Is It Time For Charities to Converge?

Photo Courtesy of Creative Commons CC
Photo Courtesy of Creative Commons CC

Remake/Remodel

Spurred by downsizing, rightsizing and god forbid, supersizing, organizations large and small are trimming resources and hooking up to maximize their market share. Not a day goes by without hearing about layoff notices followed by inevitable consolidation or merger.

We get it. This is today’s business reality where shareholders pressure their boards to reap greater dividends per share, feeding an economic evolution towards increased profits.

As charity giving is quickly approaching, what about not-for-profit and cause-based organizations? As their for-profit cousins, they both share an empirical need for capital. Are they following this trend?

The need to increase capital can often lead to reorganizing. A modern austerity practice showing its invasive nature within the charity industry.

Some have questioned, “Is this merely to keep ‘business face?'” Or, is the time right for charitable organizations to be more accountable through deeper business practices – as reorganizing or merging?

Have charities embraced the teachings of for-profit businesses?

Mark Brown of MoneySense just released his list of top-rated charities in Canada. Accompanying his list of who to give to, and who not to, Mark assesses the four pillars of (charitable) business accountability: charity efficiency, fundraising costs, governance/transparency, and most importantly, cash reserves.  Each accountability showing its suspected pain-points with talent retention, marketing disclosure, and ethical governance. Exposed through the media or by external audits, many charities continue to show little to no improvement in these areas. Especially with building cash reserves. Insolvency can strike at any time and having the cash to sustain a restructure should be part of any business strategy. Nothing too big, as to draw ethical ire.

A reasonable Cash reserve is good planning.

Consolidating Charities

If we look at non-direct charities, charities with no attachment to institutional governance, navigating a competitive business climate can be tremendously difficult. Large institutional charities with massive multi-million dollar budgets command a larger space across all channels of marketing. Calendars continue to be jam-packed with many causes occupying the same date. How do you compete? Is it time for smaller and mid-size charities to merge?

Is it that crazy to start thinking about combined charities?

On a gigantic scale, last week we saw Anheuser-Bush InBev absorb SABMiller. Yes, beer is beer, but look at the product delineations: lagers, ales, stouts, light, low-carb, etc. Is this simply just diversifying its brand, or building market share?

You bet it’s all about market share. Charities should be no different.

For example, let’s transpose this ‘type’ of a merger with two large charities. Say, Canadian Cancer Society, and the Canadian Breast Cancer Foundation. Yes, one wide-scoped on their strategic direction and health responsibilities and the other entirely focused on one type of cancer.  Not to disrespect or undermine these two well-regarded organizations, but at the end of the day, we are talking about the eradication of cancer. This means more money is needed for research and programs.

By merging charities, the public would be offered a one-stop shop for gifting. Plus, stakeholders and partner acquisitions from both organizations would come together and increase market share for procuring capital.

As a benefactor, you want to choose how your money is used. Is it education, outreach or research? The opportunity to self-direct your donation can still happen if two charities with the same mission combine. Convergence will command more market share and provide more charitable dollars to the cause.

Not being a tax expert, one thing is very clear to me. Charity giving is deeply personal. How that charity is run is not. It’s a business. With very few dollars available, it’s time for charities to remake/remodel their business strategies by joining forces. After all, it’s your money.

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