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Focus on Not-For-Profit Religious Organizations: Centralization of Administrative Functions

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As religious organizations face a decline in the number of individuals entering their orders, the capacity to handle administrative functions to run their organizations becomes more difficult to manage.
April 2, 2012

As religious organizations face a decline in the number of individuals entering their orders, the capacity to handle administrative functions to run their organizations becomes more difficult to manage. One way of handling this issue is to look at centralizing offices, functions, and/or departments. This can be an overwhelming task but one that creates long-term benefits for the organization and helps decrease the demand on and time commitment from the members, freeing them to carry on with the mission of the organization.

Following we will discuss certain of the activities that need to occur to ensure a successful centralization project. Note that the activities discussed are not all inclusive; each organization will need to evaluate each component and add activities to those highlighted here.

 Vision Plan Current State
 Future State
 Implement
Assess the mission
and vision of the
organization

Go/No Go Decision
Develop
communicate plan

Develop project plan

Hire consultants
Develop fact base

Evaluate current activities

Assess current skill sets

Develop future state

Develop centralization plan

Develop centralized organization Structure
Plan

Implement

Mentor
 Monitor and Communicate

Vision

Before any activities are undertaken, the leadership of the organization, including the governing council, needs to assess the overall mission and vision of the organization. This is a thorough assessment of where they see the organization and its members in the long term. What core values and mission will the organization undertake? What is the level of new members joining the order, aging of the current members, potential future leaders, and finally its organizational structure? For the latter, this includes, identifying all locations where the organization currently has operations, the purpose of those operations, the functions within each, and the long-term role of that location and its alignment with the mission and vision for the future.

Through this exercise, an informed decision can be made on centralization, the impact to the mission and vision, its members, and employees.

Plan

If the outcome of the first phase is to centralize, the planning phase begins. In this phase, certain items need to be considered, including the scope of the centralization (locations, departments only, functions only, etc.), the number of employees to be directly impacted, impact on vendors, customers, etc. With a good understanding of the scope of the centralization project and the overall vision, other activities can be planned and executed with minimal ambiguity.

The development of a communication plan is also crucial to executing an effective centralization plan. The communication plan needs to consider the form of communication, content, and delivery. The goal is to minimize disruptions and chaos, which could easily cause the project to fail. Since the centralization project will involve the termination of certain employees and/or complete shutdown of certain office locations, the communication plan should embody the overall values of the organization and reinforce clear and open communication.

The project plan is not the plan to execute the centralization, but rather the plan to develop the centralization plan. Along with a project timeline and critical activities, the plan should highlight the resource requirements along with the gaps in resources. This should also help determine the extent to which consultants will be used to assist in the project. Certain of the activities to be included in the plan include gathering an understanding of the Current State, developing the Future State, and developing an implementation plan for the centralization.

Most centralization projects will require the assistance of an outside consultant. The consultant will help fill the gap in the resource requirements as identified in the project plan, address a specific skill set needed, and provide an outside view to the project.

Current State

The main purpose of the Current State is to understand current operations/activities and assess them with the perspective of centralization. This is a critical phase as this is where decisions will be made on what to keep, what individuals have the skill sets that can fill gaps in the centralized environment, the technologies used, and what processes are working better than others.

The phase involves gathering data; analyzing the data; conducting interviews; reporting requirements, roles and responsibilities of each individual within each function; identifying all information systems; and assessing the functions, processes, and technologies. This is a time- consuming effort, but the information gathered is invaluable and critical to developing the future vision for the centralization. Various preliminary decisions will be made based on the information gathered. Therefore, it is imperative that the team executing this phase of the project is thorough and has some practical experience.

One of the critical tasks in the Current State analysis is evaluating the capacity for change along with identifying those processes/functions that will be easier to centralize. Preliminary ideas as to the staffing levels required in the centralized environment will be developed at this phase, along with an identification of the current individuals who have the skills necessary to continue in the centralized environment. In addition, the identification of 'process champions' will be important as these individuals could be selected to 'champion' the centralization of a process, function, or department based on their skills and experience.

With the data and analysis of the Current State of operations, the development of the Future State will become easier and more practical to develop and eventually implement.

Future State

The development of the Future State will involve the knowledge gained through the Current State assessment and the understanding of the mission and vision of the organization. The alignment of the Future State with the mission and vision will ensure buy-in from all stakeholders. As the Future State is developed, considerations to change management should be included in the centralization plan.

In this phase, a top-level view of the centralization outcome is first developed and then a more detailed analysis of the activities to achieve centralization is developed. Key to this is the development of a centralization plan with milestones and objectives, including the sequencing of events and activities that must take place. Resources needed to execute the centralization activities should be identified, along with their roles and responsibilities. The organizational structure of the centralized organization needs to be developed, communicated to the leadership of the organization and approved. With these decisions in place, the recruiting process can begin. One other critical factor to consider is the legal structure of the centralized organization. This may require establishing a separate legal entity and dismantling existing ones.

The communication plan developed during the planning phase should be revisited and adjusted as needed to take into consideration items learned since its development. Change management factors should be reinforced as certain individuals will resist change, which could lead to the failure of the centralization plan.

Before executing the centralization activities, the Future State and the centralization plan need to be communicated to the governing body and the various locations of the organization. Any feedback received should be considered and evaluated as part of the implementation phase.

Implement

The implementation phase involves the creation of the centralized organization, the merger of activities/departments, etc., following the centralization plan. The implementation should incorporate the following principles:

  • Plan – Before undertaking any of the centralization activities, proper planning and consideration of various factors should be addressed, such as:
    • Establishing roles, responsibilities, and project tracking for all process implementations
    • Developing, documenting and presenting critical policies and procedures for approval
    • Creating adequate communication plans for all stakeholders impacted by process changes
    • Providing training for all individuals responsible for executing new processes and/or centralized functions
  • Implement – As implementation activities are executed, the implementation team should consider the people, process, and technology. Certain items to consider are:
    • Maintain consistent and open communication with all personnel responsible for implementation
    • Consider the volume of transactions to be processed by the centralized areas
    • Staffing levels should be evaluated
    • Communication to all stakeholders should be consistent, this includes vendors, customers, and other 3rd parties
  • Monitor – Monitoring should occur throughout the implementation process. Critical to this is establishing realistic check points to ensure progress is being made and corrective action is timely to ensure an effective centralization. Factors to consider include:
    • Create periodic checkpoints (30, 60, 90-day) to review process performance and make any necessary adjustments
    • Identify points of success and improvement with the implementation and apply to the next process
    • Establish a process to monitor compliance with policies and procedures
    • Report findings to the governing body or implementation committee if one was established

Plan for the centralization to take several months, be flexible, and be ready to correct as the plan progresses. The end result will be a more robust organization, leaner cost structure, and better alignment with the organization's long-term mission and vision.

 

Under U.S. Treasury Department guidelines, we hereby inform you that any tax advice contained in this communication is not intended or written to be used, and cannot be used by you for the purpose of avoiding penalties that may be imposed on you by the Internal Revenue Service, or for the purpose of promoting, marketing or recommending to another party any transaction or matter addressed within this tax advice. Further, RubinBrown LLP imposes no limitation on any recipient of this tax advice on the disclosure of the tax treatment or tax strategies or tax structuring described herein.

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