and Austin’s (2010) conceptual framework, we seek to understand three P’s in the merging process: The Pre-merger stage, examining the motives and barriers to merge; The merger Process, examining power relations, identity and belonging, and decision-making during the merger; and the Post-merger stage, where attitudes toward the merger outcomes and their association with pre-merger motivates and predetermined goals are examined. Our contribution is the examination of the relationships between selected organizational variables and the attainment of merger goals using the three P’s merger cycle.

In what follows, we review the theoretical background of nonprofit mergers, describe the methodology of our study, present the study findings arranged according to the three stages of the merger process, and discuss the contribution and implications of our findings in light of COVID-19 and other crises. Our findings add another layer to the theory building on nonprofit mergers as a strategic response to changes in the nonprofit environments, especially in times of crisis.

Literature review

A merger is defined as “the result of a decision by two or more organizations to combine their operations in a permanent relationship” (Golensky & DeRuiter, 1999, p. 138), “fusing their boards, management and legal entities to form a single organization” (La Piana, 2010, p. 28). Whereas mergers are usually perceived as a response to an organizational internal crisis (Toepler et al., 2004), they can also be a strategic move designed to adapt to dynamic external constraints or heterogeneity and duplication in the nonprofit sector when too many NPOs are competing with each other for scarce resources (Singer & Yankey, 1991).

The three P’s of human service mergers

The literature refers to three stages in the merger process: pre-merger, merger implementation, and post-merger stages (Benton & Austin, 2010). This conceptualization guides our literature review and finding sections, but we refine it using the framing of the three P’s of human service mergers: Pre-merger, Process, and Post-merger.

The pre-merger

This stage is characterized by probing, courting, and aligning expectations to establish the feasibility of the merger, the parties’ willingness to merge, and the anticipated objective and subjective challenges (Milway et al., 2014). Objective assessments may include the robustness of financial resources, resource-depleting and duplicate programs, the organizational structure and administrative processes of each party, as well as the potential costs and benefits of the merger. At this stage, the ideology and values of each organization as more subjective dimensions are revealed and reformulated based on common denominators (La Piana & Hayes, 2005).

The motives that lead organizations to consider merging are also assessed in the pre-merger stage. The motives may be classified into external and internal factors. External factors include circumstances of social, economic, political, or health crises, such as the COVID-19 pandemic, that threaten the NPOs’ financial stability and survival (Benton & Austin, 2010; Lee, 2022). Policy changes or pressures by government agencies or funders (Fischer et al., 2017); seeking to reduce the competition for the same resources by organizations operating in similar areas may be another motivating factor (Sargeant & Jay, 2002).

Internal factors for mergers concentrate on malfunctioning and managerial failures within the organizations. Some examples include inefficient utilization of resources to the point of insolvency, liquidation, or bankruptcy; difficulty by the still-separated organizations to achieve significant socioeconomic or technological value; or an organizational change process that requires adjusting mind-sets, strategies, organizational structures, and/or administrative processes (Norris-Tirell, 2001; Singer & Yankey, 1991; van Bortel et al., 2010; Wernet & Jones, 1992).

The merger process

In this stage, the merging organizations strategically decide about the new entity’s vision and goals and choose a new management team (Gomes et al., 2011; Kohn & La Piana, 2003; Ricke-Kiely et al., 2013). Transformational leadership with empathy and sensitive attention to the human capital is critical at this stage (Benton & Austin, 2010). These leaders should collaborate with workers to allay their fears and cope with their needs, dissatisfaction, and low morale (Thach & Nyman, 2001), because such responses can negatively affect the efforts to establish the merger (Goldkind et al., 2013).

In this stage, the new organizational leadership may also need to address opposition by formal or informal networks of interest groups seeking to preserve their organizational power (Chen & Kranskopf, 2013), setting interim objectives, allocating resources, introducing new service technologies, and making decisions for or against program expansion, closure, or revision (Norris-Tirell, 2001; Reeve & Wong, 2015). The leadership of the merged entity may need to deal with organizational cultural gaps and create a new cultural blend to shape its unique identity (Weber & Tarba, 2012).

Barriers to the merger Process include the concern for the loss of organizational autonomy within the merged entity, the blurring of the NPHSOs’ identities, and the withdrawal from the ideology, values, and visions that inspire it (Benton & Austin, 2010). Opposition by top management and board members to the loss of control that provides them with power and status, and employees’ resistance to change and fear of the effects of the merger on their job security (termination, loss of promotion opportunities) represent two additional barriers (Taylor et al., 1992). Finally, opposition by external stakeholders, particularly funders, to the formation of a big organization that controls the market can also derail merger efforts (Schmid, 1995).

The post-merger

In this stage, the efforts of the merged organization should be directed toward achieving stability and evaluating post-merger outcomes vis-à-vis predetermined merger goals (Ricke-Kiely et al., 2013; Weber & Tarba, 2012; Wernet & Jones, 1992). Post-merger outcomes may be evaluated objectively in terms of measures such as increasing market share and number of clients and improving the quality of services while reducing administrative costs, or subjectively reflecting the attitudes of involved stakeholders (regulators, funders, board members, executives) on the merged organization’s position as a leading, powerful and influential organization (Benton & Austin, 2010; Cooper & Maktoufi, 2019; Giffords & Dina, 2003; Milway et al., 2014; Mullins, 2006).

Such outcome assessment is challenging because it is difficult to define quantifiable criteria for success or failure in nonprofit mergers since the profit criterion (common in business mergers) is less relevant. Merger failure occurs, then, when mergers do not achieve their desired outcomes, or when they “fail to fulfill their initial promise” (Pietroburgo & Wernet, 2010, p. 19).¹ Merger failures have been attributed to challenges facing the human factor, such as a lack of strong leadership promoting an organizational vision (Campbell, 2009) and resistance to change expressed by affected employees and managers who do not trust their new partners (Kavanagh & Ashkanasy, 2006). Merger success, on the other hand, occurs when desired outcomes – such as economic or technological value, legitimacy improved service quality, reputation, or financial robustness – are achieved (Barnes & Fisher, 2006; Pietroburgo & Wernet, 2010; Ricke-Kiely et al., 2013). Mergers initiated by organizational management have succeeded more often than those imposed by external stakeholders, such as funders (Mullins, 2006), and employee participation in the planning and implementation processes has also predicted success (Giffords & Dina, 2003; Goldkind et al., 2013).

While the literature on nonprofit mergers presents valuable knowledge on different aspects of mergers, there is still insufficient knowledge on the merger process, power relations in mergers, and the relationships between various organizational variables in the different merger stages, such as the motives for mergers (pre-merger) to the merger outcomes and the attainment of merger goals. Informed by this literature, the goal of our study is to add to the knowledge of merger processes and outcomes by examining the following questions: (1) What are the main motives and resources used in the pre-merger phase? (2) What are the enabling factors and the hindering challenges encountered in the merger implementation process? (3) What merger outcomes and what merger challenges emerge in the post-merger stage, and how are the merger outcomes related to merger motives and mergers predetermined goals?

Method

This study utilizes the Comparative Case Study approach (Reddy, 2015; Stake, 2006), and combines qualitative and quantitative methods, to gain a profound understanding of the merger processes and thus answer the research questions. To ensure a broad representation of nonprofit activities, the sample included seventeen organizational participants – Israeli NPHSOs providing services for people with disabilities, marginalized populations, children at risk, migrants, members of the security forces, and social change organizations. Each of the mergers included 2–3 NPHSOs that have merged into one new entity. In total, 17 NPHSOs that have merged into eight new entities served as the case studies in our sample (Miles & Huberman, 1994). The focus of the study was the 17 NPHSOs that were involved in the mergers. All the mergers in the study were completed at the time of data collection.

Data collection and tools

The data were collected at the height of the COVID-19 pandemic, in 2020–21. Qualitative data included organizational documents (reports, meeting minutes, legal documents on the merger process), materials from organizations’ social media and websites, and 29 semi-structured in-depth interviews with past and present senior managers, founders, and board members in the merged entities. The interviews took 60–90 minutes and were conducted either face-to-face or via Zoom due to social distancing restrictions. The interview protocol included open questions about the merged organization, power relations, organizational politics during the process; and the interviewees’ involvement in the merger. All interviews were audiotaped and transcribed. In the findings reported below, pseudonyms are used. The study was approved by a university IRB committee. All participants signed informed consent forms and were ensured full confidentiality.

Quantitative data included an online survey of senior management and board members who have participated in the merger process or have been active in its aftermath. The survey included a 34-item questionnaire adapted for this study from other studies of nonprofit mergers, or specifically written for this survey; they were organized in three clusters according to the three stages of the merger cycle. The questions focused on the merger’s objectives and motives; participants’ perceptions of the merger; barriers and challenges to merger implementation and strategies for overcoming opposition; power relations between the merging organization; success and failure indicators, and participants’ sociodemographic information. The construction of the questionnaire included a pilot stage of examining its suitability to the research population and making minor adjustments based on feedback.

The respondents were given the choice of completing it using Qualtrics or over a phone call. Out of 100 invitations, fifty responded, of whom n = 42 completed the survey and are represented in the findings section. Their mean age was 60 (range 31–82); 35% were women; two-thirds had higher education (16+ years); Nearly a third (31%) were managers, and the rest (69%) were board members.

Data analysis

We used an inductive process of thematic analysis with a wide variety of data types. According to Terry et al. (2017), the key to thematic analysis is the quality and richness of the data that enable deep and nuanced insights. We adopted Creswell’s (2013, p. 182) approach to analyzing case studies as “moving in analytical circles.” All data were systematically coded with tags (e.g. members trust building, internal politics, social capital – personal aspects). After conducting an in-case analysis of each case, combining deductive aspects (based on the literature) and inductive ones (based on themes arising from the field), we moved to conduct a between-case analysis, searching for similarities and differences between the various themes arising from each case, and characteristics unique to certain organizations or organizational processes (Stake, 2006). The online surveys were analyzed using SPSS, and the qualitative materials were analyzed using ATLAS.il. In the course of the analysis, we compared the various researchers’ findings to ensure consensus. The analysis of the survey findings included descriptive statistics of the relevant variables and correlations of selected variables.

Results

The findings are organized according to the Three P’s framework: A Pre-merger stage, where we focus on the motives for the mergers and issues of resources and (lack of) strategic planning. The merger Process stage, where we focus on how conflicts and challenges were handled. And the Post-merger stage, where we elaborate on merger outcomes and their association with merger motives and organizational culture of mergers in general and in NPHSOs in particular.

The pre-merger stage

Most of the respondents supported the merger (66%), spoke for it (58%), and did not oppose it (79%). On the other hand, 39% were worried about it. We discuss two key characteristics of this stage: Motives for the merger and the lack of strategic planning.

Motives for the merger

The quantitative results showed that internal management motives – including financial considerations (mean 4.2 on a 1–5 Likert scale) and professional considerations (mean 3.9) – were ranked highest among the motives for mergers, while internal personal motives (mean 2.6), internal political motives (mean 2.2), and external pressures (by funders 2.5 and by political stakeholders 2.2) motivated the merger decisions to a lesser degree. Among the interviewees, several have noted that merging two organizations would make the merged entity more economically stable and more influential vis-à-vis its environments and regulators, referring to both internal motives and external pressures for mergers.

For example, a board member (Merger M1) said about the financial motives of his organization in the decision to merge that “the ‘big question’ was a question of operational costs; it was about budgetary and financial considerations.” As described by another board member (M2), “To promote significant change, we came out with the slogan ‘Big change is made together.’” By increasing the economic share of the merged organization in its competitive environment, the merger was seen as enabling to attain objectives each of the merging organizations could not achieve independently: “We will become a large body with public resonance, one rather than two that has to navigate on their own. […] if we’re bigger, our impact will be greater […]” (manager, M1).

Another internal motive was professional: A recognition of the overlap and redundancy of services provided to similar populations. As the CEO of a large NPHSO (M7) said:

On the very first day, I joined the organization, I went over to the CEO of the other organization and told him, “Let’s join forces.” And then I asked him twice, thrice, and then he brought me to his board to persuade them, and they were convinced. The arenas of the two organizations were the same, and this enabled the merger.

Other dimensions of the internal motives for mergers include mismanagement of resources, both material and human, and inefficient work processes, or processes unadjusted to meet the organizational vision and objectives. As described, for example, by a former CEO of a merged NPHSO (M3), merging with an organization that offers innovative processes and advanced technologies was a “survival” solution for an organization facing a management crisis:

Our organization had a wasteful organizational culture. There was no careful monitoring of donation funds, a very corrupt system; it’s a veteran NPHSO that started before statehood, with a “Esprit de corps” that prevents intervention in inefficient work processes, […] or systematic documentation of in-kind donations or houses bequeathed by people after their death.

Among the external pressures driving the merger, the interviewees reported pressures from government ministries responsible for budgeting the NPHSOs. Examples of such pressures included publishing social service tenders where one of the clauses requires inter-organizational cooperation with other NPHSOs; appointing an external committee that recommended a merger; or an audit by the Registrar of Associations (the main regulator of NPOs in Israel) that recommended organizational restructuring and economic improvements. A former CEO (M2) described another type of external pressure applied by a philanthropic foundation: “They said to us: ‘We’ve been supporting you for ten years now, and you can’t simply shut down. It means that our entire investment went down the drain.”

Resources and lack of strategic planning

The participants attributed varying levels of importance to different resources brought by their NPHSO to the negotiating table in the pre-merger stage. As seen in Figure 1, the most essential resources included professional knowledge, market dominance (geographical or topical), and the charisma and experience of the NPHSO’s leadership.

Figure 1. Resources of merging NPHSOs, rank-ordered.

While resources for merging organizations were well recognized, the strategic planning practices in the pre-merger stage frequently turned out to be amorphous, unstructured, unsystematic, and poorly performed. Instead, the initial contacts between the NPHSO leaders who raised the idea of a merger were often sporadic or accidental, and the decisions taken early on were informal. The opportunities and risks for the organizations and their clients, as well as the added value of the merger and its advantages over the current situation, were not sufficiently examined. As testified by one of the interviewed board members (M1), “I don’t remember any conceptual discussion around the merger issue.”

The contacts were mainly intended to assess the parties’ attitudes toward the merger and lacked a clear setting of targets and desired outcomes. The negotiators were led by “gut feeling,” and used their intuitions based on their experience in managing organizational systems that inspired them to think out of the box. However, no structural framework or long-term planning was evident, as if “You decide to get married after the first date,” as one of the interviewed executives said (M1).

The pre-merger stage was also characterized by a lack of transparency. Decisions were often made in small forums of management members who knew each other well. The informal meetings were sometimes held outside the organizational premises, but their impact on the decision to merge was decisive. Sometimes the board members and employees were completely uninvolved in and unprepared for the drama that was about to unfold. Vagueness and ambiguity were typical characteristics of the birth of the merger idea, as described by one board member (M1) who was highly involved in the pre-merger negotiations: “We still didn’t have a model of what exactly we wanted to do, and that was missing.”

The merger process stage

Key enabling factors

The merger Process stage is dynamic and emotional with several factors enabling it. The survey respondents addressed the question of the key factors enabling the merger. They pointed to the support provided by a legal consultant (4.28), the honest and open dialogue between the board members of the two merging organizations (4.10), and the depth of board members’ involvement (4.02) as critical dimensions in the merger stage, while the need to involve an organizational consultant (3.73) and employees (3.05) were less consensual. As seen in Figure 2, the human factor – the participation of a legal consultant (4.28), the commitment of senior management (4.24), and the commitment of board members (4.00) were the most important enabling factors, while pressure by funders or because of policy changes played a secondary role (2.44 and 2.45, respectively).

Figure 2. Enabling factors in the merger stage, rank-ordered.

When asked about the centrality of key players, members of the board were found to be most central in merger decisions (M = 4.35 on a 1–5 Likert scale), closely followed by executive management (4.26), while funding organizations such as foundations, government ministries, or local municipalities (3.03), and employees (2.40) were less central in enabling the merger.

Another factor is the nature of decision-making: Should the decision about the merger be made consensually, or is a majority enough? One-third (34%) of survey participants reported that the relevant decisions were made unanimously, a quarter (26%) said they were made by majority vote, 14% of the respondents reported no orderly decision-making mechanism, and the remainder believed that decisions were made in a narrow forum of the board (20%) or by the executive management only (6%).

Challenges of merger implementation

One challenge raised in the interviews was unequal professional knowledge, or the question of what happens when the professional level of the employees of one organization is lower than that of the employees in the other. A board chairperson in M5 described this:

If you merge two bodies that are not on the same professional level, the natural expectation is that those on a lower professional level will improve, but that’s not true. I mean, a merger between organizations that have a professional, cultural, mental, or any other gap usually drags the stronger down. Probably, the natural tendency in such a situation, is if you see someone next to you who is not as good, then you stop pursuing quality and excellence …

The second challenge was creating a shared sense of belonging, identity, and solidarity. Since each original organization was formed around a core vision that reflected its members’ values, and personal and professional identities, members of the merging organizations felt it was important to preserve that “organizational core.” Therefore, the ability of the merged organization to maintain diverse identities and values of the body of employees joining it has affected the shared sense of belonging of members in the newly merged organization.

The challenge of establishing a shared sense of belonging while maintaining independence was reflected in debates around the name and logo of the merged organization. In five organizations, the process of choosing the name was described as a source of intensive tension. It embodied elements of belonging, identity, values, and vision. A board member (M1) described it as follows: “Mergers, no matter whether in the business or nonprofit world, usually fail due to two issues. One – who will lead, and two – the name of the merged entity.” Three organizations in our sample, which were also the strongest economically, chose not to change their name, or at least guarantee that the original names are retained together with the new name. Among other things, these organizations were more dependent on external funds, thus rebranding could threaten their revenues and relations with long-term donors.

A third challenge was organizational politics, ego, and passion, terms that were used repeatedly in the interviews. One manager sharpened the meaning of the term “ego” in the context of the merger of her organization (M1): “It’s less about my professional ego and more of defending something that is mine, that belongs to me and many other people around me.” The descriptions of the merger in her organization suggest a sense of blurred boundaries between “self” and “organization,” which turned every discussion that could have been businesslike into a passionate, personal issue. A board member from M5 added:

Having come from the business world, I have often raised my eyebrows, failing to understand why people were fighting and how much bad blood was there [in the NPHSOs world]. These NPHSOs fight one another very aggressively, to the point of quarrels and excommunication […] when in fact the issue at hand is everyone’s concern for the same community.

Other interviewees, however, applauded the ability of CEOs and board chairpersons to “put their ego aside” during and after the merger. This ability to set their disagreements aside and calm the stormy emotions helped promote a sense of belonging and encouraged dialogue and connection between the merging NPHSOs. As one chairperson (M1) described it: “We mainly had ideological discussions that often concealed a desire to feel at ease but … there wasn’t a lot of ego stuff. It was more about professional power struggles.”

A fourth dilemma had to do with the internal politics within the merging NPHSOs, dealing with issues such as forming relations of trust (or the lack thereof) (Hasenfeld, 2010), power struggles over the control of key positions, disagreements in the boardroom between the supporters and opponents of the merger, and personal resistance due to bad blood. Distrust between officials in the merging organizations was repeatedly described. In one organization, a crisis of trust emerged/erupted between the new board and the CEO. The crisis was so deep, that it caused an irreversible situation where the entire senior management of one of the merging organizations (CEO, president, founder), as well as many employees, had to resign. In most organizations, some members of the board and many mid-range managers have received only partial information about the merger process and were not always consulted in important decision junctures. In such cases, those excluded described feelings of loss of trust, disappointment, and resistance to the process.

Coping with conflicts

The merger process involved complex organizational relationships. Sometimes, these were characterized by mutual trust, but oftentimes conflictual relationships emerged as well, characterized by distrust and competition (28% of respondents identified power and control struggles as characteristic of merger processes). In both the interviews and survey, we found various tools developed to cope with conflicts during the merger. Joint meetings of managers and board members, and executive interventions were the most commonly used conflict resolution tools (57% and 61%, respectively). Fewer NPHSOs used more participatory tools such as experiential workshops and roundtables dedicated to processing the merger experiences and overcoming disagreements. Conversely, the organizations were opposed to external facilitation of the merger process because external entities tended to impose solutions. Concerning the hiring of organizational or legal consultants as a conflict resolution tool, the results were undecided: 39% of the respondents said no external consultation was used, while an identical percentage testified to the importance of such a tool.

Overall, these various tools allowed the creation of a new, unified organizational vision and culture. Indeed, the findings indicate that the participants believed that along the way, the merging organizations did manage to cope with conflicts, and to establish trust and mutual respect; 67% of respondents rated trust and mutual respect to exist “to a great extent” or “to a very great extent” at the end of the process.

The post-merger stage

Post-merger challenges

Although all our case studies continued operating after the merger, and although most interviewees agreed the merger was necessary, significant post-merger challenges were still raised. The first was relations with external stakeholders such as government ministries and funders. In certain cases, the former seemed to turn a cold shoulder to the merged organization, leading to the loss or suspension of government contracts, reducing the flow of funds to the merged organization, and resulting in its declining professional reputation. Thorny political relations with regulators were also apparent, as they pressured the merged NPHSO to replace managers and board members, terminate executives, or they would remove the political backing for the management’s moves. With regards to funders, additional challenges were that funders felt in some cases excluded from decisions in the pre-merger stage. In other cases, it became difficult to retain donors in support of the merged organization due to a sense of detachment following the significant changes in the organizations.

A second post-merger challenge had to do with the internal arena of the merged organization, involving tensions and resistance to organizational change, leading to the retirement of board members and managers, and clashes with frustrated employees. Also prominent were difficulties due to the replacement of managers and senior staff members, the hiring of new professionals, and the need to train them. The post-merger stage often involved additional barriers due to the encounter between different organizational cultures, methods, and approaches, and gaps in work processes and knowledge. One of the managers interviewed called the merged NPHSO “a posttraumatic organization” (M1).

Merger outcomes and their association with merger motives and organizational culture

Most survey participants expressed positive views about the merger outcomes. They saw it as an important move for their organization (72%), felt it contributed considerably to achieving its goals (68%), and that it enabled the expansion of the organization’s client base (62%), and improved the quality of its services (61%). These attitudes were associated with the question of whether or not merger targets were predetermined.² In organizations where merger targets were set, the respondents felt significantly more positive about the merger outcomes (top four statements in Table 1), and in the remaining statements, the mean was also higher among organizations where targets were pre-set.

Table 1. Attitudes toward the merger outcomes: overall means and by predetermined targets.

“The merger …	M (SD) (1–5 scale)	Predetermined targets Yes || No		Significant difference (t-test)
was an important step for my NPO”	4.09 (1.25)	4.57	3.76	✓
contributed to achieving our organizational objectives”	3.96 (1.28)	4.50	3.65	✓
enabled increased budgets”	3.67 (1.23)	4.19	3.30	✓
broadened the client base”	3.59 (1.30)	4.19	3.20	✓
enabled greater influence on policymakers”	3.59 (1.26)	4.00	3.40
improved the quality of services”	3.55 (1.18)	3.94	3.37
enabled greater market share”	3.45 (1.30)	3.81	3.30
enabled us to win more tenders”	3.19 (1.26)	3.63	2.95
“I’d like to go back to the pre-merger situation”	1.34 (0.75)	1.14	1.41

When asked about the effects of the merger on the organizational culture of the merged organization, the survey respondents felt hopeful and ranked high outcomes such as developing a climate of mutual trust (4.0 on a 1–5 scale), encouragement of innovative solutions (3.9), and a sense of stability and confidence (3.6). The low ranking of a statement on an atmosphere of suspicion in the organization was also a positive sign of merger outcomes. Here, too, we find a significant association between the organizational culture statements (top three) and the predetermination of merger targets (see Table 2).

Table 2. Post-merger organizational culture: overall means and by predetermined targets.

“In the merged NPO …	M (SD) (1–5 scale)	Predetermined targets Yes || No		Significant difference (t-test)
there’s a climate of mutual trust between the board members and management”	4.00 (1.1)	4.44	3.63	✓
there’s a climate encouraging new ideas and new ways to solve problems”	3.91 (1.01)	4.33	3.63	✓
there’s a sense of stability and confidence”	3.61 (1.18)	4.06	3.32	✓
management sets high performance standards to employees than in pre-merger”	2.72 (1.21)	3.06	2.53
greater importance is attached to org. performance than in pre-merger”	2.38 (1.25)	2.63	2.26
there is suspicion between the employees from the two pre-merger NPOs”	2.25 (1.27)	1.94	2.53

Our last question examined the correlation between merger motives and merger outcomes (Table 3) and between merger motives and the emerging organizational culture (Table 4). The main finding is that there is indeed a significant positive relationship between professional merger motives and the assessment of the merger outcomes, mainly regarding professional outcomes (organizational objectives, client base, service quality), and less so regarding economic outcomes (increased budget, market share). A significant positive relationship was also found between professional motives for the merger and organizational culture aspects in the merged NPHSOs (Table 4, Column I). Note, moreover, that there is a significant negative relationship between all the other motives for the merger (personal, pressure by funders, external political considerations) and the outcome indicators. Finally, financial considerations for the merger were not related to any outcome indicator.

Table 3. Merger motives and merger outcomes: correlational table.

Motives Outcomes		Professional	Economic	Personal	Funders’ pressure	Political-Internal	Political-External
	Important step for my NPO	.682^**	−.163	−.356^*	−.448^*	−.150	−.532^**
	Achieve org. objectives	.538^**	−.218	−.330	−.377^*	−.122	−.447^*
	Increased budgets	.284	.179	−.254	−.056	−.276	−.184
	Broaden client base	.510^**	−.021	−.444^**	−.170	−.162	−.272
	Influence on policymakers	.421^**	.163	−.200	−.031	−.280	−.152
	Improved service quality	.522^**	−.060	−.242	−.223	−.309	−.289
	Greater market share	.254	−.030	−.440^**	.035	−.215	−.080
	Win more tenders	.389^*	−.083	−.193	−.195	−.289	−.223
	Go back to pre-merger situation	−.672^**	.035	.397*	.357*	.242	.343

*p < .05(two-tailed); **p < .01 (two-tailed). Significant correlations are bolded.

Table 4. Merger motives and post-merger organizational culture: correlational table.

Motives Org. Culture	Professional	Economic	Personal	Funders’ pressure	Political- Internal	Political-External
Climate of Mutual trust	.595^**	−.048	−.398^*	−.576^**	−.375^*	−.680^**
Encouragement of new ideas	.572^**	.088	−.311	−.512^**	−.262	−.550^**
Sense of stability and confidence	.365^*	.056	−.107	.082	−.147	−.132
High standards to employees	.251	−.091	−.371^*	−.217	−.338^*	−.282
Organizational performance	.199	.092	−.332^*	−.090	−.190	−.091
Suspicion between employees	−.325	−.207	.134	.270	.258	.418^*

*p < .05(two-tailed); **p < .01 (two-tailed). Significant correlations are bolded.

Discussion and conclusions

Health, economic, and social crises, such as the global COVID-19 pandemic, threaten the survival of organizations in general and NPHSOs in particular. Since the COVID-19 outbreak, many NPHSOs have been forced to significantly reduce the scope of their activities, cut costs, terminate or change programs, or furlough employees (Choi et al., 2023; Schmid, 2021). Changes in NPHSOs’ environments necessitate that they adjust themselves to the new reality and consider new modes of operation, including mergers. In this study, we have attempted to expand the knowledge of motives, challenges, power relations, and outcomes of nonprofit mergers in times of crisis. We have examined the ways mergers can serve as a strategic response for restructuring and reviving NPHSOs and contributing to their social innovation by focusing on the three P’s of the merger: Pre-merger, Process, and Post-merger (Figure 3).

Figure 3. Roadmap of the findings by merger stage.

In the pre-merger stage, it appears that among the factors pushing for mergers in Israel, financial and professional considerations play a greater role than intra-organizational personal or political considerations, and external pressures by political or philanthropic players. The interviews highlight the centrality of financial-economic motives: a desire to increase efficiency, to overcome an economic crisis, and to diversify, leverage existing, or recruit new funding sources. In line with the literature (e.g., Pietroburgo & Wernet, 2010), financial-economic considerations coexist with professional ones, such as the desire to prevent multiplicity in service provision to similar populations and the desire to implement more effective management methods.

External pressures by political (regulators, government ministries who fund their activities) or philanthropic (business or individual) players have also been found to affect the organizations in entering mergers, but to a lesser extent. Funders dissatisfied with the NPHSO’s outcomes can pressure it to merge, and NPHSOs wishing to survive respond to such pressures.

In many of the studied mergers, we did not see a planned strategic process with clear predetermined objectives and taking into consideration all relevant stakeholders. Rather, we found that the initial contacts between the leaders of the merging organizations were usually informal, even accidental, without first examining the risks, opportunities, and implications for the organizations and their clients. Nor did we find appropriate preparatory or participatory processes with the involvement of managers and employees designed to better understand the merger benefits (Cooper & Maktoufi, 2019; Thach & Nyman, 2001). Thus, we conclude that as early as the pre-merger stage, orderly planning processes must be undertaken, including alignment of expectations by the leading teams, as well as meetings to alleviate fears and suspicions, attended by all the stakeholders within and outside the merging organizations.

The quantitative findings indicated that the merger decision-makers were mainly members of the board and management and occasionally relevant funders. In many cases, the leading figures of the merger formed a “closed” forum where decisions were made without the involvement of other key players (such as employees, clients, funders, and even to the exclusion of some board members). Oftentimes, forum meetings were informal, held outside the organizations’ premises, and members of the forum had previous acquaintanceships. While such informality may build trust among the members of the forum, and enable more efficient decision-making, such a managerial style has often contributed to resistance and concern by excluded players, as accusations of lack of transparency.

To avoid the emergence of suspicions, opposition, and “toxic” organizational politics at this early stage, it is important to implement strategic planning and ordered sharing mechanisms, including the setting of clear success and failure indicators, a recommendation supported by the significant association found in this study between merger outcomes and predetermined targets. An organizational culture of mutual trust and respect has developed much better in organizations that have set such indicators for the merger. Those organizations have also developed a climate of innovation, a sense of stability and security. Moreover, organizations who have set success indicators for the merger are satisfied with its results more than organizations who have not.

Similar to the literature, the merger stage was described by all interviewees as dynamic, and intense, involving complex decision-making processes (Gomes et al., 2011; Ricke-Kiely et al., 2013). Two aspects of these processes are highlighted here. One is the critical commitment of senior management and board members. The higher the commitment they brought into the merger process, and the more open and candid the dialogue they facilitated between the boards of the merging NPHSOs, the higher the vitality of the merger. A second aspect, also indicated in the literature (Chen & Kranskopf, 2013; Goldkind et al., 2013), was the decision-making style. For effective decision-making, and for sharing the decisions with broad circles of stakeholders, the decision-making process should be both systematic and participatory as much as possible.

In line with the literature (Lee, 2022), we also found that the human factor is a major challenge in merger processes. Tensions between the NPHSOs, organizational politics within or between them, the resistance of individual employees, conflict, competition, and lack of trust or communication problems between members of the management and board have all been identified as challenges or barriers, emphasizing the criticality of relationships and emotions in the merger process. These findings highlight the centrality of the human factor in the merger stage. When NPHSOs merge, their human capital merges as well, hence the need to invest time and resources to improve the cooperation between employees, to position employees in new roles, and establish uniform professionalism, a positive and supportive organizational culture, and a new vision for the merged organization. The main tools used to resolve conflicts were joint meetings and managerial interventions. The organizations made less use of participatory mechanisms or external organizational consulting. It appears that the use of such mechanisms should be expanded, to better engage the various stakeholders in the process.

Another important issue in the merger stage is the building of a sense of belonging, identity, and solidarity among members in the merged organization because mergers are often accompanied by power struggles, mistrust, and attempts to challenge senior members of the merged organization. Most mergers were characterized by significant turnover of employees, managers, and even board members. The interviews indicated that patient, empathic, and inclusive management of the human resources of the merged organization, and management that acknowledges differences between the merging organizations helped create a new sense of belonging, shared organizational identity, and solidarity.

Organizational politics is a familiar element in any organizational change process, including mergers (Benton & Austin, 2010; Schmid, 2010). The challenge is to identify the challenges, such as resistance to change, and deal with them explicitly by developing efficient organizational mechanisms. Indeed, trust-building was also found to be a significant aspect and a main challenge in our studied mergers. The personnel changes – such as a new board, a new director, and/or combining employees from two different organizations – required a reestablishment of trust. Here too, the transparency of the merger process, as well as the scope of integrating as many and as diverse stakeholders as possible in the process led to failing crises of successful trusting environments. The more stakeholders are notified and included in the decision-making process, the higher the trust built in the merged NPHSO.

The post-merger stage is critical because this is the time when the merged organization has to be stabilized, new norms and standards must be adopted, an appropriate organizational structure must be designed, and work must be invested in formalizing work processes and realizing the organization’s objectives. The finding that more than half of the participants reported that no success and failure indicators had been predetermined is a red flag. Without such indicators, it is difficult to assess what is the added value of the merger. It is therefore important to determine success indicators for every organization considering a merger. Nevertheless, many of the participants did estimate the outcomes of the merger as relatively positive. Still, organizations that set predetermined success targets felt that their outcomes were better, in terms of their trust level and mutual respect, their climate of innovation, and the sense of stability and confidence built in the organization. This indicates the importance of planning and goal setting in merger processes. The implications of the merger for the organizational culture of the merged organization were also seen as overall positive. The most important aspects of building the organizational culture in the merged organization were mutual trust between the board and management members, encouragement of new ideas, and the ability to find new ways to solve problems.

The literature indicates that in cases where the merger is seen as successful, success is defined in terms of socioeconomic or technological value higher than that achieved by each of the pre-merger organizations independently (Barnes & Fisher, 2006; Pietroburgo & Wernet, 2010). Indeed, in many of the mergers studied here, success was associated with obtaining greater resources and legitimacy, improved efficiency and services, and a greater share of their market environment. The presence of formative, enabling, and autonomous leadership which offers a clear organizational vision, and support from both within and outside the organization, also helps achieve positive merger outcomes (Campbell, 2009; Kavanagh & Ashkanasy, 2006).

This study has some limitations. First, the number of cases in the study is based on only eight mergers. This is a relatively small number of cases, but it reflects the rather small number of NPHSO mergers in Israel since the introduction of legislative changes in the Law of Associations in 2009 (Limor, 2009). The mergers studied in this paper represent the general population of merged organizations in Israel. In this aspect, it seems that the eight case studies allow for a thorough understanding of mergers in times of crisis through in-depth interviews and comparative case studies that help to deal with this limitation.

In the quantitative aspect, the study is based on the answers of 42 managers and members of public boards representing 17 merged NPHSOs. This constitutes a representation of over 40% of all the people who were contacted. It is still a relatively small sample for statistical analysis. Thus, the findings about the relations between variables must be taken with a degree of caution. It should be noted that the fifty respondents who agreed to answer a questionnaire were selected from a list of about 100 interviewees created using a snowball method whereby the interviewees recommended other possible interviewees who held a managerial role in the organizations. However, the combination of quantitative and qualitative research methods, as well as reliance on organizational documents allowed us to cross-check empirically based information. In this way, we sought to strengthen the reliability and credibility of the findings that allow inference and even generalization to mergers of NPHSOs.

Merger is a complex process of organizational change. Our study points to the importance of organizational culture in the three merger stages but future research could enhance the understanding of nonprofit mergers by exploring additional merger dimensions, such as emotions in mergers and organizational politics. The research on emotions in mergers could contribute to a better understanding of emotions in organizational change processes, and research on organizational politics is needed because the internal politics during merger processes were deemed most influential.

To conclude, similarly to other social and economic crises, the COVID-19 health crisis has made it difficult for NPHSOs to meet their objectives. Mergers can be a strategic option for dealing with such crises. The study has shown that managing the merger and then restructuring the merged organization is challenging. There is a need for careful planning, setting clear objectives, and determining success indicators. Developing mechanisms for shared decision-making and coping with conflicts is also important. Our findings also point to the organizations’ need for legal and organizational consulting in the process – from the stage of considering the merger option, through the assessments of its pros and cons, to planning and implementing the merger. We therefore recommend that umbrella organizations, infrastructure organizations, government agencies, and funders develop knowledge and support mechanisms that will help organizations considering and implementing nonprofit mergers.

The findings of this study contribute another layer to theory building on nonprofit mergers. Mergers are long-term strategic responses to internal constraints and external pressures that oblige organizations for structural and managerial endeavors, different from the one used before the merger. The study also contributes to the theory by revealing factors and conditions that influence achieving the merger’s goals. In this aspect, the study adds to other studies that have dealt with the success and failure of mergers. It highlights that a merger is not an end in and of itself but an effective means of providing improved services to clients who should be viewed as the merger’s main beneficiaries.

Our study has several implications for the nonprofit sector. In recent years, we have witnessed various crises, including the COVID-19 health crisis, the financial crisis of 2008–2009, the political crisis resulting from rapid changes in government and political instability, and the climate crisis. In each of the crises, nonprofit organizations were largely affected by it. Alongside their efforts to deal with crises, they have experienced economic and financial crises that required them to make strategic, structural, and organizational assessments and changes. The fragmentation and challenges experienced by NPHSOs due to the crises could lead to the inefficiency of the nonprofit sector in utilizing its resources. A merger is one strategy that the NPHSOs should examine to strengthen their economic and financial stability and achieve synergistic effect in providing services to their clients in times of internal or external crisis.

Disclosure statement

No potential conflict of interest was reported by the author(s).

Notes

¹ Studies report a high rate (70%-90%) of failures in nonprofit mergers (McCormick, 2001; Milway et al., 2014).

² More than half of the participants argued that in the mergers in which they participated, merger targets were not predetermined.