Here is an well written piece by Pat Nichols on the benefits of outsourcing. Pat Nichols runs Transition Leadership International, a
business that serves nonprofits dealing with turnarounds, mergers, and other
major strategic changes:
Let me draw a distinction before exploring this
further. In our recent, troubling
political discourse the term “outsourcing” has, oddly, become a synonym for
“off-shoring” of labor. By outsourcing,
I mean contracting for the performance of functions that might otherwise be
conducted by wage-earning or salaried staff.
Whether those contracts are domestic (as they are with the vast majority
of nonprofit outsourcing) or international (as with much corporate customer service
and some manufacturing) is an important consideration from an economic and,
sometimes, ethical point of view but the position of an ocean isn’t relevant to
whether a contract represents outsourcing.
Neither, for that matter, is the question of whether the
contract is intended to be temporary or long term.
Stories of Success
In the organization I mentioned above, the biggest issues we
faced were existential. We needed to
fundamentally rethink and update our understanding of the mission and the
business model to serve it. As is often
the case, we had many constituents strongly resisting change to their beloved
organization.
Staff wasn’t credible in getting these issues on the table
because they hadn’t performed adequately in a couple of key managerial
areas: providing good customer service
through the use of our database and producing timely and accurate
financials. I decided to outsource both
functions to the same firm. After years
of frustration, we had both sets of issues materially resolve in less than 90
days, allowing us to get on with the rich strategic issues facing us.
This resolution simply would not have been possible had we
chosen to hire a new CFO and a new database manager, asked them to diagnose the
problems then retrain or hire key people and manage the new team to
success. We almost certainly would have
doubled the time required. And, in the
instance above, we actually saved a bit of money.
Another client and I outsourced our messy accounting
problems and, a month or so into the clean up, we lost the CFO. If that CFO had been an employee we would
have suffered a severe setback. Instead,
the outsourcing firm had a strong replacement in place within days and the
transition was nearly seamless.
Yet another client was a highly visible start-up—in the news
and in the rifle sites of a number of critics.
We outsourced everything initially, knowing that we would bring much
in-house over time. Most notably, we
needed to build a communications strategy and function simultaneously. Hiring a firm that knew our field was the
crucial first step and it paid great dividends, not only in communications
delivered but in bullets dodged!
Let me also knowledge that the decision as to whether to
outsource must be adapted to management style and strengths, to short term and
long term imperatives, to highly specialized skills or knowledge and, of course
to culture. Bringing or keeping
functions in-house is often the right strategy.
A Presumption in Favor of Outsourcing
Citing “fit” and “culture” too often is a disguise for
valuing a misguided control over mission and is used to preclude serious
consideration of this option. In fact,
I would argue that for an organization of $5 million a year or less, some form
of shared services (including outsourcing, shared employees, an association
management company, etc.) for back-shop operation should be the presumed best
strategy. Though that dollar standard is
a bit arbitrary, smaller groups are very hard pressed to hire the quality of skills
and experience they need in those back-shop areas and many, many organizations
suffer real mission damage because of their operational weaknesses. (By “back-shop” I mean, of course,
accounting, database management, office management, human resources, etc.)
Though with larger organizations the presumption might be a
bit softer, I think nearly all organizations should take a hard look at
outsourcing options. Even my recent
clients, who have been in the $15mm to $60mm range, often find great value in
having an array of skills, the bench strength and the occasional access to
highly skilled, highly specialized personnel.
I hear other supporters of outsourcing suggest that it works
well if limited to non-core functions.
But I would take issue even with that as a blanket limitation.
First, the startup I mentioned above felt that communication
was a core, not a support function, and none-the-less found great value in
outsourcing it initially. Further, if
the CEO function is not a core organizational function, it is at least THE core
function in uniting mission with programs, with people, with fiscal resources,
with reporting, etc. And, of course, my
kind of role, serving as interim CEO, is itself a form of temporary
outsourcing. Its value is well
established in the corporate world and has grown remarkably among nonprofits
during my 17 years in the field.
Usually, people’s careers are disrupted by outsourcing
decisions. That is, I am persuaded, a
bad thing. However, underserving the
mission for which an organization was created, and underserving the public that
forgoes taxes on its efforts—those are worse things! And, there are ways of managing these
transitions humanely, even beneficially.
In some instances, for example, the outsourcing companies convert key
personnel to their own payrolls.
So, the nut of this argument is that our commitment to mission
requires us to take a hard look at how to manage our organizations as well as
possible and that outsourcing almost always merits consideration. With smaller organizations, I would urge a
presumption in its favor. To shy away
from getting the best value available because of an impulse for greater control
is a disservice to our organizations, our missions and, ultimately, the
well-being of those we serve.
