Over the last two years, I have interacted closely with a few Indian non-governmental organisations (NGOs) and been both a donor as well as an adviser. My aim has been to enable “capacity building” in the NGOs so that they can scale faster, be cost efficient and make a large impact in the communities that they serve.
As a serial entrepreneur in startup businesses, my objectives have also been scale, cost efficiency and impact.
The difference between a for-profit business and an NGO is that businesses raise capital from commercial investors to provide financial returns, whereas NGOs raise capital from philanthropists to provide social returns.
Even though businesses are driven by a profit objective and NGOs are driven by compassion, the management needs in both cases are overwhelmingly similar.
1. Both categories require an initial aspirational vision, from an ambitious, far-sighted founder.
2. This vision needs commitment and consistency, without faltering when challenges appear. Sometimes, founders lose confidence mid-stream and mission-drift sets in: this is often suicidal.
3. A committed and competent management team is essential, and they need to be passionate about the mission. For an NGO, they also need to be very compassionate. In both cases, people need to be well-paid—passion cannot replace salary, and volunteers cannot replace management.
4. Once the mission and the team are in place, pilots have to be run to obtain insights about how to design the service offering for maximum impact. These experiments are essential to establish the validity of the initial concept.
5. Advisers, partners and government agencies need to be approached as no organisation can succeed in isolation.
6. Technology, data analytics and continuous innovation are essential in today’s world in both the service offering as well as the internal operations.
7. Fund raising from the right investors is essential. The investors should not be heavy-handed or force the organisation to change its mission, as that would be disastrous. Only those investors should be taken who are committed to the mission, founder and management. It is often difficult to resist incoming money but saying “no” is also necessary.
8. Governance is of huge importance at the board level. Board members must be selected not only for their chemistry with the founder, but also for their objectivity and experience. They must be fully involved and not just a presence. Unfortunately, this is often more an exception than a rule.
As I write this, I realise again, how much similarity there is between a for-profit business and an NGO!
Recently, a third category is coming up, which is a blend of a business organisation and an NGO. These are called social enterprises, who are for-profit, but their customers are from unprivileged communities and their objective is to uplift their customers’ well-being. There is a fine balance between the for-profit objective and the social objective, and synergising both requires a very special skill and attitude. Having been part of a social enterprise myself, I have experienced how to overcome the apparent discrepancy. If successful, this model enables social causes to be ‘self-financing’.
In conclusion, the same founders can be excellent philanthropists as well as business people.