Saving the Pennies That Save Lives Helping a non-profit organization and its chapters embrace efficiency to do more good DOWNLOAD

Abstract

A large non-profit relief organization with hundreds of local chapters throughout the United States wanted to reduce costs and improve standardization and control across the enterprise. Deloitte helped them in their efforts to design and implement major improvements in a variety of areas, including employee benefits, sourcing and shared services. The result? Tens of millions in annual cost savings - money that could be redirected from administrative needs to helping more people and better serving the community.

The Challenge

Non-profit organizations share a quality that makes them effective in their work, but less efficient in their operations: They are not built like other businesses. While many of their people combine a fierce sense of purpose with solid managerial skills, their structures make it difficult to implement technology or efficiencies that would be of paramount concerns in for-profit companies. We found dedicated, capable people throughout this organization - but they were working in a compartmentalized environment that didn't make the most of their contributions.

The organization depended upon local chapters whose autonomy made it difficult to build in standardization or economies of scale. This decentralized structure brought more relevant, personal assistance to the communities the chapters served, but resources that could have been applied to people in need were instead applied to administration and duplicative overhead costs.

As with many improvement efforts, their biggest challenge was changing attitudes and behaviors. The members of this organization had to buy-in on the idea that bottom-line management isn't the enemy of charitable intentions - that profit isn't the only reason to use resources efficiently.

How We Helped

Deloitte helped the organization in their efforts to reduce costs and improve effectiveness through a series of improvement initiatives. A big key to success was getting people throughout the organization to understand and embrace the changes. This required strong and visible leadership from the national office, as well as broad involvement from local chapters.

It also required extensive training. Whereas a similar initiative in a for-profit environment might have used communications strategies focused on cost reduction, we helped this organization tailor their messages in this case to stress the additional good people would be able to do if the organization were more efficient with its resources. Pilot tests helped demonstrate this level of improvement was not only idealistic, but realistic.

The Deloitte team spent more than a year in close, daily contact with the organization. We began with a targeted team of infrastructure operations and human resources service delivery practitioners, who helped the organization perform a feasibility assessment. In the design and implementation phases, our presence expanded to include practitioners from manufacturing operations, finance, strategy, technology, capital markets, organization and talent and total rewards service areas.

Solution

A series of improvements were designed and implemented to help the national organization and its hundreds of chapters function more efficiently and effectively as a cohesive unit, including:

• Benefits. Across all of its chapters, the organization offered more than 500 medical plans through more than 90 different providers. The focus of this initiative was to provide standard medical coverage to all full time employees, and to improve efficiency and purchasing power while reducing the legal risk of non-compliance. Our team assisted the organization in migrating all local health care plans to an enterprise-wide benefits program. We also helped them create a Center of Expertise for the benefits function that was integrated with human resources (HR) and payroll, to help simplify administration and reduce administrative resources, all while improving service levels. This approach generated more consistent medical benefits, increased employee participation and allowed for $12 million dollars in annual savings.
• Sourcing. The organization was not fully taking advantage of its scale or brand to help maximize savings across spend categories. There was significant overlap throughout different parts of the organization, with each unit managing common spend elements independently. Purchasing staff were mainly focused on tactical activities, and different parts of the organization did not follow a consistent procurement process or methodology. Our team worked with stakeholders from the business functions (e.g., IT and HR) and local chapters to help the organization design and implement new strategic sourcing processes, and to establish governance structures to drive compliance and sustain savings in a complex, federated operating model. As part of the effort, we helped them design and conduct a successful four-month pilot test across six key spending categories. In total, they expect the sourcing improvements to reduce non-personnel costs by 30 percent, saving the organization more than $40 million a year.
• Shared services. The organization did not effectively share back-office processes, procedures, or technologies, making it difficult or impossible to operate efficiently. The solution was to create shared services solutions for back-office functions, including finance and accounting, HR, payroll, logistics and fulfillment (supply chain), donations management and benefits. They expect the shared services model to reduce costs by 10 to 20 percent, saving the organization tens of millions a year. They also expect it will help them improve transparency, visibility and comparability of data; enhance financial controls; reduce administrative costs; and become more forward-looking and less reactive.

While these tangible improvements and benefits were the most easily measurable outcomes of their initiative, the organization's leaders also expressed appreciation for the way we helped them customize a business perspective to serve a non-profit environment. Through this series of projects, we helped them change the way people across their organization think and behave - which enabled them in turn to deliver more help of a different, life-changing kind.