Pagnoni: NONPROFIT OUTSOURCING: A Vital Option

First of Two Parts by Laurence A. Pagnoni

Thirteen years ago, as executive director of a human services organization, I was faced with two problems: I saw hired staff fail and realized that I needed a higher level of thinking than I could afford to bring inside the organization. A friend recommended an outside specialist. At first, it seemed unusual to be reaching outside of the organization. Then I realized that my bookkeeper was only on the premises for two days a week, and my direct mail service had never been on-site. My frame of reference suddenly changed, and I began to explore an option that many nonprofit organizations still do not explore or underutilize.

In fact, while preparing this article, I contacted the Hauser Center for Nonprofit Organizations at Harvard University, the Aspen Institute, and several other think tanks to inquire about the latest research on nonprofits and outsourcing, and found that it was almost entirely nonexistent!

Outsourcing is now a $450 billion industry. It refers to the practice by which a company delegates certain in-house functions to a third party. In a fast-paced world, it is often used as a synonym for offshoring, which refers to the growing practice of American, Japanese, and European firms to outsource to third-world countries where wages are low, regulations are few, and the costs of doing business are substantially less.

Having become identified with offshoring, outsourcing may perhaps seem an unsavory practice, particularly to members of the helping professions who have a keen sense of social justice. “We don’t outsource,” the development director of a downtown youth services agency recently advised a consultant who sought an interview with her. Her tone was dismissive, as if she were being asked to support the death penalty or carry a concealed weapon.

One can even detect something of a “backlash” in the nonprofit world. Blackbaud, a leading software provider and consulting services for nonprofits, is also a major source of information about the nonprofit sector. Its 2006 State of the Nonprofit Industry Survey opens a unique portal on various aspects of nonprofit operations including staffing. Seven hundred and eighty-five nonprofit professionals responded to the survey. Given a list of ten specific tasks ranging from accounting to grant writing, between 84% and 99% said that at their agencies the functions were performed in-house.

Roughly a quarter of all respondents indicated that a full-time staff person had been hired to discharge each task. Half of all respondents said the tasks were part of a non-specialist’s job description. Nonprofit executives, however, may want to consider assigning non-core functions to outside specialists, because overlooking this option may be to an organization’s increasing disadvantage. The first part of this article presents an overview of outsourcing and assesses its risks and benefits; the second installment looks at the outsourcing option most integral to nonprofit operations.

Read the report here:

Smart_Outsourcing_Pt_I

Laurence A. Pagnoni holds advanced degrees in management and theology, is the former executive director of several nonprofit organizations, and is on the faculty of New York University’s Heyman Center for Philanthropy. He serves as president of LAPA/Laurence A. Pagnoni & Associates, Inc. (www.lp-associates.com), a New York-based consulting firm providing fundraising and management services for organizations working in the public good.