SHARED SERVICES: A GUIDE TO CREATING COLLABORATIVE SOLUTIONS FOR NONPROFITS

SHARED SERVICES: A GUIDE TO CREATING COLLABORATIVE SOLUTIONS FOR NONPROFITS

About this Guide This guide was developed by The NonprofitCenters Network to help organizations create successful shared services programs. The NonprofitCenters Network publishes guides, studies, and reports based on best practices gathered from an international community of nonprofit center leaders and shared services providers. We also provide consulting on creating shared spaces and services. To find more information, articles, and sample documents, please visit our Resource Center at www.nonprofitcenters.org/resources. About The NonprofitCenters Network The NonprofitCenters Network, a program of Tides, is a community of leaders and professionals from the nonprofit, philanthropic, financial, real estate, and public sectors. We offer training, consulting, educational resources, and connections to help you create and operate nonprofit shared facilities and services. Our mission is to increase the capacity and effectiveness of the nonprofit sector by supporting the development and ongoing operations of multi-tenant nonprofit centers and other quality nonprofit workspaces. Our vision is a future when every nonprofit organization has access to the workspace it needs to support and sustain healthy, vibrant communities. About Tides Tides believes healthy societies rely on respect for human rights, the vitality of communities, and celebration of diversity. From donor-advised funds to fiscal sponsorship, from green nonprofit centers to programmatic consulting, from grants management to risk management and more, Tides gives you the freedom to focus on the change you want to see. For more information visit www.tides.org. P.O. Box 29195 San Francisco, CA 94129 415.561.6365 www.nonprofitcenters.org

SHARED SERVICES: A GUIDE TO CREATING COLLABORATIVE SOLUTIONS FOR NONPROFITS Authors Jackie Cefola, Third Sector New England China Brotsky, Tides Roxanne Hanson, The NonprofitCenters Network Research and Production Tuan Ngo, The NonprofitCenters Network This guide was produced with generous contributions from The San Francisco Foundation Pierre and Pamela Omidyar Fund at Silicon Valley Community Foundation The NonprofitCenters Network www.nonprofitcenters.org 2010 The NonprofitCenters Network and Tides.

CONTENTS 6 Author s Introduction 7 How to Use this Guide PART 1: SHARED SERVICES OVERVIEW 9 What are Shared Services? 9 The Need for Nonprofit Shared Services 10 Shared Services by Sector 11 What Benefits Do Shared Services Offer? 11 Purchasing Power 11 Efficiency 11 Employee Retention 12 Quality Resources 12 Collaboration and Innovation 12 Stability and Investment 13 What Services Can Be Shared? 13 Shared Physical Resources 14 Shared Staffing 16 Shared Programs PART 2: PLANNING CONSIDERATIONS 19 How to Get Started 20 Who Provides Shared Services? 20 Mission Fit 20 Capacity 20 Resources 21 How are Shared Services Structured? 21 Independent Provider 21 Joint Venture 21 Fiscal Sponsorship 23 Networked Services 23 Shared Governance Models 23 Shared Services and Mergers 24 Choosing the Right Structure 25 Who Will Use Shared Services? 26 Market Assessment 27 How are Shared Services Funded? 28 Are Shared Services Profitable? 29 How are Shared Services Managed and Staffed? 29 Staff Roles 31 How are Costs and Benefits Allocated? 31 Four Allocation Models The NonprofitCenters Network www.nonprofitcenters.org 2010 The NonprofitCenters Network and Tides. 4

CONTENTS PART 3: PLANNING TOOLS 34 How to Create a Shared Services Plan 34 Shared Services Planning 35 Financial Projections 36 What Communication Skills are Necessary? 36 Shared Services Agreements 36 Confidentiality and Privacy 37 Marketing 37 Communications and Feedback 37 Branding 38 Conclusion PART 4: CASE STUDIES 41 Al Sigl Business Center 42 Centre for Social Innovation 43 Children & Family Services Center 44 The Foraker Group 45 GroundWork group 46 Nonprofit Enterprise at Work (NEW) npserv Program 47 Public Health Foundation Enterprises 48 Third Sector New England s Fiscal Sponsorship Program 49 Tides, Inc. 50 United Community Services Co-op PART 5: APPENDICES 52 The NonprofitCenters Network: Shared Services Options 54 Merage Foundation: Staffing Shared Services Alliance Central Office Staff Roles and Responsibilites 55 Merage Foundation: Governance Structure For the Children s Home Child Care Center Network Merage Foundation: Family Home-Based Day Care 57 Schedule of Projected Operating Revenues, Expenses and Start-up Costs Cash Basis 58 Summary of Significant Projection Assumptions and Accounting Policies 61 Centre for Social Innovation: Standard Sub-Lease to Tenants 64 2008 Letter of Agreement Between Tides, Inc. and Partner Organization 66 Appendix A Tides Shared Cost Model 67 Appendix B Service List 68 United Community Services Co-op: Application for Membership and Subscription of Shares 69 Children and Family Services Center: Services Agreement 78 References 79 About the Authors 80 Become a Member The NonprofitCenters Network www.nonprofitcenters.org 2010 The NonprofitCenters Network and Tides. 5

AUTHOR S INTRODUCTION Dear Readers, You are holding in your hand the first comprehensive guide for nonprofit leaders looking to create shared services programs. The topics and case studies explored in this guide are based on interviews with executives of shared services programs and knowledge we gathered through field research across the United States and Canada. Shared services and programs are a major example of the nonprofit sector s current focus on innovation, including how to collaborate in new ways and how to operate more efficiently. For 20 years I ve had the good fortune to work with Tides as we ve become a vital resource for the nonprofit social change sector through our grantmaking, nonprofit management, and nonprofit spaces programs. Over the years, we have found that efficient infrastructure is a critical part of facilitating social innovation and making the world a better place. Drawing together resources, ideas, and energy of people across the nonprofit world, collaborative workspace and services offer nonprofits greater financial stability through cost-saving. Experiences in the private, public, and nonprofit sectors prove these gains are possible when shared services are designed effectively. Shared services reduce redundancy, increase synergy, promote idea sharing and funding resources, and offer nonprofits a way to thrive in changing and uncertain markets. In a time when funders are demanding effectiveness, solid organizational infrastructure is critically important. This guide will help you leverage and share expertise across organizations in an efficient manner. Tides and The NonprofitCenters Network are committed to building a community of shared services providers who can enrich the field through peer networking and research. I encourage you to visit The NonprofitCenters Network website at www.nonprofitcenters.org to find more resources, sample documents, and case studies. We are also available for consulting to nonprofit leaders embarking on this process. Many people were involved in putting together this publication. I want to thank the nonprofit leaders who generously shared their experiences and lessons learned. These dedicated changemakers have highlighted both their successes and mistakes for the benefit of the entire nonprofit sector. I also want to thank The NonprofitCenters Network community, a group of people that is leading the movement on shared spaces and services. Their ingenuity and fortitude in forging a new collaborative landscape is furthering the strength of our sector. Lastly, this publication would not have been possible without the generous support of our funders. Warm wishes, China Brotsky Senior Vice President, Tides Executive Director, The NonprofitCenters Network We wish to thank the following people who helped us with review of the guide, research, production, and for providing valuable information for this guide: Tim Beachy, United Community Services Co-op Mark Bertler, Public Health Foundation Enterprises Peggy Egan, Children & Family Services Center Neel Hajra, Nonprofit Enterprise at Work John Hrusovsky, GroundWork group Barbara Jiang, Independent Consultant Diane Kaplan Vinokur, University of Michigan Deborah Linnell, Third Sector New England Eli Malinsky, Centre for Social Innovation Dennis McMillian, The Foraker Group Daniel Meyers, Al Sigl Business Services John Powers, The Alliance Center Daniel Saat, Tides, Inc. Kay Snowden, Third Sector New England Jonathan Spack, Third Sector New England Kuleana Design The NonprofitCenters Network www.nonprofitcenters.org 2010 The NonprofitCenters Network and Tides. 6

HOW TO USE THIS GUIDE Nonprofit organizations face challenging times. Volatile financial markets are impacting funding opportunities, while demand for services as well as operating expenses are increasing. For the majority of nonprofit organizations with already limited resources, these challenges indicate a need for a new paradigm. This guide is developed for nonprofit center leaders looking to extend shared services to their tenants and for nonprofit executives seeking innovative ways to do more with less. Information provided in this guide does not take the place of legal or financial counsel. Different local regulations and policies impact different shared services offerings. An attorney and an accountant should be consulted when planning any large-scale shared services program. It is often easier for organizations to share certain resources, such as staff or equipment, when they come together in one location. However, shared services do not require organizations to co-locate. Organizations have successfully shared infrastructure, staff, and programs in dispersed locations. To explore the range of opportunities, this guide includes successful shared services programs created both inside and outside nonprofit centers. While qualitative as well as quantitative data demonstrate that nonprofit organizations benefit from shared services, this is the first comprehensive guide for nonprofits looking to create shared services. This guide provides step-by-step guidelines for you to follow to build your own successful shared services program. It includes best practices, models, and case studies. The writers of this guide realize that shared services programs come in different sizes, from three organizations sharing a copier to new ventures aimed at serving multiple organizations. We encourage you to apply information from this guide appropriate to the size and level of complexity, realizing that not everything here will apply to all programs. Creating a multi-tenant nonprofit center involves a complex set of legal and real estate considerations that are not covered in this guide. If you are interested in developing a new nonprofit center, please contact The NonprofitCenters Network or visit www.nonprofitcenters.org. Definition of Shared Services: Physical resources, staff, and programs which are governed and allocated across traditional organizational boundaries. Nonprofit organizations are increasingly collaborating to develop shared services. > For updates on shared services, case studies, and sample documents, please visit www.nonprofitcenters.org/shared-services-guide. The NonprofitCenters Network www.nonprofitcenters.org 2010 The NonprofitCenters Network and Tides. 7

PART 1: SHARED SERVICES OVERVIEW n What are Shared Services? The Need for Nonprofit Shared Services Shared Services by Sector n What Benefits Do Shared Services Offer? n What Services Can Be Shared? Shared Physical Resources Shared Staffing Shared Programs Purchasing Power Efficiency Employee Retention Quality Resources Collaboration and Innovations Stability and Investment

WHAT ARE SHARED SERVICES? Multiple organizations, or multiple programs within a larger organization, establish shared services to collaboratively and more efficiently make use of physical spaces, equipment, staff, and program resources. We define shared services broadly as the collaborative use of resources across traditional organizational boundaries. The Need For Nonprofit Shared Services New economic challenges are fueling the growth of shared services among today s nonprofit organizations. The United States is home to almost 1.5 million registered nonprofit organizations, over 80% of which report annual revenue and assets below $100,000 (National Center for Charitable Statistics 2008). Small budgets limit the ability of these organizations to access the standard administrative resources they need to help them succeed. The current economic crisis is increasing demand for social services provided by nonprofit organizations. At the same time, economic volatility is leading funders to conserve resources and re-evaluate funding priorities, while day-to-day operating expenses are increasing even when revenues do not. A survey conducted by Nonprofit Finance Fund reported that approximately 73% of nonprofits nationally saw increased demand for their services in 2008 and the majority (76%) anticipated a significant increase in the need for services in 2009 (Nonprofit Finance Fund, 2009). But while demands for services are up, increases in operating costs are negatively impacting organizations ability to stay in business and serve their clients. For example, between 2009 and 2010, health insurance premiums nationally are anticipated to rise between 10 to 11%. At the start of 2009, 14% of nonprofits nationally had no cash, including any reserves, that is readily available; 17% had enough to cover one month of expenses; and 19% had enough cash to cover more than six months of expenses (Nonprofit Finance Fund, 2009). For the majority of nonprofit organizations with already limited resources, the challenges outlined above will require fundamental structural changes. For some, the solution is sharing services. Most nonprofit organizations have a traditional organizational model with their own core operations such as purchasing, public relations, human resources, IT support, equipment, and workspace. The current economic crisis is leading nonprofit organizations to look for new, cost-effective structures. Shared services offer a long-term solution by allocating much-needed resources across traditional organizational boundaries. Shared services increase purchasing power and reduce costs, increase operating efficiency and reduce risk, improve access to high-quality services, and foster the collaborations that lead to program innovation. Experiences in the private, public, and nonprofit sectors prove these gains are possible when shared services are designed effectively. The NonprofitCenters Network www.nonprofitcenters.org 2010 The NonprofitCenters Network and Tides. 9

Shared Services By Sector Private Sector The trend to develop shared services originated in the private sector in the late 1980s as a response to changes in the economic climate. Businesses aggressively outsourced overhead functions to reduce costs. New technology solutions and customized production techniques increased the need for coordination along the supply chain. Increased competition in global markets furthered the need for organizational partnerships and strategic alliances (Cooke, 2002). By 2002, approximately 80% of Fortune 100 companies had implemented some form of shared services (Cooke, 2002). Between 2001 and 2003 an estimated 20,000 strategic alliances were formed in the private sector, with the number of businesses forming alliances growing at 25% each year since 1987 (Zineldin & Bredenlöw, 2003). Corporate executives continue to implement shared services today because of the benefits they generate. A majority of executives surveyed report that the benefits achieved from shared services in the private sector include: n Reduced costs n Performance improvement n Increased productivity n Better functional technology n Increased collaboration and teamwork Public Sector A 2005 survey indicated that, internationally, 66% of the senior government executives asked were already engaged in or developing shared services. Most executives also described shared services as very important to meeting current business challenges (Accenture, 2005). Nonprofit Sector Collaboration is a long-standing strategy in the nonprofit sector, in part, fostered by funders. However, very little quantitative information is available about the number of successful shared services programs currently operating in the nonprofit sector, though one study reported that 65% of nonprofit organizations with budgets under $1 million engage in cross-organizational alliances (Kohm, La Piana, & Gowdy 2000). While sector-wide research is scarce, numerous studies provide information about shared services strategic restructuring, strategic alliances, mergers, and other strategies used by nonprofit organizations (Kohm, La Piana, Gowdy, and McCambridge are just a few sources in this large field of study). Other sources describe shared services models employed within a variety of specific fields, such as early childhood education, (the Merage Foundation) (Stoney, 2009), anti-poverty through asset ownership (McCulloch & Woo, 2008), and health care access (Crooks, Spatz, K.J., & Warman, 1997; Ginsburg, 2008; Wellever, 2001). Executives further claim that by implementing shared services, costs were reduced an average of 14%. Most also thought shared services improved their employee recruitment and retention efforts (AT Kearny, 2004). The NonprofitCenters Network www.nonprofitcenters.org 2010 The NonprofitCenters Network and Tides. 10

WHAT BENEFITS DO SHARED SERVICES OFFER? Purchasing Power By purchasing services collectively, organizations can take advantage of bulk purchasing discounts and economies of scale. This helps organizations build their purchasing power by lowering per unit prices and generating new savings typically available only to large institutions. Efficiency Shared services reduce the duplication of functions and infrastructure across nonprofit organizations. Through shared services, organizations decrease the expense of redundant services and increase investment in programrelated activities to fulfill their missions. Shared services can also standardize processes across organizations, leading to faster service. Employee Retention Centre for Social Innovation: Affordable Community The Centre for Social Innovation (CSI) in Toronto offers shared facilities and services for 170 member organizations. Organizations pay an affordable base rent for workspace, plus an amenities fee to cover shared services. The financial savings are important, but only part of the value, as the center also creates important opportunities for social networking and collaboration. More information about the Centre for Social Innovation is in Part 4: Case Studies. Nonprofit staff are often forced to fill a variety of roles. Shared services can offer the opportunity for both skilled technical staff and program staff to focus on their core competencies, creating higher job satisfaction. With staff resources focused on their specialties, organizations can realize better quality control and reduce their overall risk. The most important thing that tenancy at CSI has done for my organization s ability to achieve its mission is to [give us] access to a healthy, inspirational environment where our own ideas can be tempered against like-minded people, groups, and organizations, greatly increasing access to a talent-pool of social capital, and thus significantly improving our overall organizational development. Tenant Centre of Social Innovation, Toronto The NonprofitCenters Network www.nonprofitcenters.org 2010 The NonprofitCenters Network and Tides. 11

Quality Resources Shared services allow nonprofit organizations to access specialized expertise, improved services, and new technologies that could otherwise be unaffordable or unavailable. Often agenices have differing levels of sophistication and/or capacity. Generally shared services provide the opportunity for all agenices to rise to the highest level of service, utilizing best practices. This situation leads to an increased capacity for agencies currently operating at a lesser level of service. An example of this would be an agency that used dial-up access for Internet suddenly having access to T1 services. Collaboration and Innovation Shared services are founded by organizations that want to work together to better serve their communities. Successful collaboration can generate cross-organizational learning, improve service coordination, and broaden constituent access to community agencies. Shared services organizations can go a step further to facilitate innovative programs that cut across traditional organizational boundaries. Stability and Investment When mission-based nonprofit organizations create shared services programs, they are creating long-term systems to keep the associated resources, expertise, and financial exchange in the nonprofit sector. Shared services can also provide built-in back up, reducing the risk of losing institutional knowledge and practice when an individual staff person leaves, and creating overlapping service teams. It is comforting and supportive to be in the company of organizations that share our goals of making a difference. MACC CommonWealth, LLC: Minimized Risk MACC Commonwealth was founded in 2007 to provide shared administrative and program services to leading human service providers in Minneapolis/St. Paul. MACC Commonwealth currently serves ten member organizations with shared human resources, information technology, and financial services. Among the many benefits, shared services have reduced risk for all participating organizations. Instead of relying on individual employees or service providers, member organizations access a larger shared services team. This improves the standardization of services and at the same time reduces the risk of fraud. For more information about MACC CommonWealth, visit www.mcwmn.org. npserv : Enhanced Services NEW in Ann Arbor, Michigan, offers shared information technology services with the npserv system. Through npserv, nonprofit organizations utilize a centralized server, Linux software, email, and data management systems that are managed by a team of information technology experts. Participating organizations reduce investment in hardware and software while gaining access to high-quality maintenance and security systems. npserv also provides affordable, on-call, technology support. More information about NEW s npserv program is in Part 4: Case Studies. Kate Sipples South Africa Partners, tenant of Third Sector New England s NonProfit Center The NonprofitCenters Network www.nonprofitcenters.org 2010 The NonprofitCenters Network and Tides. 12