A Nonprofit Guide to Outsourcing

ANonprofitGuidetoOutsourcing

ByAmyKarsonandMarciaBrown

October,2012

NonprofitCoordinatingCommitteeofNewYork1350Broadway,Suite1801,NewYork,NY10018

phone:212‐502‐4191fax:212‐502‐4189www.npccny.org

Copyright©2012NonprofitCoordinatingCommitteeofNewYork,Inc. ‐2‐

ANonprofitGuidetoOutsourcingIntroduction:TheNonprofitOutsourcingClearinghouse ............................................... 3Chapter1:Overview:NonprofitsandOutsourcing ...................................................... 5

Chapter2:KeyBack‐OfficeFunctionalAreas ................................................................ 6

Chapter3:SelectingandWorkingwithOutsourcingVendors..................................... 10

Chapter4:Pricing ........................................................................................................ 12Chapter5:ContractingwithVendors ........................................................................... 13Chapter6:TrackingOutsourcingOutcomes ................................................................ 14Chapter7:ConclusionandContactInformation ......................................................... 16

TheNonprofitCoordinatingCommitteeofNewYork

TheNonprofitCoordinatingCommitteeofNewYork,Inc.,(NPCC)isthevoiceandinformationsourceforNewYorkCity‐areanonprofitsonissuesthatfaceallnonprofitorganizations.Establishedin1984,NPCChasapproximately1,500dues‐payingnonprofitmembersintheNewYorkCityarea. NPCCsavesnonprofitsmoneythrough14groupbuyingprogramsforbasicbusinessexpenses,fromliabilityinsurancetoofficesupplies,sononprofitscanfocustheirresourcesonachievingtheirmissions.NPCCstrengthensnonprofits’managementandgovernancebyprovidingtrainingandsupportfornonprofitmanagersandboardleaderstoeffectivelypursuetheirmissionsandmaximizetheimpactoftheirservices.NPCCservesasthevoiceofthenonprofitcommunitybybuildingpositiverelationswithalllevelsofgovernmentthroughourhighlyeffectiveGovernmentRelationsCommittee,andbypromotinggoodgovernance,accountabilityandeffectivenessbynonprofitsthemselves.


Introduction:TheNonprofitOutsourcingClearinghouse

Managingnonprofitorganizationsgrowsmorecomplexandchallengingeveryyear.Today’snonprofitexecutivemustregularlydemonstrateprogresstowardachievingtheorganization’smission,balancethebooks,complywithagrowingnumberoffinancialandotherregulatoryrequirementsbyfederal,stateandlocalgovernments,helprecruitandworkwithastrongboardofdirectorsthatkeepstheorganizationaccountablewhilecontributingexpertiseandleveragingresources.Theexecutivemustalsocommunicatetheorganization’s“story”toawidevarietyofaudiences,practiceenlightenedmanagementofstaffandvolunteersincludingpoliciesofdiversity,inclusivenessandculturalcompetency,exploreandadoptappropriatenewtechnology,andsuccessfullyraiseneededrevenues–allwhileassuringtransparency,effectivenessandaccountabilitytodonorsandthepublic!

Yet,nonprofitorganizationsoftenlacksufficientresourcesor,insomecases,necessaryskillsorexpertisetocarryoutkeymanagementfunctionscriticalinordertosustaintheorganizationandpursueitsmission.Amongthestrategiesthatnonprofitsandnonprofitmanagementexpertshaveexploredtoaddressthesechallenges(e.g.,sharedservices,collaboration,co‐location,subcontractingtoconsultants,andothers)isoutsourcing.

Inthenonprofitcommunity,outsourcingreferstothedelegationofkeymanagementareas,especially“backoffice”services,tooutsidecontractorsorvendors,usuallyonarelativelylong‐termbasis,withtheexpectationofimprovingquality,strengtheningmanagementeffectiveness,andperhapsloweringcosts.Nonprofitoutsourcingdiffersfromthecommonunderstandingofoutsourcinginthebusinesssectorinthatthekeyobjectiveor“bottomline”istobecomeamoreeffectiveorganization,notonlytosavemoney.

Althoughusedbyallsizesandtypesofnonprofitorganizations,outsourcingofbasicbusinessfunctionsisparticularlyrelevantforsmaller,mid‐sizedand/oryoungerorganizations.Suchorganizationsoftenlacktheinfrastructureandresourcestofullydevelopeffectivebusinessoperationsinthewiderangeofessentialareasthatrequirestateofthearttechnicalexpertise.Suchkeyareastodayinclude:InformationTechnology(IT);BookkeepingandFinancialManagement;MarketingandCommunications;Fundraising;Purchasing;RiskManagement;LegalServices;andEmploymentandHumanResources.

Outsourcingcanbealogicalanswertothechallengefacingthousandsoftoday’snonprofitmanagers:Howdowebecomeexpert,well‐staffedandefficientinkeybusinessoperations,despitetherealitythatweandourorganizationsfrequentlylacktheexperience,in‐houseresourcesand/orwherewithaltofullydevelopandeffectivelymanagekeybusinessoperations?Outsourcingoneormoresuchkeyfunctionsoffersopportunitiesfortoday’snonprofitmanagerstotaptheexpertise,experienceandeconomiesofscaleofspecializedprovidersoftheseservices.

Outsourcingalsooffersthepotentialadvantageofreducing(althoughneverentirelyeliminating)thescarcetime,financialresourcesandmanagementattentiondevotedtotheseareas,allowingmoremanagementattentiontomission‐relatedactivitiesandresults.Ratherthaneachnonprofitentityanditsmanagerhavingtobecomehighlyexpertatmasteringandperformingthesedisparatefunctions,someorevenallcanbecontractedoutandmonitoredwithlessoveralladministrativetimeandeffort.


Itshouldbenotedthatmanybusinessesandmanynonprofitsalreadyhaveoutsourcingexperience.Manyuseapayrollcompany,forexample,toprocesstheirpayroll,remittheirtaxestotheappropriategovernmentagencies,andprepareanddistributetherequisiteW‐2and1099forms.Otherorganizationsmayhavealawyerorlawfirmonretainerwhoreviewscontractsandadvisestheorganizationonlegalmatters.Othersmayhaveabookkeeperwhomaintainsthebulkoftheorganization’sfinancialrecordsbutisnotonstaff.

Untilrecently,feworganizationshavethoughtaboutoutsourcingofbackofficeservicesinacomprehensiveandcohesiveway.However,areportreleasedin2009bytheEugeneandAgnesE.MeyerFoundationandtheManagementAssistanceGroup,1basedonasurveyofgranteesoftheFoundation,interviewswithgrantmakers,consultantsandback‐officeserviceprovidersaswellasareviewofliteratureonthetopic,foundtherewasaneedforsuchservicestobeofferedtononprofitsandanopportunityforvendorstocreatebusinessmodelsthatwouldservethenonprofitsector.Tellingly,thestudynotedthatsomeofthebarrierspreventingnonprofitsfromoutsourcingback‐officeserviceswere:(1)aninabilitytoidentifyproviderstheyneededatareasonablecost;(2)thelackoftimenecessarytofindandcontractwithvendors,and;(3)unproductiveexperiencesinthepast.

In2010,NPCClaunchedaNonprofitOutsourcingClearinghouse(NOC)programtohelplocalnonprofitsmeetthechallengesidentifiedbytheMeyerFoundationreportandattainlong‐termsuccessandsustainability.AprimarycomponentofthisprograminvolvedthecreationofapubliclysearchableNOCDatabaseofoutsourcedserviceproviders.Theideaisthatnonprofitscanusethistooltocomparevendorsandtheircharacteristicsusingthesamecriteriato“shop”forgoodquality,cost‐effectiveoutsourcedservicesprovidersacrosseightkeyareas:InformationTechnology,Bookkeeping&FinancialManagement,Fundraising,Marketing&Communications,RiskManagement,HumanResources,PurchasingandLegalServices.Thedatabasecanbefoundatthefollowingsite:http://noc.npccny.org.

TheNOCprogramsimultaneouslybeganofferingoutsourcingconsultingfornonprofitsseekingin‐depthconsultationontheirback‐officefunctionsandtheirpotentialforoutsourcing.Thegoaloftheseinitiativesistomakeiteasierfornonprofitstodecidewhethertooutsourceoneormoreoftheiradministrativeservicesand,ifso,tohelpthemchoosetherightprovider.Thiseffortbeganwithapilotgroupof50nonprofits,manyofwhichhavesinceengagedinsuccessfulrelationshipswithoutsourcedserviceproviders.Theprogramhasalreadydemonstratedthevalueofoutsourcingforparticipatingnonprofitsandpromisestoshowpositive,measurableimpactontheseorganizations’efficiency,aswellasonimprovingtheirorganizationalperformanceandincreasingtheirimpactontheirmissions.

TheNOCprogramhasbeengenerouslysupportedbyTheNewYorkCommunityTrust,TheAchelisFoundation,TheBoothFerrisFoundationandTheFrancesL.andEdwinL.CummingsMemorialFund.Weareextremelygratefulfortheirsupport.

1Leach,Mark,OutsourcingBackOfficeServicesinSmallNonprofits:PitfallsandPossibilities.AStudyConductedbytheManagementAssistanceGroupinPartnershipwiththeEugeneandAgnesE.MeyerFoundation,Washington,D.C.(September2009):PDFfileavailableatwww.meyerfoundation.org/outsourcing09


Chapter1:Overview:NonprofitsandOutsourcing

Definition:Outsourcingisthedelegationofkeymanagementareas,especiallyrepeatableback‐officeservices,tooutsidecontractors/vendorsforarelativelylong‐term.Outsourcingmaybeanappropriateoptionfororganizationsofallshapesandsizes,wherethedesiredresultisoneormoreofthefollowing:

1. Improvedoperationalefficiencyandquality2. Increasednetrevenue(intheformofcostsavingsorincreasedrevenue)3. Improvedorganizationaland/ormissionperformance

TheRoleofOutsourcingProfessionals:Theroleofoutsourcingprofessionalsvariesbasedonthesizeandscopeofeachindividualengagement.Avendorisfrequentlyusedasanimplementerandissubsequentlyresponsibleformanagingdaily/weeklytasksrelatedtoaspecificfunctionalarea.Avendormayalsobeutilizedasateacherinanefforttoeducatethenonprofitandsubsequentlyhelpthemdevelopanadditionallevelofexpertisein‐house.Additionally,aserviceprovidermaybeusedasastrategicpartnertohelpthenonprofitmakewiseandeducateddecisions.Allvendorcontractsshouldexplicitlystatetheroleoftheoutsourcedserviceprovideraswellasthespecificdeliverablestobemanagedbybothparties.BenefitsofOutsourcing

1. Reducelong‐termoperatingandcapitalcosts2. Increaserevenues3. Enhanceorganizationalimpact4. Improvemanagementeffectivenessandflexibility5. Increaseaccesstotechnology,skillsandinsightsnototherwiseavailableoraffordable6. Improveabilitytofocusonorganizationalmission7. Shiftliability(eg.,Payroll)

OutsourcingCaveatsNonprofitsshouldbeawareofthefollowingpriortomovingforwardwithanoutsourcedvendor:

1. Providersmustbeselectedandservicesmustbeperformedwellandwithinlegalandregulatoryrequirements.

2. Nonprofitexecutivesshouldbesensitivetoemployeereactionsandmisconceptions.Employeesmayfearforpersonaljobsecurityandsafety,subsequentlymakingthetransitiontoanoutsourcedserviceproviderchallenging.

3. Duediligenceisrequiredtomonitortheperformanceofoutsourcedserviceprovidersonaquarterlybasis.

4. BoardsandSeniorManagementmustprovideoversightandretainlegal,fiduciaryandprogramresponsibilities.


Chapter2:KeyBack‐OfficeFunctionalAreas

TheMeyerFoundationreportonoutsourcingnotedtheareasofback‐officemanagementmostinneedbynonprofitswere:marketingandcommunications,humanresourcesandfinancialplanning.AtNPCC,wehavefoundthistobetruebut,overmanyyearsofofferingreferralstovendorsthatcouldhelpourmembers,we’vealsoreceivedalargevolumeofrequestsforhelpwithinformationtechnology,legalissues,fundraising,riskmanagementandpurchasing.Afterextensiveinterviewswithvendors,webelievethattheseeightareasofback‐officeresponsibilityare,infact,theonesmostrequestedbynonprofitsandtheoneswithasufficientnumberofvendorsavailableandwillingtotailortheirservicestothenonprofitsector.

Anonprofitorganizationmaychoosetooutsourceallorpiecesofanentirefunction.Forexample,itisnotnecessarytooutsourcetheentirefundraisingfunctiontoathirdparty.Manyorganizationssimplywishtooutsourceprospectresearchorgrantwriting,whileretainingallotherfundraising‐relatedresponsibilitiesin‐house.Serviceprovidersaretypicallyveryflexibleandwillingtoworkwithclientsaroundwhichareasremainin‐houseandthosethatareoutsourcedtoathirdparty.Acomprehensivelistingofservicesprovidedbydifferentoutsourcingproviders,byfunctionalareas,canbefoundbelow.Itishelpfultohaveageneralideaofwhichservicesyourorganizationwishestooutsourcepriortocontactingavendor.

1‐InformationTechnology1. Strategictechnologyplanning2. ITauditmanagement3. Procurement4. Serverinstallationandmanagement5. Networkinstallationandmanagement6. Desktop/laptopinstallationandmanagement7. Mobiledevicesupport8. Cloudservices9. Serverback‐upandmaintenance10. Systemsmonitoring11. Networksystemupgrades12. Networkingacrossmultiplesites(WAN)13. VirtualPrivateNetworking(VPN)14. Networksecurity15. Softwareupdates16. Websitecreation17. Websitemaintenanceanduploads18. Developmentandmaintenanceofintranet19. Developmentandmaintenanceofextranet


20. Developmentandmaintenanceofweb‐basedapplications21. Databasecreation22. Databasemaintenance23. Cabling24. Movesandexpansions25. Setupandmaintenanceofvirtualinfrastructure26. Installationandmaintenanceofphonesystem27. TrainingServices28. On‐siteemergencyassistance29. Off‐siteemergencyassistance30. 24/7support/helpdesk31. Disasterrecoveryservices

2‐Bookkeeping&FinancialManagement

1. Strategicfinancialplanning2. Generalbookkeeping(includingA/Rprocessing,A/Pprocessingandbankreconciliations)3. Managementofrelationshipwithpayrollprocessingfirm4. Preparationofdonationreceiptsandthankyouletters5. Auditpreparation6. 990preparation7. 990Questionnairepreparation8. Assistancewithbudgetpreparation9. ChartofAccountspreparationand/orupdates10. Creationoffinancialreports11. Boardreporting12. Funderreporting13. Forecasting

3–Fundraising

1. Strategicfundraisingplanningandexecution2. Grantwriting3. Grantmanagement4. Prospectresearch

a. Individualb. Foundationc. Corporated. Government

5. Eventmanagement6. Majorgiftcampaigns7. Capitalcampaigns8. Plannedgiving9. Governmentcontracts10. Hiringfundraisingstaff


11. Casematerialsandmessagedevelopment12. Infrastructuredevelopment13. Directmailande‐solicitations14. Databasemanagement15. Boardandstaffdevelopment

4–Marketing&Communications

1. Strategiccommunicationsplanningandexecution2. Mediarelationsandmanagement(includingpressreleases,researchandmediaplacements)3. Crisiscommunication4. Branding5. Creationofdonorcommunicationandsolicitationmaterials6. Creationofsocialmarketing/programmaterials7. Stafftrainingformediainterviewsandpublicspeaking8. Socialnetworkcapacitybuilding9. Websitedevelopmentanddesign10. Generaladvertisingandmarketing11. Specialeventpromotion

5–RiskManagement

1. Strategicriskmanagementassessmentsandperiodicriskreviews2. Propertyandcasualtyproductsandservices3. Employeebenefitsandretirementproductsandservices4. Healthinsuranceproductsandservices5. Stafftraining6. Training,proceduresandpolicymanuals

6–HumanResources

1. Strategichumanresourcesplanningandexecution2. Recruitmentandstaffing(permanentandtemp)3. Benefitsadministrationandconsultation4. Traininganddevelopment5. Performancemanagement6. Employee/laborrelationsservices7. Compensationanalyses/salarysurveys8. Creationofemployeemanuals/policies9. HRcompliance,auditandassessment10. HRhelpdesk11. Vendormanagementsolutions

7–Purchasing

1. Strategicpurchasingplanningandexecution2. Accesstodiscountedgrouppurchasingprograms


3. Vendorreferralsandcoordination4. Managevendorbiddingprocess5. Cutpurchaseordersandmakedeliveryarrangements6. Managevendorrelationsincludingissueresolution

8–LegalServices1. Strategiclegalplanningandexecution2. Startinganonprofit3. Generalcommercialandcorporatedocuments4. Taxexemption5. Governance6. Structuringofcollaborationsandpartnerships7. Mergersandalliances8. Litigation9. Fundraisingandsolicitationguidance10. Privacyissues11. Bondwork12. Realestate13. Governmentrelations/lobbying14. Intellectualproperty15. Laborandemploymentlaw16. Outsourcedgeneralcounsel


Chapter3:SelectingandWorkingwithOutsourcingVendors

TipsforCreatingSuccessfulOutsourcingArrangementsManynonprofitsstrugglewiththedecisionofwhenandwhethertooutsource.Itisfrequentlylessexpensivetooutsourceaspecificfunctionratherthanhireafull‐timeorpart‐timestaffperson.Numerousvendorsandnonprofitscitethefollowingessentialtipstomaintainingsustainable,efficientandproductiverelationshipswithoutsourcedserviceproviders.Thesearealsohelpfulindeterminingwhetherornotyourorganizationisadequatelypreparedtooutsource.

1. Yournonprofitmustmakealong‐term,internalcommitmenttodevelopaspecificfunctionalareawithoutsourcingasapotentialfirststep

2. Yournonprofitandtheoutsourcingservicesproviderorvendorthatyouselectshouldsetclearexpectations,goalsanddeliverablesforallrelevantpartiesinwriting

3. Yournonprofitshouldobtainbothstaffandboardsupportpriortocontactingoutsidevendorsa. Ensurethatyouhaveappropriatestaffsupportbothinanoversightandadministrative

capacityb. EnsurethatyourBoardofDirectorsisawareofyourselectionprocessandpreparedto

supportyouchoices(s)4. Yournonprofitmusthavetheabilitytopayforoutsourcedservices

Ataminimum,nonprofitorganizationsshouldtakethefollowingstepspriortohiringanoutsourcedserviceprovider:

1. Conductanin‐personinterview2. Checkthreereferences

a. Allvendorreferencesshouldbefornonprofitorganizationsofsimilarsizeandscope(ifpossible)andforworkperformedwithinthepast12months

3. Reviewthevendorwebsitetobothobtainabetterunderstandingofservicesprovidedandtheclientservicemodel

4. SearchresourcessuchastheNOCdatabase,theBetterBusinessBureauorperformasimpleGooglesearchforadditionalinformation

Alistingofpotentialquestionstoaskvendorsduringtheinterviewprocessisasfollows:

1. Whatisthescopeofyourservice‐‐indetail?2. Howlonghaveyoubeeninbusiness?3. DoyouworkwithclientsoutsideNYC?Ifso,where?4. Whereareservicestypicallyprovided;on‐site,off‐siteoracombination?5. Howmanynonprofitclientsdoyouserveinmycity,sector,andorganizationalsize?6. Doyouhavethebandwidthtotakeonanotherclientrightnow?7. Can you provide references for three nonprofit clients of similar size and complexity to my

organization?8. WhowillIbeworkingwith?9. Howdoyouhandleemployeeturnover?


10. What’sthe“foodchain”‐‐ifyouhaveaproblem,howdoesitgetresolved(indetail)?11. Howdoyouchargeforservices;hourlyorprojectfee?12. Howlongdoyouusuallyworkwithclients(monthsoryears)?13. What will you expect of our organization (including board, staff, etc)? Describe the ideal

relationshipwiththeorganization’sprofessionalstaff.

Priortoengagingwithavendor,mostoutsourcingserviceproviderswillsupplyastandardcontractfornonprofitstoreviewandsign.Itishighlyrecommendedthatallvendorcontractsbereviewedandeditedbyanattorney.


Chapter4:Pricing

Thepriceyoupayforavendor’sserviceswill,ofcourse,dependonmanyfactors:theserviceoffered,thelengthoftheengagement,thelevelofservice(s)youneedandthecomplexityoftheservicearrangement.YouwillnoticeintheNOCdatabase(https://noc.npccny.org/noc/)thatwehaveaskedeachvendortooutlineitspricingmodel.Weurgethosecontemplatinganyoutsourcingrelationshiptocomparecostsamongvendors,inquireaboutpastandfutureanticipatedpriceincreases,andmemorializeallpricingwithinthecontractestablishedwithavendor.Youmayalsowanttoincludepricinginthequestionsthatyouaskothernonprofitorganizationsthathaveusedorareusingthevendor’sservices.Forexample,“Wastheoriginalestimatetheamountthatyouactuallypaid,ordidthecostsubsequentlygoup(ordown)?”Werecommendaskingasmanycurrentorrecentusersaspossibletogetafeelfortherangeofyourpotentialactualcosts.

Pricingforoutsourcedservicesvariesbasedonthesizeandscopeoftheclientengagement.Althoughsomevendorsmayofferprobonoservicesforclientsthatmeetspecificcriteria,thisisnotthenorm.Numerousserviceproviderswill,however,offerdiscountedpricingfornonprofits.ManyofthevendorsincludedaspartoftheNonprofitOutsourcingClearinghouseprogramofferadditionaldiscountstoNPCCmembers.Pleasereviewourdatabaseofserviceprovidersformoreinformation.http://noc.npccny.orgVendorsnotonlyvaryinhowmuchtheychargeforspecificservicesbuthowtheybillclients.Abriefoverviewofthetwomostwidelyusedbillingschedulesareasfollows:

1. Hourly–Manyvendorswillbillclientsateitheraflatrateperhouroravariableratebasedonthelevelofexpertiseprovided(ex.PartnerbillshigherthananAssociate).Underthisarrangement,clientsstrictlypayforhoursworkedbythevendor,whichmayultimatelybelessexpensivethanafixedfeearrangement.

2. Fixedfee–Numerousserviceprovidersfinditbeneficialtobillaflatrateforservicesprovided.

Thisistypicallydoneonamonthly,quarterlyorprojectbasisandisderivedbasedontheestimatednumberofhourstobeworkedwithinagivenperiod.Thismodelmayworkverywellfororganizationsonafixedbudgetandaresubsequentlyunabletohandlevariablemonthlyorquarterlycosts.

Manyvendorsalsoofferanhourly/fixedfeehybridarrangementwherebysomeservicesarebilledhourlyandothersarelockedinatafixedrate.Othersmayinitiallybillonanhourlybasisforthefirstfewmonthsandthentransferontoafixedfeescheduleonceclientneedsandpreferencesarebetterunderstood.Itishelpfultohaveaclearunderstandingofvendorbillingoptionsandtheprosandconsofeachscenariopriortoengagingwithaserviceprovider.


Chapter5:ContractingWithVendors2

Acontractatitsmostbasicisasetofpromisesbetweenpartiesthat,ifonepartybreachesorfailstoperform,entitlestheotherpartytoaremedyunderthelaw.Itisthedocumentthathelpsseteachparty’sexpectationsandputsinwritingthegoalsanddeliverablestowhicheachpartyhasagreed.Readallcontractscarefullyandmakesureyouunderstandthetermsbeforesigninganyagreement.Anagreementisreachedasaresultofanegotiationbetweenparties.Eachpartyhastobenefitenoughfromtherelationshiptobewillingtoaccepttheagreementandsignthecontract.Severalkeyprinciplesmaybeusefulinapproachinganegotiation:

• Beprepared:Gatherinformationinordertounderstandeachparty’sgoalsincludingmarketratesforservicesandindustrypractices.

• Determineabottomline:Whatisthemostyourorganizationcanaffordtopay?Whatminimumlevelofservicesmustbereceivedinorderforthearrangementtomakesense?

• Haveacleargoal:Whatbusinessarrangementwouldbestbenefityourorganization?Whenenteringintoacontractitisessentialtounderstandallthetermsoftheagreementandtothoroughlyreviewthewrittenagreementsinceimportanttermscanbeburiedin“boilerplate”languageattheendofadocument.Keycontractualprovisionsinclude:

• Term: Howlongwillthecontractualrelationshiplast?• Costs: Howmuchwillyoupayforwhatservices?• Modification:Whathappensifthepartieswanttochangethecontract?• Termination: Underwhatcircumstancescaneachpartyendthecontract?What,ifany,isthe

penaltyforendingthecontractearly?Justbecauseavendormaintainsthatacontractistheir“standard”formofagreementdoesnotmeanthatitcannotbechanged.Askforthechangesthatarenecessarytomakethecontractadvantageous.

2ThankstoLindaManley,LegalDirector,LawyersAllianceforNewYork,forthisadvice.AneweditionoftheLawyersAlliancepublication,AdvisingNonprofits,whichincludesachapteroncontracting,willbeavailableinJanuary,2013.www.lawyersalliance.org


Chapter6:TrackingOutsourcingOutcomes

Itisessentialtomeasurekeyoutcomesasaresultofworkingwithanoutsourcedservicesprovider.Performancemetricsshouldbetrackedinconjunctionwiththevendorandwrittenintocontractsasappropriate.Thesemetricsshouldfallintothefollowingthreecategoriesandwillvarybothbyorganizationandfunctionalareaoutsourced:

1. Increasednetrevenue2. Improvedoperationalefficiency3. Improvedorganizationalperformance

NPCCworkswithnonprofitstotrackperformancemetricsforaperiodofoneyear.AllparticipantsinourNonprofitOutsourcingClearinghouseprogramareaskedtotrackthefollowingmetrics,regardlessofthearea(s)outsourced.

1. Increasednetrevenuea. Declineincostsb. Increaseinrevenue

2. Improvedoperationalefficiencya. Decreaseinstaff/boardtimespentontheoutsourcedfunction

Additionally,NPCCalsotracksthefollowingmetrics,withintheareaofimprovedorganizationalperformance:Bookkeeping&FinancialManagement:1. Declineinbookkeepingerrors2. Improvedauditresultsasmeasuredbythefollowing:

a. DeclineinissuesraisedwithinManagementLetterb. Decreaseinyear‐endclosingjournalentriesbyauditor

3. IncreasedaccessibilitytofinancialreportsandtemplatesbyBoardofDirectorsFundraising:1. Increasednumberofrevenuestreams2. IncreasedBoardinvolvementinfundraisingasmeasuredbythefollowing:

a. IncreasednumberofBoardmemberscontributingtotheorganizationb. IncreasedtotalrevenuecontributedbytheBoardc. IncreasedBoardmembertimedevotedtofundraising

3. Increaseduseofsolicitationstrategies4. Improvedfundraisinginfrastructure

IT:1. Declineinorganizationaldisruptions2. ImprovedaccesstoITtools/services


Marketing&Communications:1. Increasednumberofrevenuestreams2. Increasedrecruitmentofnewvolunteers3. Increasedalumni/clientengagement4. Increasedsupportfromcommunitymembers5. Increasedactivepartnerships6. Achievementofanewadvocacyorlegislativegoal7. IncreaseduseofsolicitationstrategiesHumanResources:1. Improvedemployeemorale,productivityorjobsatisfactionasmeasuredbythefollowing:

a. Declineinemployeeturnoverb. Increasedemployeeattendanceand/orparticipationatmeetingsandorganizationaleventsc. Decreaseinemployeecomplaintssincesigningwithavendor

2. Increaseduseofemployeeandlabor‐relatedlegalexpertise3. ImplementationofnewHR‐relatedpoliciesandprocedures4. Protectionfromatleast1sourceofliabilityandlossbyretainingathirdparty,therebymitigating

riskLegalServices:1.Improvedabilitytohandleregulatorycompliancematters2.ImplementationofnewpoliciesandproceduresresponsibleformitigatinglegalriskRiskManagement:1.Declineinreportedlosses/insuranceclaims2.Improvedabilitytohandleregulatorycompliancematters3.ImplementationofnewpoliciesandproceduresresponsibleformitigatinglegalriskPurchasing:1.Improvedaccesstogoodsandservices2.Declineinlogisticalerrors


Chapter7:ConclusionandContacts

Outsourcingisanincrediblyusefultoolthatcanhavenumerouspositiveimplicationsfornonprofitorganizations.ThroughtheNOCprogram,wehavewitnessedstrongpreliminaryresultsfromourprogramparticipants(finalresultswillbepublishedinareportinmid‐2013).Outsourcinghashelpedtheseorganizationsbuildsustainablerevenuestreams,cutcosts,enablestafftofocusonprogrammaticversusadministrativetasksandimprovenumerousotheraspectsoforganizationalperformance.Welookforwardtobuildinguponandexpandingthisprograminthefuture.Pleasefeelfreetocontactuswithanyquestionsorcomments:AmyKarson MarciaBrownNOCProgramManager [email protected] [email protected]‐389‐6050 212‐502‐4191,ext27

Copyright©2012NonprofitCoordinatingCommitteeofNewYork,Inc. Nonprofitsarewelcometolinktothisguide(www.npccny.org/info/outsourcing.pdf)ortophotocopyitforunpaiddistribution.However,nopartofthisdocumentmaybereproduced

eitheronlineorinprintwithouttheexpresspermissionoftheNonprofitCoordinatingCommitteeofNewYork.

NonprofitCoordinatingCommitteeofNewYork 1350Broadway,Suite1801,NewYork,NY10018

phone:212‐502‐4191fax:212‐502‐4189www.npccny.org

Documents

A Nonprofit Guide to Outsourcing