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Sunday, May 28, 2023

Oped #2

Predictions about future business trends are as reliable as the weather. Even so, here’s one that is bound to cause a firestorm across the national non-profit landscape. It may not happen soon, but it will happen some day: The wave of corporate mega-mergers sweeping the country eventually will come crashing down on America’s biggest charities.

The driving forces that have brought together banks, high-tech companies and pharmaceutical giants need to be examined by the Red Cross, Heart Association, Cancer Society and other national organizations. Why should economies of executive leadership, marketing and real estate only apply to publicly traded companies? Why should a return on investment only apply to shareholders looking to make a profit? In a word, they shouldn’t.

Take, for example, the merger brouhaha that enveloped two Southern California coastal communities a few years ago Newport Beach and its neighbor Laguna Beach. Both cities had art museums. Both museums were suffering financially. In many cases, board members and major donors overlapped. Despite these issues, each organization steadfastly maintained separate facilities, professional staff, fund-raising and marketing campaigns and, yes, even accounting firms.

Finally, the board president of each museum came to the conclusion that something had to change. To make a long story short, the two organizations merged. This is not to say it was a pretty picture. Supporters on both sides were delighted and furious. Lawsuits were filed. Friends became enemies. To this day, old wounds still linger.

What came out of this merger mess was a much stronger art museum one that attracts far more people today than ever before. The same result would emerge if the nation’s largest non-profit organizations come together. More money would be available for research, cures would be found sooner, and more people would benefit than do today.

The challenge in getting from here to there will be enormous. It will take tremendous courage on the part of board members to admit this is the right course of action. After all, most of their organization’s top executives would lose their jobs, and even board members would have to find something else to do.

Much has been said about the impact corporate mega-mergers have had on employees, the economy and society as a whole. What’s taken for granted is this simple fact: In order for businesses to grow and thrive, they always must be willing to change. If they don’t, they run the risk of going under.

No company is immune. Look what’s recently happened to Levi Strauss, CompUSA and 3Com. Once the undisputed leaders in their fields, these companies now are on the brink of financial disaster. The nation’s largest philanthropic organizations will face a similar fate if they don’t start thinking about change.

Change, by definition, means uncertainty. How change is managed is an issue board members and executives struggle with daily. Over the last several years, national non-profit charities haven’t had to face the change issue as much as they have the growth issue. Now it’s time to plan for and predict their future.

Any organization that does not plan to conduct more research, deliver cures faster and serve more people runs the risk of being rejected by its shareholders. The best way to avoid this often-fatal error is to change to merge. It’s worked for Wall Street. It will work for philanthropy, too.

Denny Freidenrich is the major gift development director at the University of Southern California’s Annenberg School for Communication.

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