Nonprofits face many compensation-related challenges, such as working with tight budgets or navigating compensation compliance. However, regardless of the specific hurdles your nonprofit faces, nonprofit compensation consultants can help!
These experts understand the ins and outs of designing and implementing effective compensation strategies for nonprofits. The right consultant will take into account your unique needs to guide your compensation efforts and create a sustainable strategy for the future.
To help find the right expert for your organization, we’ve created this guide to hiring a nonprofit compensation consultant. We’ll cover:
- Astron Solutions: The #1 Choice for Nonprofits Seeking Compensation Consulting
- Nonprofit Compensation Consultants: Frequently Asked Questions
- 7 Steps for Hiring a Nonprofit Compensation Consultant
- How to Get the Most Out of Nonprofit Compensation Consulting
Your compensation strategy greatly affects your nonprofit’s ability to attract, retain, and develop top talent, so it’s worth working with a compensation consultant for their expertise and experience. Let’s explore the hiring process together.
Astron Solutions: The #1 Choice for Nonprofits Seeking Compensation Consulting
At Astron Solutions, our team of knowledgeable consultants has been providing compensation and general HR guidance to nonprofits (and for-profit businesses) for over 25 years. We know that nonprofits have unique needs and challenges, and we tailor our solutions to your specific team and goals for organizational growth.
Our compensation consulting services include:
- Market Analysis: To compensate your employees effectively, you need to be aware of what pay levels look like at organizations similar to yours. We help you benchmark current compensation levels for the roles at your organization and make improvements so you stay competitive in the nonprofit talent market.
- Internal Pay Equity Analysis: To protect your organization’s brand and reputation as an employer, ensure that you’re compensating all of your employees fairly. We’ll help you make the necessary improvements by taking a critical look at internal pay equity.
- Performance Management Improvements: Together, we can create a performance management system that takes into account your nonprofit’s values and performance measures, as well as different organizational levels or lengths of tenure.
- Career Progress Program Development: Engage and retain top talent by ensuring there are clear paths to career progression at your nonprofit. We’ll help you map out the paths to growth so that employees see your organization in their future.
- Compensation Outsourcing: Once we’ve done our initial work together to improve your compensation strategy, you can turn to us for future projects and needs with a reasonable retainer fee.
All of our services are rooted in our core compensation philosophy: total rewards. With total rewards, you view compensation holistically, taking into account the direct and indirect ways in which you compensate your employees. This helps you meet their needs while staying mindful of your budget.
Nonprofit Compensation Consultants: Frequently Asked Questions
If your nonprofit has never worked with a compensation consultant, it’s helpful to review the basics of nonprofit compensation and compensation consulting before your team starts to research potential candidates. Let’s walk through a few common questions and their answers.
What do compensation consultants do for nonprofits?
Compensation consultants offer a 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 have experience in other aspects of nonprofit operations, like nonprofit human resources.
Why hire a compensation consultant?
In general, nonprofits turn to consultants when they need external support in their operations. For instance, some nonprofits work with technology consultants when improving their tech stacks or fundraising consultants when gearing up for capital campaigns.
Nonprofits that seek compensation consultation are usually growing organizations looking to develop their first overarching compensation strategy. Or they may be taking the opportunity to make important updates to their compensation structures. These big-picture tasks usually address a more specific goal like reducing turnover or improving recruitment.
There are a few key benefits to bringing in an expert rather than trying to tackle your compensation challenges in-house. They include the following:
- A consultant offers a more measured, objective view of your organization’s compensation strategies.
- Working with many 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 to develop an effective, sustainable 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.
Ultimately, 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?
Your nonprofit should hire a compensation consultant when your compensation strategy needs an update. Here are a few examples of situations where this might be the case:
- When your nonprofit transitions from being run by volunteers to having paid staff
- When your nonprofit experiences considerable growth
- When your nonprofit experiences unexpected staffing or financial issues
Ideally, you’ll bring in a compensation expert early on in these situations. In some cases, it may be wise to hire a compensation consultant as a preventative measure to keep issues from cropping up in the first place. This way, you can iron out a strategy that serves as a blueprint for sustainable, steady growth, preparing you to weather unexpected future challenges.
7 Steps for Hiring a Nonprofit Compensation Consultant
Now that you have some background on compensation consultants, let’s dive into the steps for hiring the right partner.
Note that your exact hiring process may look different depending on your organization and its needs, but your team can use these steps as a general outline of best practices to follow.
1. Review your organization’s needs.
The main idea in this stage is to define a focused scope of services. Begin by identifying why your organization needs compensation support. Ask yourself the following questions:
- What compensation challenges are we 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 prepares 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, ordering your priorities.
Focusing on what your nonprofit 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 professional at your nonprofit, it’s important to get your leaders on the same page about hiring a compensation consultant before beginning the hiring process. This will prevent any confusion, wasted time, or pushback.
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.
Additionally, you’ll probably want to work with your nonprofit’s board 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.
These guidelines should include:
- A general budget or maximum amount your nonprofit can pay 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 keep the hiring 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. Save the specifics for when you’re reviewing proposals from your top candidates (more on this later).
4. Begin your research.
Review the core concepts of employee compensation with your team to give yourself and your team a shared vocabulary and understanding of your particular situation. This will help your team understand the specific issues that your consultant later identifies regarding your current strategies. Plus, your team will be able to 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 is relevant experience. Their references should include organizations of a similar size and mission whenever possible. More generally, they should have experience working with nonprofits, as nonprofit operations are subject to a unique set of pressures that lead to complex compensation contexts.
Additionally, look for consultants who take a more holistic approach to compensation than just analyzing numbers. Compensation takes multiple forms, especially for nonprofit employers.
Ready to start your compensation consultant search?
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. Standardize your RFP process between candidates to see the differences between each strategy.
The length of your RFP will vary, 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 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 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 any additional candidates 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 reach out to them. Introduce yourself and submit your RFP. Provide your contact information, set a date by which you 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 receives proposals from compensation consultants, take a deliberate and organized approach to review them.
Have your team members each read through the proposals. Work together to create summaries of each proposal that recap the main takeaways, distinguishing characteristics, and adherence to your guidelines. Use a ranking system similar to the one you used in Step 6 to compare the proposals. One will probably stand out as the best choice, but don’t be afraid to reach back out to ask for clarification or additional information from the consultants. 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 Nonprofit Compensation Consulting
Once you’ve invested in compensation consulting services, you’ll want to get the most out of your engagement. Here are some tips for maximizing the time you have with your consultant:
- 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. Also, set up regular times to meet and check in throughout the engagement.
- Work off of clearly-defined objectives. At the beginning of the hiring process, you identified what your nonprofit needed out of working with a compensation consultant. Return to those objectives and any goals or deliverables you discussed with your consultant during the hiring process. Ensure you’re both prepared to track progress toward those objectives and evaluate how well the partnership is serving your organization as the engagement progresses.
- Provide all the information your consultant needs to succeed. Your consultant is an outsider to your organization, which means they’ll need plenty of background information and context to evaluate your compensation strategy and suggest useful changes. Ensure your team provides all the information and materials your consultant needs and is prompt in answering any questions.
- 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 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 have everything you need to succeed before they wrap up their work with you. For example, your HR and payroll departments should 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 easy 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 productive in your partnership and don’t be afraid to work to realign expectations as needed throughout the engagement.
Hiring a nonprofit compensation consultant presents an exciting opportunity for your nonprofit to work with an expert and make positive, long-lasting changes to your compensation strategy. Use the information in this guide to successfully navigate the hiring process!
Want to keep reading about compensation or HR? Here are some additional resources we recommend:
- How to Write Compelling Job Descriptions (+ FREE Template). Job descriptions empower your organization to find top talent and create a foundation for developing that talent. Get our free template in this guide!
- Nonprofit Human Resources Consultants: The Definitive Guide. Need assistance with your other areas of HR in addition to compensation? Look no further than nonprofit HR consulting. Learn all you need to know here.
- 23 Top HR Consulting Firms for Small Businesses & Nonprofits. Explore this list of highly recommended HR consulting firms for organizations of all types.