Outsiders Meet Nonprofits' Need for Thrifty Quality: Cuts Create Booming Management Industry
Kopecki, Dawn, The Washington Times (Washington, DC)
You're an executive at a nursing home and you just bought a lifetime membership in the National Association of Boards of Examiners of Long Term Care Administrators. You assume that health care professionals are writing your newsletters, coordinating your certification programs and planning your annual convention.
But when you call, someone like Randy Lindner - an association executive who has no professional training in long-term care - answers the phone.
The National Association of Boards of Examiners of Long Term Care Administrators, or NAB, is just one of the 18 accounts overseen by Washington-based Bostrom Corp., an association management company. Mr. Lindner, the general manager of Bostrom's Washington office, has served as the NAB's executive director for more than a year.
The arrangement suits both organizations.
"We couldn't find the quality of staff based on what we can afford to pay," NAB President Steven Chies said. The group pays Bostrom a little more than $100,000 a year to plan its meetings, set up its training, write its newsletters and manage day-to-day operations.
That $100,000 wouldn't even cover a minimum salary-and-benefits package for an executive director in the Washington area. A comparable staff with its own offices would swallow about 30 percent of the nonprofit group's $1 million annual budget, Mr. Chies said.
Outsourcing was in its infancy 10 or 15 years ago, association executives say. But it's grown as associations face shrinking budgets, decreasing volunteer forces and increasing demands for services as rival groups fight for fewer and fewer members. Rather than raise operating costs by hiring or beefing up permanent staffs, more and more nonprofits are using contracting as a cheap solution to find quick expertise.
The number of organizations nationwide managed by outside firms grew 37 percent from 1990 to 1995, according to the Chicago-based International Association of Association Management Companies (IAAMC).
Nonprofits "have never had to be as conscious of the bottom line," said Frank Casale, the executive director of the Outsourcing Institute, a private research firm in New York that tracks the industry. "They now have to be conscious of it, conscious of overhead, conscious of expenses."
"If you want to support a new program, you've got to figure out how to hold the line on staff and provide the new program. One of those ways is outsourcing," said Douglas Ducate, senior vice president of PGI Exhibitions Inc., an Arlington company that plans exhibits for association and trade shows.
Associations' desire to cut costs has spawned what's basically a new industry in the Washington area the past decade.
Today, 68 percent of associations outsource at least some activities, according to the 1996 Policies and Procedures in Association Management study, published by the American Society of Association Executives in Washington. That number has increased in the past five years, an overwhelming majority of the associations surveyed said.
Even the outsourcing firms outsource: They hire free-lancers to complete special projects.
Annette Petrick, the president of Annette Petrick Outsourcing in Woodstock, Va., operates her 2-year-old business out of her home and outsources her own administrative work to a company called Private Secretary.
She projects her firm's fiscal 1998 revenues at $350,000, nearly three times her first year's gross.
It's little wonder that outsourcing firms large and small are thriving in Washington: More than 2,500 associations with about 66,000 employees call Washington and its suburbs home. Only Chicago and New York come close to harboring so many nonprofit groups, according to a study by the Greater Washington Society of Association Executives.
"We essentially allow [associations] to buy just what they need rather than employ someone full time," said Clifford Brownstein, president-elect of the IAAMC. …