Donor-NGO Relations Within the Context of Corporate Social Investment

ngos donors social investment
Tuesday, 23 November, 2004 - 11:17

Sustainability in its simplest form means to support and/or keep in existence. Most discussions around sustainability in the sector are focussed on the financial support or, more accurately, the lack of

Sustainability in its simplest form means to support and/or keep in existence. Most discussions around sustainability in the sector are focussed on the financial support or, more accurately, the lack of it. Alternatively, financial sustainability is expected to develop through the design of self-generating income by the non-profits, rather than donor funds.

Over the last decade we have seen social support move from the traditional government coffers to a greater reliance on big business and private contributions. There has also been growth in the non-profit sector, leading to a situation where the pie has more or less stayed the same size, but changed its flavour and has to feed more people. A lot of time and energy is spent by non-profit organisations (NPOS) trying to raise funds in order to ensure their ongoing survival in the face of current challenges.

However, the question of sustainability in the non-profit sector will not be answered by solely analysing data, growth rates, fund flows, numbers of entities, sector focus, etc. I believe there is a fundamental flaw in the relationships between donors and nonprofits that will threaten the underlying viability of the sector in the long-term, no matter the level of funding that is received or thrown at development.

The current relationship is dominated by a give-and-take attitude. Or, you may prefer, a master-servant relationship. This obviously leads in large part to power plays, the subsequent resentment and an overall unhealthy situation. Granted, there are pockets of very effective donor/recipient partnerships, but they seem to be the exception to the rule. To elaborate on this point and its implications for the sustainability of donor-NPO relations, this article puts the relationship between the corporate and NPO sectors under the lens.

In the for-profit world, there are many business-to-business relationships. Many of these are strategic in nature with both parties benefiting from the collaboration. The benefits are easy to measure through net income or increased turnover, for example. Life in the non-profit world is not so straightforward; the institutions putting up the money (i.e. donors) are not the end beneficiaries, as shareholders would be in the for-profit world. The end results are not easy to measure and progress is not always quickly and easily seen.

With regards to current corporate donors, this must be a change in mindset that is not easy to replace. There is not a return-on-investment that can easily be calculated to measure the ongoing success of a project. There are administrative costs that need to be incurred that do not contribute to the bottom line in some way. In fact there is no bottom line to measure because, quite simply, there is no profit to achieve. This is in direct contradiction with the profit motive of the parent company.

Non-profits, on the other hand are typically started by social entrepreneurs who have no interest in profit driven goals, but rather want to save-the-world, or at least a small part of it. Their motivation for existence is driven by the difference they make, not the profit they keep. Professional management skills can be lacking, resulting in limited systems to feedback and report to the donors who have contributed the funds.

These two different worlds simply collide on a regular basis. Recent research demonstrates that the desired end goal of social impact is similar, but there still lacks the clarity of the roles that each participant must play to be effective. To compensate for this, each party attempts to impose their own agenda and needs on the relationship, often leading to mistrust and lack of understanding, resulting in less effective society benefits.

Recent studies have highlighted the following key areas of building a strong strategic partnership:

  • Accountability.
    Corporate governance issues are alive and well in the social sector and donors are asking more questions about the funds donated than ever before. While this is fair and ensures that checks and balances are in place, it also increases the burden on already overstretched resources in many NPOs.
     
  • Mutual understanding.
    Lack of clear communication and of mutual understanding of each other’s goals and agenda is destructive. This leads to a great deal of frustration through different perceptions of successful outcomes and social focus. For example, NPOs argue that the donors are not clear in what area they are likely to fund and much wasted time and energy is spent on trying to secure funding from inappropriate sources. Likewise, donors will argue that the projects they agreed to fund are not having the desired outcome they envisioned / perceived.
     
  • Organisational capacity and support.
    A dilemma exists in the non-profit world. Many donors refuse to support the NPO itself, rather only intending to support the projects of a non-profit organisation, while at the same time demanding sustainability from the NPO. The reality is that NPOs need financial support to grow their organisations and skill levels to maximise their effectiveness.
     
  • Recognition of funding efforts by the donors is required.
    While many may feel that corporates should just give funds out the goodness of their hearts, this is not realistic. They need to see a “return-on-investment” for these funds, even if this is merely a public acknowledgement by the NPO of where the funds came from. In essence, this is just plain good manners and a way to say thank you for the support.
     
  • Management skills for nonprofits.
    Recognise that the individuals or groups that have a passion for a specific cause start many non-profits and may not be skilled managers. The management skills of non-profits will need to be improved for them to continue to be effective and address the criteria above in an efficient manner while not taking away from the social challenges at hand.

The above findings indicate that success will come with a little less ‘take’ and a little more ‘give’. Each party has a valuable contribution to make. They cannot make the social impact without the support of one another; this is a symbiotic relationship. Unfortunately, the required adjustments cannot happen without change.

While the non-profit sector does not want to become more ‘corporate’ in their approach, fundamental business practices may be the most important way they can maximise their social impact and win the support of the donor community. Donors also need to rethink their funding strategies and support the non-profit organisations to build their organisational capacity and business knowledge in addition to the support already given to the vital projects undertaken.

By working together to create synergies, not compromises, the sector can be sustainable. As soon as each party starts compromising, the effectiveness is diminished. These poorer results will lead to less funds being contributed to the sector, in turn limiting long-term sustainability.

Devin Smith is an independent consultant, and an MBA Graduate with a research focus on "strategic relationships between donor and non-profit organisations."

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