Donors’ Demands for Results and Professional Training Programs Fuel Growth of Consulting World

Consultants who focus on the nonprofit world have been growing fast in number in large part because of the proliferation of professional training programs for nonprofit leaders and the arrival of big new donors from the business world.

Those donors have brought with them a demand for well-researched strategic approaches and measurable results, according to Thomas J. Tierney, a co-founder of Bridgespan, a nonprofit consulting firm with offices in Boston, New York, and San Francisco.

Because very few charities and foundations can afford staff members with the full range of experts they need to attract and retain donations in this environment, the need for consultants grows, say other experts.

And the demand for measurable results is likely to continue to gather steam over the next decade, says Mr. Tierney. He points to the 40 billionaires who this summer pledged half of their wealth to charity, as part of a push by the philanthropists Warren Buffett, and Bill and Melinda Gates.

“They will want impact,” he says of those potential mega-donors—and, he says, so will the baby boomers, especially as more of them reach the age when they want to give more of their wealth to good causes.

Timothy L. Seiler, director of public service and the Fund Raising School at the Center on Philanthropy at Indiana University, has studied charities since the 1980s. He says he has seen a general rise in the professionalism of consultants.

“One of the big differences is that consultants are paying more attention to research,” Mr. Seiler says. “There is a greater embrace of theories and research as a way of improving practice, instead of just on-the-job training and learning in the field.”

Another difference is the existence of university programs to improve professionalism, like Mr. Seiler’s program at Indiana, which also teach the nonprofit employees who study in them that there are times when outside help is needed.

‘Virtual’ Firms

In its infancy, say veterans of the field, nonprofit consulting was a small and relatively cozy industry, with many of its pioneers serving as Jacks (or Jills) of all trades. But today, says Jeanne Bell, chief executive officer of the 30-year-old CompassPoint Nonprofit Services, in San Francisco, consulting for charities now involves more price competition and more specialization.

“A first big wave of consultants, in the early ‘90s, included individuals, former charity executives with 10 and 20 years’ experience, who decided to hang out a shingle,” says Ms. Bell.

The second wave, lasting from the late ‘90s to today, she says, are large for-profit management firms from the corporate world expanding their work into the nonprofit sphere.

They have been followed, says Ms. Bell, by smaller, specialized for-profit firms, some of which operate “virtually” as solo consultants or small groups of consultants who market themselves together. Many don’t share a true business partnership or corporation, she says, or even a physical office.

And, she notes, the recession has accelerated the rise of people saying they are consultants. “I don’t know if they have jobs or not.” These days, Ms. Bell says, when CompassPoint puts on a conference aimed at its nonprofit clients, about 10 percent of the attendees will be aspiring consultants.

All this competition means more choices for nonprofit clients, but also a wider range of consulting fees. For instance, Chuck V. Loring, a consultant who works from Fort Lauderdale, Fla., and his business partner, Dave Sternberg (who works from Indianapolis), focus on board fund raising and governance, and they say business is booming.

But they say even their low-overhead operation (Mr. Sternberg often works from a coffee shop) has stiff competition from newcomers for charities’ business. Within the consulting industry, the charge for a study for a projected $6-million to $8-million capital campaign, Mr. Sternberg says, can go as high as $40,000 to $60,000—but he’s heard of new entrants offering to do it for $15,000 to $20,000.

The prices are also going down for other reasons, experts say. In tight economic times, few charities are thinking about expanding so there’s not a demand for capital-campaign studies. Mr. Sternberg sees another difference: “Those few campaigns we are doing now are smaller. Organizations are looking at their big vision and paring it down. Instead of a three-story building they are going to make it one story and build it over time.”