Associations also tend to be scrappy economic players, building a multi-layered stream of revenues out of the slightest of opportunities. This is because association dues are the third rail of association management, so association executives must fashion as many alternative revenue streams as they can.
Additionally, associations are often small entities, sometimes with improvised back rooms. Many people in this sector still believe the primary reason for merging nonprofits is to reduce administrative costs (it's not), and so the small savings that come from combining small back rooms are naturally disappointing.
Moreover, while there are not stock and ownership barriers to merger in a nonprofit association, there are also fewer material incentives to accept a merger or alliance. So the impetus must come from the leadership's vision, yet often it is hard for board members or executives steeped in for-profit merger metrics to see the benefits of an association merger.
Why Associations Should Consider Mergers Today
Voluntary associations, whether they are called business leagues, membership groups, professional societies or something else, play a major role in facilitating the civic dialog that is indispensable to a functioning democracy. Private individuals and organizations can't play that role, nor can government.
But this role comes with a catch. Because associations generally play an intermediary role, they must be ready to change course based on their readings of environmental signals. This means that association management must pay close attention to their business model because environmental forces can make it obsolete quickly. Moreover, association members are usually subject to the same external forces.
So the catch in association management is this: Associations must be able to change faster than either their members or the government can, because that responsiveness is their enduring source of value. Right now the political and cultural environment is demanding that the private sector play a greater role in shaping public policy in everything from the local neighborhood to the federal government, and our only large-scale vehicle for doing so is associations. In the past, that meant creating new associations and membership groups. Today, it requires stronger private representative entities with deep-rooted abilities to sort through the complex needs of respected institutions.
To put this in perspective, try to see association mergers as a tool. In terms of size and scale, many associations are just like small businesses. Environmental changes affect small businesses faster and often more deeply than their larger counterparts, so a change affecting members will ripple through an association relatively fast. In effect, associations are expected to reflect their members, so they must be constantly prepared to change accordingly. Increasingly in today's environment, that means mergers.
Media coverage of publicly held company mergers has provided a rich seedbed of myths about mergers; rest assured that even in the for-profit sector these myths are often distorted or misleading. Mergers, including among associations, play by the same rules of economics and organizational effectiveness as every other entity. As many association members consider this step on their own, it is inevitable that their associations will do the same. For the foreseeable future, associations in many sectors will need to expand their strategic options accordingly.
Thomas A. McLaughlin is vice president of consulting services, Nonprofit Finance Fund, and a member of the faculty at the Heller School for Social Policy and Management at Brandeis University. This column is adapted from the second edition of his book Nonprofit Mergers and Alliances (©2010, John Wiley & Sons) and from "Tying the Knot," one of his articles in the October 2008 edition of the NonProfit Times. He can be reached at tom.mclaughlin@nffusa.org