Charities tout their “cost of fundraising” as metrics to evaluate effectiveness, but these values are often misleading. Organizations with high percentage on ground spends may have lower overheads and the ones with higher overheads may be the only ones big enough to be serving target populations far removed from the mainstream.
It is impossible to spend any period of time studying the Corporate Social Responsibility (CSR) scene in India and not become cynical. There are, literally, millions of people and hundreds of causes in India that could be improved with more training, better infrastructure or even a little money. Individual contributions are too few and far between. And government spending is monolithic and inefficient; plagued by the middle-man phenomenon.
So while I am not in favour of legislating behaviour I can see the benefits of requiring companies to direct a portion of their profits to CSR. Schedule VII of the Companies Act 2013 is a good stop-gap measure; but only a stop-gap because it works like a 2 per cent tax on top of already one of the higher corporate tax rates in the world and that, in my opinion, makes it untenable.
It has been a few years since the introduction of the rule and the overall landscape of CSR spends by companies is littered with the shattered dreams of organizations involved in work on the ground and the frustration of CSR heads in companies who don’t know what impact their money is having; for the causes as well as the company’s name.
There are a number of reasons for the reality of CSR falling short of expectations. And, in subsequent columns, we will go through a number of these reasons. Today I want to focus on how individuals, and companies, select the charities they want to empower with our money.
A number of large companies have set up independent CSR vehicles that utilize the funds from the parent organization in consistence with their values while also creating some return (social or financial) for the parent organization. Such a luxury may not be available to smaller organizations who would, ideally, want to write a cheque to an NGO and be rid of their obligation.
Mahindra and Mahindra’s various foundations, for instance, focus on empowering women, children, the disabled and economically disadvantaged. This not only furthers the Mahindra brand; serving communities, from which they source labour, reduces the cost of labour and attrition for M&M. But even at a large-scale the foundations deploy many NGOs to provide the expertise on the ground. The logic is simple—organizations which have the experience and the network in the field are better placed to do the actual delivery than a new organization. NGOs are more cognizant of the realities on the ground and so they can devise the right delivery systems and incentives that lead to adoption and ensure endurance of the programme.
So, big or small, funding organizations are best served by partnering with NGOs who know what they are doing.
How does one judge how good an NGO is? That isn’t an easy question to answer for a variety of reasons. There are no independent bodies that evaluate NGOs on effectiveness. Though there are entities like GiveIndia that have vetted over 200 NGOs for transparency
and effectiveness. Internationally, organizations like Give Well do NGO evaluations, but by their own admission, their US-centric template doesn’t work in India.
How does one measure effectiveness anyway? I have seen charities tout their “percentage spent on ground” or “cost of fundraising” as metrics to evaluate effectiveness, but these values are often misleading. Organizations with high percentage on ground spends may have lower overheads because of small teams, thereby limiting their reach and impact and the ones with higher overheads (and lower percentage on-ground spends) may be the only ones big enough to be serving target populations far removed from the mainstream (geographically or socially); and hence, more needy of the assistance.
Cost of fundraising has some of the same limitations as a metric for evaluating effectiveness. Older organizations will have their fundraising networks in place thereby requiring less to raise funds each time but that says nothing about their impact.
It becomes incumbent on the CSR lead, then, to evaluate NGOs on an individual basis. How they can do that will be the subject of the next edition of this column!
The writer is an alumnus of IIM Ahmedabad and has experience in setting up, running and advising businesses across a variety of sectors. He is currently the CEO of a consulting firm.