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Are iNGO mergers the wave of the future?

Group discussion initiated by DevEx.

By Carlos Santamaria.

So iNGOs should become as efficient and effective as private companies to better serve communities in the field? Virginie Martins de Nobrega said definitely yes, and a merger between organizations that have a common goal but are acting on a different level and carrying out different projects — like Save the Children and Merlin — can allow them “to have a coherent chain of competences [as part of] a much needed global approach for a better coordination.”

The Save the Children-Merlin merger is going to affect thousands of aid workers worldwide, but what does this operation mean for the future of these organizations in general?

In last week’s Dev Buzz, we called the merger “a sign of the times” — iNGOs scrambling to reinvent themselves in a competitive, globalized marketplace where foreign aid is increasingly “going local,” and focus more on advocacy and capacity building based on decades of experience working in the field.

Key aid community leaders like ActionAid CEO Richard Miller suggest that big iNGOs will grow globally and small local ones will thrive in emerging countries, but the problem is the so-called “squeezed middle” like Merlin, which are set to be under constant threat of being bought out by the bigger fish like Save the Children.

So are mergers and acquisitions the wave of the future for iNGOs?

In a group discussion initiated by Devex on LinkedIn, our members weighed in on the issue and commented that while aid organizations need to become more competitive and efficient, mergers are not the only way to achieve these goals, and iNGOs should not let this trend undermine their true goals.

Efficiency and aid effectiveness

“I’m curious to see how this goes. If executed well, this could work out for both parties: Save the Children could move more deeply into health territory, and Merlin’s competencies in international healthcare delivery could find their way to more people across the globe,” said Mattie Ressler. However, she pointed, out, both aid groups and their beneficiaries will suffer “serious consequences” if Save the Children’s management and structure is not strong enough to sustain the transition process.

Adam Childs agreed and explained that like any other industry, the humanitarian sector needs to evolve and be more efficient.

He mentioned the proliferation of new NGOs particularly since the 2004 tsunami has led to more and more funds going to overheads and international staff costs. On the other hand, if all NGOs merged into a single organization, they would be unable to “fill in the [development] gaps” and “closely resemble a government.”

Childs called for improved efficiency if it leads to making a bigger development impact for iNGOs: “The success of any merger is a matter of organizational culture … but also core values and beliefs.”

The end of NGOs?

Not all Devex members are optimistic about mergers being the future of international aid groups.

“This could be the beginning of the end of NGOs and the vital role they play in society. The larger question is do you need a merger to be efficient, effective and relevant,” said Rienzzie Kern.

Kern noted that one lesson learned for iNGOs from corporate sector mergers is that “declared benefit for the consumer is better price and better service” or as far as development work is concerned, cheaper inputs and better service delivery.

In this sense, he explained, mergers cannot “save” an aid group from shutting down: “If an NGO goes under it probably does not need to exist, don’t try to merge and put a second NGO under.”

Kern insisted that iNGOs should not try to copy all private sector practices but try to figure out their own way to become “more efficient, effective and relevant.” In this sense, the recent announcement by Save the Children and Merlin “is a big temptation to now see a merger as the silver bullet” because some make the assumption that all private companies are more efficient than NGOs, although he admitted not a single aid group is perceived to be truly efficient and effective.

No silver bullet, but mergers can be an answer for iNGOs willing to integrate resources in the same sector but in different level or that want to have a broader scope, replied Martins de Nobrega.

“As for the failing NGO, there is no such thing as a failure but a lesson to learn. NGOs should follow their own development,” she added.

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