Rose Report: Issue 9

Sharing Services and Sharing Success

issue09-pic-story3Nonprofit Organizations have been forced to get creative in order to cut costs while still staying on mission. In the wake of the recession, charitable contributions significantly dried up, government funding got scarcer, and as the financial crisis took a toll on communities across the country, the demand for services from non-profit organizations only intensified. In some cases, coming up with a new strategy has been no less than a matter of survival. Luckily, many nonprofits have found that moving to a shared services model has allowed them to become more financially efficient, and also more effective in serving the people who rely on them.

Sharing services can take several different forms. It can mean teaming up with other nonprofits to share the same administrative departments, such as human resources, IT, and accounting. It can also involve turning to outsourcing firms such as Rose Financial Services to handle back-office needs, rather than incurring the overhead costs of housing them on-site. RFS’ clients, for instance, save as much as 25 to 35 percent compared with what it would cost to staff in-house accounting departments.

Shared services can even mean leasing office space in partnership with one or more other organizations. Another real estate-related option is “hoteling.” This refers to the practice of multiple employees sharing the same space. Maybe one employee works from home three days a week, while the other uses the on-site office, and then they switch for the remaining two days. This works for employees of the same organization, or employees of different organizations that have entered into a lease with each other. The result is a reduced footprint, and reduced real estate expenses.

Whatever form it takes, the trend toward sharing services is only growing. According to statistics gathered by the Nonprofit Finance Fund, 24 percent of nonprofits planned to collaborate with other nonprofits in 2012 to reduce their administrative expenses, and 17 percent said they’d already taken this step. 56 percent reported that they planned to collaborate with other organizations to provide programs, and 49 percent said they’d already done so.

Robert Michaels, a Senior Controller at RFS who works with nonprofits, says another benefit of using a shared services model is that it allows his clients to strengthen their internal controls. Whereas a nonprofit may not have its own robust accounting department with formalized procedures, if it outsources its finance and accounting function to a company like RFS, it immediately gains access both to tried and true policies, and professionals who are experts in their field.

An article in the academic publication, the Stanford Social Innovation Review, highlighted examples of the huge cost savings associated with sharing services. The article—published in 2010, when the shared services trend started to take off in earnest—explained how the Tennessee Aquarium agreed to provide financial, human resources, IT, and other services to two smaller, struggling museums. Eight years into the arrangement, the museums had saved nearly $4 million in administrative costs while the aquarium had gained more than $1 million in revenue from the fees it charged the smaller institutions. Talk about a win-win.

Though the economy has obviously hit nonprofits hard, the success many have had using a shared services model is proof that with a little creativity and forward-thinking, organizations can continue to thrive even in this tough environment.