Saving money through resource sharing

Our good friends at Jacobson Jarvis and MarketFitz hosted a gathering of nonprofit thought leaders to talk about Source Sharing: Banding Together to Save Money. We thought the NPower community would enjoy reading a summary, some terrific points to ponder. Thanks to Carolyn Hojaboom for providing!

Introduction

On March 30, 2011, Seattle-area nonprofit leaders gathered to engage in a thought-provoking discussion about sharing resources with other organizations in order to improve operational efficiency. Panelists included:

• Susie Burdick, Executive Director of the Hearing, Speech and Deafness Center, as moderator
• Heather Fitzpatrick, President and CEO of MarketFitz, Inc,
• Kevin Maifeld, Founder and Professor in the Master of Fine Arts in Arts Leadership at Seattle University
• Debbi Lewang, former CFO of Pacific Northwest Ballet and now a financial consultant to not-for-profits

The panelists shared their firsthand experiences with several different source sharing arrangements, as well as their recommendations for implementation.

Examples of Source Sharing

Source sharing arrangements can vary in size, structure and scope. As representative examples, the panelists discussed their experiences with the following models:

1. Outsourcing: One of Washington’s largest healthcare organizations sliced a double-digit percentage off the cost of running its communications team by engaging MarketFitz to reengineer and manage the department
2. Combined Resource Purchasing: Five competing arts organizations (including Seattle Children’s Theatre, led by Kevin Maifeld at the time), banded together to purchase software that streamlined operations but was too expensive for any one organization to purchase independently
3. Shared Services Coalitions: Eight non-profits with non-aligned missions formed a coalition (facilitated by Susie Burdick and the Hearing Speech and Deafness Center), to share training, resources and information
4. Shared Executive Personnel:Three not-for-profits in Tennessee share a single CFO, allowing them to tap top talent at a fraction of the cost, a model currently being championed in Seattle by Debbi Lewang

Benefits

Panelists described the financial and non-financial benefits of the source sharing arrangements with which they had experience. Highlights included:

• Reduced operating costs through sharing of staff that would not be fully utilized in a single organization
• Peer coaching partnerships wherein “best practices” regarding other operational concerns are shared
• Shared training opportunities
• Increased employee retention rates as a result of improved diverse career paths and/or the ability to maintain employment during economic downturns
• Greater negotiating power with vendors
• Improved accountability and tracking of progress against plan
• Increased opportunity for directors to be strategic while holding a vendor responsible for execution

Potential Obstacles to Implementation

Because these types of solutions are not yet commonplace, panelists noted that a strong internal champion is required. That individual may experience resistance from their board and/or employees, often due to a fear of loss of management control, concerns about whether competing organizations may have access to closely guarded donor information, fear about job losses and/or upsetting team dynamics.

While these obstacles exist, they are not insurmountable. Panelists advised participants to:

• Clearly define the need or issue, and the desired outcome
• Consider competitive concerns and hand-select collaborators accordingly, whether they are peers or vendors
• Partner only with organizations you truly trust
• Gain support within your staff and your board by educating both groups about the benefits
• Establish ground rules, roles and performance expectations early in any source sharing partnership
• Identify a leader who will serve as coordinator and fiscal agent when collaborating with other not-for-profits
• In the case of a coalition, carefully consider succession issues and the impact transitions might have

Getting Started

The panelists emphasized that the models outlined were not mutually exclusive. Not-for-profits who are interested in reaping the benefits of these models can start with something very simple, such as teaming with other organizations to share the cost of training, or jump in to address a more substantial need, such as trimming the cost of IT, HR, or marketing. To get started, panelists recommend:

• Identifying needs and objectives
• Determining whether to partner with non-competing or mission-aligned organizations, or with a vendor
• Carefully assessing potential outcomes and risks using formal analysis techniques such as time & motion studies, resource reviews and financial assessments, particularly the project is a substantial change
• Formalizing the engagement, including roles, responsibilities, and expected outcomes
• Get buy-in from the board
• Considering labor and tax laws in your vendor requirements, especially relative to independent contractors
• Look for someone with solid experience that matches your needs, if using an outside vendor

Conclusion

The current economic downturn has been hard on the not-for-profit community, but the situation has a silver lining. It has encouraged organizations to search for creative ways to streamline operations so that they can continue to deliver – and even increase – services in our community.  The panelists concluded the discussion by encouraging organizations to think creatively about how to band together to save money, support one another, and improve results.

- Alison Carl White