Armanino Blog

Nonprofits: How to Make Outsourcing Work for You

by Eric Thomas
April 30, 2019

Today’s historically low unemployment rate makes it harder for nonprofits to recruit and retain the employees they rely on to fulfill their missions. When it comes to nonprogrammatic job functions, this challenge is even more intense. Nonprofits are constantly on the defensive to justify their overhead ratios, which increases the challenge of competing with the corporate world for top accounting, HR and technology talent.

While temporary agency staffing might seem like an economical solution, a tight job market means that experienced temp staff can be just as hard to find as full-time employees. For many small and midsized organizations — in the nonprofit and for-profit arenas — outsourcing to qualified professional service providers offers the access to quality talent they need, at a price point they can justify.

What Should You Outsource?

Ongoing administrative functions such as payroll, accounting and HR management are the ones that most people think of when they think about outsourcing. These areas are not only complex but highly regulated, and noncompliance can lead to regulatory scrutiny and even fines.

Rather than spend many thousands of dollars per year to keep in-house employees current on the latest regulations, many nonprofits hire specialists to handle those functions. While your organization has ultimate responsibility for compliance with all relevant laws and regulations, outsourcing the responsibility for keeping people trained and up to date on the latest rules and best practices is often more economical and less of a headache. It also frees up your time and attention for strategic functions, such as fundraising and development.

Sometimes these more strategic areas also call for outside help. For instance, nonprofits may bring in outside experts to help with strategy and management of major capital campaigns. Another common example is the implementation of a new CRM or accounting system. You don’t need a technology expert on staff all the time, because these projects happen only once in a while, but a failed implementation would cost your nonprofit dearly. A major software implementation is a perfect time to hire a professional IT firm to oversee the project.

Find the Right Fit

Here are some points to keep in mind when vetting a potential outsourced service provider or evaluating an existing relationship:

  • Do they “get” you? When you interview the provider, ask what issues and challenges they see facing nonprofits that are similar to you. Their answers should convey an understanding of your space. Follow up by asking for references from other nonprofits, so you can validate those first impressions.
  • Can they scale with you? One common pitfall among nonprofits is to start off with a small firm or independent contractor. These individuals and small companies might provide great service up front, but as they become busier, response time can wane. If you have been working with a provider for some time and are starting to see poor service, have a frank conversation about how to get things back on track. If they can’t or won’t address your concerns, it might be time for you to move on.
  • Are they using state-of-the-art technology? Whether you’re just embarking on a relationship or have been with an outsourced service provider for years, ask the provider about their technology footprint. Make sure they are staying up to date on the tools and software platforms that are right for your nonprofit.
  • Who owns the relationship? Relationships work best when they are one to one. Designate a point person within your organization who will hold the service provider accountable.

Reduce the Noise

At the end of the day, outsourcing only makes sense if it frees up time and internal resources to focus on your core mission. By outsourcing to a competent provider, you greatly reduce the distraction of administrative and ad hoc functions and activities, so you can focus more hours and energy on the programs that fulfill your nonprofit’s purpose.

If you’re looking for help evaluating current functions that might be better outsourced, give our nonprofit team a call.

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Eric Thomas - Partner, Consulting - San Ramon CA
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