It’s not just about the numbers: The pivotal role of culture during mergers and acquisitions

This is the fifth article in our NFP collaboration series.

When an organization is contemplating a merger with another, it’s crucial to understand the financial, operational, legal and human capital implications of the transaction. However, it’s also essential to understand the critical role that culture plays in the success or failure of the integration process. During the 2024 Baker Tilly not-for-profit governance and fiscal workshop, we were fortunate to have three insightful and experienced speakers as part of the panel discussion, Mergers, acquisitions, joint ventures, oh my! Not-for-profit leaders share lessons learned, which kicked off the event. Each panelist provided valuable takeaways regarding the integration process and stressed the importance of cultural considerations drawing upon their individual experience and knowledge.

NFP leaders' lessons learned

As part of the dynamic panel discussion, Jean Phelps, Chief Executive Officer, Incompass Human Services, talked about the importance of identifying potential cultural pain points early in the due diligence process and addressing them head on; like any other issue would be tackled. She discussed the important roles of the board, organizational brand, services and name as well as organizational leadership, including talent alignment and succession planning.

We also engaged the board's perspective on NFP combinations through MiSide Board Chair, Cheryl Hawkins, PhD. She discussed the need to identify common values between the organizations and the importance of balancing communication and transparency with efficiency. She also urged listeners to remember that even in the midst of the transaction, operations must keep rolling.

Our third panelist, Philip Yun, President and Chief Executive Officer, World Affairs, was involved in a recent merger in 2023. He explained that from his perspective, not-for-profit mergers are generally more complicated because of how important an organization’s mission, vision and core values are to the people that work there.

Key internal considerations

Mergers and acquisitions (M&A) can create uncertainty and anxiety among employees. People begin to wonder what their role will be within the new organization and if in fact, they’ll have a role. A strong organizational culture can foster trust, reduce fear, encourage commitment – and even solicit excitement about the combined organization’s future. When the two cultures align, employees are more likely to stay with the “new” organization, reducing turnover and retaining valuable expertise.