Put the money in your mission: How leveraging shared services can reduce the business costs of running a nonprofit

Abstract

No nonprofit has a mission statement focused on managing an efficient office. You don’t start a nonprofit because you’re zealous about accounting, HR laws or where you buy paper clips; nonprofits are founded to fulfill a need in the community and serve the public interest. But then there is the business of nonprofits. There are paperwork, vendor management and millions of other little things that any small organization must deal with regardless of their mission.

Most nonprofits never rise to the scale of having a full internal administrative staff and purchased equipment. They rely on a slew of vendors for services, equipment and more, but their small scale puts them at a disadvantage at the negotiating table.

In the for-profit world, the business process outsource industry covers nearly every imaginable administrative service, and Professional Employer Organizations (PEOs) are now an entire outsourcing sector that covers all HR matters. These industries provide small businesses with solutions for their common problem: how does a small organization realize an economy of scale without having the scale required?

On the nonprofit side, there are very few organizations that provide comparable services. These operational services are often provided by membership-based groups or fiscal sponsors commonly called “shared- service organizations.” These organizations offer an economy of scale that they open up to other organizations, providing operational support at a price point that is more affordable than doing it internally. This allows a smaller nonprofit more flexibility in their budget to put more money in their mission.