Nonprofits can face many compensation-related challenges. For instance, you might be struggling to attract and retain top talent for your organization. Or, you may find it difficult to navigate the landscape of compensation compliance on top of everything else your nonprofit does.
The good news is that whatever specific compensation hurdles your nonprofit has to deal with, there are experts that can help! In particular, it may be time for you to work with a nonprofit compensation consultant. These experts know the ins and outs of designing and implementing winning compensation strategies and understand the unique needs of nonprofit organizations. Relying on a consultant’s knowledge and experience can help your nonprofit scale up its compensation strategies in ways that are sustainable and promote continued growth.
If you’re considering investing in compensation consulting services, it’s imperative that you handle the hiring process with care. You need to find a consultant who can serve as a true partner to your nonprofit and set you up for long-term success.
To help, we’ve created this guide to give you a leg up in the hiring process. In it, we’ll cover:
- 7 Steps For Hiring a Nonprofit Compensation Consultant
- How to Get the Most Out of Your Engagement With a Compensation Consultant
- Frequently Asked Questions About Nonprofit Compensation Consultants
Your compensation strategy can have a big impact on your nonprofit’s ability to attract, retain, and develop top talent, so bringing in an outside expert can be a very smart move. Take the necessary steps to find the perfect partner for your organization and you’ll be on your way to better compensation strategies in no time!
7 Steps For Hiring a Compensation Consultant
Let’s dive into the steps you should follow to hire a nonprofit compensation consultant. Your exact hiring process will vary depending on your organization and its situation, but your team should use these steps as a general outline of best practices.
1. Review your organization’s needs.
The main idea in this first stage is to define a focused scope of services. Begin by identifying why your organization needs compensation strategy support. Ask yourself the following questions:
- What compensation challenges is our organization currently facing?
- What are our nonprofit’s immediate and long-term compensation goals?
- How can we measure the effectiveness of our current compensation strategy and prepare to measure the effectiveness of our engagement with a consultant?
- What are we looking for in terms of a consultant’s experience and expertise?
- What is our timeline for addressing this compensation challenge?
- How can we ensure that this consulting engagement aligns with our organizational values and helps prepare our team to further our mission?
Next, have your team list out your organization’s goals for working with a consultant, sorting them into ‘immediate’ and ‘long-term’ categories. Refine your list as much as possible, ranking and ordering your priorities. Avoid listing any redundant goals, and don’t prioritize those that are irrelevant to the most pressing changes you want to be implemented.
Taking the time to focus on what your organization truly needs from a compensation consultant will save your organization time and resources once your consultant is on board, and it’ll help them to get up and running on developing your new strategies quickly.
2. Discuss with your nonprofit’s board of directors.
If you’re an executive director or human resources leader at your nonprofit, it’s important to get your leadership on the same page about hiring a compensation consultant before beginning the hiring process. This will help prevent any confusion, wasted time, or considerable pushback down the line.
Start by reviewing your list of goals or the scope of desired services compiled in the first step. Your main objective at this stage should be to ensure everyone’s goals are aligned and that the whole leadership team understands the need for outside support.
In addition, you’ll probably want to work with your nonprofit’s leadership team to establish a selection committee to handle the research and comparison process. Then, assign specific roles and responsibilities to each of the members for the process.
3. Outline some key guidelines for the consulting engagement.
Next, begin to determine a few key guidelines for your engagement with a compensation consultant. These should include:
- A general budget or maximum amount your nonprofit can pay for a compensation consultant
- A target start date for consultation services
- A general timeframe for the engagement, either an end date or target duration
Determining these guidelines early will be helpful in keeping the process focused from the start. Plus, it gives your candidates some specifics to build their proposals around. However, remember to keep your process somewhat flexible.
For example, determining the maximum amount of money you’re able to devote to compensation consulting is a good idea, but there’s no need to outline highly-detailed budgets until you’ve seen the solutions that your candidates propose.
Reviewing the proposals from your top candidates later will be the most useful time to begin determining specifics and negotiating details.
4. Begin your research.
Review a few core concepts of employee compensation with your team. Conduct some research online or by talking with colleagues in other organizations. Check out our employee compensation guide. The idea is to give yourself and your team a shared vocabulary and understanding of your particular situation.
This will help your whole team understand the specific issues that your consultant later identifies in your current strategies. Plus, it’ll also help your team more effectively advocate for your organization’s goals and priorities in your new strategy.
After that, it’s time to start researching potential compensation consultants. There are two main resources you’ll probably use to identify possible partners:
- Recommendations from colleagues in other organizations
- Online lists or directories of top consulting firms
The most important thing to look for in a compensation consultant, though, is relevant experience. Their references should include organizations of a similar size and mission whenever possible. More generally, they should definitely have experience working with nonprofits. Nonprofit operations are subject to a unique set of pressures that lead to complex compensation contexts uncommon in for-profit environments.
Additionally, look for consultants who take a more holistic approach to compensation than just analyzing numbers. Compensation takes multiple forms, especially for nonprofits-as-employers.
5. Draft an RFP.
Work with your team to draft a request for proposal (RFP) for compensation consulting. The purpose of your RFP is to communicate your organization’s exact situation, needs, and goals for working with a compensation consultant. Asking for proposals in a fully standardized way will really let the differences between each candidate’s strategies stand out.
The length of your RFP will vary depending on a number of factors, but there are a few essential elements that it should include to yield the best results. Let’s walk through how most organizations structure their RFPs:
- An overview of your organization, briefly describing your history, mission, and donor base.
- A description of your compensation needs, or the scope of services you identified earlier, with additional information added as needed to provide context.
- The guidelines (general budget and timeframe) your team has already determined.
- Expected outcomes or goals for the engagement, and a list of concrete deliverables.
- Questions and requests for additional information, background, and approach to compensation of the consultant or consultant team.
- Additional information or questions as needed.
The main idea is to give your candidates a concise overview of your needs that lets them propose a strategy for addressing them. A more focused RFP without excessive or irrelevant questions will generally get the most creative and efficient proposals.
Work with your team to draft an RFP, then present it to your board for final approval.
6. Compare the candidates and reach out to them.
Next, work with your team to compile a shortlist of top candidates based on your research. Have each team member rank their top potential consultants, and then compare your rankings. Chances are, one or more frontrunners will emerge. Start your list with those frontrunners, and then determine if there are any additional candidates who might fit the bill.
The number of compensation consultants on your shortlist of top candidates will vary, but once you’ve narrowed down your picks and have a finalized RFP, you should begin reaching out to them. Introduce yourself and submit your RFP. Provide a preferred way for them to get back in touch with the completed proposal, set a date by which you’ll plan on making a decision, and offer to answer any additional questions the consultant might have as they develop a strategy for your organization.
7. Review the completed proposals and make your pick.
As your team begins to receive proposals from compensation consultants, take a deliberate and organized approach to review them.
Have your team members each read through the proposals. It might also be useful to work together to create summaries that recap the main takeaways, distinguishing characteristics, and adherence to your required guidelines of each proposal you receive. Use a ranking system similar to the one you used in Step 6 to compare the proposals. One will probably stick out as the best choice but don’t be afraid to reach back out to ask for clarification or additional information from the consultants. (Hint: This is a great opportunity to see how collaborative a consultant is.)
Once your team reaches a consensus, it’s time to notify your new compensation consultant and start discussing details!
How to Get the Most Out of Your Engagement With a Compensation Consultant
Once you’ve invested in compensation consulting services, you’ll want to get the very most out of your engagement with a consultant. Here are some tips for maximizing the time you have with your consultant in order to get the very best outcomes for your organization:
- Prioritize clear and open communication from the get-go. Your compensation consultant may have a slightly different communication style than your internal team does. Make sure to align communication expectations and grant the consultant access to the communication tools they’ll need to contact your team. You should also set up regular times to meet and check in throughout the engagement.
- Remember, your consultant should act as a partner for your organization. They need to take the time to get to know your unique perspective and mission before finalizing their strategy recommendations. One-size-fits-all solutions are very rarely your best bet, especially when it comes to something as important as your nonprofit’s compensation strategy.
- Ensure that your internal team understands the complexities of compensation. Study up on modern approaches to nonprofit employee compensation before diving into your engagement. This will result in the most effective, flexible, and sustainable strategies down the line.
- Ask for documentation and training whenever you need it. Your compensation consultant’s goal is to help solve your compensation challenges now and in the future. Make sure you’ll have everything you need to succeed before they wrap up and leave. For example, your HR and payroll departments should definitely be looped into any changes that directly affect how they operate.
- Keep an open mind, but remember you know your nonprofit best. Your consultant may bring new ideas to the table that your nonprofit team has never considered implementing. For example, they may suggest designing and kicking off an employee recognition program or trying a new approach to structuring your compensation packages. Be open to these new ideas, but remember, at the end of the day, you’ll know what is best for your nonprofit. Make sure to communicate any feedback to your consultant so they can further tailor their suggestions to your organization.
Working with an outside expert isn’t always the easiest thing to navigate, especially when that expert needs to be integrated into your nonprofit’s working style and culture. Leverage these best practices to ensure both parties are able to be productive in your partnership and don’t be afraid to work to realign expectations as needed throughout the engagement.
Frequently Asked Questions About Nonprofit Compensation Consultants
If your organization has never worked with a consultant before, it can be tricky to find your bearings once you decide to hire one. Take some time to review the basics of nonprofit compensation and compensation consulting services more generally before your team starts to research possible candidates. To help, we’ll answer a few common questions!
What do compensation consultants do for nonprofits?
Compensation consultants offer a fairly wide range of services to organizations of all sectors. For nonprofit organizations, these services typically include:
- Overall compensation strategy development
- Executive compensation strategy development
- Conducting benchmark surveys
- Reviewing existing compensation plans
- Creating or updating incentive or variable compensation plans
- Designing pay communication strategies
- Assistance in navigating compensation-related laws
Many compensation consultants will have experience in other aspects of nonprofit operations, like nonprofit human resources.
Why hire a compensation consultant?
There are a number of reasons why your organization might need some extra support in the area of compensation.
Most commonly, growing nonprofit organizations are looking to develop their first overarching compensation strategy, or they’re taking an opportunity to make needed updates to their compensation structures. These big-picture tasks are usually targeted towards addressing a more specific goal like reducing turnover or improving recruitment.
In terms of the benefits, there are some important reasons why it’s usually a smart idea to bring in an expert rather than try to tackle it in-house. Consider these benefits of hiring a compensation consultant:
- A consultant can offer a more measured, objective view of the state of your organization’s compensation strategies.
- Working with a number of different organizations and situations gives consultants a fuller bank of experience to draw from.
- Compensation plays a major role in your organization’s growth, so the stakes are fairly high; the cost of failing at developing your own strategy could be quite serious.
- A compensation consultant’s job is to focus solely on the issue at hand, so they’re able to work more efficiently than your own busy team.
One benefit will probably outweigh the others depending on why you’re looking for compensation support. An outside expert saves you time, energy, focus, and potentially a lot of money in the long run.
When should you hire a compensation consultant?
Hire a compensation consultant for your nonprofit when your strategy is in need of an update.
Ideally, this will be well before you experience any type of retention, recruitment, or financial crisis. Bringing in an expert early to develop a professional strategy for your nonprofit will help to prevent issues like these from cropping up in the first place. It pays to stay on top of your internal operations because you’ll be able to better identify when it’s time to make changes sooner rather than later.
Still, many nonprofits hire compensation consultants to help solve and prevent specific issues they’re experiencing at that time. These might include unexpected staffing or financial issues that need immediate attention. In these cases, a compensation consultant can help develop a strategy and set new short- and long-term priorities for your organization.
Taking a big-picture view, the best time to hire a compensation consultant is when your nonprofit is experiencing considerable growth. Small to mid-sized nonprofits can especially benefit from compensation consulting. A comprehensive compensation strategy can essentially serve as a blueprint for growth, preventing your organization from losing focus, time, or money down the road.
Hiring a compensation consultant for your nonprofit is an exciting opportunity to identify a partner that your organization can work with to strengthen its compensation strategy, and, consequently, its team! Plus, as you fine-tune your organization’s internal operations with the help of a consultant, you’ll notice a trickle-down effect—when your internal team and processes are strong, you’ll be better equipped to deliver your mission to your beneficiaries!
Want to keep reading? Here are some additional resources we recommend:
- Nonprofit Human Resources: The Full Guide & Best Practices. Nonprofits need HR, too! Learn the basics of nonprofit human resources management in this comprehensive guide.
- Working With a Nonprofit Human Resources Consultant: A Guide. A nonprofit HR consultant can take an objective look at your current strategy and suggest tailored improvements. Learn more in this explainer.
- HR Consulting Firms: 20+ Top Providers for Small Businesses. Looking for a consulting firm that can help your small business improve? Here are some of our top recommendations.
- How to Write Job Descriptions (+ FREE Template). Learn how job descriptions affect your HR functions and how to write a compelling one using our free template!