Report Shows Nonprofits Could Benefit from Outsourcing

New business models needed for small and mid-sized organizations

Washington, D.C.– The current economic situation has only intensified the ever-present need for executives of small and mid-sized nonprofits to find effective ways to reduce overhead costs. According to a report by the Eugene and Agnes E. Meyer Foundation and the >Management Assistance Group, outsourcing is a promising strategy for these nonprofits to meet their back-office needs, but there are many barriers that prevent outsourcing success.

The study, “Outsourcing Back-Office Services in Small Nonprofits: Pitfalls and Possibilities,” is based on a survey of Meyer Foundation grantees; interviews with grantmakers, consultants and a range of back-office service providers; and a review of current literature on the subject. The goal for the collaboration was to identify alternative back-office services that could strengthen operations, relieve pressures on executive directors and lead to greater efficiencies, particularly in this difficult economy.

Key findings include:

• Outsourcing may not offer short-term cost savings but can offer significant long-term benefits and cost savings.
• Current business models for outsourcing often are not well suited for serving small to mid-sized organizations, many of which are complex and have significant unmet needs.
• There is great opportunity for business entrepreneurs with a deep knowledge of and sensitivity to the nonprofit sector and innovative new business models.
• Areas most in need of better solutions include: human resources, marketing and communications and financial planning.
• Barriers that prevent nonprofits from outsourcing back-office services include: the inability to find specialized skills at a reasonable cost, lack of time to find and contract with providers and negative past experience.

“Our previous research revealed the importance of management infrastructure and administrative support in preventing leadership burnout and turnover in nonprofits,” says Meyer Director of Programs Rick Moyers, referring to the Foundation’s “Daring to Lead 2006” report. “There is an urgent need for innovation in how small and mid-sized nonprofits handle their back office functions, and increased use of outsourcing can help address that need.”

The 48-page study offers ideas for grantmakers, back-office service providers, nonprofit executives and business entrepreneurs as they consider how to better meet the back-office needs of nonprofits. It also proposes a framework for evaluating outsourced back-office services.

To interview Rick Moyers, contact Amy K. Harbison at (202) 552-7470.

Download the report and three-page executive summary.