Guest Post: Mike Printz, Principal Consultant, Nonprofit CFO
Nonprofit organizations often encounter objections when considering the outsourcing of financial services. This article will explore the challenges and benefits of outsourcing compared to hiring staff.
Many nonprofits are resource-constrained, struggling to raise sufficient funds for administrative tasks essential to their management. Successful organizations invest in core functions like leadership, finance, human resources, information technology, and governance to maintain a strong reputation.
Executives typically opt for hiring staff to meet these needs. The process involves convincing the board of the necessity of new positions, fundraising to support these hires, recruiting top talent within budget constraints, interviewing for skills and cultural fit, offering compensation packages, and investing in orientation, training, goal setting, supervision, and evaluations. Additional investments include benefits, time, space, technology, and activities to foster the desired work and service culture. This process, often costly in time rather than money, leads executives to hope for staff retention, with alternative options like outsourcing being overlooked due to concerns over control.
For nonprofits, convincing board members of the need for investment is
challenging, as they often default to traditional staffing and may not fully grasp operational needs. This situation can lead to discussions being postponed. However, considering the efforts involved in direct hiring, outsourcing may be a viable alternative, offering confidentiality, control, cost savings, and flexibility.
There are several scenarios where hiring employees for financial services may be beneficial. Conversely, outsourcing can be a strategic choice with numerous advantages. Below is a comparison of hiring versus outsourcing:
| Issue | Hiring | Outsourcing |
|---|---|---|
| Lack of In-House Expertise | Investing in someone with the necessary skills or development potential, ensuring they have relevant knowledge and experience. | Financial service providers often have specialized knowledge, ensuring accurate and compliant financial management. |
| Cost-Effectiveness | Requires ongoing investment in salary, benefits, technology, etc. | Often more cost-effective, particularly for small and medium-sized organizations. |
| Focus on Core Competencies | Adds to the organization’s competencies but stretches management during staff turnover. | Allows focus on primary operations and objectives, freeing up resources. |
| Scalability | Time-consuming and expensive to hire and train new staff. | Provides flexibility to scale services based on changing needs. |
| Access to Technology | Limited by staff’s knowledge and organizational resources. | Leverages financial software and tools without significant upfront costs. |
| Time-Sensitive Projects | Effective if staff can allocate time without neglecting core duties. | Accelerates processes with efficient handling of time-sensitive projects. |
| Control and Management | Direct control over tasks and performance. | Easier to replace underperforming services while retaining control. |
| Company Culture and Loyalty | Fosters stronger company culture and loyalty. | Service needs may vary with organizational size and focus. |
| Long-Term Investment | Represents an investment in the company’s future. | Suitable for smaller organizations, with transition support to staffing. |
| Integration with the Team | Better integration and collaboration. | Achievable with intentional practices and technology. |
| Confidentiality and Data Security | Better control over data security and confidentiality. | Reputable providers maintain strict security measures. |
| Dedicated Focus | Sole dedication to the company’s goals. | High commitment to client needs. |
| Faster Response Times | Quick response to urgent issues. | Technology-enabled timely responses. |
| Greater Loyalty and Motivation | Higher commitment and productivity. | Potential for undermining culture if employees feel undervalued. |
| Intellectual Property Protection | Better protection under company policies. | Legal agreements required for protection. |
| Regulatory Compliance and Risk Management | More control over compliance and risk. | Specialized firms ensure compliance and reduce risks. |
In conclusion, both outsourcing and hiring have their roles, with the choice depending on various factors like task nature, budget, expertise, and long-term goals. A hybrid approach combining both methods may be most effective for some organizations. When outsourcing, it’s crucial to conduct thorough due diligence and choose reputable firms with a track record of success.
About the Author
Michael Printz is the Principal Consultant at Nonprofit CFO. With four decades of executive leadership experience in Pittsburgh’s nonprofit sector, Mike’s expertise spans government-funded human services, independent non-denominational churches, patient-financed healthcare hospitality, and senior living communities.
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The information contained in this article is not a substitute for legal advice or counsel and has been pulled from multiple sources.
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