Ups and downs of nonprofit consulting

Ret Boney

Used correctly, consultants can bring needed expertise to nonprofits, provide them with a little extra bandwidth, or pave the way for vital but painful change, experts say.

Mismanaged or mismatched, however, consultants can mean wasted time and money, a list of unaccomplished tasks and a frustrated staff and board.

In many ways, nonprofits are not very different from for-profits, so the same thought process applies regardless of your tax status, says Dow Bauknight, a former management consultant and retired executive director of NTEN Charlotte Region, a nonprofit technology consulting group.

“A nonprofit is really like a startup business and the people who run them should be entrepreneurs,” he says. “It is a fight every day to make ends meet. And it’s all hands on deck.”

Just as in the business world, consultants can help win the fight by providing extra hands for specific tasks, but it has to be done right, says Bauknight.

That means finding a qualified professional and making sure the consultant and nonprofit agree on the issue, problem or question that needs to be addressed, then developing an agreement that contains specific objectives and deliverables, he says.

The upside

Perhaps most importantly, consultants can provide nonprofits with a depth of expertise that many groups can’t afford, beg or borrow in any other way, says Rick Moyers, director of programs for the Meyer Foundation in Washington, D.C.

“There’s a specialized knowledge among people who do this work with nonprofits that tends to make these projects go better,” he says. “You hire expertise and perspective that’s difficult to access any other way.”

It’s that potential that drove the Meyer Foundation to develop its Management Assistance Program in 1995.

Since then, the program has awarded almost 500 grants totaling about $5.5 million, almost all of which is used by nonprofits to hire consultants to address organizational development issues.

“In general, a consultant can give you access to much higher levels of expertise than most nonprofits can typically afford to have on staff,” Moyers says. “Often it’s much higher levels of expertise than organizations can access using a volunteer.”

Outside consultants also can provide the neutrality and a broader perspective that people closely connected to the organization lack, he says.

Justifying the money to bring in a qualified outsider, especially when a board member or volunteer is willing to help, can be challenging.

“Most nonprofits wince every time they take any money away from mission or program,” says Moyers. “Boards and executive directors sometimes can be short-sighted and not realize the long-term costs of failing to address key organizational issues.”

In many cases, nonprofits need that deep expertise only occasionally and not on a day-to-day basis, so consultants are more affordable than permanent staff, says Bauknight.

If a nonprofit wants to set up a new human-resources system or a 21st-century website, for example, a consultant who is current on those skills can set up a state-of-the art system to be run by more moderately priced employees, he says.

Consultants also can help an organization effect a change in direction or tackle a difficult task, he says.

Nonprofit executives typically are busy people with little bandwidth to take on additional, time-consuming efforts, and sometimes they lack the capability to spearhead major changes.

Consultants are a good choice for “a task that requires a continuity of effort and focus that staff cannot provide in the face of day-to-day operations,” says Bauknight. “Or the staff may not have the capability to do it, but they may not readily admit they don’t have the capability.”

Providing that type of “propulsion,” as Bauknight calls it, can move a nonprofit down a new path at an accelerated pace, equipping the organization with facts, structure and a roadmap for change.

“A consultant can focus and get it done,” he says. “They’re not distracted by the upcoming fundraiser or the personnel issues. They were hired to address that one thing.”

The downside

In the Meyer Foundation’s Management Assistance Program, the consultants its grantees engage typically work out well, Moyers says.

Since 2002, the funder has been tracking program results to gauge effectiveness.

In a survey of 154 of the more recent engagements the foundation has funded, about 85 percent to 90 percent of the feedback was “very positive.”

But things can and do go wrong.

One problem is a failure on the part of the nonprofit to devote adequate time and non-financial resources to consulting efforts, he says.

“They need a lot of information from the organization,” he says of consultants. “They need to speak with staff, and the board needs to be committed. Sometimes when things go wrong, it’s because the organization hasn’t invested enough in supporting the consultant.”

That said, it’s possible for nonprofits to become overly dependent on consultants, who in some cases can cultivate that dependency.

“The best consultants build an organization’s capacity to do the work themselves eventually,” says Moyers. “They don’t want to be on perpetual retainer to any organization. They do their work and move on.”

Bauknight agrees.

“The caveat is to make sure the expert not only leaves behind a system, but trains personnel to operate it,” he says.

Ensuring that happens requires hard work by the nonprofit up front to outline the project, its goals and deliverables.

“The huge, huge pitfall is having a myriad of objectives and not having agreement across the various groups of stakeholders as to specifically what the objectives are,” says Bauknight. “It’s better to have a ferocious debate among friends early on and agree on what is to be addressed.”

Another pitfall is giving in to the temptation to engage or employ a board member or other friend of the organization.

“If they’re not truly outside the organization, you need to completely understand the implications of that and be able to live with them,” says Moyers.

If a consulting project run by a board member or the spouse of a staffer goes badly, and the consultant has to be fired, can the nonprofit live with that, he asks.

Some volunteers come to nonprofit consulting engagements through the private sector, and while those skills can be useful for some projects, some consultants can underestimate the complexity of nonprofits.

“They assume if they can do the work in the for-profit sector, a nonprofit should be simpler,” Moyers says of business consultants. “I don’t think that’s the case.”

The bright side

Although the economic downturn has taken a bite out of nonprofits’ budgets, fundraising, staff and moral, now may be an excellent time to bring in a fresh perspective, Bauknight says.

“Recessions are great opportunities to either introduce change or to react to it,” he says. “It’s a great opportunity to winnow, to shed, to get rid of this ‘thorn in the side’ we haven’t been successful with.”

And while the downturn won’t go on forever, now is a good time to think about plans for the next three to five years and identify opportunities presented by the recession and the coming recovery, says Moyers.

That’s a process the right consultant can help with.

“It has never been more critical for nonprofits to understand their business model – what programs and services generate net revenue for the organization versus those that don’t,” he says.

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