Excellent Article on the Third Sector in India

I would like to recommend an excellent article on the third sector in India that discusses and helps to explain some to the unique challenges that such organizations face in India and how they are different from other countries, especially those in the West.

The Problematic of Third Sector and Civil Society in India: Some Reflections, Sreedhara T.N. and Rajarama Tolpady, Journal of Karnataka Studies, Vol. 2, No. 3 & Vol. 3, No. 1, May2005-April 2006, pp. 19-59.

Indian Tax Law Issues

One thing that I am noticing that will be a bit tricky is the tax exemption that donors will get for their donations. Under Indian law, the exemption is generally under either Section 80(G) or Section35AC. Donations under 80(G) are entitled to a 50% exemption (plus possible an additional amount that can amount to approximately 10% or so). Donations under 35AC are entitled to a 100% exemption.

From speaking with those working in other countries, we are seeing that this is a problem in developing countries, where full exemptions do not exist. That aside, it is something we will have to consider when seeking funds in India. The good news is that corpus funds often fall into Section 35AC, so it might actually help us to get unrestricted funds.

Performance Metrics for the Development Sector

No quest in the development sector remains as elusive as the search for meaningful performance metrics. And with increasing demand for corporate social responsibility – commonly referred to as “CSR” – business are increasingly seeking performance metrics to validate their social investments. But in this endeavor, for-profit organizations are failing.

The main reason for this failure is the misconception that development sector performance is similar to corporate sector performance. The fallacy is that by tracking efficiency and output, a fair measurement of performance immerges. But, as businesses minds know, performance cannot be measured without a definite understanding of what is to be achieved, or the objective.

All businesses share one objective: increase profit. Businesses adapt different strategies to increase margin and/or volume, but ultimately all performance will be measured against this objective.

The core objective of development work, on the other hand, is to change the environment, so that such work becomes no longer necessary. Essentially, performance is a measurement of how well you are affecting the system in which you operate to make your effort redundant. For example, an organization seeking to improve the status of women in rural India will be successful once rural women’s status has been corrected. In development work, you are not trying to increase demand for your work, but rather decrease the need.

And now we can see why businesses’ CSR departments have difficulty producing performance metrics. The objective of development work is essentially the inverse of the for-profit objective. When development sector performance data is demanded, the business sector defaults to measuring output and efficiency. But output and efficiency help measure development sector performance only if they are measured against the ultimate objective. Increase output and efficiency is not necessarily an indication of success.

For the development work, therefore, we encourage organizations to first define, in terms particular to that organization, what success would look like. That vision of success becomes the core objective. By further defining what is necessary for that objective to be realized, organizations develop a better understanding of what good performance entails, and what data will indicate success. Only by defining and applying objectives can we meaningfully measure development work performance.

Ways to Connect NRI Volunteers to NGOs

One issue we have see with NGO management almost everywhere in the world is that it is very difficult to manage volunteers. While many are very talented and have great experience it is often not it the non-profit world. Even if it is there are concerns over motivation, keeping the happy, what one can assign to volunteers and be sure that they will get quality work back in time, etc.

For Indian issues this is especially important because they are staffed very leanly and if they are given volunteers that can and will be motivated to work and handle responsibility, then it can be a great boon. Give, for example, has found an excellent way of not only bringing in foreign volunteers and interns but has taken advantage of many other Indian volunteers, especially women with great work experience that are either at home or taking leave from work. (I would recommend contacting Give regarding their experiences if you are interested in how to implement a similar program).

And now that we are back in London and have had a chance to meet with some Non-resident India (“NRI”) community groups, it is clear that there is an opportunity to connect those interested in helping Indian NGOs to Indian NGOs. Many of these groups have people who have great experience working with volunteer groups to do a range of things – put together cultural shows, language schools, community meetings, and efforts to lobby local government. They would be able to help in volunteer coordination and bring those much needed skills to an NGO and would probably be able to do so in relatively short stints of volunteering where they could “teach” people at the NGO what they could do to help get the best out of their volunteers.

Final Say Regarding the Content of the Report

As we get ready to meet with donors one new wrinkle we are finding is ownership over the reports we will present. Of course, we want the NGOs to be happy with what the document says, but we have to be critical. The reports must be seen as “ours” and as done with a critical eye. While we shy away from outright recommendations, it is clear from donor discussions that they look favorably on our recommendations because they trust the quality of our diligence and base that largely on our previous experience and work relationships. Therefore, we have to convince the NGOs that even if we say things they disagree with they have to accept it because it will encourage more open and honest communication, as well as encourage long-term donations. In future meetings, we will have to emphasize this point.

Perverse Incentives: Why the Correct Criteria Matter

Another criteria related issue we are discussing with our partners is how certain categories that people like to report often have a great risk of becoming harmful if they become the standard measurement tool.

For example, we are debating – and trying to convince a group that has sought our help and insight – that reporting on things like “students educated” and “children fed” should not become the thing they view as their main measures or what they should try to get donors to examine most closely. In our view both of these categories result in “teaching to the test” behavior. The more one focuses on “students educated” or “children fed” the more one tries to raise these scores because that is how the group measures success and how the donor does, as well. The problem is that NGOs should not operate like businesses and maximize certain scores. After all, the NGOs’ really aims are to reduce these scores, and unlike businesses, encourage their own extinction. The fact that more students are being fed or educated does not really mean an NGO is being more effective or successful. Of course, it does not indicate they are not, but what we are trying to convince this group – and others like it – is that reporting needs to focus on other types to measures, as well.

This where we think outcome measurement is especially important. It encourages a more holistic approach to reporting and learning and sees many criteria in concert so that when one evaluates any one criterion, one sees it in terms of the ultimate outcome that is being sought.

Additional Thoughts on Beneficiary Surveys

We are working with several other groups to discuss the possibility of creating shared platforms for the exchange of information on NGOs throughout the world. One issue that has come is what measurement criteria should be used. There is a tendency to quantify everything. This is understandable because it allows for easier comparison, gives the donor a sense of understanding regarding the information he or she is viewing, and is quicker and easier to examine. We have discussed before how we are opposed to exclusive use of these criteria. For one, it often doesn’t provide anything useful. What does a score of 8 on responsiveness mean. What does 4 stars mean? Yes, these are useful and where possible quantitative data should be used but it must be in combination with more subjective measures or a hybrid to be full effective.

One thing we have mentioned is how we would like to incorporate beneficiary surveys into our reports to show how well NGO listen to their beneficiaries. We would like to use a common questionnaire to examine the groups and then use them to compare each other and their own progress. We will try to use number scores, but they will be hollow without some anecdotal support or at least some explanation of the score. Additionally, allowing for explanation means that the NGO is forced to reflect on the results and account for them – something we think is very important.