Corporatisation of NGOs: Is it Time to Put a Full stop?

In my association with the Ministry of HRD in eighties I used to work very closely with NIEPA, UNESCO and several other bodies and groups. I used to be invited as a Professor from the Indian Institute of Management Ahmedabad and quite often to represent corporate sector point of view. The assumption used to be that corporate sector manages itself well and professionally and educational institutions, not- for- profit organizations etc. have something to learn from the way they manage. IIMS symbolised for them the corporate sector point of view. After having been invited quite often I used to note with amusement that, on one hand they would like my presence but on the other, show tremendous hesitation in using any management systems I suggest.

I was several times confronted with the following question and comment: “What applies and works for industry does not hold good for managing educational institutions and education systems and NGOs. Managing education, not for profit agencies (NGOs) and government is a different cup of tea. We don’t think MBO, Strategic Planning, and Performance Appraisals etc. work in Education. Please don’t tell us what we should do in Managing Education or NGOs by drawing lessons from corporate sector which is totally different game”...

At the same time they would not have any workshop without management consultants drawn from IIMs and the corporate sector. I had to go out of way several times to convince the participants and organizers that most innovations in Business came from the Education system and we are merely re-importing after the corporate world has succeeded in using the same. I had to give the history of MBO and trace it back to Benjamin Bloom’s educational objectives, draw the developments in Information Technology to B F Skinner the famous educational psychologist etc. Of course the argument always was that education is meant for development while business is meant to use the fruits of development to further itself. Of course over a period of time education also has become unfortunately a big business. Not only education but also those who govern education manage it like business. The big difference between business (and commercialisation) and development is the purpose. The purpose of development is to uplift the levels of knowledge, skill, attitudes and values and through them lift up people economically and socially and ensure good quality of life. The purpose of business is to make money by providing goods and services to customers. Business vanishes if it does not serve those who set it up. Serving the customers is only the means for doing business. Contrasted with this the purpose of an NGO is to serve the people for whom it is set up (not those who set it up but those for whom it is set up). The people for whom the NGOs are set up normally called as beneficiaries and for professional bodies it is the members and non-members that constitute the profession at large.

If an NGO becomes a body that serves those who set it up than those for whom it is set up then it becomes business. If a business serves mainly those for whom it is set up (the customers or beneficiaries) it slowly becomes a service organization and it is rarely such a thing happens. However an NGO set up to service people slowly may deteriorate by narrowing the range and number of people they serve and then may become a business organization in the guise of an NGO. I feel now-a-days many organizations or NGOs run the risk of becoming business places with profit or money motives than development agencies. For example the Government decides to set up a regulatory body to regulate and enhance the standards of education. The same body slowly could deteriorate into a self serving agency by collecting funds for the private use of the regulators and thus education could becomes business. Similarly a college set up for educating students charges capitation fee and aims at passing on the benefits to those who set it up them it becomes business.

There are many safeguards that prevent business from becoming charity (for example profit, sales, quarterly performance declarations, dividend declarations, share price, annual share holder meetings, markets, MIS etc.) but there are no safeguards that prevent a charity from becoming business apart from the laws that govern the Trust or Registered Society. However the apathy of the beneficiaries to such deterioration is the main cause for the same. For example in some of the professional bodies like NHRDN, NIPM, ISTD etc. I have seen some times a Chapter President or a Committee Chairman is appointed and continues to hold the position for several years even when his term is over. He rarely convenes meetings but uses his designation of the President or Convenor or Chairman in his bio-data, represents the body in many conferences, gets invited for seminars etc. In those circumstances often members keep complaining and express their helplessness but do not do anything. They have the power to call for a special meeting to discuss the issue and elect a new Chairman. Most often I found that the members privately complain but publicly praise the Office bearer or at least dare not to confront him. It is this lack of initiative and responsiveness from the members that encourages conversion of charity to business. Same thing happens in Government and education. Everyone wants a favour from the regulating body and hence they dare not raise any questions. The body or the educational institution gets along well and even may become famous.

Members do not take active interest but expect the association to always give to them some service or the other once they paid their membership amount. Often they forget that when they join a professional body as member the fee they pay is symbolic of their contribution and interest in the body, are expected to receive the benefits but they are not the only beneficiaries and the profession at large including those who are currently not members need to be serviced. They forget that they also have an obligation to contribute to the body’s functioning and objects and they should not merely treat themselves as beneficiaries. As an NGO each member has an obligation to contribute to the furtherance of the objects for which the Society or Trust has been set up.

In this context I like to examine the concept of “Corporatisation”. The term corporatisation means doing things the way corporate sector does. What is the way corporate sector does? In my view it corporatisation means “Professional, Scientific, Systematic, Cost conscious, Quality driven, Customer focussed, ROI centred, Expansive, Investor Value giving, Profit driven etc.” Most of these adjectives apply equally to NGOs and professional bodies except “Investor driven” and “profit driven”. NGOs and PBs should be professional, quality driven, cost conscious, beneficiary driven instead of member driven. However, In NGOs and Professional bodies and Trusts, the investors do it for charity and not with a view to get any personal or individual returns on their investments for themselves but expect the returns for others. The moment an NGO or a PB starts having people who donate their time with a ROI for self in mind it becomes more like a profit driven corporate sector.

How much and NGO or a trust spends on itself is an indication of its effectiveness:

The most important consideration in managing a charity organization or an NGO is how much it spends on itself. This includes all salaries of those employed by it, maintenance and all other costs which do not go directly to the beneficiaries or members (in case of a registered society). For example in a professional body like the NIPM, ISTD, NHRDN, AIMA the amount spent for the members is the cost of the newsletters, seminars, conferences and such events and processes that directly benefit the members. All the rest is considered as money spent on itself.
Consider an NGO which organizes an event to collect some money by servicing those who can afford. The event should generate funds to be available to the less privileged that the NGO desires to serve. The NGO collects Rs. 10 lakh from the event and spends eight lakhs to manage the event. Six out of the eight lakhs are given as fee to an event manager and another two lakhs on administrative costs including food etc. The ten lakhs it has earned came out of seven lakhs of donations and three lakhs fee. The NGO may feel happy that it has saved two lakhs for the poor. In my view the NGO has wasted large part of their earnings on the event manager. I consider the event manager as middle man. Instead of using the event manager if the NGO used its own resources it may have spent much less. Sometimes the argument is made that those who donate money for NGOs donate to get publicity and hence they are willing to give money only when they are sure that their charity is known to many individuals and the event managers help in the same. So in essence what this NGO has done is to publicize the donors at the cost of the beneficiaries and for the benefit of the event managers. A truly charitable organization donates for a cause and not for publicity. Donating to get publicity is in my view corporatisation of donation. Any thing you do with largely or primarily financial benefits now or in future is a sensible thing to do. That is what most corporates try to do and hence it may be called as corporatisation.

Consider another NGO which organizes and event and earns five lakhs. It spends on the event itself two lakhs and saves three lakhs for passing on to the beneficiaries. This NGO does not spend on event manager and the event is managed by its own members who work for charity or for service purposes. In the former case of the NGO also they work for service but the strategy they use may not be as laudable as the latter one.

Tendering:

Now days another process that is extensively sued is the tendering process. One I received for a trust I have started an invitation to bid for a project. I pointed out to them that such a project should be carried out on charity basis and not through bids for consultancy. I even volunteered to work for this organization on the project. Finally I did not even know that the project was given to one of the bidders and at a high cost as a consultancy project. When I came to know and raised an issue some of the members silently spread a rumour that I am raising these questions because I did not get the bid. This entire mind set is indicative of corporatisation- attributing profit motive to everyone including trustees as corporate work with profit motive.
Some of the NGOs use tendering as a process to justify actions that have already predecided. They decide a party and then do their paper work to justify the same. Tendering is a good process for hard ware purchases as you know what you want. But putting a tender for soft processes which the NGO itself is known for is not the right thing to do and is indicative again of corporatisation. For example if an agency that specialises in Adult Literacy ahs all specialise in adult literacy but decide to float a tender to get ht best adult literacy strategies from external agencies have merely abrogated their responsibilities. Similarly a HR or Personnel Management or Training and development Body floating tenders for design gin a performance appraisal system for their staff or training their staff in my view is not the right thing to do. Such things should be done only when there are no internal competencies and such competencies cannot be obtained on a charity basis. Most managers of Trusts and Voluntary agencies take up the jobs for the bio data value it gives and once they become Chairman, or Presidents, or Managing Committee members they discover that they have limited time and hence resort to outsourcing techniques. Anyone who spends Trusts funds on managing the trust itself beyond 20% is not doing a good job.

Positive Side:

On the positive side of managing NGOs a large number of members today are more than willing to give their quality time for charity purposes. For example the amount of time given by members to bodies like the ISABS, National HRD Network, NIPM, ISTD and Local Management Associations like the Ahmadabad Management Association are exemplary. There are many competent people in these bodies.

However care should be taken to see that these bodies do not over-corporatize by taking symbols of corporatisation and ignoring the essence of corporatisation mentioned above. By taking symbols I mean changing logos for image building without accompanying changes in the internal functioning or processes and efficiencies of the organization. For example Bank of Baroda changed its logo only when it was ready to launch a number of new schemes and also change some of the internal processes. They initiated a large number of new initiatives and communicated to the public at large that they are into the next generation banking.

Similarly by merely having monthly or quarterly meetings for which the NGO or PB spends a lot of money without justification of the work being done between the meetings may be over- corporatisation. Quarterly publication of results in corporate sector is not the same as quarterly reporting of an NGO when not much happens between he quarters. A meeting of twenty people from all over the country costs at least Rs. 5 lakhs of real costs (air fares, venues, stay, and daily time costs) and may be equal to Rs 30 to 40 lakhs of opportunity costs ( I have explained the rationale of the costing of meetings in my book on Hurconomics, Oxford& IBH). Four meetings would cost twenty lakhs with an opportunity cost of over a crore. Sometimes the costs may not be visible easily as they are borne by the respective organizations.

New Management Technologies:

Introducing new management practices and systems like MBO, Strategic planning, performance appraisal etc are certainly the most desirable things to do. A good part of management thinking is for any organization. Having a good MIS, Performance management system, Long term planning, vision etc. In my view are not in any way indicators of corporatisation. They are necessities for effectively running or effective functioning of an organization. The way you do it is what I call corporatisation. As I started off this article by saying most management systems and processes have out comes of education and philosophy and necessities. They are not indicators of corporatisation.

However in the name of managing a Trust or an NGO effectively and efficiently if the Trust’s Management spends a lot of its resources on maintaining itself and to get the business done it is corporatisation. For example frequent meetings to decide course of action if it involves travel and time and money it needs to be looked into. Spending Trust’s resources on consultants, event managers, publicity, conferences and seminars meant for the press and television, spending on dignitaries and foreign experts to grace the occasion, spending on media publicity, five star hotels for stay, beautification of web sites and change of logos, appointment of consultants, business class travel etc. are all indicators of corporatisation of an NGO. If these are in limits (not exceeding the 20% in total) I suggested above then one can say that it is in limits.
T V Rao
Adjunct Professor, IIMA and Chairman, TVRLS