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Consulting for nonprofits adapts to market

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Todd Cohen

Many of the 37 state associations of nonprofits that are members of the National Council of Nonprofits have been looking to upgrade the databases they keep on their own members so they can communicate and work with them more effectively.

Rather than each individual state association going to the expense of hiring its own consultant, the national organization is pulling together some of its member associations to explore the possibility of sharing the cost of a single consultant to develop a new database system that performs functions all the groups need.

“As a network, we’re collaborating so we can share the cost of customization,” says Jennifer Chandler, vice president and director of network support and knowledge transfer at the National Council of Nonprofits.

Stretched to the limit in the face of budget cuts and rising demand for services, a growing number of nonprofits are developing new kinds of relationships with consultants to handle new kinds of work to help address critical needs.

With the volatile marketplace creating complex and rapidly changing challenges for nonprofits, they are moving beyond the traditional pattern of working with consultants to handle periodic, cookie-cutter projects that take a big overview of an organization or particular organizational need, experts say.

Instead, they say, nonprofits are developing ongoing relationships with one or more consultants to build their organizational capacity to address emerging and critical market challenges and needs.

“We aren’t doing these episodic, huge-contract strategic plans every five years, but partnering in ways that are much more real-time,” says Jeanne Bell, CEO of CompassPoint nonprofit services, a San Francisco-based nonprofit consulting firm. “When groups really find partners and capacity-builders who will stay with them, the relationship is less doctor-patient and more collaborative.”

Nonprofits with a “culture of continuous learning,” Bell says, may have a handful of consultants they work with on a continuing or intermittent basis, relationships that can be tapped, often virtually through social media or the internet, when market forces create a need to adapt.

Shifting marketplace

The marketplace for consultants has changed dramatically in recent years.

With the damaged economy leaving a growing number of skilled professionals from the public, for-profit and nonprofit sectors out of work, a lot of them have turned to consulting to put their expertise to work for nonprofits, Bell says.

And with Boomers retiring and pursuing “encore” careers, for example, and with service-learning and fellowship programs placing students in nonprofits, organizations have new pools of talented volunteers who can offer them expertise they need.

Nonprofits also can develop processes for strategic thinking by “leveraging the human resources” in their own organizations, Bell says.

At the same time, the “market is demanding a different kind of consulting, and leading-edge providers are responding with more flexible and contextual engagement or scope of work,” she says. “There is no more turn-key consulting.”

Many nonprofit leaders, Bell says, are “suspicious of time-intensive, expensive, relatively-generic processes that seem too divorced from what leaders of the organization actually know is the question or the issue.”

And those issues revolve around the critical questions of organizational capacity and strategies needed to respond to changes in the marketplace, she says.

Building capacity

Chandler says a key challenge for nonprofits that may lack in-house expertise is to find consultants who not only can help the organization fix an immediate problem but also can help the organization build its own expertise.

“True capacity-building leaves the nonprofit with the capacity to address the issue going forward in the future, as opposed to just putting your finger in the dyke and plugging up the hole,” she says.

A top priority for the National Council of Nonprofits is to help nonprofits and their funders “understand what capacity-building is all about,” she says.

Capacity-building, she says, “is often based on reaching out and finding new talent to help the nonprofit build its own capacity.”

If they lack in-house expertise on a particular issue, she says, nonprofits can hire full-time or part-time employees or hire a consultant.

Hiring consultants

Nonprofits should do a lot of digging before hiring a consultant, Chandler says.

State associations of nonprofits, she says, are likely to have a list of consultants that have identified themselves as serving nonprofits.

Those consultants likely will be familiar, for example, with the details of nonprofit accounting, and will understand what distinguishes nonprofits from for-profit entities, she says.

But state associations, she says, generally do not certify or approve the consultants on their lists.

Before hiring a consultant, she says, a nonprofit should check prospective consultants’ references; talk to other nonprofits that have worked with them; and ask for samples of their work, including reports they have prepared for other nonprofits, which can remove confidential material before sharing those reports.

“It starts with a clear idea of what you want the consultant to do, so you have to really do your homework,” she says. “You can’t expect a consultant to come in and wave a magic wand.”

Nonprofits also should trust their gut, she says.

“So much of the success of the consulting engagement,” she says, “is based on the mutual relationship between the client and the consultant.”

Consultants typically are independent contractors, defined by the U.S. Department of Labor and the IRS as “someone who is not under the control of the employer,” Chandler says.

And while they bring their own skills to a project and generally work on their own time, they generally are not under the supervision of the nonprofit, she says.

So nonprofits should develop a written agreement for consultants that spells out the scope of the project, as well as the deliverables the nonprofit expects the consultant to produce, the compensation the nonprofit will provide, and the fact that the consultant will take care of his or her own taxes and insurance.

Consulting priorities

Before turning to a consultant, Chandler says, nonprofits should assess their own capacity, both their strengths and the areas in which they have room for growth or may lack in-house expertise.

Issues nonprofits typically are finding to be priorities for which they need to build their capacity, Chandler says, include communications, fundraising and technology.

“Having the ability to communicate what you’re accomplishing, and what your mission is, is core to your ability to attract supporters, raise money and for any kind of partnership for expanding your programs,” she says.

“Communications capacity is something that every nonprofit needs,” she says, “and not every nonprofit leader is a skilled communicator.”

When a nonprofit leader talks to the media, for example, he or she might need some coaching, Chandler says.

And communication is multi-faceted, including newsletters, websites, print publications, and social media.

“This is a changing world, and nonprofit leaders of a certain generation might not be as skilled in understanding the impact of social media, so it might need to enlist the help of younger generations to help navigate those waters,” she says.

Fundraising is the need for which nonprofits most frequently turn to consultants, Chandler says.

While nonprofits need to build their own resource-development capacity by themselves and through their own boards, she says, a consultant can “jump-start the process and give you discipline.”

A consultant also can help prepare a nonprofit’s board for fundraising and “help you think about all the opportunities available to build relationships that can result in funding down the road,” she says.

A third priority need for which nonprofits are turning to consultants, Chandler says, is technology, such as development of websites, databases on donors and volunteers, and networked systems to connect workers at multiple sites, particularly in rural states.

“Technology is not a skill that everyone has, and many nonprofit leaders have more programmatic backgrounds,” she says. “And technology is changing so rapidly that if nonprofits do not have the expertise in-house, they should explore engaging a consultant who can identify the most up-to-date technology solutions.”

Still, she says, while nonprofits may want outside assistance developing their websites, they likely will want to keep control of the task of actually publishing content on the websites.

“If a nonprofit doesn’t control or know how to update” its website, she says, “that is not a good way to build capacity.”

Consulting trends

Bell of CompassPoint says the field of nonprofit consulting is changing, both in the form it takes and the work it does.

Still, she says, nonprofits can find it bewildering to makes sense of how to work with the new generation of volunteers with business and other pertinent expertise, and independent consultants still represent the largest consulting market for nonprofits.

The kind of consulting nonprofits are looking for also is changing.

Rather than hire consultants and undertake a traditional, extended process that typically begins and ends with a retreat and follows predictable steps in between, she says, nonprofits want to focus on a key strategic question tied to marketplace conditions to which the nonprofit needs to respond.

Key issues on which nonprofits are turning to consultants, Bell says, include business planning, moving to a “culture of evaluation,” rethinking their communications, and preparing their leaders to handle change.

Trying to cope with the loss of funding and changes in the field of best practices, for example, many nonprofits are adjusting their business model.

“It can be helpful to have a consultant hone in on what’s going on in the business model and what might be realistic ways to look at funding streams,” Bell says.

And with nonprofits shifting their approach to evaluation from one that tracks output to one that measures community impact, she says, consultants can help nonprofits identify the skills, questions and tools they need to develop and make productive use of the new metrics.

Communications also represent an area in which nonprofits can find it productive to work with consultants, Bell says.

Most nonprofits are small and typically lack a formal communications staff, often assigning that function to the fundraising staff.

Yet with the explosion of online media and the emergence of social media, “the expectation for even small organizations about having a communications strategy is very real,” Bell says.

“It requires a rethinking of your staff, skills and systems,” she says. “It can be helpful to have a leading-edge communications expert figure out what you might want to do and what’s realistic to do and how to resource it.”

Another key issue on which nonprofits might consider working with consultants involves the area of organizational development, specifically through intensive support to leaders to cope with organizational change.

Consulting is emerging as a “tool for organizational development,” providing training, coaching and peer learning for individual leaders and teams, Bell says.

“The way organizational interventions take root,” she says, “most likely will require or be catalyzed by complementary support to the people who have to lead the change.”

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