We live in a very different world today than when most INGOs were established. Profound demographic, economic and technological changes have reshaped our world. And as the world settles into the second decade of the 21st century, the economic recession in the United States and Europe, the winding down of major relief and reconstruction efforts in Iraq and Afghanistan, new sources of development funding from mega-foundations and private remittances, and new donor nations such as Brazil, China and India are forcing development actors to reassess business models and modes of operating that have changed little in 40 years.
Many NGOs understand the threat to the status quo and see the need to change but don’t know how to remain true to their mission while maintaining the vitality and financial health of their organization. As change comes barreling down the tracks like an on-coming train, many NGOs stand paralyzed like a deer caught in the headlights. This subject is receiving additional attention with the recent publication of a report by the nonprofit consulting firm, FSG. The report, titled Ahead of the Curve, Insights for the International NGO of the Future, was sponsored by the William and Flora Hewlett Foundation.
FSG’s task was complicated by the diversity of the study group. Although the report studied INGOs with at least $30 million in annual revenue, the organizations ranged from single-sector program implementers, to groups more focused on advocacy, to giants like World Vision with tens of thousands of employees and over a billion dollars in annual revenue. While FSG does a good job of describing many of the disruptions brought on by progress and globalization, different organizations will experience them differently depending on their mission and size. It would have been helpful to have tried to tease out some of these differences instead of simply arriving at a set of conclusions where one size clearly does not fit all.
Compounding this problem are some of the examples FSG used to draw general conclusions that, for those who are familiar with them, are not easily generalizable. For example, the fact that Habitat for Humanity successfully used an advocacy model to expand its impact is not a good basis for concluding that the future for INGOs is to become advocacy organizations, as the report does. I was also frustrated that the report didn’t use plain language to explain its points and recommendations. I found the report laden with jargon and vague language, perhaps because it just is not clear what the future holds. FSG’s crystal ball is just as murky as everyone else’s.
There are four main points in the FSG report.
First, the report foresees INGOs leaving implementation to local organizations and focusing instead on influencing policy through more advocacy-type activities (what they called a systems approach). This may have worked for Habitat, but I don’t think it makes sense for most INGOs. Moreover, having dynamic multi-national NGOs is more important than ever in a globalized world. For one thing, most add value precisely through their management, technical, financial and organizational implementation expertise. Second, finding funding for policy advocacy is even tougher than finding funding for implementation. Don’t get me wrong: addressing policy/regulatory issues is fundamental to progress, but I don’t see it as the answer for most INGOs.
The report also recommends that INGOs should move away from growth models that define success by revenue or staff size and instead define success by how much they can influence development agendas. I took this as a polite way of saying that INGOs should prepare to get smaller. That is probably a correct prediction for many, but it is because competition is getting fiercer, not because the services INGOs offer are no longer needed. It’s too bad that the point wasn’t focused on getting smaller in order to be more efficient and cost-effective.
FSG encourages INGOs to develop new revenue streams such as commercializing products to capitalize on intellectual property; finding high-net-worth individuals; and reinventing themselves as consulting businesses. Telling INGOs to find wealthy sponsors is like telling them they should find the holy grail. And many, especially the ones that act as implementing partners, already operate as a type of consulting firm, providing specialized expertise and management services. Anyone looking to the report for insight into funding models for the future must have been sorely disappointed.
The fourth point in the report recommended finding synergy with the private sector by viewing business as a development partner, not just through CSR philanthropy, but through direct business operations. Here, I think FSG gets it right, and their observations and recommendation are on point. Ironically, while the strongest point in the report concerned the private sector’s evolving role, the report itself reads like it a public-sector paper written by committee, not a market analysis.
Presenting the conclusions of the FSG report in plain language might provoke some planning scenarios about the implications of some of the real world trends the report catalogs, such as stagnating U.S. Government funding; the emergence of developing country competitors; donor policies that seek to limit or exclude INGOs from competing in favor of local organizations; and the way a handful of mega-foundations, especially the Bill & Melinda Gates Foundation, are changing the rules of development financing. But, I was disappointed by what was missing from the analysis: no mention of consolidation within the sector; no assessment of the type of new competitors entering the field or their likely staying power; no real discussion of the issue of local capacity, which is so often used as a stalking horse for protectionist policies; and little effort to tie the whole thing back to the changes in the real world, such as a rapidly growing middle class, continued conflict in parts of Africa and the Middle East, the persistence of an international terror threat, new donor countries, remittances, and the whole issue of the globalization of labor markets that has transformed pricing of international expertise, to name a few factors.
I see a somewhat different future for INGOs. Even if donor funding declines and priorities shift, the demand for human development solutions is not going to disappear, and INGOs that offer cost-effective, quality services will remain relevant and add value. The key challenge will be to adopt more efficient and effective business practices in order to compete in increasingly sophisticated markets. (This will sound painfully familiar to executives in private-sector multi-national corporations.) I believe that INGOs that offer quality, cost-effective services and are nimble enough to develop new clients and product lines will remain a vital and valued force in our world. The bottom line is that the need for INGOs isn’t going away, although some INGOs might.
Patrick, thank you for your careful read and thoughtful review of the report. My coauthors and I are encouraged by the response we’ve received from leaders at both INGOs and donors. Even if readers of the report don’t see eye to eye with us, if it helps to start dialogues and spur action, we will consider our work to be worthwhile. Some of the points you raise in your blog include better defining systems approach, asking whether INGOs will continue to play an implementing role, and the overall need for INGOs to change. I address these points below.
In the field survey that we conducted for our study, almost 60% of respondents reported using advocacy as a tool. We do think advocacy will become even more important for INGOs in the coming years, but we agree with you that for many, it’s not going to replace direct implementation. The systems approach we talk about, however, goes beyond the traditional definition of advocacy. In the case of Habitat, World Vision, PATH, and others who are taking this approach, this involves conducting systems mapping, gap analysis, and bringing in other players – companies, local NGOs, other INGOs, government agencies – as needed to fill those gaps. Advocacy can certainly be a part of this approach. But at its heart, the systems approach is a new way of conducting the implementation work that addresses gaps in the whole system rather than siloed approaches. Donors are increasingly becoming more intentional about taking systems approaches, as evidenced by USAID’s recent report on local systems.
We do believe that the technical implementation skills, along with issue area knowledge and organizational stability, will continue to be unique differentiators of INGOs. Even for those that continue with the same level of emphasis on program implementation, we believe the approaches we highlight can be useful in thinking about greater scale and longevity of impact. Shared value corporate engagements are not appropriate in all situations, but they can bring greater sustainability through the profit motive of the private sector compared to traditional grant programs. Inclusive and disciplined multisector partnerships can avoid duplication of work and create greater efficiencies by allowing all partners to track impact using the same set of metrics.
If it didn’t come through clearly enough in our report, we absolutely see a role for INGOs in the coming decades. But simply becoming better versions of their current models will probably not be enough to survive the disruptions that both we and you articulate. More importantly, we think these new approaches are needed to generate even greater impact for the individuals who are the ultimate “customers” of INGOs.
We hope to continue this dialogue with you and other colleagues from INGOs and donors during the rest of 2014.