New Report on Outsourcing Back-Office Services
by MAG and the Meyer Foundation

The Eugene and Agnes E. Meyer Foundation funded the Management Assistance Group (MAG) to assess the back-office needs of Meyer grantees and 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. The study’s report, Outsourcing Back-Office Services in Small Nonprofits: Pitfalls and Possibilities, found that the back-office needs of small nonprofits are urgent but largely unmet.

Small organizations (those with annual budgets under $3 million and fewer than 20 employees) play critical roles in the nonprofit sector — whether they’re creating new ways of politically engaging constituencies or providing innovative services that meet a community’s particular needs.  Smaller nonprofits bring a diversity of constituencies, voices, and approaches that are essential to fostering cross-fertilization and innovations that can advance their fields.

As vital as these small nonprofits are, their leaders must often divide their time and energy between developing the programmatic work and managing a wide array of back-office needs, including administration, finance, human resources, and information technology.  Unlike larger nonprofits which typically hire staff with expertise in these areas, smaller nonprofits’ leaders must often learn as they go and are often dissatisfied with their own performance, with pro bono services, and with outsourced providers whose business models are not tailored to the non-profits’ needs.

Not surprisingly, small and mid-sized nonprofits cite limited management infrastructure and lack of administrative support as key contributors to executive director burn-out and turnover, according to Daring to Lead 2006 by CompassPoint and the Meyer Foundation.

The impacts of not finding better solutions for back-office needs are many — inefficiency and burnout, high staff turnover, cash flow crises, loss of funding, missed opportunities, diminished impact and threats to growth and sustainability. At best, these are enormous challenges for leaders of small nonprofits. At worst, the lack of adequate back‐office infrastructure is responsible for their ineffectiveness in achieving their mission and incalculable human and financial waste.

The new study focuses on outsourcing as a potential solution and reveals the structural constraints and possibilities in outsourcing to small nonprofits.  Mark Leach, the author and MAG Senior Consultant, found “outsourcing to be a promising strategy for helping nonprofits improve their back-office operations because it offers access to higher level professional skills than nonprofits can afford to hire on staff and reduces the management and administrative workload of executive directors.”


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