5 Great Truths of Installing Shared Services, Part 2
Below is a full interview from each person quoted, and more. These interviews contain much information about the technical elements of installation of shared services. While some of these interviews didn’t fit in the narrative from part 1, there is still great information here if you are getting ready to jump into this endeavor.
Ed Lord, currently regional VP at the USO, led the American Cancer Society’s standup of shared services from 2001 to 2004. At the time, he said, no national nonprofit had put together a shared services effort.
He recounted, “I had done a mini shared service in Pennsylvania when I was there (in the ACS Pennsylvania Division), and my ideas were adopted nationally. I didn’t really want to go to Oklahoma (the intended shared services location) and work on it, but they were insistent to the point of calling my wife! We got her on board with it, so we went for two years and wound up staying for three.”
Ed described, once in the chair, he was visiting for-profit corporations to gain an understanding of his path in terms of the end product he would ultimately deliver to the organization. But even more important, he said, was buy-in from every segment of the organization, from his own leadership in the C-suite to the field level.
The ACS at the time was not a consolidated organization. Ed’s first job was to sell the idea of shared services to the divisions. He noted that the fact he came from a division helped immensely in gaining trust and demonstrating an understanding of the division viewpoint.
His first formal step was to form a group to study the idea at large. From there, he and his team formed user groups. This overarching group established a guiding principle. Ed said, “We kept them focused with ‘What is essential for division or chapters to do themselves, and what is keeping them from it?’”
Resulting from the work of this group, his team decided these three things were drive their efforts and become their mantra:
- Cost savings by installing shared services
- Opportunity costs if no shared service was present
- Potential for improved relationships with donors
After that, user groups were composed to address major functional areas. He said, “My strategy was to use user groups to get input and have those groups put out reports about what was needed. That way we had buy-in and also had insight into their pain points, even though we knew many of those already. When we got pain points, we purposefully addressed their issues. It was about their pain and increasing efficiency.”
These user groups also ultimately helped take the message to the field. He said his team put together speaking points for the user group members. As an example, he gave, “If development people ask about money oversight, say this: ‘You’re going to have full visibility with batch views, etc. And oh, by the way, this will speed things up.’”
User groups were organized in these areas:
- Human Resources
- Field development
- Division development
The First Services Delivered
The first shared services put forth were:
- Accounts payable
- Data processing, including inbound donations, expense reimbursement, etc.
Ed said, “On accounts payable, everyone was doing it differently. We had no insight into total spending. But we were able to put that together with purchasing to find savings.”
“Purchasing,” he said. “That was a no-brainer. They were all buying separately. As an example, we went to one design for tees. It was hard to put through. We had 10% waste, but we still saved so much money, even with that. We always had extras and had no reorders. With Relay growing so quickly, having that tee at the event was huge.”
Data processing’s installation as a shared service was bolstered by expense reimbursements being sped up tremendously. Ed said, “The much faster process my team provided helped the idea of shared services become accepted.”
Finally, the services were identified, installed and ready to go. When the switch was flipped, he said, “Everything broke. We hired managers we thought would manage the process, and we had to replace them all because it turned out we needed innovators instead. So many problems came up when we actually did turn it all on that we had to do a lot on the fly to figure it out.
“Everything broke. We hired managers we thought would manage the process, and we had to replace them all because it turned out we needed innovators instead.” Ed Lord
“I personally put together the direct mail process for the whole country. But we couldn’t keep up with the inbound mail. It couldn’t be processed because we couldn’t scan it quickly enough. Finally, we figured out a batch system that fixed it. We invested in a lot of tech that changed very quickly. Now it’s easier… laws have advanced as well as tech. Now, for example, you don’t have to send a physical check; you can send the image. Then, we had to have the check.”
These failures were challenging as many people were poised and ready to tear down the effort. He continued, “One of the biggest fears we faced in installing shared services, consolidations and mergers is this: Will I lose my job?”
But in this case, he said, Relay For Life’s exponential growth during that time meant that he could say, “You (this division) can determine that, but here are the expected cost savings year one, two and three.” We’ll save you money and give you more to work with, more money to pay these people.” Ed thought that the installation of shared services was important to the exponential growth of Relay, “We were able to support it, and it was moving at light speed. Relay would have faltered without us.”
Division pushback was intense. Ed categorized it into “real” and “not real.” Real, he considered to be: job security and oversight on the money. Not real he considered to be: “My volunteers will hate this. I’m getting donor complaints.”
He continued, “There was a lot of stuff that wasn’t being done well. They (the divisions) didn’t want us to know that. They didn’t want oversight.”
In response to the initial failures and continued pushback, Ed’s team continued to develop the services and add new ones, like customer service.
While success was important to the overarching goals of the ACS, Ed’s team had an even higher stake: “We were told within a couple of years we had to survive on the fees we were getting from divisions to support our budget.”
Mark Payne had a different seat on the same bus as Ed, helping the ACS consolidate services. Mark served in various roles at the ACS, from VP of a Relay For Life business unit in a division to nationwide workgroups for shared services.
Mark’s largest project was working toward a nationwide t-shirt and promotional goods consolidation, with Ed. Later he worked on the support of event logistics and digital support.
Mark commented, “In retrospect, although some processes were later modified, it’s important to strike a balance between centralization for overall efficiencies and the localized and volunteer-driven efforts, especially in a volunteer-driven model.”
“In retrospect… it is important to strike a balance between centralization for overall efficiencies and the localized and volunteer-driven efforts, especially in a volunteer-driven model.” Mark Payne
“What made Relay For Life a volunteer-driven event was the entrepreneurial mindset. Each event was at a different level of recognition (of volunteers). Some were not appropriately or consistently providing acknowledgment (recognition) to their volunteers at the local event level. For that reason, it did indeed elevate (in importance) how the organization acknowledged their volunteerism in the aggregate. For those events that had the proper recognition practices already in place, the change brought each event to an overall similar branded recognition experience with the use of such promotional items. For some, that changed what was historically unique with their local experience, to some degree.”
While Mark did not comment on opportunity costs or potential for improved donor relations, (from Ed’s guiding principles) he felt that overall savings from installing shared services equated to about 10% of the expense. He also noted that staff responded very positively to having the t-shirt effort handled by the national organization, and that the brand was stronger based on this tactic.
Like Ed, he felt that staff concerns about any negative impact on volunteers were not ultimately proven out. He said, “As for the t-shirts, consolidating suppliers did not have a negative impact on volunteers or staff, from what I recall. The cost savings overall was significant and volunteer leadership consistently valued the reduced expense associated with their event. Consistent branding of events was a huge win.”
John Vranas has seen the inside of several notable national nonprofits, giving him a rare perspective on shared services. Most recently the chief development and marketing officer of the Humane Society of the United States, here John talks about his experience with shared services at Make-A-Wish. He describes the close relationship between installing shared services and the cost of shared services to the affiliate.
“Make-A-Wish America,” he said, “is federated. When I was there in 2014, there was a set dues structure at 6% to 7%. Shared services had a fee above that. What they wanted to do was set up the easiest commodities to handle (to be addressed by shared services). With 57 Chapters and 57 CFOs, 57 990s audited books, etc., clearly there was an opportunity. The question was, ‘Could the national office provide resources to help get this done without getting in the way of chapters being independent?’”
“The question was, ‘Could the national office provide resources to help get this done without getting in the way of chapters being independent?’” John Vranas
The effort, John said, was to get rid of redundancy and redirect human resources. He said, “It’s not so much a loss of jobs but a redirection of jobs. If a chapter had 25 people, you could hire them to do the other work of the organization. They went after the smaller chapters first. If they could prove the concept there; they would get more. They had the chapters broken down into three to four groups. For each group, A, B and C chapters. “A” were the largest chapters. Each group had one person who attended national board meetings (one per group with no voting rights). This gave them a voice to the board.
The national office was able to get consistency in their numbers. They were able to show the overall power of the organization. They had a separate person that reported to the CFO who was in charge of these changes. They provided reports to each chapter office. They had to provide the same reports with the same timing. For the national office, it was a loss leader. They (the organization) were not making money on this. The national office was financing it to a great degree. They were trying to recoup as much as they could so they could add more chapters so that it grew.”
Although the effort was a loss leader for the national office, it was not so for the chapters. He said, “The national organization wanted to make sure that the chapters saw a decrease in expenses. The chapters were paying a fee, but they were spending a lot less than they had (before shared services). They (national organization) wanted it to be a breakeven for the national office. Overall, the savings were enormous.”
Looking back, John said his takeaways were:“Find the chapters that want to work with you and work with them. Once they (Make-a-Wish) had another chapter come on to the program, it started to accelerate. You cannot bite it off all at once.”
As the Easter Seals’ VP of Business Development and Service Line Strategy, Marcy Traxler’s entire job is looking for opportunities to meet and exceed financial and operational targets and goals. A functional shared services plan seems tightly aligned to this charge. But Easter Seals has an affiliate structure with all entities incorporated as separate 501(c)(3)s.
Unlike many organizations that maintain this structure as a choice from leadership, Easter Seals has to collaborate with the Medicaid requirements of each state, as it is a provider of last resort for health care services. Also, the particular needs of each geography are highly variable in terms of mission delivery, requiring flexibility as well. The affiliate model allows each affiliate the flexibility required to meet state Medicaid requirements and local needs.
However good are the reasons for the affiliate model to be in place, the model can make “finding opportunities to meet and exceed financial and operational targets” pretty tough for Marcy. Despite that obstacle, Easter Seals currently manages these functions at the national level:
- Some direct response
- Planned giving
- Federal legislation lobbying
- Group purchasing — opt-in
- Corporate sponsorship
Strategic Plan Assisted the Shared Services Installation
The path, Marcy said, is through the strategic plan: “The strategic planning process was our path to collaboration. It was incredibly helpful in building trust. We started with a coalition of the willing. In 2019 we asked, ‘What do you think our priorities are?’”
“We did a two-day meeting with 70% of our affiliate CEOs. We started talking about how other nonprofits had changed their structure and why. We reviewed all these different ways to interrelate in a network. The conversation was anchored by the impact on the lives of the people we serve. We asked, ‘Can we measure our shared outcomes? What are a couple of key service lines we can begin to address?’”
At every stage, Marcy said, leadership met with the core work team. Then the organization held town halls, then held regional meetings… all of which impacted the strategic plan.
Currently, 30% to 40% of the 70 affiliates participate in collaborative digital campaigns, mostly smaller affiliates, according to Marcy, “They see the most benefit.”
While some direct response is collaborative, direct mail is not a collaborative effort, much to Marcy’s chagrin. She said, “We stopped doing this eight to 10 years ago. We were doing it in a very old school way, focusing on premiums. We were cultivating donors using the offers, not the mission. We’re slowly trying to turn this around. We have resistance at the affiliate level.”
That resistance, however, is being overcome through national efforts to deliver more value. She said, “We were functioning in an old-style way before our new CEO (Angela Williams) came. We were not forward-thinking. We kept trying the same thing with diminishing returns and (doing) that diminished trust.” She continued, “Our dues did not meet or exceed the value we brought to the affiliates in the old organization. ‘You get to use the brand’ was not enough, especially when our brand value had diminished. Now we have a ‘better together’ network strategy.”
While their federated status has only allowed an opt-in for shared services offering, Easter Seals has made forward progress on collaboration at the national level.
Marcy said, “We do shared service contracting at the national level, working with major payers on our service lines (Easter Seals delivers health care services). Those are contracts the national office will get, then we’ll impose a fee structure to share down to the affiliate level.
“We also do group purchasing. We said to the vendors, ‘If you can help us unlock the potential of the network, we’ll let you in. One hundred percent is this… which we won’t get.’ We’re at about 45% to 50% penetration of the network on bulk purchases. Now, we are trying to turn over some of our marketing in the same fashion.”
Shared Savings, Not Shared Services
Marcy said, “We formed CFO affinity groups to help us identify what we wanted to try and purchase as a group. We call this effort ‘shared savings,’ not services. It’s softer. It’s a journey. We slowly bring them along. The groups work toward shared benefits without a super formal structure. We feel we must bring them to a consensus about choice, by choice.”
“We feel we must bring them to a consensus about choice, by choice.” Marcy Traxler
Beyond affinity workgroups, other workgroups focused on, for example, “What’s an affiliate?” and “How do we measure success?”
One tactic Marcy’s team and leadership have used to collaborate more is to install regions that are driven by the CEO. In this effort, she said, “We have seen consolidation of affiliates (COVID-19-related), and Angela (Angela Williams, CEO) put in regions even before that. Over the two and a half years she’s been here, they started looking at themselves as regions versus a singular affiliate. That has helped us collaborate more easily.”
The rise of technology in everyday work is making the affiliate/national relationship even more interesting. Technology, Marcy noted, makes geography less relevant. She used telehealth, social media fundraising and a national database as examples, predicting a move to more shared services forced by technology rendering geography less important.
Also, with Easter Seals, Ron Ekstrand has had several interesting seats on the bus. After the prior CEO departed, Ron served as interim until the new CEO was installed. After that, he moved to lead the Arkansas affiliate as CEO and currently works on several workgroups. Earlier, Ron served nationally as the SVP of Network Advancement and Affiliate Relations. Even earlier, he led another Easter Seals affiliate as CEO.
Ron reiterated Marcy’s points regarding value-add: “The challenge that we have in the federated model is that national has no centralized control or ownership. Therefore, it must be a value-add approach. We have to ask, ‘What can a national do — because they can do it at scale or because there is a requirement for consistency?’ As an example, affiliates can’t do legislative advocacy in D.C. and speak with a common voice. The shared service element has to be clearly something we all benefit from by paying dues and having input.
“Using the advocacy example, every affiliate is very different. Those differences are driven by natural evolution and adaptations, dependence on particular funding streams, competition, labor markets, community needs and more. Given our mission, there is no consistent package of programs that are delivered from geography to geography. But one-off advocacy would not represent us well and would be confusing to legislators. It has to be delivered at the national level for consistency.”
Ron uses this scorecard when he works on shared services workgroups:
- Should we centralize this because we couldn’t do it well individually? Typically, this would include functions like benefits, human resources, IT and technology.
- Should we centralize because this function requires consistency across the organization? Examples would be advocacy and brand.
- Should we centralize because affiliates can’t do it on their own for the same price? Is there a value-add because of group purchasing? For example, at the affiliate level, I can’t hire a lobbyist in D.C. because I can’t spare the cost. National can.
- Should we centralize this because it saves time and offers greater efficiency?
- Should we centralize this because it is a nonstrategic function? We outsource non-strategic functions rather than build that expertise in house. As an example, we aren’t experts at benefits management. We should outsource that and avoid using internal resources to build expertise that is not core to the mission. That can be seen here — we are self-funding with regards to insurance, but we are not building the expertise in house.
- Should we centralize this function because it is easy to centralize it? Or should we not because it is hard to centralize it? How hard is it to get this function up and operating?
Like the other interviewees here, Ron took note of the human side of the centralization of services.
“There is the political, the social side of it,” he noted. “Getting people to accept the decision is tough. We have to go slow to go fast. People must have a say in the process and must agree on the principles. If they make the decision, then they will follow the decision. Their involvement avoids sabotage. Eighty percent of the effort is social, about the people. Twenty percent of the effort is technical.”
“We have to go slow to go fast. People must have a say in the process and must agree on the principles. If they make the decision, then they will follow the decision.” Ron Ekstrand
Ron also noted that shared services conversations can inspire fear of loss of autonomy or even a job: “I start with core values and the kind of culture we are trying to create. I focus on creating a work environment where people want to come to work. Financial results come from the results of customers’ experiences. Good service comes from happy employees. Most people jump into the cost/revenue side when talking about shared services or consolidation. But we must be intentional about the kind of culture we are creating. We need to have some way for key leaders to leave. We need, not a golden parachute but a buyout. Having that would refocus the executive on long term goals and the most important people — the client and those serving the client.”
Marcy and Ron both connect their shared services effort to their recently completed strategic plan. That plan has five interconnected objectives:
- Become the employer of choice.
- Deliver evidence-based practices deliver excellent service.
- Become the provider of choice.
- Become charity of choice.
- Ensure financial sustainability.
Otis Fulton, Ph.D., spent most of his career in the education industry, working at the psychometric research and development firm MetaMetrics Inc., Pearson Education and others. Since 2013, he has focused on the nonprofit sector, applying psychology to fundraising and donor behavior at Turnkey. He is the co-author of the 2017 book, ”Dollar Dash: The Behavioral Economics of Peer-to-Peer Fundraising” and is a frequent speaker at national nonprofit conferences. With Katrina VanHuss, he co-authors a blog at NonProfit PRO, “Peeling the Onion,” on the intersection of psychology and philanthropy.
Otis is a much-sought-after copywriter for nonprofit fundraising messages. He has written campaigns for UNICEF, St. Jude’s Children’s Research Hospital, March of Dimes, Susan G. Komen, the USO and dozens of other organizations. He has a Ph.D. in social psychology from Virginia Commonwealth University and a Bachelor of Arts from the University of Virginia, where he also played on UVA’s first ACC champion basketball team.
Katrina VanHuss has helped national nonprofits raise funds and friends since 1989 when she founded Turnkey. Her client’s successes and her dedication to research have made her a sought-after speaker, presenting at national conferences for Blackbaud, Peer to Peer Professional Forum, Nonprofit PRO, The Need Help Foundation and her clients’ national meetings. The firm’s work is underpinned by the study and application of behavioral economics and social psychology. Turnkey provides project engagements, coaching, counsel and staffing to nonprofits seeking to improve revenue or create new revenue. Her work extends into organizational alignment efforts and executive coaching.
Katrina also regularly shares her wit and business experiences on her and Otis Fulton's NonProfit PRO blog “Peeling the Onion.” When not writing or researching, Katrina likes to make things — furniture from reclaimed wood, new gardens, food with no recipe. Katrina’s favorite Saturday is spent cleaning out the garage, mowing the grass, making something new, all while listening to loud music by now-deceased black women, throwing in a few sets on the weight bench off and on, then collapsing on the couch with her husband Otis to gang-watch new Netflix series whilst drinking sauvignon blanc.
Katrina grew up on a Virginia beef cattle and tobacco farm with her three brothers. She is accordingly skilled in hand to hand combat and witty repartee — skills gained at the expense of her brothers. Katrina’s claim to fame is having made it to the “American Gladiator” Richmond competition as a finalist in her late 20s, progressing in the competition until a strangely large blonde woman knocked her off a pedestal with an oversized pain-inducing Q-tip. Katrina’s mantra for life is “Be nice. Do good. Embrace embarrassment.” Clearly she’s got No. 3 down.