5 Powerful Benefits of Shared Back Office Services for Nonprofits
In the nonprofit sector, maximizing resources and maintaining financial sustainability are constant challenges. One effective strategy is the use of shared back office services. By collaborating on administrative functions, nonprofits can streamline operations, reduce costs, and focus more on their mission-driven activities. While the immediate cost savings are evident, some of the benefits of shared back office services might be surprising and extend far beyond initial expectations. This article explores how shared back office services can help nonprofits achieve greater efficiency and impact, revealing both obvious and unexpected advantages.
1) Reduce Overhead Costs (A Short Term Advantage)
One of the most significant advantages of shared back office services is the reduction of overhead costs. Nonprofits often operate on tight budgets, and administrative expenses can consume a substantial portion of their resources. By sharing services such as accounting, human resources, and IT support, nonprofits can lower their overhead, freeing up funds for programmatic activities.
Administrative costs are proportionally higher for smaller nonprofits. There is a threshold at which budget and revenue size make these costs more manageable. Rather than operating independently and shouldering the full burden of overhead, nonprofits can collaborate to share administrative expenses, allowing them to access more robust support while reducing individual costs.
While cost savings are an obvious benefit, they aren’t the only advantage. Another significant benefit is capacity building, which, although less apparent, can have a more profound impact by ensuring long-term sustainability.
2) Strengthen Long-Term Sustainability Through Capacity Building
Beyond immediate financial benefits, shared back office services can contribute to long-term sustainability through capacity building. This can take many forms, such as:
Financial Management: Improving financial health through better budgeting, financial planning, and resource allocation.
Technology Integration: Implementing and maintaining advanced technology solutions to support administrative and programmatic functions.
Staff Development: Providing training and professional development opportunities to enhance staff skills and capabilities.
Strategic Planning: Focusing on long-term goals and developing strategies to achieve them.
For example, The Alliance, a partnership which includes Mission + Strategy, as well as Glenkirk and Search Inc., initially lowered administrative overhead through shared services. In the first year of operations, their combined overhead dropped from 11.6% to 7.9%, resulting in significant savings. This approach has helped Glenkirk and Search, both nonprofit disability service providers, sustain their missions over the long term through capacity building efforts such as balance sheet restructuring and the exchange of programmatic best practices.
3) Access Specialized Expertise
Many nonprofits lack the resources to hire specialized staff for back office functions. Shared services provide access to high-quality expertise that might otherwise be unaffordable. For example, sharing an IT professional or HR specialist can ensure that nonprofits receive top-notch support without bearing the full cost. This access to specialized knowledge and resources enhances the overall quality of administrative functions and reduces the risk of errors.
4) Foster Collaboration and Innovation
Sharing back-office services fosters a collaborative environment where nonprofits can learn from each other and innovate together. This collaboration can lead to the exchange of best practices, new ideas, and joint problem-solving. Nonprofits working together on administrative functions can also identify opportunities for programmatic collaboration, further amplifying their impact.
5) Enhance Focus on Core Mission
By offloading administrative tasks to shared services, nonprofits can concentrate more on their core mission. Staff can dedicate more time and energy to program development, community engagement, and other mission-driven activities. This focus on the core mission enhances the organization’s ability to achieve its goals and make a meaningful impact in the community.
Embracing Shared Services for a Sustainable Future
Shared back office services offer a powerful solution for nonprofits looking to optimize resources, reduce costs, and improve efficiency. While the initial cost savings are a significant benefit, the long-term advantages lie in capacity building and sustainability. Facilitating the exchange of best practices, innovative ideas, and joint problem-solving can further enhance the impact of shared services. As the nonprofit sector continues to explore new models of collaboration and resource management, embracing shared services can be an important strategy for achieving long-term sustainability and maximizing impact. Nonprofit leaders should consider this collaborative approach to strengthen their organizations and better serve their communities.
Together, we are stronger.
If you’re interested in shared back office services or need support for balancing your mission and business strategies, we’re here to help.
Mission + Strategy is an invested thought partner to your nonprofit organization. Through our Strategic Advising, Mergers & Partnerships, and Shared Back Office service solutions, we help nonprofits achieve alignment between their mission and business strategies.
