William Harper Associates

June 2008 NEWSLETTER

William Harper Associates Newsletter

This newsletter is a free service to the North American not-for-profit community from William Harper Associates. Its focus, like everything we do, is on helping organizations that do good, do better!

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In this issue:



FEATURE ARTICLE: Outsourcing Red Flags

When does outsourcing make sense? How do we identify strong candidates for outsourcing without going through detailed analyses of every function? Well, the thorough analysis still has to happen, of course, but we present here 5 red flags that may signal that outsourcing should be considered. These signs may be the evidence you need to invest some time in those analyses, and see what benefits outsourcing may hold.

But first, what do we mean by outsourcing? If we run a photocopying job down to the neighbourhood printer instead of lining up in-house, is that outsourcing? Well, outsourcing does imply the involvement of an outside supplier, but usually we think of outsourcing as spanning an entire set of activities, rather than a single transaction. And, usually, outsourcing involves ceding some control over activities to partners which do that activity as a main part of their business. So, that single photocopy job may not be outsourcing for our purposes, but getting rid of your photocopier, and having the neighbourhood printer do ALL of your photocopying, qualifies.

RED FLAG #1 – Management Spread Too Thin

Does every day seem to be jam packed with minutae? Do you have so many different things on your plate, that you can't spend any real time with any one of them? Are there things that you feel could be done by somebody else, but there isn't anybody else in your organization to do them? Outsourcing could spell relief.

Take a look at what's in your in-basket. How many of those things are on your top-3 priority list for this week or this month? (you DO have a priority list, don't you?) Seriously, whether you have a list or not, sort through your work and set out the things that just seem to be removed from the strategic issues you are trying to deal with - the things that, while important, just won't change your organization's future, however well they are done. Important, time-sensitive, but not strategic.

RED FLAG #2 – Many Suppliers

Look at who your organization works with to accomplish its work. How many suppliers and others need to deliver flawlessly in order to make things go smoothly? Think how much simpler an activity might be if only one supplier were involved from beginning to end.

If there are multiple hand-offs of work, either between suppliers, or worse, back and forth between your organization and others, that process is bound to be slower, riskier, and less efficient than it could be. Ask yourself, is each individual supplier actually adding a uniquely important value to the process? If not, it's probably time to consolidate responsibilities into fewer suppliers. Multiple benefits can be achieved by doing so: less hand-off of work from one to another; more business for the supplier makes you a more important (and valuable) customer; and, most important, your people have fewer partners to deal with, trouble shoot and generally manage.

RED FLAG #3 - Fluctuating Transaction Volumes

Do you have processes that generate huge volumes of work at certain times of the week, month or year? Do you pay overtime, hire temps, or bring in hordes of volunteers to cope? Maybe you should just let someone else cope! After all, a big peak to you might be nothing to a larger organization that does this type of work all the time. Or, it might just mesh with a big valley in someone else's operations.

Maybe it's a membership renewal, major fundraising event, or annual drive that gives rise to the peak volume. Whatever the activity, there are organizations that make it their business to do that kind of work for others. To do so, they build the processes (including using scalable technology) to handle enormous (to you) transaction volumes for many clients. They may just take away a headache or two as well!

RED FLAG #4 – Well Defined Tasks

If you've got routine administrative activities in your organization, you've probably thought that it would be nice to automate some of them. But, who can take the time, and spend the money, to search out, evaluate, select, implement and manage information technology projects? Well, the answer is that someone can, and already has. And, what that means is that they may be in a position to do your work, profitably for them, but still cost-effectively for you.

If you can define and clearly articulate all the specific processes and business rules around a particular activity within your organization, you've gone a long way toward being able to outsource it cost-effectively. And, if those processes and rules are not particularly unique to your organization, odds are that someone else is already running efficient processes that could be readily adapted to fill your needs.

RED FLAG #5 - Whose Core Competency?

OK, “core competency” is a buzzword. But, it captures the essence of this issue: is the activity that you're looking at really the business that you are in? Is it one of the things that only your organization can do, that defines what you are all about? If so, by all means, hang onto it!

But if not, find someone who is in that business – they can likely do it faster, better, cheaper than you can, and they will be itching to do so! As noted above, if someone else can do the work for you at a profit, and still be cost-effective for you, that's win-win.

Conclusion

When one or more of these red flags is spotted, it is probably time to have a look. While it can be difficult to even contemplate taking on the work of evaluating options, the benefits can be significant, and the positives can outweigh this extra work very quickly. An objective, external evaluation of those options may be the best approach, both in terms of not stretching existing management resources, and of not colouring the results by being immersed in the status quo. The costs of an external review can be recouped very quickly in many cases.

Outsourcing has potentially significant benefits for your organization. Can you afford not to have outsourcing in your arsenal?


NEWS AND RESOURCES: Newsletter Archive

Don't forget to browse our newsletter archive for access to over 100 great articles, news items and resources on the sector. Simply click on the link at the top of this page to find a comprehensive index of materials on the site. The index is updated regularly, and includes not only actual subject title, but also keywords.


DID YOU SEE: Our May 2008 Newsletter Line Up

Last month's Newsletter included the following items. If you missed any of them, click here:

  • Your IT Guy - Firefighter or Concierge?
  • Update on CRA Filing Requirements to Receive Rebates
  • Reducing the Environmental Impact of IT
  • What Executive Directors Need (2)
  • Why are our annual financial statements so late?

QUICK TIP: 45% Interest

Do you check every incoming invoice to see if your supplier offers a discount for prompt payment? You should.

In order to alleviate the burden (and uncertainty) of collecting long-outstanding accounts receivable, many companies will offer a discount for fast payment. And, these discounts can be significant. Even where they don't look like a big savings, they often are. For example, a savings of 2% of the invoice amount, in return for paying in 10 days rather than 30 (known as “2/10, net/30”) translates into an annualized interest rate of close to 45%.

So, failing to take this discount amounts to borrowing money at something like a 45% interest rate – not a good deal by anyone's standards. Or, to put it in more positive terms, taking advantage of supplier discounts can be like investing at 45% interest, risk-free!


NEWS AND RESOURCES: What Executive Directors Need (3)

If you've followed the recent articles in this newsletter, you'll know that we've been working with a group of Executive Directors in the Greater Toronto Area. The focus of that work has been in helping to meet their professional needs in their unique EDs' role. That work continues, and we are looking forward to seeing a busy year of programming for this key, but under-served, group of NPO stakeholders.

But, if it's so tough being an ED, why do they do it? There are some interesting insights in a recent study understaken by Michael C. Gilbert and The Gilbert Center (http://www.gilbert.org/), based in Seattle, Washington, USA. (Michael has generously made his work freely available under a Creative Commons license – get it here.

A couple of conclusions that are bound to ring true:

“The vast majority of people who work in civil society see their job as part of their identity, compared to society at large, in which nearly half of all workers see their job as just a way to earn a living”; and

“Civil society has a greater commitment to training than society at large”.

On the other hand, “[b]arely half as many people who work in civil society are completely satisfied with their job as those who work in society at large”. Gilbert suggests that this is because workers in civil society “are substantially more demanding about the standards that would allow them to say they were completely satisfied”. While there is no doubt some truth in this assertion, to me, this underscores the lack of resourcing and support that exists for workers in our sector. And, to me, it adds all the more urgency to helping EDs support themselves.


FROM THE ARCHIVE: Member Recognition (from July 2007)

This month's "member connections" discusses ways of honouring and recognizing your members' accomplishments.

We all like to be recognized for our accomplishments, big or small, whether we admit it or not! And, who better to recognize an individual's activity in their chosen profession, business or area of interest than the association that organizes that area?

What to recognize

The sky's the limit in terms of what events are worthy of recognition. But - and this will be a recurring theme throughout this article - moderation is the key. If every member is getting recognized for something, then the value of that recognition drops to nothing. (Worse yet, if almost every member is getting recognized, it can be a slap in the face to those who aren't!) But, there are lots of legitimate milestones, accomplishments and activities that might warrant recognition in your circumstances. Here are some of them:

  • long service or membership - with member retention being an issue for many associations, recognizing long or sustained membership is a no-brainer! Whether its 5 or 50 years, continued support is worth making a bit of a fuss over.
  • life milestones - we all have them: birthdays, weddings, retirements, and so on. Depending on the size of your membership and their sense of community, a greater or lesser degree of recognition is warranted: if everyone knows one another, then these personal milestones are well worth sharing. A large national body with many thousands of members who will never meet one another would likely consider this less appropriate, however.
  • service/leadership to the community, association, etc. - recognizing service of this nature is one of the most common and appropriate ways of honouring members (it can also be very difficult to do objectively). Service to the association itself is a particularly good thing to recognize.
  • high standards - recognizing excellence in one's field is a positive step, since it sends supportive messages to other members about the importance and value of striving for excellence. There are many opportunities, as well, depending on the type of body. Those training and examining members can reward good examination marks, successful peer reviews, or adherence with continuing professional development requirements. Athletic clubs hold meets or competitions with awards being a big part of the event.
  • contests - excellence need not be based on the association's own assessment: contests or votes among the membership can recognize a member's efforts even where there are no objective criteria to measure them. For example, a photography club could post members' works on their Website and solicit member votes for their favourites.
  • other awards - members who receive other recognition in the community or beyond can also be recognized. Simply reporting 'news' of members' other honours provides some 'spill-over' benefit to the membership and association.

How to recognize

Let your imagination run wild in recognizing your members! But, moderation (or proportionality) is the key. In particular, different types of honours must have reasonably appropriate, and proportionate, awards. Some possibilities:

  • certificates - recognition through certificates, plaques, lapel pins, desktop accessories or other display items is an enduring way to recognize accomplishments. As an added benefit, items on proud display continue to deliver your brand messaging to everyone in the vicinity (if you design them with this in mind).
  • events - honouring members at or with a special event, whether a black-tie dinner or a family picnic, can make the honour very special and memorable. Very often, honours can be tied into events being held for other reasons (AGMs come to mind), to add interest and variety to them as well. This can also reduce the cost of honouring members in a stand-alone event.
  • publicity - everyone likes a little public recognition (for the right things, at least!). So, go ahead and issue that press release and, by all means, post the honour on your Website! This recognition can bring added exposure to the association and all members.
  • fee reductions - providing preferred pricing on association services may be a tangible way of recognizing certain members, and may have the added benefit to the association of increasing participation rates in those services (so, it may not be a net cost to the association after all!).

Benefits

Other than being nice people, why do we honour members? There are many benefits that can be achieved, if the honours are thoughtfully designed. For example,

  • increased affinity - members just honoured by their association are likely to have a pretty positive impression of that association, and become allies or "boosters" if given half a chance. This can bring many downstream benefits, including greater member retention, increases in services used, more members volunteering, etc.
  • publicity - as mentioned above, publicity can have a positive effect on the association and all members. Excellence-related awards send powerful messages about your organization's and members' high standards (to the public and to the members themselves). Life milestone awards serve to put a friendlier, human face on your group. This may benefit self-regulators that run the risk of developing an adversarial relationship with their members.
  • recruitment - honours can add to the attractiveness of an organization, both by increasing its visibility and publicity, and by demonstrating how well the organization treats its members.

Risks and costs

Like most things, there are downsides to watch out for, though. A poorly designed program can lead to a number of potentially significant issues:

  • implied endorsement or favouritism - recognition of some members but not others can be misunderstood if communications are not well handled. The public can take this as an endorsement of the honoured members, and other members can see these gestures in a far less charitable light. It is also important to have clear criteria for the honours, an open and transparent process, and sufficient communication so that all members have a chance to learn about the honours in place.
  • potential embarrassment - imagine making a great public noise about the high standards of a member only to have that member subsequently have a high-profile competence or (even worse) criminal problem. While this risk can never be totally eliminated, it is important to do one's homework in this area. Also, having clear criteria that gave rise to the award are important.
  • cynicism - in this day and age, many audiences are cynical. Awards, unless legitimate, can be seen as self-congratulatory and self-serving, which can end up causing more damage than good. Again, moderation is the key to having the honour accepted for what it is.
  • cost - last, but not least, of course, is the out-of-pocket costs involved in awards. Much can be done inexpensively these days, in terms of certificates and plaques. Tieing in recognition to other events, newsletters, and so on, can help to keep these costs under control. It is also important to know how many members will likely be awarded, so that costs can be properly planned and budgeted for.

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