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Challenge 44 in the series 50 Reasons Why It Is Hard to Run a Nonprofit
Two food banks serve the same county. They compete for the same grants, solicit the same donors, and deliver food to overlapping neighborhoods. Each runs its own warehouse, its own fleet, its own accounting system, and its own fundraising operation. Combined, they spend more on duplicated infrastructure than either spends on direct food distribution.
Everyone in the community knows they should merge. Nobody will say it.
The Stanford Social Innovation Review published an analysis that clarifies the real issue. The problem in the nonprofit sector, they argue, isn't duplication of services — it's duplication of service provider infrastructure. Two food banks serving the same area may both be needed. Two warehouses, two development directors, and two Form 990 filings probably aren't.
That distinction matters because it defuses the most common objection: "But our community needs both of us." Maybe it does. But does it need both of your back offices?
This is one of seven "market failures" I identify in Managing Your Nonprofit for Resilience — a structural inability to reallocate resources toward their highest use. In a market economy, inefficient companies get acquired or go bankrupt. In the nonprofit sector, inefficient organizations persist because nobody has an incentive to force the question. The cost is real: every dollar spent on duplicated infrastructure is a dollar not spent on the mission, and the communities these organizations serve don't care which logo is on the truck. They care whether food shows up.
The resistance is partly rational and partly emotional, and understanding which is which matters for anyone trying to move the conversation forward.
Identity runs deep. Every nonprofit has a story, a culture, and supporters who feel ownership. Merging feels like erasing that. Board members who built the organization resist being absorbed. Staff worry about their jobs. Donors worry about their relationships.
Mergers are genuinely risky. They take years, cost money, and sometimes don't work. The San Antonio Report documented how even in a city where community leaders openly advocate for consolidation, conversations stall because nobody wants to be first.
Funders send mixed signals. They talk constantly about collaboration and efficiency — then fund competitively. A merged organization doesn't automatically get the combined grant funding of its predecessors. Sometimes it gets less, because program officers treat the merger as an opportunity to "right-size."
And "collaboration" becomes an escape hatch. "We don't need to merge — we can collaborate." Sometimes that's true. Shared services agreements, coordinated intake, and joint advocacy can capture efficiencies without full consolidation. But I've seen too many "collaboration agreements" that amount to a shared letterhead and an annual joint meeting. If collaboration isn't producing measurable efficiency, it's just a word.
Research from Northwestern University found that in 88% of nonprofit mergers studied, leaders from both organizations felt the merged entity was better positioned to achieve its mission. Eighty-eight percent.
The organizations that merge well start the conversation before they're in crisis. They involve both boards early. They use an outside facilitator. They name the fears explicitly — job loss, identity loss, donor confusion — and address them in the merger agreement.
For organizations not ready for full merger, shared services offer a middle path. Shared accounting, shared IT, shared HR, or a joint development director can deliver most of the efficiency gains without the identity disruption. If it works, deeper integration becomes natural rather than forced.
The framing matters too. Start with community need, not organizational identity. What does this county need? Is it two separate food banks, or is it one food bank with twice the capacity? When you ask the question that way, the ego falls away.
And get funders involved early. If your funders are privately hoping you'll merge, they may fund the process. A funder who invests $50,000 in a merger that saves $200,000 annually in duplicated costs has made the best grant of the year.
The question of when to merge, when to partner, and when to hold your ground is one of the most consequential decisions a nonprofit leader faces. I explore it — with real examples and frameworks — in Nonprofit Good News Premium.
Identify the one organization in your community that most closely mirrors your work. Invite their ED to coffee. Ask one question: "Where do our programs overlap, and where are we duplicating effort?" You don't have to propose a merger. But you do need to have the conversation — because your funders are already having it without you.
This is part of an ongoing series based on the 50 challenges outlined in Appendix 1 of Managing Your Nonprofit for Resilience (Wiley, 2023). Each post names one challenge clearly and offers a practical reframe with steps you can take this week. For deeper coverage of nonprofit strategy, risk, and resilience — including tools you can put to work immediately — check out Nonprofit Good News Premium.