"Outsourcing" has gotten a bad name among many. If you're like most Americans, the word conjures up images of American jobs being shipped off to factories abroad. However, in an environment where nonprofit organizations are increasingly looking to collaborate, outsourcing can be a critical tool for having bigger impact.
There are many reasons that nonprofits may want to consider outsourcing some of their functions. Small nonprofits often don’t have the necessary capacity to handle all of the "back-office" demands of their work. Things like paperwork, IT services, and book-keeping can be relatively easily outsourced so that the organization can focus on its core competencies and enlist the support of experts on other areas.
Moreover, competition within the nonprofit sector is also more intense than ever. The number of nonprofit organizations in the United States is constantly increasing, and in the current economic climate, all of these nonprofits are facing financial strain.
Outsourcing allows these organizations to cut costs in the long term by making some expensive administrative expansions unnecessary. According to a publication by the Meyer Foundation entitled "Outsourcing Back-Office Services in Small Nonprofits: pitfalls and Possibilities", long term savings make this strategy well worthwhile. By outsourcing, nonprofits can clearly get access to expertise and skills while saving time and money.
Despite these benefits, outsourcing in the nonprofit sector is still relatively uncommon. A 2006 survey presented 785 nonprofit organizations with a list of 10 common tasks (grant-writing, IT services, etc). Respondents were asked to indicate which tasks were performed in-house. Depending on the task, only 1%-16% used an outsourcing strategy.
So what gives? What holds nonprofits back from invoking this approach?
- For many nonprofits, short term costs are prohibitive. A 2009 article in Philanthropy Journal explained that while many nonprofits recognize the benefits of outsourcing, they feel they cannot afford the short term costs. Many smaller organizations just don’t have the necessary capital to invest.
- Outsourcing any aspect of your operations means you lose control over it. For some nonprofits with a very strong organizational culture, this loss of control is a deal-breaker.
- Some nonprofits also complain about the inability of the standardized outputs of outsourcing to fit their customized needs.
There are resources for nonprofit organizations looking to outsource. The Foundation Center has created a collaboration resource portal. This portal includes the Nonprofit Collaboration Database, which provides detailed collaboration profiles. Outsourcing is just one way that nonprofits can respond to the push for collaboration, and the database lists collaborations at varied levels of integration, including mergers, shared staff, and joint-programming. Explore our collaboration portal to find a fit that works for your organization.
Another key resource is the Nonprofit Coordinating Committee of New York (NPCC), which has just launched the Nonprofit Outsourcing Clearinghouse program. The program is designed to help nonprofits reduce administrative costs, increase productivity and improve operational quality through the use of outsourced services.
NPCC is accepting applications from nonprofit organizations and will select 50 nonprofits to match with an outsourced vendor in one of nine areas: bookkeeping and financial management, human resources, purchasing, risk management, legal services, information technology, marketing, fundraising, and real estate management.
Interested organizations can apply to the NPCC program by Jan 12th, 2011.
What about you? How have you or your organization benefited from outsourcing? Do you have any tips to share with other nonprofits? What function would you most like to outsource? Tell us in the comments section!
-- Reilly Kiernan, Educational Services Fellow, Foundation Center