Too much work and not enough staff to go around? If being understaffed is getting you down, you might consider outsourcing your human resources function. It could give your staff more time to spend on your nonprofit’s other core duties, mission-driven programs and strategic plans.
Here are some suggestions to keep in mind if you’re thinking about outsourcing part or all of your HR work.
Weigh the benefits
First off, you’ll need to decide which segments of the HR function to “farm out.” Take a look at recruiting, training, benefits planning and administration, compliance monitoring, leave management and performance reviews. These are all labor-intensive responsibilities where expertise counts. Transferring all or some of them to the right outside party can vault your organization to a higher level of professionalism and efficiency in those areas.
The move also might result in improvements. For example, an HR specialist firm is likely to have more tools, contacts and time to spend recruiting new employees than your own organization has.
Calculate the costs
Let’s face it: You’ll appreciate the savings in staff hours caused by a decision to outsource. But the primary draw for most not-for-profits is reduced costs. So you’ll need to perform a cost-benefit analysis, and your CPA can assist with this step. Even if the cost is more to outsource, you may decide that the extra dollars are worth freeing up staff hours for other initiatives.
Gauge the drawbacks
One of the biggest drawbacks to outsourcing is the loss of control. That’s why it’s important to think through the ramifications of handing off various HR responsibilities. Certain tasks may require an understanding of your organization’s culture and history to be effective. Also consider the impact of letting go any HR people currently on staff who’d duplicate the outsourced work.
Before you contact outsourcing service providers, make sure you have buy-in from your staff and the board of directors.
Prepare to launch
Once you’ve researched and met with outside service providers (see “What to ask an outsourcing firm” for some tips), you’ll want your attorney to review the contract.
And after you’ve committed, but before you make the big change, be sure that you have controls in place to monitor the quality of the new arrangement. Your CPA can assist you with this. Also appoint one or more individuals to test those controls regularly.
Look to the future
If you’re happy with your new arrangement, you might want to explore other areas of your operation as possible outsourcing candidates. Those could include payroll, IT, bookkeeping, financial management, purchasing or marketing and communications.
Sidebar: What to ask an outsourcing firm
Before you choose a firm to handle your human resources function, you must do your homework. The Nonprofit Coordinating Committee of New York, comprising about 1,500 nonprofit managers and leaders, suggests asking these questions in person to three service provider candidates:
- What is the scope of your service, in detail?
- How long have you been in business?
- Where are your services typically provided: on-site, off-site or a combination?
- How many nonprofit clients do you have in my area, sector and size?
- Can you provide references for three nonprofit clients of similar size and complexity to my organization’s?
- How do you charge for services: hourly or on retainer?
- Who’ll I be directly working with?
- What will you expect of our organization, including the board and staff?