Foundations and nonprofits invest a lot of money in consulting firms. At least one in three foundations says it has hired a consultant in the previous two years for services that include strategic plans, evaluation, marketing, executive searches, and more.
The Covid-19 pandemic and the recession it triggered shift this picture — investment in consulting has likely dropped in the immediate context of the crisis. However, demand for consultants’ services will probably increase as we emerge from the pandemic, as foundations and nonprofits strategize about how to pivot operations and best use scarce resources. Therefore, it’s critical that we understand consultants’ role in the nonprofit world.
I’ve spent the last two years studying these consultants and their impact. Whenever I’ve talked to colleagues at nonprofits and foundations about my research, they have, without fail, complained about consultants hired by their organizations. Conversations tend to go something like this: “Gosh. [conspiratorial glance] Consultants are such a waste of money. I mean, we had one, and I’m pretty sure they did nothing.” This idea is rampant in the popular press — take, for example, the popular 2005 book by Martin Kihn, House of Lies: How Management Consultants Steal Your Watch and Then Tell You the Time.
So why are nonprofit organizations, perennially strapped as they are for cash, investing so much in services they love to hate? Are consultants really providing such uniformly poor services for their clients?
I’ve found that, speaking generally, consultants that specialize in nonprofits are passionate and committed to their craft, and they are invested in nonprofit and philanthropic success. They also bring important assumptions to the table about what good nonprofit strategies look like.
On the whole, consultants want your nonprofit to focus on your unique value proposition as an organization. They want you to develop clear goals that are measurable, preferably through quantitative means. They want you to align what you do with available funding. They advocate for strong, decisive leaders who take responsibility for their organizations. They want you to emulate best practices in your field.
These ideas all sound good and, indeed, are important guidelines.
However, they lack agreed-upon meanings and can have unintended consequences. Best practices often end up defined as common practices of similar organizations, which could render nonprofits more homogeneous.
Conversely, focusing on unique value imports a standard assumption from the corporate world that all organizations need to differentiate themselves from competitors, and the focus is often geared toward making a case to grant makers rather than responding to the needs of the communities nonprofits serve.
Aligning programming with available funding reinforces foundations’ influence on the problems nonprofits focus on. Quantitative program evaluation works better for some programs than others, as many grant makers and experts on measurement now acknowledge. And a preference for decisive leadership, while helpful to consultants (which find authoritative leaders easier to work with), can run the risk of undermining the collaborative and consensus-oriented nature of many nonprofits.
Taken together, these approaches promote a style of leadership and decision making that is linear and focuses on the means to achieve desired ends, which is popular in Western society and crowds out other traditions’ decision-making styles.
People vs. Analytics
Additionally, what you see isn’t what you get — subtle distinctions in consultant approach strongly influence what nonprofits get for their money. These distinctions don’t boil down to different services; they are often overlooked when nonprofits select consultants.
Say your foundation is choosing a consultant for strategic planning. You could choose a sole proprietor — a single individual who might improve your planning process or provide content expertise, depending on his or her background. You could choose a small firm that specializes (or doesn’t) in your area of work.
Or you could choose a large, prominent firm — such as McKinsey, Boston Consulting Group, or Bridgespan, which might work for both nonprofits and for-profits or focus solely on nonprofits. Your choice will be influenced by your budget, your needs, and who is deciding — for example, an influential board member might twist your arm to go with a prominent brand like McKinsey.
But the distinctions between these consultants go beyond their size and price tag. Differently sized generalist firms, for example, bring seriously different assumptions to the table.
For large, prominent firms, the solutions are in the analytics, carried out according to proprietary models by an army of brainy youngsters. They can get access to national foundations and experts to consult on your behalf and assess client opportunities through quantitative modeling. With access to sophisticated trend and market data, these firms produce what they see as the objectively optimal solution for your nonprofit.
Only foundations and big nonprofits can afford prominent firms’ high fees (often upward of $250,000). This means that who you are affects what kind of advice you get.
Small firms don’t have these kinds of data — what they do have is access to relevant networks of your peers. For them, the solutions are in the people — these firms are interested in producing what you see as the right solution for your organization. They interview local grant makers and leaders on your behalf — as one consultant put it, “[the founder’s] smart friends.” They assess client opportunities through phone interviews with local foundations and donors and comparison to organizations they view as your peers. These consultants insist that they hold process, rather than content, expertise — as another consultant stated, “[We] depend on our clients to be content experts.”
A senior consultant explained her take on this distinction. “It’s a difference in opinion of what strategy is.” She claimed that smaller firms assume the client knows best, so the consultant focuses on “hand-holding, workshopping, are we all in agreement on what we want to do and how we are going to get there?” In contrast, she told me, for larger firms’ clients, there are “three choices; you get to pick one.”
This leader framed the comparison pejoratively, but in reality, both approaches can alienate you. The latter can feel generic, inattentive to the realities of your work, hard to implement. The former can feel like nothing new, just repackaged existing knowledge.
I’m oversimplifying — boutique firms vary widely, and there are important distinctions between nonprofit specialists like Bridgespan and global-management consulting firms like McKinsey.
Imposing Corporate Approaches
Most firms specializing in nonprofits, including large ones, do lots of hands-on facilitation and coaching, and they rely heavily on interviews because of the paucity of quantitative data about nonprofits. For some, their staff offers experience in the content of your work (such as education or homelessness).
However, something larger is at stake. Only foundations and big nonprofits can afford prominent firms’ high fees (often upward of $250,000), and you need to be well connected to obtain elusive pro bono work, which often means having a member of a prominent firm on your board. This means that who you are affects what kind of advice you get.
Small nonprofits don’t get sophisticated analytics or access to national experts or grant makers — instead, information comes from their leaders, and leaders’ and consultants’ networks, constraining their universe of options to what’s known to work locally and among similar organizations.
Small organizations also tend to get less-inclusive processes — after all, the more people you talk to, the higher the price tag. We could see this as a sensible division of labor in which small organizations focus on local impact and legitimacy or, conversely, as limiting to grass-roots nonprofits’ creativity and ability to meaningfully involve a diverse range of players in their plans.
On the flip side, big nonprofits working with prominent firms look to different sources of information, with an inclination toward corporate algorithms and national experts over local knowledge. Again, this could be sensible — corporate analytics could be advantageous in making sense of complex organizations’ operations, and national grant makers might have the deep pockets necessary to fund new projects on a large scale. Or, it could contribute to perceptions of large organizations as alienated from local constituents and out of touch with day-to-day reality.
Worst case, this situation could become a self-fulfilling prophecy. In this scenario, boutique consulting firms recommend that nonprofits adopt conventional nonprofit practices while major consulting brands consider these practices to be inadequate.
If nonprofits, in the course of their lifecycle, transition from working with boutique firms to major brands, the recommendations of the former might be contradicted by the latter.
Put another way, as a consequence of the division of labor between consulting firms, nonprofits may be pushed from conventional nonprofit practices toward corporate models for organizational structure, assessing impact, and making decisions if they move from hiring boutique firms to working with major consulting brands. It’s important to note that research shows that small nonprofits seldom grow into large ones — nevertheless, this divergence of practice should give us pause.
The Potential for Missed Opportunities
For the most part, consultants working in both contexts (and everything in between) are thoughtful professionals doing their best to support and elevate their nonprofit clients. Every year, consultants help thousands of nonprofit and foundation leaders navigate and take action in complex and changing environments. In all cases, it’s vital that we understand the assumptions that we and those we hire bring to the work.
To do so, foundations and nonprofits considering hiring consulting support must think carefully about what kind of advice they — or their grantees — truly need.
Setting aside personal connections to consultants and popular brands, what sources and types of data do they find compelling? What will it take to convince decision makers to take action? What kinds of organizations do they aspire to emulate? How do these needs match up with available resources and consultants?
These questions will be especially critical as we navigate the reality and aftermath of the Covid-19 crisis, when nonprofits and grant makers turn to consultants to help them set priorities, pivot, or reinforce their work in the context of widespread and shifting need.
After the Covid-19 crisis, nonprofits and grant makers will turn to consultants to help them set priorities, pivot, or reinforce their work.
Ultimately, my research suggests that many nonprofits’ dissatisfaction with their consultants is related to inadequate communication in both directions — from consultants regarding their process and what they do and don’t deliver, and from nonprofits regarding their assumptions and expectations. It’s important, of course, to acknowledge that legitimate criticism exists regarding the penchant that major for-profit consulting companies often demonstrate to apply one-size-fits-all solutions for their clients, corporate and nonprofit alike.
Regardless, the devil is in the details, with the potential for real benefits — or wasted time and missed opportunities — for nonprofits.
Leah Reisman is a Ph.D. candidate in the Sociology Department at Princeton University.
