Why your NGO is dependent on donors:
 the vicious cycle and how to fight it
Written by Anna B. Sabhaney

You might have noticed recurring patterns in your NGO where you end up in the same place again and again, no matter what you try…

It could be that you apply repeatedly for funding and despite your best efforts, you are unable to raise the funds required to implement the projects you know are urgently needed by the community you are helping, your aspirations for growth destroyed.

It could be that you make efforts and plan to grow your organisation, invest in the learning of your staff and then people leave because you are not able to meet their salary or benefit expectations.

And these situations keep on recurring again and again.

Insufficient funding.

Project scopes and timescales that are not conducive to learning.

No prospects of organisational growth.

More funding difficulties.

Less and less abilities to grow and control what projects you do.

Now, if this is you then you are in the NGOs vicious cycle of dependence on donors for funding and in this post I will explain why it happens and four things you can do to snap out of it today.

Before I do, the first truth to recognise is that there's a balance of control between donors and NGOs’ interest and that the interests and the priorities of the philanthropic organizations funding projects will inevitably be different to those of NGOs on the ground, intersecting but different.

Donors seek social impact and are driven by their own philanthropic mission. They use NGOs to deliver the change and projects they want to see done on the ground. The funds they are trustees of, come with the weight of the responsibility of ensuring the “best use is made of them”. In fact, donors often also need to report back and justify their investment decisions to their funders, stakeholders, members or charity commissions. To ensure they make the best decision possible, and because they are not on the ground and not able to measure change themselves, they must rely on third party information provided by NGOs. Therefore, in exchange for philanthropic grants donors control projects by expecting reporting, monitoring and evaluation information.

Meanwhile, NGOs have different concerns and priorities. NGOs are on ground and they need to make the difficult decisions of which community in need or vulnerable group to help first. They worry about being able to cover their costs, pay their staff and whether their organisation will be able to survive to help more people tomorrow, and the next year and the year after that. They are keen to invest in their growth and learning but are not always afforded the time, fees and space to be able to plan into the future and dedicate enough time to learning on-the-job.

The fact that there might be conflicts of interests between NGO and donor needs is not a problem. The problem, is poorly set up partnerships between NGOs and donors which set off a negative chain reaction of unintended consequences, erode the value created for beneficiaries and reduce the effectiveness of the money spent.

The main question to ask at the start of any new relationship is – has it been set up in a way that is fair, balances both parties needs and aspirations, provides effective mechanisms for managing change and equitably allocates risk, control and value created?

The root cause and start of the NGOs vicious cycle of dependence on donors - is getting this balance of control wrong, poor negotiation and poor project set up from the very beginning. The balance is all too often skewed towards the donor’s interests, preferences and needs foregoing the NGOs needs that are critical to successfully achieving change on the ground at scale.

This is how the cycle unfolds:

1. The donor has control of the funding and therefore they act as “The Client” and set the scope of the projects based on the limited information they have.

2. When the NGO isn't confident enough to believe in the value of their skills, does not have clarity or is not able to explain clearly why it needs certain aspects of projects to be a certain way (e.g. timescales, components, flexibility for change) it fails to negotiate effectively with the donor.

3. The donor is unaware of the impact of their scope, fee, reporting and time management decisions on the NGO and the project is set up on the donor’s terms.

4. The NGO ends up struggling to deliver the project to the quality standards it would like too, cannot use the project as a means of learning and expanding its staff’s expertise and is left with no reserve funding at the end of the project to maintain or reinvest in the next project.

5. Over time, because of income uncertainty, instead of only seeking out the donors and partners that are a good fit, an NGO can end up moulding its offer to fit the interests of the donors it comes across.

6. If the NGO takes on too many projects that are not aligned with its main mission, its vision and reason for existing become diluted and less clear.

7. As a result of the NGO taking on board so many activities, it loses its USP and it becomes more and more difficult for it to differentiate itself from its competitors and therefore it becomes less and less confident in its unique skills and less able to attract new partners.

And so, the cycle starts again: Too much time and effort wasted on trying to attract donors that are not a good fit; poorly set up projects and programmes that leave no time to build long term ownership on the ground and have insufficient fees allocated to organisational learning; no excess income over expenditure at the end of the project to reinvest in building organisational sustainability.

Ultimately this leaves the NGO stuck in prolonged financial uncertainty with no control over the future of its organisation or its ability to continue its important work and reach its aspirations.

This happens despite both the NGO and the donors setting out with the best of intentions to find good partners to help them deliver change. Unfortunately, there are more unintended consequences:

• Projects and programmes that cannot feasibly be delivered within the timescales and resources available.

• Projects that do not take into consideration the complexities, risks, changing contexts and unintended consequences that come with tackling complex social issues.

• Poor trust between NGOs and donors and failure of communication.

Missed knowledge exchange and learning opportunities between partners.

Funds wasted on projects that may show some benefits in the short term but are not sustainable and do not empower local communities to take charge and drive positive change for themselves in the longer term, because they rely on more funding to be maintained and function.

Excessive time and effort spent measuring indicators and parameters that are not comprehensive or accurate representations of the real change and value created on the ground, and therefore give a biased view of what has been achieved.

• Unsustainable NGO models that rely only on donors for funding and invest up to 80-90% of their time seeking funding instead of building their expertise and delivering the impact that they set out to achieve in the first place when they chose to work in an NGO.

So, if your NGO is  stuck spinning somewhere in this cycle. There are four things you can do from today to snap out of it and start building a better future for yourself, your beneficiaries and your organisation:

1. Understand your U. S. P. – believe in, protect and invest in the value of your skills. You have unique knowledge of problems on the ground that no one else at any scale in society has. That knowledge is valuable and other partners need it to achieve their agendas and goals, so leverage it!

2. Be picky with your donors and partners – you are picky with every other relationship or person you let into your life, so be the same with donors. A donor grant may give short term gratification in the form of abundant funds, but funds are not everything and if the terms of the delivery of the work do not align with your goals, your capabilities and your learning objectives, these partnerships can do more damage than good to your organisation and will not benefit the donor either. They are also likely to take away precious time that you could instead spend developing your expertise and working with other more suitable partners. The longer it takes you to deliver change, the longer your beneficiaries will have to bear their existing problems and the less people you will be able to help.

3. Try not to let the shortage of funding in the short term skew your decisions – cashflow and making ends meet is always a challenge. But try to look beyond the immediate. Planning and developing a funding and growth strategy is a great way of doing this as it provides the clarity and structure that you need to evaluate what short term funding options are or are not a good fit for your organisation.

4. Practice negotiating – this is a critical skill in business and in life. You should never be shy of asking for funds to support your organisation in the longer term! Partners come and go, but NGOs typically remain local and attached to those communities and through their projects become responsible for continuing the good work in the longer term. So, it is only fair for your NGO to be rewarded for its efforts so that it can strengthen its ability to continue helping more people in the longer term. Every other consultancy and type of organisation in the sector is rewarded for their work, so you should to! Invest time at the start of a new partnership explaining to your donors what your challenges are, how you intend to tackle them and what non-negotiable things you need to deliver the work.

It can take only a day, a week or a month to set the intent for change, but a lifetime to master the skills and discipline to take it forward and bring that intent to fruition every day. So, take responsibility for delivering that long-term change for your beneficiaries and set yourself up with the clarity, resources and planning tools you need to live up to your expectations.

If you set these things in place from today and at the start of every new endeavour, you'll find everything else will fall into place: the monitoring and evaluation against goals will be easier; communication will be easier; your satisfaction will be greater; you will develop a stronger network of partners you rely on for advice and expertise and you will attract better partners who you will deliver better projects and greater change with.

Anna B. Sabhaney

I help non-profit Founders and CEOs get funders and stakeholders listening
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