Outsourcing for Nonprofit Organizations [2024 Guide]

Outsourcing is getting traction in almost all domains of businesses and industries across the world. Numerous models such as onshore, offshore, nearshore outsourcing development, and many industry-specific models have emerged in the marketplace to achieve the most promising outcome offered by the outsourcing model extensively used in contemporary HR management.

According to Statista information, the global market value of the outsourcing industry was about $92.5 billion in 2019 with leading sharing contributed by IT outsourcing, which is about 66.5 billion. According to the Research and Markets projections, global IT outsourcing would reach $410.2 billion by 2027.

Let’s have a look at how nonprofit organizations can use the outsourcing model to achieve the top benefits offered by this popular form of human resource services.

In this article

What Is Outsourcing?

It is a business practice in which the service-seeking company (referred to as customer) hires the services of a third party, commonly referred to as client or service provider, to perform the activities relating to services, manufacturing, development, and other business processes on the behalf of the customer company.

The term outsourcing emerged as an extensively accepted term in 1989 and was readily adopted throughout the decades afterward. Numerous outsourcing companies emerged in all sectors of business. New types and industry-specific sub-models of outsourcing such as offshore outsourcing, onshore outsourcing, and outsourcing nearshore models emerged to offer specialist outsourcing services.

Outsourcing software development has become one of the most popular business processes in IT outsourcing, which is the leading component of the global outsourcing market.

How Can Non-Profit Organizations Use Outsourcing?

The nonprofit organization sector is a gigantic one in all major countries of the world. According to the Urban Institute’s The Nonprofit Sector in Brief 2019 report, the total assets of nonprofit organizations in the USA only are about $3.79 trillion. The annual revenue of those nonprofit organizations was recorded at about $2.04 trillion.

Nonprofit organizations face significant challenges in hiring the human-talent that is skilled, experienced, qualified, and affordable. Those challenges become more serious for small and medium-sized nonprofit organizations because they have comparatively small budgets and face competition from big wigs. The use of outsourcing is a boon for small and medium-sized nonprofit organizations in different business processes.

The Myer Foundation study cited in the Nonprofit Coordinating Committee of New York guidebook identifies numerous back-office activities and processes that can be managed more efficiently if they are outsourced to professional service providers. Those domains include the following.

• Information technology-related activities
• Fundraising related activities
• Financial management and bookkeeping
• Risk management, communication, and marketing
• Human resource management and legal services
• Purchasing and vendor management

Hiring specialists to perform the above-mentioned back-office activities is very costly that all nonprofit organizations cannot afford. The best solution to reduce cost and maintain a high level of focus on core activities is using outsourcing services. With the help of information technology, numerous back-office activities can be automated to save time and money.

Top Benefits of Outsourcing for Non-Profit Organizations

All major non-profit organizations all over the world use different models of outsourcing to reap the benefits of outsourcing. A few top benefits of using outsourcing services include the following.

Reduced operational cost

The topmost benefit for nonprofit organizations to use outsourcing services in different business processes such as Financial Services Outsourcing, accounting, marketing, fundraising, resource management, strategic planning, and other domains is a significant reduction in operational cost. According to a recent research study information, transaction cost, specialization, and comparative advantages are three fundamental components that are achieved by using professional-level outsourcing services in nonprofit organizations. Hiring dedicated professionals to perform those activities will cost the not-for-profit NFP organization hugely. If they hire shared outsourcing services from professional outsourcing providers, the operational cost of the organization will be reduced significantly.

Access to skilled tech talent

Finding skilled tech talent is a big challenge for hiring managers nowadays. According to the Korn Ferry projection, more than 85 million technical jobs will go unfilled due to the unavailability of a skilled workforce. The size of the shortage of the tech-talent market will reach $8.5 trillion by 2030. This will impact nonprofit organizations hugely. In such a situation, outsourcing is a sign of relaxation. Outsourcing will allow non-profit organizations to have access to the global pool of tech talent, which will help them achieve their desired objectives easily.

Use of cutting-edge technologies

Leveraging the positive impact of cutting-edge technology, especially in information technology, is the need of the day for every type of industry. E-learning, e-health, artificial intelligence AI, analytics, AI Article Writing, and process automation are the top trending technologies extensively adopted in non-profit organizations. Finding skilled people through outsourcing to leveraging those technologies offers a great competitive edge in the industry.

Increased performance

Outsourcing helps small and medium-sized nonprofit organizations increase the performance and productivity of the organizations. According to San Jose State University research, outsourcing improves performance if the primary, supplier, and competitive uncertainties are controlled properly. This study is equally applicable in not-for-profit NFP organizations too. Thus, outsourcing increases the performance of nonprofit organizations in all major business processes.

High-level professionalism

Any organization having highly skilled tech talent, modern technologies in place, a higher level of domain compliance, and greater automation in business processes will show a high level of professionalism in its activities. The use of outsourcing helps organizations to have access to professional tech talent to create a highly professional environment of work, which will be handy for producing a professional touch in all activities and processes of the organizations.

Better strategic planning

Strategic planning is fundamental for any kind of organization to run smoothly. Hiring a consultant specializing in strategic planning is very costly stuff. Outsourcing the consultancy services to a professional service provider will help improve the organization’s strategic planning significantly at very reasonable prices. Better strategic planning will position a nonprofit organization to achieve a competitive edge and smoothness in the operation of the business in the most fiercely competitive marketplace.

Greater focus on core activities

By outsourcing the less important and back-office activities to the third-party service provider will allow you to dedicate more time to the core activities of a nonprofit organization. Thus, the focus of the team will remain on the major goals of the organization.

Final Takeaway

Outsourcing has become a very fundamental component in managing numerous business processes with full focus, accuracy, and professionalism. All sizes of nonprofit organizations are choosing the use of outsourcing for different activities and process management. Back-office processes like IT, accounting, fundraising, HR management, and other activities are the major domains for outsourcing. Outsourcing offers numerous benefits to a nonprofit organization as mentioned in this article.

FAQ

What Is Outsourcing for Nonprofits?

Outsourcing for nonprofits refers to the practice of contracting out certain tasks or services to external companies or specialists, rather than handling them internally, in areas like marketing, fundraising, IT services, and administrative tasks.

Why Do Nonprofits Outsource?

Nonprofits often outsource to gain access to specialized skills and expertise, to save costs on hiring full-time staff, to improve efficiency, and to allow their internal team to focus on core mission-related activities.

What Services Are Commonly Outsourced by Nonprofits?

Commonly outsourced services include accounting and financial management, fundraising and grant writing, marketing and public relations, IT services, and human resources management.

How Can Outsourcing Benefit a Nonprofit’s Fundraising Efforts?

Outsourcing fundraising efforts to specialized agencies or consultants can bring in expertise in donor management, campaign strategy, and grant writing, potentially increasing the effectiveness and reach of fundraising campaigns.

What Should Nonprofits Consider When Choosing an Outsourcing Partner?

Nonprofits should consider the outsourcing partner’s understanding of the nonprofit sector, their experience and track record, cost-effectiveness, alignment with the nonprofit’s values and mission, and the quality of their services.

Can Outsourcing Help Nonprofits with Compliance and Regulatory Requirements?

Yes, outsourcing to expert service providers, especially in areas like accounting and legal services, can help nonprofits navigate and comply with complex regulatory requirements and financial reporting standards.

How Does Outsourcing Impact a Nonprofit’s Operational Efficiency?

Outsourcing can significantly improve operational efficiency by delegating time-consuming tasks to external experts, streamlining processes, and freeing up internal resources for more strategic activities.

What Are the Risks Associated with Outsourcing in the Nonprofit Sector?

Risks include potential misalignment of goals, loss of control over certain aspects of the operations, confidentiality concerns, and the quality of work if not properly managed and monitored.

How Can Outsourcing Help Nonprofits Manage Costs?

Outsourcing helps nonprofits manage costs by eliminating the need for full-time staff for specialized roles, reducing overhead expenses, and allowing for more budget flexibility and cost-effective resource allocation.

What Impact Does Outsourcing Have on a Nonprofit’s Staff?

Outsourcing can relieve the internal staff of a nonprofit from overburdening workloads, allowing them to focus on core mission-related tasks. It can also bring in new perspectives and expertise that can complement the skills of existing staff.

How Do Nonprofits Measure the Success of Outsourcing?

The success of outsourcing can be measured by evaluating cost savings, improvements in efficiency, quality of work delivered by the outsourcing partner, and the overall impact on the nonprofit’s objectives and mission.

What Is Strategic Outsourcing in the Context of Nonprofits?

Strategic outsourcing involves carefully selecting which functions to outsource based on their strategic importance, potential for cost savings, and the nonprofit’s ability to manage and oversee these external relationships.

Can Outsourcing Improve a Nonprofit’s Marketing and Communication Efforts?

Outsourcing marketing and communication to specialized agencies or consultants can enhance a nonprofit’s outreach and engagement strategies, leveraging professional expertise to boost visibility and impact.

What Are the Best Practices for Managing Outsourced Relationships?

Best practices include setting clear objectives and expectations, maintaining open and regular communication, establishing strong management and oversight processes, and regularly reviewing and assessing the performance of the outsourcing partner.

How Does Outsourcing Technical Functions Benefit Nonprofits?

Outsourcing technical functions like IT support and web development can provide nonprofits with access to the latest technology and expertise, ensuring efficient and secure operations without the need for in-house technical staff.

What Role Can Outsourcing Play in Nonprofit Event Planning?

Outsourcing event planning can bring in professional expertise in logistics, vendor management, and event marketing, allowing nonprofits to host successful events with less internal stress and resource allocation.

How Can Nonprofits Safeguard Confidentiality and Data Security When Outsourcing?

Nonprofits should ensure that outsourcing partners have robust data security measures and confidentiality policies in place, and should include data protection clauses in their contracts to safeguard sensitive information.

What Factors Should Nonprofits Consider When Outsourcing Internationally?

When outsourcing internationally, nonprofits should consider factors such as cultural differences, time zone variations, language barriers, and the legal implications of working with an overseas partner.

How Can Outsourcing Aid in Grant Writing and Fundraising for Nonprofits?

Outsourcing grant writing and fundraising can bring in specialized skills and knowledge of best practices, increasing the chances of winning grants and running successful fundraising campaigns.

What Are the Ethical Considerations for Nonprofits in Outsourcing?

Ethical considerations include ensuring fair labor practices, transparency in operations, maintaining the nonprofit’s values in outsourced activities, and ensuring the outsourced partner aligns with the nonprofit’s ethical standards.

How Does Outsourcing Impact Donor Relations and Engagement?

Outsourcing can positively impact donor relations and engagement if the external partners provide high-quality, professional interactions with donors, but it requires careful management to maintain consistency in the donor experience.

Can Nonprofits Outsource Social Media Management?

Yes, nonprofits can outsource social media management to leverage expertise in digital marketing and engagement strategies, helping to build a stronger online presence and community.

What Is the Importance of a Clear Contract in Nonprofit Outsourcing?

A clear contract is crucial in outlining the scope of work, responsibilities, deliverables, payment terms, and confidentiality agreements, ensuring both parties have a mutual understanding and agreement.

How Can Outsourcing Facilitate International Expansion for Nonprofits?

Outsourcing can facilitate international expansion by providing local expertise, reducing the need for physical presence in new locations, and assisting with navigating different cultural and regulatory environments.

What Should Nonprofits Look for in an Outsourcing Partner’s Track Record?

Nonprofits should look for a partner’s proven track record in similar projects or with similar organizations, their reputation in the industry, client testimonials, and case studies demonstrating their ability to deliver quality results.

How Can Outsourcing Influence a Nonprofit’s Strategic Planning?

Outsourcing can provide nonprofits with more time and resources to focus on strategic planning, offering external insights and expertise that can contribute to more informed and effective decision-making.

What Are the Challenges in Outsourcing Financial Services for Nonprofits?

Challenges include ensuring accurate and compliant financial reporting, maintaining confidentiality and security of financial data, and finding a partner with the specific expertise needed in nonprofit financial management.

How Can Nonprofits Ensure Quality Control in Outsourced Services?

Quality control can be ensured through regular monitoring and evaluations, setting clear performance metrics, maintaining open communication for feedback, and having contingency plans in case the service does not meet the required standards.

How Can Nonprofits Ensure Effective Communication with Outsourcing Partners? Effective communication can be ensured through regular meetings, clear articulation of goals and expectations, establishing points of contact, and using collaborative tools for project management and communication.

What Is the Role of Technology in Outsourcing for Nonprofits? Technology plays a crucial role in facilitating effective outsourcing through tools for communication, project management, data sharing, and tracking the progress and impact of outsourced tasks and projects.

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