CMGT500 WK4: Academic Article on Non-Profit Merger

Largest Non-Profit Merger in U.S. History

People don't often associate the words "non-profit" and "competitive market". Non-profits tend to be thought of as independent entities. There are countless non-profits in the U.S. and with disappearing funds many fold, well thought out initiatives are lost and hard work is forgotten. For this weeks assignment I read a very aptly written article on what is likely the largest merger in history in the non-profit sector. The merger took place between the Points of Light Foundation (POLF) – an organization founded in 1990 as a response to former President G. W. Bush’s initiative to encourage Americans to volunteer, and the Hands On Network (HON) – an organization created in 2002 that reached out to young Americans looking to volunteer in their communities. The merger was finalized in 2008, under the name HandsOn Network. These two organizations are an excellent example of how to come together to continue providing services while working within the economic context of diminishing funds. 

The article, written by Deborah Edward, Ph.D. is titled “Getting to Yes: The Points of Light and Hands On Network Merge”. Edward’s article highlights the importance of the social networking and transparency of the merger. As Gulati points out, there are three main motives to collaborate, and of those, this article indicates that two of those motives are poignant for the POLF & HON merger. They were interested in minimizing transaction costs and establishing a competitive edge in an industry with diminishing funding.

Rosabeth Moss Kanter mentions in her article that there is a continuum for the type of mergers that take place, and the POLF and HON merger seems to be of the mutual service consortia, as both parties offer similar services but their concern is financial distribution. Edwards walks the reader through the steps of this mutual service consortia as she details the courtship, engagement, and “setting up housekeeping” (Kanter, 1994). Below I will share some of the highlights!

The table here illustrates relevant organizational elements before the merger. These are all elements that were considered before and during the merger.

	Points of Light	Hands On Network
Structure	Runs like a federal agency	Grass-roots, flat hierarchy, inclusive model
Decision Making	Top Down exclusively from executive ideas	Top Down with all staff involved in idea development
Philosophy/Mission	Bring together resources to effectively provide volunteer services; provides training, knowledge sharing, and mechanism design	Provide opportunities to encourage social activist and entrepreneurial volunteering, priamrily geared at young volunteers
Strategy	Teach members of the community how to organize	Project centered approach
People	120+ professionals; organized by initiative; older demographic	Organized by initiative and/or regional service; younger demographic
Location	Private offices for each team; 3 stories of building in DC	Cubicles with private discussion rooms; NYC, DC, Atlanta
Board Composition	Colleagues of former president G. W. Bush, representatives from donors (e.g. Disney), representatives of Corporation for National Service, representatives connected with U.S. legislature	Representatives from donors, Affiliates of HON, local residents, representatives connected to non-profits and U.S. government,
Funding	Primarily federal, 30% private, nominal income from memberships + fees, MissionFish auction site	Primarily private, some federal grants, fees and earned income resources

*All information from Edward article

Although both organizations offered overlapping services, they had enough variance to compliment one another. POLF had what appeared to be secure funding and a well developed brand, but the organization stopped growing and by 2006 concerns were raised about the longevity of it’s ability to reach out to new volunteers and continue services. HON was gaining popularity and growing at a rate that was leading the organization to hire more and more staff and reached out to more and more service centers. The market environment was also changing rapidly, with increasing competition for funding, more demanding expectations for impressive results, and federal agents seeking tangible results of impact. When the CEO of POLF announced his intention to retire to 2007 the courtship began between the two organizations.

The organizations did their courtship dance and after a luncheon between former president G.W. Bush and the CEO of HON, they found that indeed there was competitive advantage in collaborating. After 3^rd party analysis, they found aligning values, complimenting services, and corresponding strategies. With the driving need to maintain funding, they began to move towards an accelerated development of a collaboration. Both companies ran self-analyses, felt the chemistry, and believed in the compatibility, which are exactly the steps outlined by Kanter is critical in the courtship phase.

When the process started, or the engagement phase, the 3^rd party agency surveyed staff about the culture of their organization and set out to identify opinions about the potential alignment. Both organizations assigned leaders and a collaborative task force to represent the needs of both HON and POLF during merger discussions. Based on Kanter’s article, the details of the merger as outlined by Edward indicated that the HON and POLF collaboration was off to an exemplary start. Then, just as Kanter states, difficult questions emerged in the “setting up housekeeping” phase.  Concerns for the name (legacy vs popularity), leadership (CEO, board composition), and financial stability fueled suspicion.

At the beginning, both organizations seemed to be of weak form trust partners, in which it appeared that they shared the luxury of minimal vulnerability therefore, minimal opportunism (Barney & Hansen, 1994).  However, reports revealed that both organizations were at financial risk – HON was waiting on withheld donations due to the ambiguous result of it and POFL was getting news that due to potential legislature, multi-million dollars cuts were in consideration from their federal funding. POLF questioned HON integrity, and the nature of their relationship quickly began to rely on strong form trustworthiness, because vulnerabilities surfaced and they were going to have to rely on one another to not violate one another’s values and principles of behavior. 

The article itself a bit playful, as it doesn’t end with a definitive conclusion about the merger, even though it was li. After investigating the website, http://www.handsonnetwork.org, it is evident that the merger was successful, and one can see how they chose to combine forces because they have it clearly described on their history page. What I found most interesting, was that the name, although it took on HandsOn Network, the website is littered with the Point of Lights name as well, which evidences successful strategies to both indulge in the popularity of Hands On while preserving the legacy of Points of Light. As the merger took place a little over 4 years ago, I imagine it was successful. The first image on my blog is their combined logo, which is intended to give the illusion that Points of Light foundation presents the HandsOn Network. 

            

Edward, D. (2008). Getting to yes: The Points of Light and Hands On Network merger. RGK Center for Philanthropy and Community Services. Retrieved from http://www.handsonnetwork.org/about/history

http://www.handsonnetwork.org