RSM New Zealand

Case Study | The merger of Alzheimers Auckland and Alzheimers Counties Manukau

Bonnie Robinson (former General Manager of Alzheimers Auckland and now CEO of Howick Baptist Healthcare) shares her experience and insights from the successful merger of Alzheimers Auckland and Alzheimers Counties Manukau under the “Super City.”  The following case study puts the spotlight on collaborative strategies:

Overall, the merger took 16 months but its origins go back to the establishment of the organisation:

  • 26 years ago Alzheimers Auckland was established
  • 23 years ago Counties Manukau broke away because they felt they would get more service in their area if they were separate
  • For 20+ years the two organisations were very separate
  • In March 2010 Alzheimers Auckland received an invitation from the Board of Alzheimers CM to have informal discussions about how we could work together better.
  • In June, ACM wrote formally to AA and asked us to manage them on contract for a period of 6 months, and during this time to begin discussions about formally merging into one united organisation.
  • From November 2010 moved to a new united operational structure, while retaining separate legal status.
  • From November to May we went through the process of writing new constitution rules etc. for the proposed new entity and consulting with the membership of both organisations.
  • June 2011 both organisations voted unanimously for the change, and we then applied to the Registrar of societies and the Charities Commission.  

Drivers to merge

One of the reasons we were able to be successful was that a number of the key drivers for change were present.  If you are interested in merging or other forms of collaboration – these are some of the factors that need to be present for you to have a chance of making it happen.

Tipping point

You need to watch out for the tipping point and make sure that you are ready to take action when you see it start.  For ACM the tipping points were:

  • Election of new Board
  • Long serving GM left the organisation
  • Board did not move to appoint immediately but sought independent review of the organisation
  • Concern about future if the three Auckland DHBs combined – would they contract with two separate Alzheimers organisations?

For Auckland

  • No real need to merge – we were doing fine, but Board was focused on growth and opportunities
  • DHB contracts –similar concern re what might happen if DHBs combine
  • Fact that ACM GM had left – we would not be dealing with sensitive HR issue of having two GMs and only one GM role.

Needs of governance

Good governance is one of the things that NFPs, especially small ones, struggle with – getting good people on your Boards.  Merging provided an opportunity for the Alzheimers organisations to strengthen their board with only one board instead of two, and whole of Auckland community to now draw on.

How to grow to meet demand

From our strategic planning we knew that the numbers of people with dementia in Auckland were going up cumulatively 3% per year – but our funding was not keeping pace.  We needed some creative ways to grow.  Merging provided both organisations with the ability to grow with the same income level through savings in management and administration.

Funding

Our merger happened as the recession was really starting to bite from a fundraising and funder perspective.  We recognised that we were unlikely to get more DHB money in the medium term and donor dollars were going to be hard to get.  Being split across Auckland was not helpful in some ways to our fundraising, and CM especially did not have sufficient size to be able to afford its own full time fundraiser – management and admin staff had been trying to pick up this role.  Both organisations needed a step change in terms of funding coming in.  Joining together was one way to achieve this as we were able to hire in additional fundraising staff, on same budget and open up new funding opportunities such as sponsorship and events because we were now Auckland wide.

Funder attitudes and potential changes

In Auckland we were seeing a trend for DHBs to reduce the number of providers they contracted with for example home care in ADHB went down to four providers only.  With the likely amalgamation of DHBs in future, we could see this trend continuing.  Merging hopefully places the organisation at less risk.  We won’t be competing with each other at least, and bigger and stronger if we end up having to compete with others.

Philanthropic Trusts have less funding and more demands – and we were getting signals that they wanted to ensure there was no duplication or wastage.

Challenges

So there were and are many things that might drive NFPs to look at merging or other forms of working together more for effectiveness.  However, it is not a straight forward process.

Change Management

The merger represented for AA and ACM a significant change management process.  If you are considering a merger and as a manager or Board you have no or little experience of change management it will be important to get some advice.

Overcoming the “Tyranny of Nice”

Even if you get your change process right, it does not guarantee that everyone involved will get on board.  As NFPs I think we often struggle with this – with making decisions that individuals in the organisation don’t like but that are good for the organisation and our clients as a whole.

Culture is critical

Any significant change in an organisation involves a change in organisational culture.  Culture is an important aspect of any organisation and is especially important in NFPs.  Many staff are attracted to our organisations because of their culture and this has many positives with staff dedicated and going the extra mile.

But you need to manage culture in the same way as you manage other aspects of the organisation – because without deliberate attention to it you can end up with a culture that does not allow the organisation to grow and move forward.

A merger accelerates cultural change in an organisation and makes it overt.  This was one of the biggest challenges for the Alzheimer’s organisations.  We were merging two cultures and shifting from being very small organisations to something larger.  Staff were probably most affected by the cultural change from the merger than anything else.  Merger or collaborations therefore require organisations to be clear about culture and manage it.

Capacity and capability 

In general, organisations have to continue to deliver normal services while undertaking a merger.  As most NFPs have a flat management structure this can cause a capacity challenge.  At AA and ACM, we recognised that we had this and also capability challenge.  We needed some management, legal and IT expertise.  We had to find this, which meant in many cases buying it in. 

Cost

It costs money to get more efficient.  The merger was not cost free.  We had legal costs, IT costs, project manager costs, meeting costs.  NFPs often have a “mend and make do” philosophy – the Alzheimers' Boards had to recognise that to get the merger right they needed to spend money.

The Working Together fund was helpful – but – appeal to funders here – the costs of merging could be seriously prohibitive to smaller NFPs – if we want to get more efficient then we need assistance to do so.

Funding Disincentives

When the two Alzheimers organisations looked at their funding sources, they realised that in the short term they might lose some grants due to funding criteria.  It is a brave board that faces a potential loss of income short term, because they consider that long term they will get more income.  Many, many NFPs simply do not have the resources or the courage to be able to do this.

Funders have a big responsibility here.  If what funders really want is for the NFP sector to consolidate and be more efficient, then we need funding incentives to do so. 

Complex stakeholder groups

A list of any service focused NFP's stakeholders and their relationship to services might look like this:

  • Clients (use services, don’t pay)
  • Funders (pay, don’t use)
  • Donors (pay, may use, may not)
  • Sponsors (pay, want some kind of return)
  • Members (may pay and use)
  • Staff (provide, but may also use or have used)
  • General Public (use, pay, or not, but have a view) 

One of the special challenges of being an NFP is the complexity of our stakeholder groups and their relationships, particularly in social services where there is usually no direct relationship between service users and the funding.  All our stakeholders have a view on who we are and what we should do – so any change requires communication with and managing of a wide range of groups and individuals.  The Alzheimers organisations spent a lot of time meeting with and communicating with all the varied stakeholders so that there were no surprises. 

Managing Passion

Forget the Tango in Argentina – if you want passion come work for the NFP sector!  This drives us to work towards those impossible goals we set ourselves.  When it works well, it is a powerful force for change.  However passionate people tend to be very personally involved and feel they should be involved in all decisions.  This makes change management complex.

Factors in Success

So with all those challenges, what made the difference for AA and ACM between success and failure in the merger?

1. Two willing partners

It is much more effective and efficient to merge or collaboration because you want to than because an external party is forcing you to.

2. Organisations focused on same outcomes – even if delivery mechanism different

It helps if the parties are heading in the same general direction. If the aspirations or mission of the organisations are too disparate, then merging or collaboration is less likely.

3. Living together before you get married

For nearly a year, the two Alzheimers organisations operated as one, while being legally separate. This is probably one of the reasons the merger happened and went as quickly and as smoothly as it did. It was commitment without commitment.  We were able to experience how it would be to be one, while still being legally able to return to our previous situation if it didn’t work out. This I think encouraged both Boards to take the decision to leap in and give it a go.

Additionally, even if our membership had said no to the formal legal merger, we could have continued to operate as one indefinitely – as this was a governance decision and not a constitutional and therefore membership decision. Again this meant the Boards had confidence to undertake the restructure of roles and merge operations, because if it worked, and we wanted to continue, we could.

4. Boards willing to take risks

There are hard decisions to be made when making change. Governance and management needs to be robust enough and skilled enough to be able to take calculated risks.

5. Focus on long term and big picture 

The management literature tells us that the majority of mergers don’t last. One factor is that many organisations and individuals within them are impatient for gains. While it is important to have quick gains, the real gains are often in the medium term. Leadership of the organisation needs to be focused on these longer term gains, and able to continue to generate commitment and enthusiasm.

6. Able to afford the up-front costs 

The costs of efficiency need to be able to be met. Organisations need reserves or external funding to meet the costs involved in joining together.

So why merge?

Fundamentally considering merging is about stewardship.  It’s about knowing that we are doing the absolute best with the dollars we are given, for the benefit of the people we serve. At AA and ACM, we could no longer justify why we were separate.  Stewardship demands that we ask the question, often, and answer with honesty.

If for no other reason NFPs should consider mergers because we want to stay in control of our own destiny as organisations and as a sector.  Organisational development experience suggests that you should seek to change when you are successful.  If you wait until things are going wrong, the likelihood is that your change won’t work.  In the NFP sector people can see success as a sign to leave well enough alone.  Then a crisis occurs and we are in catch up mode.  So if you are a successful organisation – maybe this is the time to think about who you could be partnering up with for the future.

Consolidation of the sector is coming whether we like it or not.  Funders and politics are driving some of it, as are economic conditions.  Our independence as a sector, the ability to do things the way we think they should be done, is one of our greatest assets.  Strategically we should be getting ahead of the consolidation game.  Let us make the decision ourselves to merge or in other ways get more efficient – do not wait until a funder or policy decision pushes us into it.

The experience of Alzheimers Auckland is that merging is hard work, scary at times, but which can lead to fantastic outcomes.  There are plenty of ways to get together.  As a sector let’s take the lead, as we have often done with our attitudes and our services, and find some that will strengthen us. 

For more information on the merger please contact Bonnie Robinson on 09 538 0804.

Alternatively, if you are seeking advice on implementing a collaborative strategy please contact RSM on audit@rsmnz.co.nz or (09) 367 1656

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