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Learning From Mergers - The Case Studies: Chief Executive, 3va

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Learning from Mergers - the case studies

3VA
Eastbourne and South Downs, East Sussex

3VA was formed on 1 November 2009 following the merger


of two local Councils for Voluntary Service (CVS): Eastbourne
Association of Voluntary Services (EAVS) and South Downs
Council for Voluntary Service (SDCVS). 3VA provides services
in three districts within East Sussex: Eastbourne, Lewes and
2006 Wealden. They operate three offices, one in each of the areas,
EAVS and SDCVS Closure of local CVS and provide a range of support services to the large and
work together to in Wealden
provide support vibrant voluntary and community sector.
services in Wealden April 2008
Boards make
In 2006 Wealden’s CVS closed down. This left a large district within East
decision to
investigate merger Sussex without a support organisation for the voluntary sector. The CVSs
option; Task Group serving the two neighbouring districts – EAVS and SDCVS – worked jointly
set up to offer at least some support to voluntary organisations in Wealden and
Task Group scopes worked together to establish the key support needs of the local voluntary
out merger;
and community sector, and how to meet them. The idea to merge
consultations with
funders, members, essentially grew out of this cooperation and from their desire to provide a
staff and other coherent service across the three districts.
stakeholders
April 2009 While the lack of a CVS in Wealden was the key external factor which
AGMs vote in prompted the two organisations to consider merger, a range of other
favour of merger;
factors contributed to the decision to take the merger forward. Key among
Task Group
becomes shadow these was the belief that a larger organisation would be more financially
board sustainable in the long term, and better able to attract funds than a single-
district organisation.
Shadow board
undertakes
preparations for
Another motivating factor was the “There was actually a genuine
merger and full due desire of the two boards to maximise belief that we could get the best of
diligence efficiency and enhance the quality both worlds at the time by putting
of services offered to voluntary the two organisations together, in
1 November 2009 organisations. The new larger terms of efficiency but also in terms
Merger date organisation would also be better of quality of service.”
Post-merger phase
placed to represent the voluntary Chief Executive, 3VA
sector and give it a stronger voice
in local decision-making. “We wanted to identify economies
of scale not in order to make
The boards envisaged that funding savings but in order to refocus our
would be redirected from back- activities more on the areas of work
office functions to frontline services, which would benefit third sector
benefiting the voluntary sector, organisations directly.”
which the organisations were
Chair, 3VA
created to serve.
Learning from Mergers - the case studies
Page 2 3VA

The merger process

In April 2008 a joint board meeting took place between the trustees of
EAVS and SDCVS, at which it was decided that the possibilities for merger
should be investigated. Other options of providing CVS services in the
Wealden district were also explored, for instance a formal collaboration
agreement or the setting up of a new organisation to be active in Wealden
only, but these options were judged to be less favourable and more costly
than a full merger. A Task Group was set up with equal representation from
the two organisations, with a mandate to consider the issues that could be
expected to arise from a possible merger.

During this time it became clear that a full merger in the form of dissolution
of the two organisations and creation of a new entity would not be legally
possible. One of the organisations, EAVS, had a pension scheme with the
Pensions Trust, which would not be transferable to a new organisation.
Dissolving the organisation would result in the crystallisation of its debt
and would leave it with a significant liability. For this reason, it was decided
that the merger would take place under a different form. EAVS would
change its name to 3VA and amend its Memorandum of Association
to allow all of SDCVS’ members to automatically become its members.
SDCVS would be dissolved and its assets and staff would be transferred
to the new organisation, 3VA. This process was named ‘convergence’, in
order to avoid some of the negative connotations associated with mergers
and the possibility that the Pensions Trust liability would crystallise.

The Task Group created two consultation documents – one for the
organisations’ funders and one for wider public consultation. Consultations
with the funding agencies took place in September 2008, three months
prior to the opening of public consultations in December. The organisations
wanted to ensure early on that they had support, or at least a neutral
attitude, from their funding partners before taking the merger any further.

A full public consultation was opened in December 2008 and lasted until
March 2009. The consultation documents were made available to all
members of the two organisations, who could comment and express their
views on the merger. The feedback from the consultation was generally
positive and so it was decided to proceed with the merger. Following this,
AGMs was held in 2009 at which members were asked to vote in favour of
the two organisations converging.

After the vote the Task Group constituted itself as a shadow governance
structure for the new organisation, tasked with planning and executing the
merger and undertaking a full due diligence process. A final AGM was held
in October 2009, and the merger took place on 1 November 2009.
“I think the real challenge is
The organisations were able to maintain existing levels of support to
that as a charity you have to
voluntary organisations throughout the merger process and did not seek
maintain business as usual
additional funding for it from existing statutory partners. Its costs were met
while you’re going through
by external funding and by freeing up uncommitted reserves.
a process of organisational
change.”
Both of the organisations sought professional HR advice separately, as
Chief Executive, 3VA the issues they faced in relation to staff were different – while EAVS staff
Learning from Mergers - the case studies
Page 3 3VA

remained on the same contracts, SDCVS staff were transferred to the


new organisation under Transfer of Undertakings (TUPE) legislation. Staff
were kept fully informed and updated on progress throughout the merger
process, and were also represented on the joint Task Group. They were
also given assurances that they would be consulted on any changes made
to the organisational structure or their terms of employment.

External support was also sought from solicitors, particularly in relation


to the Pensions Trust and the amendments of memorandum and articles.
External consultants were also brought in to facilitate several sessions of
the Task Group.

Success factors

One of the key success factors for 3VA’s merger was the fact that
communications with staff, member organisations and the wider voluntary
sector were kept open and transparent throughout the ‘convergence’
process. Holding extensive consultations ensured that possible challenges
were anticipated before the formal preparations for merger began.

Another important success factor for the merger was the early engagement
of statutory sector partners. The CVSs made sure they knew that existing
“The dialogue between funders supported the merger before they took it forward, and kept them
funders, politicians, trustees informed on progress throughout. This helped raise the credibility of the
and management started need for merger in the eyes of member organisations and the public, and
early on…The process was assured funders that the new organisation would be well-placed to deliver
well thought-through.” better and wider-ranging services than its predecessors.
Third Sector Policy Manager,
Governance & Community Another reason behind the success of this merger was the creation of
Services Department, East the joint Task Group. Stakeholders felt that it was very important to have
Sussex County Council joint ownership of the merger process to avoid perceptions that one
organisation was taking over the other. The Task Group was chaired half of
“One of the key strengths the time by one organisation and half of the time by the other.
of the merger is that the
The leadership provided by the Task Group and the two boards of trustees
development work for it
was also important for the success of the merger. From the start, they
was done jointly by the two
were absolutely clear on the reasons to merge and had the will to take
organisations through the
the process forward and resolve issues as they emerged. Their firm belief
joint Task Group.”
that a merger would - in time - produce real benefits to the local voluntary
Chief Executive, 3VA and community sector was instrumental in keeping up momentum in the
negotiations.

Benefits of merger

From the County Council’s point of view, the fact that there is now one CVS
covering three fifths of the county makes it much easier to sustain good
working relationships. They are also confident that the merger will result in
improved support for voluntary and community organisations in the three
districts.
Learning from Mergers - the case studies
Page 4 3VA

“There wasn’t a parity of The CVS now has a much clearer and more coherent organisational
service within the area… structure and a new integrated IT system, which has improved internal and
Quality was lagging in some external communications and brought benefits to both staff and frontline
areas.” organisations.
Director, Local Voluntary
Organisation
Frontline organisations have already benefited from the merger, especially
in the Wealden district, where there had previously been less support
available. 3VA has achieved very good visibility in the area and has been
able to draw in a large number of groups. Services have now become more
even across the three districts.

“It’s really important for Feedback from organisations supported by the CVS suggests that they
groups who are merging to have already seen a positive impact in terms of the quality and timeliness
understand that although it of the information they receive. Officers from the two organisations have
may well lead to savings and been able to share good practices and offer their diverse expertise to
efficiencies over time, the act the community and voluntary sector. The CVS is also able to draw on its
of merger is actually an act of own experience to help other organisations going through organisational
investment.” change.
Chief Executive, 3VA
Stakeholders also expect that 3VA will be able to achieve financial efficiencies
over the long term (2-5 years). These are expected to arise from greater
confidence of funders in the new organisation, leading to greater levels of
income, and from creating a more efficient administrative function. A shift
of resources from back-office functions to frontline services is expected to
take place, resulting in further benefits to frontline organisations.

Challenges and drawbacks


“It’s important to understand One of the key challenges experienced by the organisation related to
that in any merger process buy-in from staff members. Staff were concerned that the merger would
there were going to be result in redundancies and radical changes to the organisational cultures
some tensions within the of the merging CVSs. There were also concerns about the loss of identity,
organisations – that’s with some people very attached to the old organisations and ways of
inevitable.” working. The consultations that took place prior to the merger went
Chief Executive, 3VA some way towards ameliorating these concerns, particularly when it was
established that funders and members were in favour of merger. However,
organisational change on this scale was still bound to be difficult on some
staff members, with morale suffering as a result.

“Process of merger is There were also concerns raised among member organisations in relation
a process of enormous to the possible loss of local support services. It was felt that there may be
organisational change, and a reduction in face-to-face, personal services, and a certain loss of local
as with any significant change identity. This was particularly pronounced among stakeholders from South
you would expect there to be Downs CVS, who felt that there was a possibility of services gravitating
periods of time when some of towards Eastbourne, with EAVS being the larger organisation, and also the
the staff are going to find it one that would not be formally dissolved. There was a perception among
very challenging.” some that this was a takeover instead of a merger or a ‘convergence’. The
Chief Executive, 3VA
use of the word ‘convergence’ instead of ‘merger’ helped ameliorate these
concerns and secure buy-in from members.
Learning from Mergers - the case studies
Page 5 3VA

“The challenge for the CVS These concerns were addressed by making a firm commitment that
now lies in not losing track of services would continue to be delivered locally and through the creation of
smaller organisations and not the joint Task Group with equal representation from both partners. There
end up focusing on middle is no evidence offered by interviewed stakeholders that there has been
and larger ones.” any loss of local or specialised support. However, some fears remain that
Director, Local Voluntary the organisation has become ‘too corporate’ and needs to work hard to
Organisation remain focused on smaller community groups and organisations.

Another challenge that remains is to fully integrate the two organisations


in terms of both structure and culture. Stakeholders felt that it is still too
soon after the merger to have achieved this and expect that it would take
between 12 and 18 months before the differences in working are smoothed
out. 3VA is currently undergoing a formal organisational review, with the
results expected shortly.

Lessons Learned

• Open and transparent consultations with key stakeholders, including staff, and early engagement
of funders can help address the concerns raised by different stakeholders
• Having a clear understanding of the purpose of merging is a key ingredient of a successful merger
• It is important to have strong and committed leadership
• It is also important not to underestimate the amount of work that needs to go into the preparations
for merger
• Support services need to be carried out continuously throughout the merger process
• Sharing staff expertise and IT/communication systems can bring significant benefits to frontline
organisations

For further information about this case study, please contact:

Adam Chugg, Chief Executive, 3VA


01273 483832 / 01323 639373, adam.chugg@3va.org.uk

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