Submitted by Jean Butzen on February 13, 2008 - 09:08

Human Service Agencies Merge Back-Office Functions to Save $20M Annually

Tough economic times are forcing all nonprofits, large and small, to think creatively about how to cut costs. One extremely unique example of this creative thinking was recently announced in Chicago where nine of the largest and oldest nonprofit United Way agencies agreed to form a cooperative partnership to share back-office functions for their nonprofit organizations. The nine founding organizations' combined budgets total over $300M and include the Metropolitan YMCA, Hull Housing Association, and Heartland Alliance (formerly Travelers and Immigrants Aid).
An article in Crain's Chicago Business on Feb. 4, 2008 explained that the nonprofits involved in this new cooperative expect to save an average of between 2% to 4% of their operating expenses, for a total estimated savings of $20M annually. The group claims that the primary savings will come from the benefit of combined purchasing power, and not from lay-offs.
"We're in dire straits right now with all of these factors coming to a head," said Laura Thrall, CEO of Metropolitan YWCA. "The savings are important because of what it will allow us to do." Co-op members plan to shift back-office savings into programs where demand has been far beyond funding capacity for some time.
The co-op has its costs, however. The Chicago Community Trust is committting a grant of $400,000 towards establishing the cooperative and the members themselves have agreed to pay a fee of 0.13% of their revenue for the next three years to cover the costs of the cooperative venture. The group is hoping to grow and entice more nonprofits to join them, though, in which case the cost savings could potentially be even more significant.