Outsourcing can be a risky business, but can save money if properly managed. Emma Rubach offers some guidelines.
As the market for outsourcing matures, charities are becoming more daring about which functions they choose to hand over to third parties.
Where originally only HR, payroll and IT tended to be outsourced, a range of back-office and front-line activities are now looked after by other companies. Before rushing into agreements, charities need to be aware that outsourcing can be dangerous - working with a third party means handing over control of your image, for better or worse. But handled correctly, outsourcing can give you access to specialist skills that you don't have in-house - and it can save you significant amounts of money. This guide shows you how to avoid the pitfalls and protect your brand.
1Be aware of what is involved "Without understanding how outsourcing works, your expectations could be unrealistic," says Richard Fifield, director at Tenon Outsourcing. "The general level of understanding is not as good as it could be. A good outsourcer should be looking to drive down costs, but cheaper might not mean better quality."
Outsourcing can also lead to redundancies, raising the issue of complex negotiations under the Transfer of Undertakings (Protection of Employment) Regulations (Tupe). Although most charities won't have to worry about Tupe, it is worth bearing in mind. The NCVO's The Good Financial Management Guide has a section on outsourcing.
2Communicate As with all relationships, the key to healthy outsourcing is communication. Before committing yourself to a contract, it is important to make sure the outsourcer understands who you are and how you want to be represented. "Charities often say 'we're giving you our donors, our lifeblood'," says Damian Hanna, charity sales manager at direct mail and call centre specialist AMA. "Representation is very important - in outsourced call centres, calls require confident, empathetic people."
Your outsourcer should make every effort to give employees training to ensure they understand your requirements inside out. Some street fundraisers spend a day with the charity they will be working for to help them understand its mission and purpose, for instance.
3Decide where your image ends and the outsourcer's begins Good results rely on planning. It is crucial to prevent mixed messages, so decide from the start whether to come clean about outsourcing or not. Many organisations keep their outsourcing confidential, especially if it involves sensitive financial functions. But remember that in some circumstances it could be damaging if a supporter later finds out that the charity representative they spoke to is actually from another company. "A lot of organisations make the mistake of not considering this," explains Mark Freeman, chief executive of Charity Business. "Will the outsourcer act on behalf of the charity, or say it is that charity? A lot of organisations fall into their outsourcing proposition, when they should be deciding their business objectives and requirements before they enter the marketplace."
4Use a specialised outsourcer The market for outsourcing is becoming saturated with companies offering to take the work off your hands, from book-keeping to recruitment. But few specialise in charities. Look for a company that has a dedicated charity arm and ask for references from its current clients. "There are very few outsourcers who work solely in the charity market," explains Freeman. "The decision-making process for charities tends to take longer, and you need an organisation that understands that."
5Negotiate an effective service-level agreement The devil is in the detail. Tearcraft, the commercial arm of aid charity Tearfund, got its fingers burned when its fulfilment supplier failed to deliver the goods for Christmas. Neil Stevens, incoming UK business manager, terminated the relationship with the company and moved Tearcraft's business to Prolog.
"The problem was caused by the fact that we weren't sure what we needed, so the outsourcer was unsure and the job didn't get done," he says. "When pitching, a company will say anything is possible. We spent a long time setting out what was needed with Prolog. The key was a service-level agreement and a contract that says these requirements will be met."
6Keep talking "If you have to start talking about the contract, things have gone wrong," says Stevens. Don't let grievances grow to the point where lawyers are involved. Work to ensure both outsourcer and charity know where they stand, what is required of them and who is responsible for which part of the deal. "Grey areas are the death of outsourcing," warns Tenon's Fifield. Problems can develop if a function is handed over to the outsourcer without understanding, on both sides, of the implications.
"The charity should offer a complete breakdown of what is being transferred," he says. "And the outsourcer should be able to map the process effectively so everyone knows what to expect."