Charity advisers: The Professionals - Part One - The consultancy boom

Charities and voluntary organisations are using consultants and other professionals much more than they used to. John Plummer asks whether they are getting value for money from an army of advisers who charge up to £1,000 a day.

Lynn Morgan is a member of a band of about 1,000 consultants who between them earn, at a conservative estimate, between £30m and £50m from the voluntary sector each year. Unlike lawyers and accountants, they do not need any qualifications to practise, there are few mechanisms to measure their success and their fees, which usually come to several hundred pounds a day, are not recorded in charities' annual reports.

Over the past 25 years, the number of consultants has swelled dramatically.

Managers who once believed hiring them to be an admission of failure now think they can't live without them. Is that an accurate perception?

The answer is difficult to come by because so little is known about them.

"Other sectors are scrutinised rigorously, but nobody has looked at spending on consultants across the voluntary sector," says Lynda Purser, director of the Institute of Management Consultancy, the consultants' professional body.

Both the NCVO and Navca have approved lists of consultants, but neither is exhaustive. So we contacted charities, academics, regulatory and umbrella bodies - and the consultants themselves - to find out whether the sector gets value for money from these modern-day adventurers. What emerged was anything but a consensus.

The one point everyone agrees on is that the number of consultants has exploded over the past three decades. Professor Ian Bruce, director of the Centre for Charity Effectiveness at Cass Business School, hired one for the first time in 1976. "It was very unusual back then," he says.

"There was a feeling that if you used a consultant you weren't good enough yourself. Now it's gone to the other extreme - people are rushing to get them."

The rise of the consultant reflects the sector's development. "Charities now face knottier problems and much more legislation," says Bruce. "They can't hold all the necessary expertise in-house." Running public sector services, for example, requires public sector skills, and the more competitive world of fundraising needs new ideas to get ahead.

"In the 1960s and 1970s, management and fundraising were the routes into charity consulting," says Bruce. "These were the areas in which charities realised pretty early on that they needed expertise."

According to Bruce, governance consultancy is the rich new seam. "It has expanded enormously in the past 10 years because there has been a big push by trade bodies to emphasise its importance," he says.

Bruce's estimate - that consultancy costs the sector between £30m and £50m a year - is based on the predicted earnings of the 150 or so NCVO-approved consultants. It accounts for neither the hundreds of individuals not on the list nor the many large organisations, such as law firms or investment managers, that serve the sector. The true value of charity consultancy, therefore, could be much higher.

Charities hire consultants for one of three main reasons: to acquire short-term expertise, to cope with a sudden injection of funding or to get independent views. Some specialise in the voluntary sector, while others go wherever the pound takes them. "The issue is not whether voluntary sector consultants are better or worse than anywhere else," says Bruce.

"Rather, it's whether consultants are rubbish and tell you things you already know."

Consultants are quick to reject that charge, but they often do so without revealing their fees. Lynn Morgan, one of the more forthcoming, charged chief executives' body Acevo £550 a day to investigate the effectiveness of regional funders' forums, which were set up at the turn of the last century to encourage a more strategic approach to funding.

Acevo had been awarded £17,500 by the Finance Hub to carry out the research, but it lacked in-house skills. After a tendering process and interview, it hired Morgan, who had experience of co-founding a regional forum. Her £12,000 bill left a small surplus for Acevo when core costs were subtracted.

"You could say it was an expensive daily rate, but for that kind of expertise it was value for money," says David Hunter, policy and development officer at Acevo. "We have fewer than 20 staff and could not have done the report without her."

Morgan's fees vary. "I charge according to the organisation," she says.

"I charged Age Concern Harlow £300 a day to set up an appraisal system, but I couldn't work at that rate every day - if I did, I wouldn't be able to survive."

Charity workers might splutter at the thought of starving on £300 a day but, as any consultant will tell you, each day with a client requires two of preparation. "The best people go to all the conferences and key workshops," says Mike Hudson, director of the Compass Partnership, one of the oldest voluntary sector consultancies. "We also have to keep up with all the issues by reading professional journals and attending courses."

Hudson's daily rates range from £500 to £1,000 but, when he first started 20 years ago, most consultants fitted charity work in between other business.

"You tended to get consultants with good ideas, but they weren't tailored to the culture and values of the voluntary sector," he says.

So many consultants now serve the sector that Hudson suspects the 1,000 estimate is too low. "It's a question of supply and demand," he says.

"In my experience, demand has always exceeded supply."

Charities, Hudson says, should select on reputation, personal chemistry, experience and how much time the consultant invests in development.

"Consultants are not charlatans," he says. "People see what they cost and they think it's worth it."

There are consultants, however, who believe some colleagues do harm their reputation. Martin Price, director of Martin Price Associates, says: "There is a danger of people saying they are consultants when they're between jobs. The number who have stuck at it for more than a couple of years is quite low."

Sarah Atkinson, a former political consultant who is now head of corporate affairs at the Charity Commission, says it's sensible to bring in outside help when a particular skill is needed. She advises charities to take up references in the same way they would for a member of staff, and enquire whether discounted rates or pro bono services are available.

In 2005/06, the commission spent just under £700,000, or 2.4 per cent of its annual income, on consultants. "About 40 per cent of this was related to IT," says Atkinson, adding that it is good practice for organisations to reveal how much they spend on consultants even though their fees are often hidden within project fees in annual reports. "Charities that do it properly have nothing to hide," she says.

Large charities did not respond well to a request for this information, but smaller charities and their consultants appeared more open. Most consultants charge between £400 and £600 per day, but Kevin Curley, chief executive at Navca, says it's always worth shopping around. "There are good people prepared to work at a local level for £150 or £200 a day, including retired people who don't need to make a living out of it," he says. "At Navca, we expect to pay up to £500 a day. I would baulk at paying more."

The blurring of the boundary between the voluntary and public sectors has made consultants more bullet-proof. "Few local voluntary groups have experience of competitive tendering, so they do need help," says Curley, who doesn't see the professionals as bad guys. "There is a genuine demand for their services. I don't know people working for the local sector who are getting rich out of this."

- John Plummer's series continues with a look at management consultants overleaf and at lawyers on page 20. Next week he considers accountants and other forms of consultancy

COY ABOUT COSTS

Charities reluctant to reveal the sums

Only one of Britain's 10 biggest fundraising charities responded to a request by Third Sector to reveal precisely how much it spends on consultants.

We emailed the organisations, whose combined income for 2005 came to about £1.3bn, after the Charity Commission and Lynda Purser, director of the Institute of Management Consultancy, told us charities should be transparent. "It is good practice to make that information available," says Purser. "If donors ask a charity how much it spends on consultancy, it should be able to tell them."

The RNLI revealed that its consultancy costs for the year amounted to £164,000, most of which had been spent on compliance with regulatory, legal and tax requirements, such as the contesting of the zero VAT rating on lifeboat fuel.

Wes Cuell, director of services at the NSPCC, was willing to talk figures without giving a precise number. "We don't record consultancy as a single cost, but it's a comparatively small amount of money," he says. "In the past year we have spent no more than £10,000, which, on a budget of £60m, is not massive." Cuell says pro bono work has reduced the figure substantially.

For the other big beasts of the sector, however, our request was deemed too intrusive, too difficult to answer or not worthy of a reply. "There isn't a central consultants' budget, so pulling that information together would be quite time-consuming," says David Barker, head of communications at the British Heart Foundation. What's the foundation's typical day rate for consultants? "I'm not sure that's something I'd want to disclose," he says.

A spokeswoman for the RSPCA says: "I would have to ask every department to come up with an analysis."

Cancer Research UK, Oxfam, the National Trust, the Salvation Army, Macmillan Cancer Support and Save the Children did not reply. The inability to produce figures cut little ice with Purser. "If charities really need consultants, they should be prepared to say why they do and what value they get from them," she says.

PEACOCK'S VIEW: WHO NEEDS THEM?

'The best ideas come from staff, not consultants'

Consultants frequently charge exorbitant fees and offer a poor service, according to Geraldine Peacock, former chair of the Charity Commission.

Peacock, who left the commission in August, believes many consultants fail to understand the voluntary sector and adopt flawed approaches to their work. They also 'de-skill' charities by performing tasks that ought to be done in-house, she says.

"A lot of consultants rip the sector off because they think it's easy money," she says. She believes many claim to offer bespoke services, but actually fall back on the same advice: "I prefer many of the younger facilitator types coming out of Harvard and Oxford, who get staff to work out their own solutions."

Peacock, who led Guide Dogs for the Blind before joining the Charity Commission, says charities are seduced into believing they need consultants when they should be learning more from each other. "Sometimes charities get too sophisticated for their own good," she says. "The best ideas we ever had at Guide Dogs came from the staff.

"It's an important area because I can see the private sector making a lot of money out of the voluntary sector when the voluntary sector already has the knowledge itself."

Peacock is concerned about a tendency for charities to hire former colleagues, thus creating an old boys' network, and urges them to create a more transparent paper trail of the recruitment process. She also calls on charities to be more open about consultancy fees. "Some are so worried about the size of a consultant's bill that they try to hide it," she says. "I hope the Standard Information Return changes that."

Peacock ruled out becoming a consultant herself. "Too many people go into it who don't know enough about the voluntary sector," she says. "And too many people who have been in the voluntary sector think they know about it, but don't have anywhere near enough experience."

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