From NGO to social business: Why and how

By Robin Toal

Leaders of development and aid organizations talk a lot about changing donor models, value for money, operational efficiency, new technology and changing business models. And many believe that being aware of them mitigates the need for serious changes. It doesn’t.

The international development and aid sector is undergoing major changes and many organizations need to update or adapt the way they work. Many leaders I speak with are considering moving the business model from that of a donor-funded, traditional nongovernmental organization, toward a sustainable social enterprise.

But what exactly are the reasons and how does one get such a major change process right? Through my work at MzN International, I have the privilege of working with many midsize and large NGOs and social enterprises, some of which went through the transformation process recently. So what have I learned?

Why change?

It is impossible to be all things to all people. To reach a clear plan for change, it is important to address what changes in the organization’s environment management wants to react to. This also includes identifying the areas that the NGO no longer wants to work in — an even harder decision.

Most organizations I speak to list three key reasons for change:

1. A high dependency on only a few large donors makes NGOs financially vulnerable as well as less of a charity, changing its culture and the way the NGO works. As Henri van Eeghen, chief operations officer of Cordaid, the largest NGO in the Netherlands, puts it, “When the majority of funding comes solely from a few government donors, organizations take the colors of a civil service authority — slow, bureaucratic and unresponsive.” A broader funding base makes an organization not only more secure, but usually nimbler and more responsive too.

2. The overall reduction in foreign aid and development funds drives a need for diversity and additions to the existing funding base. The increased competition from non-NGOs for government funds makes shrinking government pockets seem even smaller. This means a funding strategy reliant on government donors is less likely to render financial sustainability.

3. There is an increasing awareness that the old grand model of investing tax money from the “global north” into programs in the “global south” via NGOs is simply not working; organizations need to move from being foreign aid implementers to true international development organizations.

All these changes point to one thing: There is great need to change from a traditional NGO that secures and implements government development and aid projects toward a development organization that can think creatively, act independently and account for its actions openly.

Learn about how to change with the full article available by Chris Meyer zu Natrup via Devex.

Excerpted from FundsforNGOs

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