Welcome to the e-learning lesson on Working with Consultants. Suppose your organization is considering a new fundraising strategy, but you want to get an independent perspective on how well it might work. Or you're thinking of purchasing a computer system, but aren't sure whether your staff has the expertise to make the right choice. These are some potential reasons your nonprofit might decide to hire a consultant. Consultants can potentially meet almost any need you can imagine. But is hiring a consultant the best decision in your situation? If so, what are the best approaches to identifying prospective consultants, hiring them, and making sure they're meeting your needs? At the end of this lesson, you will be able to: identify key steps for selecting a consultant, recognize how to prepare for working with a consultant, identify key elements of a basic contract, and apply strategies for managing a consultant to a consulting scenario.
Many types of consultants are available to work with organizations.
Consultants are experts who are contracted with for a period of time in order to complete a particular project. They come in all shapes and sizes, from people working individually to international consulting firms. They might also come from branches of other businesses or organizations, such as universities, libraries, museums, broadcasting companies, or research groups. In this e-learning lesson, you will learn about factors to consider when deciding whether to hire a consultant. You will also learn key steps for selecting a consultant, as well as practical approaches for contracting with and managing a consultant.
Consultants offer a vast array of services to meet organizational needs.
Consultants can provide a wide range of expertise to help organizations meet their specific needs, such as developing marketing strategies, implementing computer systems, revising accounting processes, delivering staff training, administering research projects, and many other activities. However, an organization must carefully consider whether hiring a consultant is the best decision. If the organization does decide to work with a consultant, additional preparation and monitoring will be required to ensure that the investment pays off.
CHAPTER 1: Deciding to Use a Consultant
Consultants can address a great range of organizational needs. They can be hired to provide an independent perspective or because they have special skills, experience, knowledge, or access to information. Consultants can be used to free up time for managers and directors or to fulfill short-term requirements. Although consultants can potentially be useful in a variety of ways, this doesn't necessarily mean they should be used. One of the most important steps is recognizing when not to hire one. For instance, it wouldn't be cost-effective to bring in a consultant to complete a job that could be done by a board member or by someone whom your organization is already employing. It's important to carefully consider your purpose in hiring a consultant and determine whether this is an appropriate way to achieve your goals.
Organizations hire consultants for various purposes.
Consultants can provide substantial assistance to organizations. They are usually hired to complete concrete tasks within a defined time period. Here are a few reasons why a nonprofit might hire a consultant:
- Help search for a new executive director
- Start or fix a fundraising or capital campaign
- Offer legal services or prepare a legal defense
- Create or fix accounting or investment strategies
- Identify problems in an organization and help solve them
- Research new trends, obstacles, or events and assess their potential impact
- Train staff or volunteers in essential skills
- Mediate or resolve disputes
- Help an organization's management team reach its goals
- Develop new systems for conducting daily business or offering services
- Identify and solve communication or conflict issues
- Help recruit and train new board members
- Find and install the best equipment for a particular task
- Offer a fresh perspective to organizations which are stuck in their ways
- Get a new project or program off the ground
- Give an independent perspective on a management decision
- Execute highly specialized work for a limited time
However, before you decide to hire a consultant to help with a project, ask yourself the following questions:
- Could in-house staff do the job if they had additional training?
- Does a board member have the expertise or experience to help?
- Could someone from trade, government, or sister organization help instead? What about someone from a university or college?
- Are there volunteer advisors or organizations that could provide free advice?
- Can we afford to hire a consultant?
Relationships between nonprofits and consultants are not always successful.
Although there are many success stories about relationships between nonprofits and consultants, there are some disappointments as well. Some managers complain that the consultant they hired didn't provide the outcomes they were expecting, focused on the wrong problems or, worse yet, created new problems.
To make sure you and your organization don't become a cautionary tale, it's important to look at some of the reasons why things can go wrong. For example, things can go badly when the organization fails to define the project properly, when the consultant selected doesn't have the appropriate knowledge or skills, or when the consulting firm replaces the people you thought you were hiring with less-qualified substitutes. Problems can also emerge when the consultant isn't properly supervised or when he or she isn't given the necessary information and support from within the organization.
However, organizations have the power to prevent many of the things that can potentially go wrong. Problems often result from a lack of understanding of the consultant's role and from limited knowledge about selecting, hiring, and managing consultants. To get the most out of a consulting relationship, managers need to be informed and take a proactive approach throughout the entire consulting process.
CHAPTER 2: Preparing for a Consultant
Success with consultants starts long before the first interview or reference check. Once you've decided that you have a valid reason for hiring a consultant, there are a few important steps your organization should take before placing that listing or writing a request for proposals. The most important step is to clearly and accurately define your project. How can you be sure you're picking the right consultant to meet your organization's needs if you don't actually know what those needs are? Also, before you make the decision to hire a consultant, project out the costs that are likely to be involved, and make sure you know how you'll be able to afford them. If the costs are beyond your means, can the project be restructured? Can you split the costs with another organization that shares the same problem? Being realistic about costs is critical to your success. Finally, you can have a perfectly defined problem, select the best consultant to solve it, and still end up disappointed if other members of your organization aren't truly committed. Without key stakeholders on board, the project will have little chance of success.
Defining your project is an essential first step.
To get a consulting relationship started on the right foot, you need to take the time to carefully define your project. For example, perhaps you want to focus on fundraising, but for what reason? Is your current fundraising system broken, or do you need advice on how to efficiently expand it? If it is broken, do you know what the causes are? Or are you hoping a consultant will help you identify the causes?
It’s not uncommon, when defining a project, to mistake the symptoms for the problem. This kind of misidentification can send your consultant down the wrong path, resulting in an unnecessary waste of his or her time and your money. Taking the time to really think about your problem can make a huge difference. For example, “We need a new executive director” is one problem. “We need a new executive director within ninety days, while at the same time resolving the communication and conflict problems on our board that led to the departure of the last three directors, and we need both of these things done for less than $10,000” is another problem entirely. These two very different projects would require different sets of skills.
Another important consideration is to determine whether you can legally hire a consultant for the project. For example, in many states it is illegal for a consultant to fundraise or collect funds for you unless they are a licensed solicitor. It would not be a problem, however, for them to train your staff or help implement policies which could increase your fundraising capability. It may also be worthwhile, once you’ve fully defined your project, to once again ask yourself if hiring a consultant is really the right choice. Could this work actually be carried out in-house? Will hiring a consultant for this project be a valuable investment?
It's important to realistically estimate the costs of hiring a consultant.
To estimate consulting costs, break the project down into elements and make an estimate for each one. These can include:
- Consultant fees
- Overtime pay for in-house staff
Although consultants may be expensive, this shouldn't necessarily deter you from hiring them. Letting a problem go unfixed can be an even more expensive proposition. When you determine which consultants you might want to work with, you'll receive estimates from them for your project. Consultants charge either a flat rate for a project, or they bill by the hour. They may be open to working under either type of fee system, depending on your organization's preference. Their rates will reflect their level of expertise and experience, as well as how readily available that expertise is in the marketplace. For some types of projects, a consultant might offer to work based on a commission, such as fees that are tied to success in helping the organization raise funds. However, this is considered highly unethical. A reputable consultant will not work on commission. Compensation should always be directly related to the services the consultant provides (paid as hourly or flat rates) or be reimbursement for travel and administrative expenses.
If the estimated consultant fees are more than you can afford, there might be ways to cut costs. For instance, you may be able to restructure your approach so that more of the work can be done by in-house staff. You could also approach funding sources that have a particular stake in the project's success to see if they'd be willing to provide extra funds. Also, nonprofits sometimes arrange to get consulting services donated or provided at a reduced rate, particularly if the consultant wishes to support the organization's mission in this way. However, don't assume that just because you're working for a worthy cause that a consultant can afford to work for you for free.
Before hiring a consultant, make sure you have support from key stakeholders.
Make sure to gain the support of important stakeholders such as board members, managers, staff, or key donors before you move ahead with the project. If you don't have their buy-in, members of your team may be disinterested or even actively try to thwart change.
As part of this process, make sure you know which members of your team are going to be involved in the project and what roles they will play.
- Who is going to be the lead contact with the consultant, responsible for regularly evaluating his or her work and making sure things are on track?
- Which in-house staff members will be doing aspects of the work?
- Who will be supervising them?
- Who will sit on the committee which oversees the project, and what will their responsibilities be?
Also, make sure that all of these people know what will be expected of them and that they are willing and able to do the job.
CHAPTER 3: Selecting a Consultant
How do you find the right match for your project? For smaller projects, an in-house contact person or a manager can oversee the selection process. For bigger projects or in larger organizations, it may be best to form a committee. The person or group who oversees the process will need to take the following steps: get as many names of potential consultants as possible, send out a request for proposal (known as an RFP), make a short list of candidates, conduct interviews, and make a selection. Some experts recommend that you conduct interviews first in order to create a short list, and only ask for RFPs from those who make the list. However, reviewing RFPs is generally less time-consuming than conducting a large series of interviews. Whatever process you use, make sure that it's identically applied to each applicant, even those you've worked with before. This enables you to make a fair comparison between candidates and also protects you from possible legal action.
There are several methods for collecting names of potential consultants.
The best approach for making your “long list” of candidates is to use every method available. You can use any combination of the following methods:
- Look at directories and yellow pages
- Read the trade and business press for your line of work and note what consultants these publications mention
- Look for books, articles, or blogs written by consultants working in your area
- Talk to similar organizations and see who they have worked with
- Create an advertisement
- Use Internet searches
- Ask professional associations for recommendations
When compiling this list, keep in mind that there is no professional accreditation for consultants, as there is for nurses or lawyers. Anyone can hang out a shingle and call him or herself a consultant. To make sure you’re dealing with a competent professional, you’ll need to do your homework.
A request for proposal gathers information from potential consultants.
When you take the time to write and send out a request for proposal (RFP), the proposals you receive will be in a similar format and will address the same questions and issues. Therefore, when you make a short list of candidates, you'll be comparing "apples to apples" instead of wildly dissimilar sets of information.
The RFP describes the project in general and outlines exactly what services you hope the consultant can provide. Consultants are instructed to outline the strategy they would use to find a solution, not their solution to the problem. It also invites them to submit an estimate or describe their pricing policies. In essence, the RFP asks consultants to show why they would be a good fit for your project.
You can make a short list of candidates based on the proposals received.
Once you've received the proposals solicited by your RFP, it's time to narrow down the list of candidates. You'll want to consider not only their qualifications and experience, but also their ability to take on your assignment. Do they have the available time to meet the deadlines? Are there any conflicts of interest? Will the work they do for you affect their relationship with other clients? Is the consultant a former employee? Will the solutions they present affect their ability to win other contracts? While these factors aren't necessarily deal-breakers, it's important to take them into consideration.
Another important matter is whether or not a consultant can operate legally in your state or the states where you work. This may seem like an unusual issue, but depending on the nature of the project, there may be fees or registrations required for a consultant to play the role you want. Taken together, all of these considerations will help you narrow down the candidate pool. Further short list-creation should be based on the candidates' skills, experience, and the quality of their proposals. Ideally, your final short list will contain two to five candidates.
Conduct interviews with the consultants on your short list.
The next step is to conduct interviews with all candidates on your narrowed-down list. If at all possible, hold in-person interviews. This is especially important for long-term projects or those which involve a great deal of interaction with staff. Consultant personality and presence can be key factors in successful consulting relationships.
To create useful points of comparison, you should interview each candidate using the same set of questions. In addition, don't be afraid to discuss fees during the interview. The candidates will have given you an estimate in their proposals, but fees may potentially be negotiable. There is no harm in asking about this. For a set of suggested interview questions and observations, please download Key Questions and Observations for Interviewing Consultants .
In addition to conducting thorough interviews, it's also necessary to check candidates' references to make sure the consultants have a track record of successfully completing projects. Ask for two to three references from each candidate. To allow for more dialogue, conduct reference checks over the phone, rather than via email. Please download this tip sheet on conducting reference checks.
The last step is to select the consultant who will work on your project.
Applying a thorough and well-structured selection process will most likely result in a wide array of highly-qualified consultants from which to make a selection. The best case scenario is that you find it hard to choose. In making your decision, be sure to look beyond qualifications to also consider a candidate's organizational style and personality. It's very helpful to hire a consultant who has worked with organizations whose size and culture are similar to your own. Ask for and check references from like-minded organizations with which the consultant has worked.
When it comes down to making a final choice, or even when constructing your short list, you may be tempted to pick the most inexpensive option available. However, the lowest bid isn't necessarily the best value. That choice can end up costing you more in the long run if the project fails due to selecting a consultant who is a poor fit.
CHAPTER 4: Hiring a Consultant
When you've finally chosen your consultant, you'll probably be tempted to jump into the work right away. However, your next best step is to draft a contract. Writing a contract may feel like the last thing you want to do after a long selection process. However, neglecting to establish a legal basis for this new consulting relationship can result in everything from an awkward misunderstanding to a drawn-out lawsuit. Once the contract is written, there's one more step you should take before your consultant begins working. If you haven't done so already, take the time to establish clear in-house roles. For example, who will be the project coordinator and what are his or her responsibilities? You may decide to form an advisory committee of board members and others who can lend expertise. Or you may create a steering committee of managers. In any case, it's essential that all relevant parties know their responsibilities and how they will be held accountable.
A well-written contract contains several key elements.
Good contracts address critical aspects of the nonprofit-consultant relationship. The key elements of a solid contract include the following:
- Background—provides general information about the organization and an overview of the organization’s need for assistance
- Consultant Duties and Services—describes contract start and end dates, expected tasks and deliverables, and deliverable formats and due dates
- Client Agreement—outlines what information and systems the consultant will have access to, who the in-house contact person will be, the organizations’ level of effort/commitment, method and schedule of payment, and expense policies
- Contract Changes—explains the process for altering the contract
- Contract Termination—explains how the organization-consultant relationship can be ended, if necessary
- Confidentiality—establishes what type of information should be considered confidential and for what time period
- Records and Ownership of Property—clarifies who will own rights to specific material produced by the consultant during the course of the project
- Indemnity and Applicable Law—specifies who will be liable, under what conditions, and for up to what amount, and how indemnification will be handled
- Independent Contractor—clarifies that the consultant is a contractor and not an employee in order to avoid conflict with IRS policies
- Non-assignment—ensures that the consultant you hired is the person actually doing the work
More detailed information on each of these contract elements is contained in the document, “Key Contract Elements.” Download this document by clicking on the link.
Creating a contract isn't as difficult as it may seem.
Writing a contract may seem like a lot of work, but keep in mind that, when you have access to a good sample contract, much of the document will be written for you. Your work will be to:
- Add the information specific to your organization, consultant, and project – much of which you have already developed in creating your RFP
- Decide which clauses are applicable to your specific situation
If possible, have your attorney review the contract before it's signed. A lawyer may be aware of legal issues that specifically relate to your project.
CHAPTER 5: Managing a Consultant
Once you've selected and hired your consultant, your mission is to get the greatest possible value out of the consulting experience. This comes from taking an active, hands-on approach to help manage the consulting process. And that means devoting the necessary time and resources to make sure that the consultant's efforts are a success and the organization-consultant relationship remains positive. First, it helps to keep your goals and expectations reasonable. It's important for the consultant to respond to your needs, but consultants are not employees. They usually work for more than one client at a time. Therefore, not all of their working hours will be devoted to your project, unless you specified that arrangement in the contract. Normally, it's a consultant's choice where and when they do the work, unless the particular needs of the project require them to be onsite during set hours. As long as you're clear and reasonable in your expectations, a good consultant should be happy to meet them. Most consultants want to complete the project to your satisfaction as much as you want this. However, even the best consultant can get off track without the proper guidance. Your lead contact or project coordinator should keep these factors in mind when working with the consultant.
Here are some suggestions for managing the consultant you hired.
By following these suggestions for managing the consultant, you can gain maximum value from your consulting investment.
Orient the consultant
Before the consultant starts working, give this individual as much information about your nonprofit as possible. Start with an oral orientation about the organization’s mission. Introduce the consultant to any staff members he or she will be working with, and give a tour of your facilities, including any off-site locations which may be relevant. Help the person understand the services you offer, what your market is, and who your key stakeholders are. Much of this can be communicated through materials you already have, such as strategic plans, budgets, policies, annual reports, or promotional literature. Even if the consultant will be working primarily off-site, have the person spend some time in the office to get an idea of how you organization operates. The more a consultant understands about your organization, the more the individual can customize the work to truly meet your needs.
Check in regularly
Even if the consultant is working with a number of staff members, the lead contact is still responsible for being the official liaison, monitoring progress, and ensuring that the project is on track. Holding regular meetings is a great way to keep on top of potential issues before they become real problems. Be sure to be an active participant, rather than “switching off” during meetings and simply assuming that the consultant knows what he or she is doing. Even a good consultant can fall into trouble spots without realizing it. It’s the job of the lead contact and the management team to keep the consultant on track.
The lead contact should also make sure that other involved staff members are not procrastinating. If a consultant is waiting for a decision or more information before moving forward, you could be wasting the person’s time, and therefore, your money. The lead contact should check in regularly to make sure the consultant is on target and that staff members are holding up their end of the deal.
Pay attention to warning signals
In the often-busy nonprofit world, you may not be motivated to deal with consultant issues that seem small, such as late interim reports or the consultant appearing distracted at meetings. However, these issues can signal the start of larger problems which could threaten the success of your project. It’s important to trust your intuition when there are consultant actions or inactions that make you uneasy. Potential signs that something is going wrong include:
- Projects falling behind deadline
- Staff or board members not wanting to work with the consultant
- Confidentiality being breached
- Poor quality of work
- Consultant avoiding contact or not wanting to work with you
If you have a hunch that something is amiss with your consultant, communicate with this person promptly and directly. You may discover that everything is fine, or you may catch a problem and resolve it before it becomes serious.
Evaluate at several points in the process
Evaluation should happen at the end of the project, as well as at regular periods through its duration. By evaluating as you go, you can keep the project on track and recognize shortfalls in the consultant’s work or in your organization’s contributions. However, remember that it can be easy to get “false positives” when it comes to evaluating consulting work. A firm or consultant will obviously be eager to declare that a job has been well done. Also, the lead contact or manager often has a stake in the situation; staff members will look good if the project is successful. Therefore, they may be inclined to declare a positive result prematurely. Lead contacts and managers should be aware of this potential conflict of interest on both sides and make sure that the evaluation process involves an honest look at the work.
Evaluation means more than giving a passing grade.
Evaluation doesn't just mean giving the project's deliverables a passing grade. It's also important to examine other factors, such as:
- What was the organization's input or contribution? How could it have been more effective?
- What was the process or relationship by which the project was conducted? Could it have been improved?
- Did the project accomplish its goals?
- Did the project move the organization towards its long-term goals?
It may be useful to ask these questions both within the organization and with the consultant. The consultant may have insight into ways the process or the organization's participation could be improved in the future.
The evaluation process can sometimes become very subjective. Try to recognize what views are motivated by feelings rather than objective facts. Using the contract as the standard against which the project's successes or failures are measured can help you to maintain a clear perspective. Three months and again six months after the project's conclusion, take the time for another evaluation. How well are the consultant's recommendations being implemented? Are the materials produced by the consultant being used? Evaluating the success of the project from a longer-term vantage point will give you a far better understanding of its effectiveness and make it more likely that future endeavors will be even more successful.
Consultants are often a very valuable resource for nonprofit organizations. They can provide needed skills or expertise that can greatly improve the organization's ability to deliver services efficiently and effectively. The key to success with consultants is to take an intelligent and proactive approach at every stage, from deciding to use consultants to preparing for, selecting, hiring, and managing them. Taking this approach will help to ensure that working with a consultant turns into a sound investment. Thank you for taking the time to learn about Working with Consultants.
Invest careful thought and planning in the decision to use a consultant.
Determining whether or not to hire a consultant is an important decision for your organization. Consultants can help nonprofits expand their organizational capacity and assist with identifying and solving problems. Although consultants can be used for almost any purpose you can imagine, the decision to invest in a consultant must be carefully made.
Nonprofit managers can avoid the common pitfalls involved in using consultants by taking a proactive approach. When you define your purpose, develop a list of potential candidates, carefully interview and select a good match, and manage the consultant as he or she works, the investment can have a significant pay-off for your organization.
Here are some helpful resources about working with consultants.
The books listed below provide more information about how to identify, hire, and work with consultants.
- Lewis, Howard. Choosing and Using Consultants and Advisors: A best practice guide to making the right decision and getting good value. Philadelphia, PA: Kogan Page Limited, 2006.
- McGonagle, John J. and Carolyn M. Vella. How to use a consultant in your company: a manager’s and executive’s guide. Hoboken, NJ: John Wiley & Sons, 2001.
- Newman, David. The Manager’s Pocket Guide to Using Consultants. Amherst, MA: HRD Press Inc., 2007.
- Perchthold, Gordon and Jenny Sutton. Extract Value from Consultants: How to Hire, Control, and Fire Them. Austin, TX: Greenleaf Book Group Press, 2010.
- Scanlan, Eugene A. Fundraising Consultants: A Guide for Nonprofit Organizations. Hoboken, NJ: John Wiley & Sons, 2009.
Below is a list of online articles about working with consultants.