“Fakeness among NGOs isn’t all that difficult to identify” was the headline of a recent article in the financial newspaper Mint. Written by Anurag Behar, CEO of Azim Premji Foundation, the article expectedly caused a storm in the nonprofit sector, which has of late been facing a host of challenges—harsher FCRA laws, increased CSR compliances, cumbersome reporting demands from donors, cornering of funds by governments, and so on.
I was upset as well. But when I read the article, it was less contentious than what the headline seemed to suggest, and reflected the angst of good actors in the sector: How do you stick to doing the right thing when donors and others want you to dance to their tunes? The headline of the Mint article was clickbait, which we all fell for. So much for responsible media.
The reason I’m writing this piece—in addition to being riled up by the headline—is that the nonprofit sector has been getting a bad rap for a while, and it would be nice if philanthropists and heads of foundations spoke up in support of the sector in mainstream media and to the public at large.
I occasionally hear this excuse by high-net-worth individuals (HNIs) on why they do not give: “The nonprofit sector is crooked,” they say. Having spent four decades in the corporate world, two of which also overlapped with my time in the nonprofit sector, all I can say is that there are more crooks in corporate India than in the social sector. Samaaj, sarkaar, and bazaar are run by people, and people are the same everywhere. When money is thrown at them, their behaviour changes. And this is what the Mint article was saying, with a misleading headline.
Let’s look at the five points that the article takes issue with when it comes to nonprofits: scale, depth, impact, connection to the grassroots, and purpose. All these are areas that my wife, Fiona (who has spent more time than I have in the social sector), and I have seen nonprofits grapple with, but much of this can be attributed to the demands that many funders make of them.
1. Scale
The push for scale is quite often led by funders. Corporates, through their CSR, want to fund organisations that have a pan-India reach because it’s easier to give out a few large grants than to make the effort of identifying regional nonprofits and giving smaller, multiple grants to them. But it is these regional nonprofits that have a deeper connection with the communities.
With the corpus of funders growing year on year, they are under pressure to put out more money, which in turn forces nonprofits to talk about scale. It’s a lot like when I was in the private equity (PE) world. Too much money and the fear of missing out caused valuations to go through the roof as entrepreneurs sold ridiculous expectations to excited investors. The same can be seen here in some pockets.
It’s easier to get funding to cover the cost of feeding a child than for building and strengthening an organisation to be more efficient.
One big difference between the corporate world, foundations, governments, and the social sector is that the sector struggles to get funding for that big bad word: overheads. Sarkaar and bazaar invest significantly in training people, leadership development, and technology support. But these very investments are considered as overheads and admin costs for nonprofits by funders. As a result, nonprofits struggle to raise money for them.
It’s easier to get funding to cover the cost of feeding a child or constructing a school than for building and strengthening an organisation to be more efficient. And this is one of the reasons organisations struggle to scale. Azim Premji Foundation, EdelGive Foundation’s GROW Fund, and ATE Chandra Foundation are some of the rare donors we have come across that actually fund this organisational development.
2. Depth
Fiona and I have worked with some exceptional nonprofits that go deep into their areas of work. Some of these are CORO, Olympic Gold Quest, Sunbird Trust, Centre for Civil Society, 17000 ft Foundation, Educate Girls, and SNEHA. And we have also come across others that can spin a yarn expertly. Here again, the problem lies with the person with the money.
Instead of maligning nonprofits, it might be worth looking at one’s own due diligence and decision-making process.
During my time as a PE investor, I made some great deals, and also some disastrous ones. In most cases, the problem was that we as investors had not done our due diligence and hence missed the red flags. I learned then that the best indicator for a successful investment was the promoter, not the business plan. We were successful when we spent time with the promoter to get to know them well, and we performed badly when we backed the wrong person.
The same applies to the social sector. Instead of maligning nonprofits, it might be worth looking at one’s own due diligence and decision-making process. As funders, you are responsible for your investment choices. And to make wise ones, you need to dig deep to understand the founder and the community connects that they have. These founders are human too, and they need help at times. Fiona and I, like so many others in the sector, have supported founders through divorces, funding crises, and family challenges. In fact, in retrospect, I have made more bad decisions in my investing journey than in my philanthropic journey.
3. Impact
Monitoring and evaluation is important. But it is an expensive exercise and many nonprofits do not have the funds to pay for it. I see nonprofits spending a lot of time on reporting because each donor wants it in a different format. All this costs money, but is again an area that donors do not want to fund.
We have interacted with donors who are great partners, as well as those who are difficult and arrogant. There are donors who do not ask many questions and others who ask a lot. On the other side, there are many nonprofits that do real, impactful work while there are some that only talk about impact. It is our job as funders to be able to differentiate between the two.
4. Connection to the grassroots
Most nonprofit leaders want to spend time on the field, but they are also in constant need of funding to support their work. We also know that many donors require a lot of hand-holding before they agree to make a commitment, and they expect nonprofit founders and leaders to spend that time with them. Unlike corporates, nonprofits do not have the resources to afford large teams that can provide this fundraising support. Furthermore, in corporates, the CEO spends a lot of time with investors and customers because revenue is key. Why do we consider it wrong if a nonprofit founder or CEO does the same? Because without funding, there will be no programmes to run and no people to serve.
Many nonprofits, like the ones I have mentioned above, are very closely connected to the grassroots and the communities they partner with. Nonprofit leaders spending time with funders to raise the much-needed money while their organisation and teams serve their communities do not need to be mutually exclusive activities.
5. Purpose
Many nonprofits are set up by people who want to change the world, who lead very frugal lives, and who are not driven by personal wealth or awards. Some do seek awards because many funders want external validation, and because they (wrongly) believe that awards and fellowships are a measure of a nonprofit’s scale and impact.
In summary, of course there are crooked nonprofits, just like there are crooked companies and crooked governments. But there are also many nonprofits doing outstanding work. And we must remember that the social sector has a huge role to play in areas where the state and markets have failed—in education, health, water and sanitation, gender, social justice, and so much more. It’s a long list. And if we highlighted and supported the work of all the amazing nonprofits instead of labelling the sector as fake, the world would be a better place.
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