Strategic board involvement: Steps for effective not-for-profit board governance during a merger or acquisition

This is the fourth article in our NFP collaboration series.

As not-for-profits (NFPs) continue to respond to operational and economic challenges with innovation solutions and collaboration with other organizations, board members play a critical role in the merger and acquisition (M&A) evolution. Balancing a focus on the mission with fiscal responsibility and growth is particularly challenging during stable times. With resource constraints, advancements in technology, decreased funding and fundraising and other internal and external factors impacting the NFP landscape, boards play a vital role in communication, collaboration and change management. In this article, we share guidance for NFP board members exploring an innovative collaboration or combination  to keep their organization strategically and financially focused. Reflecting on engagements and conversations with hundreds of board members, we share key steps for effective board governance during a merger or acquisition.

Triggers for collaboration

As board members have a fiduciary responsibility for the organization, the following indicators may suggest that an organization risks sustainability:

1. Financial stability: Indicators of financial troubles could be depleted cash reserves, declining key giving metrics and recurring annual losses. Even large capital expenditures could be a concern if there aren’t sufficient reserves or positive annual income to cover such an expense
2. Leadership succession: Aging and retiring leadership is a growing trend for organizations and boards to face, especially with founder-led organizations
3. Contribution, grant and revenue shortages: Long-time donors and grant funders may have decreased or stopped their giving and federal funding has greatly reduced since post-pandemic programs have ceased
4. Workforce challenges: Not-for-profit organizations continue to encounter challenges hiring and retaining qualified employees due to pay pressures and the shrinking workforce. Specialized training or knowledge may also be needed depending on the organization, and turnover or lack of proper education can impede effectiveness and efficiency in delivering services