Nonprofits Can Benefit from Outsourcing HR

Focusing on ambitious goals with limited funds, nonprofits often adopt a DIY or bargain-hunt approach to their human resources functions. They typically handle everything in-house with well-intentioned, but less experienced, HR staff. When they do seek outside solutions, they frequently settle for the cheapest option.

Nonprofits can achieve sweeping efficiencies, high employee satisfaction and reduced risk by switching to an external HR services provider. Outsourcing HR administration, payroll and benefits can yield big returns for nonprofits in several areas, while allowing them to focus on their core mission.

Focus on the mission – HR is not the mission.

Nonprofit leaders don’t choose to join their organizations because of the busywork that HR administration and management entails. They do it to make a difference by focusing on their organizations’ missions. Also, donors and grant-making institutions that fund nonprofits are pressuring nonprofits to quantify their return on investment. Given these two dynamics, passion and ROI, why hire expensive internal HR talent that will divert resources from that mission and reduce the return on investment?

Justin Miller, CEO of Slingshot Memphis, has used an HR services provider since forming his organization in 2016. Inspired by similar organizations in New York, San Francisco and Washington, D.C., Slingshot fights poverty by using investment principles and data to help other nonprofits maximize the impact of their current resources.

“The term ‘resources’ refers to financial capital, but it also refers to time,” said Miller. “Opportunity costs are very real. When I need an employee handbook, an attorney consultation or a payroll change, it’s off my to-do list with a quick call or email. Because they do all of these things, I can focus on encouraging my staff, working with organizations and raising money.”

“For a single low price, I can work seamlessly, connecting to HR specialists whenever I need them,” explained Miller. “We went through an audit, and our provider took care of it. Now our auditors go directly to them. Services like that save me a tremendous amount of time and money.”

Avoid costly compliance mistakes – get it right out of the gate.

A compliance or legal issue can place the organization and its board members at risk, erode funder confidence and trigger an exodus of valuable employees. When compliance or legal issues become known to the donors, they can feel blindsided. Donors are giving of their time and money under the assumption that these nonprofits are operated and managed in a compliant manner. So, when problems arise, funds and extra sets of helping hands can cease to exist. Nonprofits often wait until there’s a problem before consulting with an outside HR services provider. At that point, it’s about damage control.

Compliance issues can also arise in unique situations such as payroll tax and workers’ compensation insurance arrangements. Partnering with an HR services provider from the start reduces the risk of audit discrepancies and relieves the nonprofit from mountains of paperwork. It ensures that an experienced HR team applies best practices in every aspect of HR from the onset.

Leverage instant, scalable professionalism.

Another advantage of outsourcing is scalability. It enables nonprofits of all sizes and in all stages of growth to operate as an experienced, compliant employer without having to build a complex and costly HR function internally. Outsourcing provides a buttoned-up experience for employees regardless of how fluid the rest of the organization may be. From their first day at work, employees have manuals, necessary forms and contact information for a dedicated HR specialist.

“If my employees have an HR issue, they call our provider directly and their experts resolve it fast,” said Miller. “My employees are receiving great service; and I’m saving a salary, desk space and coffee for someone who has the specialized skills we need.”

Recruit and retain top talent.

Many of today’s nonprofits are big-brained organizations tackling complex challenges. They’re competing to hire white-collar professionals, such as analysts, strategists and technology experts, who expect attractive benefits packages. HR services providers can easily compose benefits packages that allow even small- and medium-sized nonprofits to vie for top-notch talent. At Adams Keegan, for example, we use our deep knowledge of nonprofits to advise clients on salaries and benefits. We know how to craft an offer to make the candidate say “yes,” while also aligning it with market forces and the nonprofit’s best interests.

Partner with an engaged advocate.

Nonprofits are fueled by people and their passion. Consequently, how an organization takes care of its employees will dictate its success. Adams Keegan works with dozens of nonprofits of various sizes and missions, from major, national organizations with a broad scope to local nonprofits with more of a niche focus. We know our solutions are working when our clients’ employees are happy and focused on their mission.

We engage personally to help nonprofits succeed. We meet with clients regularly to understand what’s going on in their organizations. Often, we serve on their boards and volunteer within their organizations. Whether it’s recruiting, harassment complaints or restructuring, we’re always on standby with guidance and expertise. This depth of support is not available from a pure payroll provider or an HR novice.

Improve efficiency with individualized solutions.

No two nonprofits are exactly alike. An HR outsourcing partner should be able to structure and individualize services to make the most sense for each unique organization. At Adams Keegan, we offer our nonprofit clients a customized matrix of HR service options to match their culture and to help them recruit and retain the talent they need. These services include options, such as health and voluntary benefits and workers’ compensation insurance, that can further reduce costs.

Nonprofits that are paying for in-house HR staff, and believe outsourcing is too expensive, may want to rethink their strategy. In an era where ROI overrules the heart, outsourcing is a must.

Trevor Benitone is a Nonprofit Practice Leader at Adams Keegan.

This article originally appeared in Greater Memphis Chamber.