This article first appeared in the Pretoria News on 16 August 2017.
The relationship between NGOs and businesses, in the context of funding partnerships, can at times best be described as “complicated”, and even occasionally leave both parties slightly disillusioned.
This awkwardness could be traced to businesses having a different approach to investing in NPOs for CSI purposes, to the approach they follow with their normal business investments.
It’s fair to say that an individual or business with the means to be generous has worked hard to be able to give, and would therefore not want to part with their money irresponsibly. It is however peculiar that they generally approach their “giving” relationships differently to the ones that make them successful in business. Often, normal business investments are made with certain conditions attached by the investor on how the investee should manage the investment, but not so many that it would restrict the investee from operating optimally. With CSI investments, however, the temptation is to place excessive restrictions or conditions on what the NGO is “allowed” to do with the funding. This could actually stifle potential returns, and limit the potential impact.
There are a few sure-fire ways that donors, often unintentionally, restrict their beneficiaries:
1. By only providing short-term funding commitments.
2. By only designating their funding to project-specific expenses.
3. By not funding any operational costs or foundational capabilities.
4. By expecting unreasonable amounts of reporting and feedback in relation the size of their investment.
One consequence of these restrictions that we have seen with many of our partners is that the perceived growth resulting from increased project donations, does not equate to actual increased NGO efficiency, or even financial health, and sometimes even has the opposite effect. As NGOs spend more money and resources on growing their programme output (often to keep/please donors), their operational and financial health suffers.
Our funding approach at Mergon Foundation is based on relationship and partnership. We distribute our resources strategically to help build strong and resilient organisations as much as supporting effective programmes.
This approach borrows from the Grant-making Pyramid Insights, developed by the Bridgespan Group, together with the Ford Foundation. The principles they suggest pave the way for more constructive partnerships, helping both funders and beneficiaries have helpful conversations regarding the allocation of CSI investment:
First, NGOs need to build strong foundational capabilities. This requires securing adequate funds to cover the actual costs of core functions.
Second, NGOs need organisational resilience based on financial health. That means accumulating unrestricted net asset balances.
Third, NGOs need to deliver effective programmes, the springboard for increasing impact.
As with any relationship, when it comes to a partnership between business and NGOs, the key ingredients to make it flourish is clear communication, expectation management and trust. This is a two-way street, and from a funder’s perspective, it is imperative to understand the organisation that you are investing in all the way from the product or service they are offering to the input required to produce that offering.
The NGO should, in turn, be able to clearly communicate their needs, strategy and tactics.
This approach should at least provide a helpful framework for developing constructive partnerships.
Klopper is the African regional manager for Mergon, of which Nation Builder is a part.