Shared services alliances help childcare centers improve efficiency
Shared services alliance may be a potential solution to help childcare centers cut costs. From California to Massachusetts, the model has slowly caught on in more than two dozen cities.
On a recent day in February, Diahann Whittington sat down and read to the dozens of toddlers and preschoolers at the childcare center she runs in Richmond, Virginia.
The book was “Pete the Cat.” These quiet moments used to be few and far between for Whittington, executive director of St. James’s Children’s Center.
More often, she was running around handling the business-side
tasks of running a childcare center. Payroll, enrollment and collecting tuition all fell in her lap.
But Whittington regained some breathing room in 2017 after the center participated in a pilot program to create a shared services alliance among area childcare centers. The alliance allowed Whittington to outsource administrative tasks to a central nonprofit hub rather than take on the work herself or increase her overhead by paying for individual services.
The concept of shared services alliances in early childhood centers popped up around the country in the mid 2000s. From California to Massachusetts, the model has slowly caught on in more than two dozen cities big and small.
The idea is simple: Alliances create a network of early childcare programs linked by a back office that handles administrative tasks. The return on investment? Cost savings and more free time to focus on kids and families, said Louise Stoney, cofounder of Opportunities Exchange, a nonprofit consulting firm focused on the business side of childcare.
“If you want to run a good business and survive storms like COVID, you have to have a strong and sophisticated administrative arm,” said Stoney. “But you can’t afford to do that if you’re a tiny childcare center.”
As COVID-19 continues to cannibalize small businesses, keeping childcare options open remains more critical than ever, added Stoney. For many working parents, access to care is what keeps them in the workforce.
Enter the shared services alliance, a term Stoney herself coined through 30 years of experience in early childcare education policy and finance.
In Miami-Dade, agencies have flirted for years with the shared services model that could link the county’s 1,000-plus centers and 200-plus licensed, home-based care options.
“We’ve long felt that a shared services model could be very positive here,” said Pam Hollingsworth, senior vice president of strategic initiatives and the Equity Institute at the Early Learning Coalition of Miami-Dade and Monroe.
After visiting shared services sites in Colorado in 2017, a group of local early-learning programs in Liberty City and Opalocka co-founded an online platform to promote shared services with funding from The Children’s Trust. The platform included training and HR opportunities to enable the platform eventually to become self-sustaining. But the effort lost steam after the funding ended and interest among private providers waned, Hollingsworth said.
In Richmond, interest in the alliance model was sparked after an 80-yearold childcare center that served some of the city’s lowest-income families closed for good. It was the second such center to close in the area in two years for financial reasons.
“We can’t afford to lose those types of childcare centers,” said Rich
Schultz, president of the Richmond nonprofit
Smart Beginnings. “That’s what led us to launch the alliance to study what we can do to help make the centers more sustainable.”
The pandemic has added stress to an already fragile scenario. About 56% of childcare providers surveyed in November reported losing money by staying open, according to the National Association for the Education of
Young Children. Roughly 42% of respondents said they had taken on debt using personal credit cards to pay for supplies and other items last year.
Some centers have already closed for good. In Miami-Dade County alone, 200 childcare centers shut down in 2020, according to state data.
But even before the pandemic, people like Stoney had seen the writing on the wall. Independent childcare centers seeking to meet high-quality standards must enroll at least 100 children in order to break even, according to her research. Yet the average center in the U.S. enrolls about 75 children and serves mostly children under the age of 3 — the costliest group to serve.
IMPROVING EFFICIENCY
When it comes to recruiting new students, ensuring healthy enrollment levels, onboarding new staff or even repairing a broken printer, Whittington said the alliance has her back.
She no longer has to spend hours every other week working on payroll. She and the teachers at the school are no longer tasked with gently prodding parents who are behind on payments. Staff at CA Human Services, the alliance’s nonprofit hub, now act as the liaison in charge of those tasks.
“We take care of all these things that have nothing to do with delivering quality childcare, but that are nonetheless essential,” said Jessica Philips, CEO of CA Human Services.
One of the centers in Richmond’s pilot effort cut down on 400 hours of labor after staff stopped doing payroll manually and switched to automation.
St. James’s pays $2,120 a month to be part of the alliance. Whittington said the expense has been well worth it.
“We were not as efficient as we could’ve been before the alliance,” she said. “We are early childhood professionals. We aren’t accounting or HR professionals.”
The alliance allowed the center to automate a lot of administrative tasks and provided the training necessary for Whittington and her staff to learn to use those tools.
When it came time to check in on the center’s licensing, the alliance put together all the necessary paperwork on her behalf.
Enrollment too has gotten a boost from working with the alliance, she added. The hub takes care of marketing and promoting the center on social media.
An alliance also has the added benefit of being able to leverage funding streams and keep an eye on grants and programs that an overworked childcare director may overlook, added Philips.
LESSONS LEARNED
Despite the benefits of working with a shared services concept, buy-in has been slow over the years. The Richmond pilot program enrolled two other centers in addition to St. James’s, but they opted out once the pilot period ended and they had to begin paying a fee.
“We can’t give this away for free because it wouldn’t be sustainable, so finding centers willing to invest in the service is probably the biggest challenge,” said Philips.
The pilot brought some other lessons, too: Rather than charging a flat fee for all participating centers, Philips said they “unbundled” services to allow centers to pay for services they really needed.
COVID-19 has made it even more difficult to bring centers on board as most of them are more concerned with simply keeping the lights on, she added.
“I think the discussion could be opened again here because we know this model works successfully elsewhere,” Hollingsworth said. “But it has to be anchored financially.”
Yet the pandemic has also made it clearer than ever that a shared services concept is needed to help centers grow and stay afloat, said Kate Byrne, a consultant with the Early Learning Coalition of Orange County in Orlando.
The coalition has been working on a plan to set up an alliance for local childcare centers. There are currently no active shared services alliances for childcare centers in Florida.
Byrne is in the early stages of researching the model. She’s come across centers that have struggled to enroll children due to a lack of tech and marketing savvy. Others have no idea where they stand financially because they’re not keeping track or generating reports.
“I strongly believe that the childcare owners and directors are overwhelmed. Their passion and their area of expertise is working with children in the classroom and managing teachers and curriculum,” said Byrne. “One solution to help them be more sustainable from a business perspective is to have them outsource a lot of those business functions to a shared services alliance.”