September 23, 2017
 
Nonprofits Should Answer Key Questions Before Outsourcing

By Heath Goudreau and Chris Donovan

Heath Goudreau, left, and Chris Donovan
Outsourcing essential business processes enables nonprofits to free themselves from certain operational tasks, enabling them to focus more fully on their core mission, but getting it right starts with understanding organizational needs.

When considering outsourcing, nonprofits should ask themselves:
  • Are we spending time on activities that distract us from our core work and growing the organization?
  • Do we lack certain knowledge and skills that could be outsourced to a specialist?
  • Can we save money and time by outsourcing?
  • Do we have the desire to share responsibilities with an outside provider, and will we work with them to make the relationship effective?
  • Do we fully know what services we want a provider to handle and the goals we want to achieve?
Nonprofits that can answer “yes” to each of these questions are good candidates for outsourcing.

Outsourcing is typically divided into three categories: technology, business process (including human resources), and knowledge process. Outsourcing provides similar benefits in each category. Here are a few, according to the Outsourcing Institute:

Reduce and Control Operating Costs — By reducing operating costs, a nonprofit can direct funds to where they are most needed.

Improve Organizational Focus — Leaving operational details to outside resources frees a nonprofit to focus on the needs of its members or constituents.

Gain Access to World-Class Capabilities — Outsourced vendors have specialized industry knowledge based on working with similar clients facing similar problems. A nonprofit need not spend time becoming an expert in areas that are truly out of its purview.

Free Internal Resources for Other Purposes — Outsourcing non-core functions enables an organization to redirect its resources to activities producing greater returns, such as fundraising.

Function Difficult to Manage — Outsourcing can help solve difficult management problems without the organization giving up management responsibility.

Selecting the Right Provider

It’s important to do your homework before contracting with any outsourcing provider. Below is a list of guidelines suggested by the National Association of Professional Employer Organizations prior to hiring an HR provider. These guidelines can also be adapted for researching other types of outsourcing providers:
  1. Assess your workplace to determine your specific needs.
  2. Make sure your provider is capable of meeting your goals. Meet the people serving you.
  3. Ask for client and professional references. Be sure to ask the client reference specific questions, such as, Is the provider qualified, responsive and thorough in their work? Do they have any hidden expenses? Can you provide an example of how this provider has assisted you? Is there anything about this provider that has disappointed you?
  4. Check to see if the provider has a history of adherence to the industry’s professional performance practices, including responsible financial management of its business.
  5. Check to see if the provider is a member of a national trade association.
  6. Investigate the company’s administrative and management expertise and competence.
  7. In the case of a professional employer organization (PEO), understand how the employee benefits are funded. Similarly, understand how the employee benefits are tailored.
  8. Review the service agreement carefully.
  9. Again in the case of a PEO, make sure the company you are considering meets all state requirements.
Outsourcing is a means to more improved capabilities and efficiencies. Using specialists in areas of functional experience that are not within an organization provides access to new technology, ideas, and tools. Finding the vendor whose skills complement your organization can improve efficiency, be cost effective, provide valuable resources, and ultimately help a nonprofit grow.

Heath Goudreau is a district manager and Chris Donovan is a sales consultant in the Boston offices of Administaff, which serves as a full-service human resources department. Contact them at 800-465-3800.

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