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The Nonprofit World Becomes Flat: How Technology and Economic Needs May Shrink Our Globe

The nonprofit sector can take advantage of the outsourcing movement.

Ashish Pandey is an experienced finance and accounting manager living in India.  Pandey’s main clients are nonprofit organizations in the United States.  From a small town, Pandey states that his “parents are proud that I am working for US” organizations and “my community members look up to me and inquire as to how they too could get in to this sector.”

Several years ago, Fiscal Management Associates (FMA) decided to look into the world of outsourcing.  FMA is a New York-based accounting firm serving nonprofit and philanthropic organizations throughout the United States.  Andrea Mills, a Director at FMA, stated,  “We decided to outsource the data input accounting function for a variety of reasons”, citing those examples for pursuing outsourcing includes lowering the cost point for data entry services, allowing organizations greater flexibility to pay for the higher level fiscal management services and removing staff burnout/turnover from continual travel to clients. 

Arun Parameswaran serves as the Chairman and CEO at the Astutant Group of Companies (AGC).  AGC works with organizations in providing overseas workforce assistance to groups in the United States. FMA is one of their clients and Mr. Pandey is a staff member.  Together all three of these parties provides financial management assistance to dozens of nonprofit agencies throughout the United States.

Mr. Parameswaran believes that outsourcing is the only viable solution to the growing shortage of skilled labor in the US and in most other parts of the developed world, particularly in the accounting industry. Parameswaran, also a CPA, stated that the American Institute of Certified Public Accountants (AICPA) forecasted a shortage of several hundred thousand CPA’s in the United States by 2014, and “the industry realized that something had to be done about this.”  AICPA stated in a 2007 article that “like their for-profit counterparts, nonprofit organizations face the challenge of a talent shortage.”

How It’s Done – Technology Makes A Big World Small

Outsourcing has long been a staple in the for-profit world and thinking about its applicability in the non-profit sector grew at the end of the 1990s.  According to Dennis Winkler, one of the early initiators of non-profit outsourcing, stated as early as May 2000, in the edition of Fund Raising Management, that “the non-profit world has encountered a number of changes that are, in some instances, radically modifying the way that non-profits manage their business functions, from accounting to human resources.  To compete and succeed over the long term in this new environment, many visionary executives are choosing to outsource part or all of their back-office functions to outside providers.”  Technologies, like cost-efficient Virtual Private Networks (VPNs), have made these choices easier for many nonprofit executives in recent years.

According to Parameswaran, VPN providers like Go-To-My PC or LogMeIn are used to complete work for host organizations like FMA. These systems are advantageous because it “secures ways out there to get the work done” and is “a flexible and scalable because we work within their existing document management and workflow management systems”.  FMA’s Mills also values VPNs, citing an example helping a client in Mexico City prepare for their financial presentation to a major foundation.  FMA was “able to show her my computer in New York City and show her how I would put together the financials”.  FMA also utilizes Skype for face-to-face conversations such as “a finance committee presentation with a client or just to see each other from a distance”.

Challenges with Outsourcing

When asked about the challenges to outsourcing, Parameswaran stated “We have heard all the objections to outsourcing time and again. These are staff objections, unpatriotic, exploits third world labor, security etc. and we have rebuttals that are logical and real to address each one of these concerns.  The reality is that there are not any negatives for anyone involved with outsourcing. I have never worked with an organization that has laid off anyone because of outsourcing. In fact the whole aim of outsourcing should be to elevate existing talent to a higher level so that they can be more productive and prosper. Any other method just does not work”.  Both Mills and Pandey also cited very little negatives about outsourcing.

In a 2006 McKinsey Quarterly article entitled “Eight Business Technology Trends to Watch”, the article stated, “As more and more sophisticated work takes place interactively online and new collaboration and communications tools emerge, companies can outsource increasingly specialized aspects of their work and still maintain organizational coherence.” Lina Srivastava is the Principal of Srivastava Consulting, and in an October 2008 blog posting stated that “because of the problem of financing, nonprofit organizations are more stretched than ever. Nonprofit staff members often wear more than one administrative hat to keep within budget. I’m not certain how many nonprofits outsource or off-shore their administrative activities—or even how many create partnerships with other nonprofits to share back office or program/service delivery functions—but since interactive technologies are making it easier and less costly to integrate and manage the work of outsiders, a number of functions can be outsourced here or abroad by nonprofit organizations.

In the nonprofit world, whatever are the potential challenges with outsourcing; they are far outweighed by the advances in technology and needs of the sector.

Future of the Outsourcing Movement in the Nonprofit Sector

FMA has ambitious plans for its future and it significantly involves outsourcing.  Mills stated, “I would ideally like to service clients all over the world.  Most of our client base is in New York City, but we are steadily growing our national and international practices.”  Mills believes that outsourcing will grow as a way for organizations to get the best accounting support at the best price point, stating “In a recent article I read, one organization outsources all presentation development and research so that their managers can focus on prep and client service.  They have increased staff morale and allow their staff to have more time to focus on client issues and solutions.  This is what I want our team to focus on and not on data input and reconciliations.”

Parameswaran also states that his firm AGC is currently working on initiatives to blend on-shore and off-shore talent to create comprehensive project-based or problem-based solutions for organizations and Pandy states that “working in this sector has generated an elated sense of responsibility. I gained practical experience and avenues to apply the knowledge that I have gained while in pursuit of CMA qualification. I have learned a lot in regards to cross-cultural work ethics”.

Read more stories by John Brothers.

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