Merging non-profits

One of the biggest differences between the non-profit and for-profit worlds is the lack of any significant mergers and acquisitions between non-profits. Starting a non-profit is easy; getting rid of an unnecessary or underperforming one is far harder than it ought to be. As a result, there is massive duplication of effort, excessive competition (especially for donations), and a failure to achieve the sort of economies of scale that are a routine feature of the for-profit world.

People in non-profits tend to resist furiously the idea that there should be fewer, bigger, non-profits. When Matthew reported in his 2006 Economist article “The Business of Giving” John Studzinski’s belief that “there are about 40 homelessness projects in London; only eight are any good,” lots of outraged letters arrived within days.

Yet a growing number of philanthrocapitalists believe that their money could have far more impact if it went to larger, more efficient non-profits, and they are trying to broker mergers. In a new op-ed
(subscription required) in the Chronicle of Philanthropy, Matthew argues that the current economic downturn may make it far easier for philanthrocapitalists to convince non-profits to give M&A a chance. They are more desperate for money, which should make them more willing to think the unthinkable. Here’s hoping.