25 Oct 2019 / by David Rourke / in Uncategorized
Achieving efficiencies while maintaining control
Non-profit organizations in Ontario are grappling with a new and very different operating environment these days.
This new environment is expected to result in drastic structural changes to Ontario’s non-profit sector – pushing for consolidation amongst similar-interest organizations specifically.
Many Ontario non-profit organizations are concerned about the impact of the widespread cuts and program restructuring to their identity, autonomy as well as the communities they serve.
One example of such structural changes is the replacement of Local Health Integration Networks with Ontario Health and local Ontario Health Teams. According to Ontario Health Teams, this change aims to achieve “unified administration and governance” in the name of quality improvement and accountability.
This significant transition includes the implementation of “focused and simplified” funding models that encourage “reduction of waste, and elimination of duplication.” The concern amongst non-profit professionals is that this shared funding models could result in community organizations losing control over their programming.
Another example is the introduction of “service system managers” within the employment and training sector as the province seeks to reduce the total number of service agreements it manages.
Consolidation is a priority for Ontario’s government – the primary objective being to achieve financial efficiencies through direct (reduced duplication) and indirect (reduced bureaucracy) means.
One strategy to achieve similar efficiencies while maintaining independence and control is through consolidated purchasing activities.
Leveraging what is known as “collaborative purchasing” or “collective buying” between two or more similar-need organizations can be a strategic first step towards (or, sometimes, an alternative to) sector consolidation.
The provincial government’s perspective is that administrative and operational redundancies exist and that there are opportunities for efficiency through consolidation. Whether this point is arguable or not, it does support our longstanding belief that there are opportunities for improvement through improved collaboration in the sector. One way to pursue these opportunities, either as a stand-alone initiative or as a step in an overall shared service strategy, is collaborative purchasing. Because many group procurement models do not require independent organizations to share identity, governance or anything else for that matter, they can be a particularly powerful yet non-threatening first step toward realizing financial and operating efficiencies.
If you’re considering a collaborative purchasing strategy, here are three points to consider:
Shared Procurement Services can result in significant hard-dollar savings
Unlike other shared services, benefits from improved procurement include significant hard-dollar savings, which can then be used to fund initiatives in other areas (including other shared services such as HR or IT.) Typically, there is opportunity for “quick wins” through improved procurement that can provide some much-needed early momentum for a shared service or consolidation strategy.
Shared Procurement Services offer a great first step.
Organizations can “dip their toe” into the shared services waters by participating in collaborative buying. Each organization can access the benefits realized through efficiencies without many of the complexities that come with more complex consolidation efforts.
Capacity among current teams can also be increased in the way of formal or informal knowledge sharing, shared access to expertise, and consolidated data collection, all of which can ultimately lead to improved performance for each organization and the sector overall simultaneously.
Shared Procurement Services reinforce sector operating principles
The more open to collaboration and change you are, the more significant the benefits can be. While many of the benefits are easily accessible, many of the deeper improvements are accessed through a new way of looking at how your team manages your operations, including your procurement activities. Perhaps it’s time to revisit the standards of the products you’re buying – and whether you’re really getting value out of them? Or to take a harder look at the principles behind how you select and manage your supplier partners? Use this as an opportunity to revisit some old practices and assumptions, work with a new network of prospective partners and prepare to embrace the possibilities available in this changing environment.
In recognition of Ontario’s new efficiency-minded, consolidation-friendly operational reality, non-profit organizations should consider collaborative procurement as an attractive first step (or alternative approach) to achieve financial efficiencies.
Regardless of whether your organization does or does not expect to be impacted by sector consolidation, establishing a shared purchasing system – like group buying – can achieve much of the same benefits with far less complexity and little compromise. This can be especially true if you are able to join an existing buying group (the ONN Purchasing Program is one example). In this case, your organization (as well as your prospective “purchasing partners”) avoid the leg work and coordination required to set up your own system yet retain the opportunity to provide input and feedback on how the program can continuously meet your needs.