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A Proven Solution for Reducing Costs and Improving Services
The prolonged economic downturn has nonprofit organizations in the arts focusing on two major challenges simultaneously: On the one hand, they must concentrate heavily on increasing funding and donor engagement; on the other, they must cut costs and continue operations with limited resources.
Arts organizations need new solutions that deliver impressive results to enable them to thrive and grow as the economy recovers. To move beyond doing more with less toward achieving sustainable cost savings, nonprofits can adopt a concept well established in the for-profit sector but not commonly used in the nonprofit sector. By adopting shared services, arts organizations can achieve savings in both time and cost while also increasing revenues, delivering dramatic service improvements and improving the efficiency of operations. Our experience has shown that shared services can improve performance and decrease costs by up to 25–30 percent.
Nonprofit performing arts and cultural organizations operate in an environment of many pressures. They must further their missions while facing falling public attendance; declining revenues from donors, granting agencies, and state and federal governments; and increasing accountability by boards of directors and donors. Compounding these issues are high operating costs that are compelling executive directors to cut internal operating costs and/or reduce services.
Determining whether shared services is a viable solution for an arts organization begins with taking a hard look at whether there are consistent pain points within internal operations or whether some activities could easily be transitioned to another party while allowing the organization to continue managing normal business. Many organizations in the arts, for example, struggle with maintaining financial systems, supporting ticket and customer service, obtaining IT guidance and 24/7 help desk support, and providing the full breadth of human resource functions.
Shared services consolidates and standardizes administrative or support functions (such as human resources, finance, information technology, procurement, ticketing and call center operations) into a single organization that provides common services efficiently, using personnel with deep, specialized business process skills. Shared services will allow arts organizations to spend less time on routine administrative tasks and more on revenue-generating activities and on their core missions.
As arts nonprofits look at ways to cost-effectively operate in the weak economy, shared services should figure prominently into their plans. The model is based on the sharing of services across organizations, allowing each to take advantage of economies of scale to obtain high-quality services at a competitive cost. Moreover, arts organizations have considerable opportunity to gain efficiencies and rigor through the use of standard, but well-developed business processes and a common business platform.
Additionally, arts organizations within a community or across communities can collaborate to achieve synergies and benefits with the shared services model.
The initial focus for arts organizations transitioning to shared services is on cost savings and cost avoidance. Organizations, however, should also seek opportunities to reap additional value from shared services, such as in making better use of an organization’s customer data to develop higher levels of analytical sophistication.
August 23, 2012
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