NFP ‘Rebellion’ Against Funders’ Demands

Not for Profits are needlessly rebelling against a growing demand from funders for impact and outcomes, rather than mere outputs, a Harvard Professor has told a Melbourne leadership conference.

Professor Kash Rangan of Harvard Business School addressed an audience of Not for Profit leaders as part of JBWere’s 2015 Social Leadership Program, hosted by NAB.

“‘Impact’ in the last five years as a topic has taken on a life of its own,” he said.

“The topic of impact has been advanced by the funders. Funders have asked non-profits, NGOs and social enterprises to go beyond inputs and outputs.

“The funders are now saying, ‘That won't do!, That’s an output. You just told me how many people you have trained, I want to know outcomes. I’d like to know, these kids you have trained, have they found a job? And if so, how long did they stay in the job? Have they transitioned into productive citizens?

“These are the difficult questions that funders are now asking of these Not for Profits to undertake… the initial reaction of non-profits is, you can guess is, horror, shock! They say, ‘Don’t hold me responsible for things I can't control! You asked me to train kids… Don’t ask me about what happens when they leave my door because I don't control outcomes.’

“A lot of non-profits have been resisting, it’s been almost like a rebellion.

“They’re saying measure me on outputs, not outcomes. But in truth, that battle has been lost… everywhere outcomes and impact have become big, big issues.

“The point I’m making is that impact is a good thing, asking for systemic impact is a good thing, but the non-profits are rebelling, Governments are struggling, and funders are confused.”

Rangan is the Malcolm P. McNair Professor of Marketing at the Harvard Business School and is the co-chairman of the school's Social Enterprise Initiative.

He teaches in a number of executive education programs including Strategic Perspectives on Nonprofit Management and in his address encouraged organisations to persevere and see the demands of funders as an opportunity to be more strategic.

He said that organisations, whether Not for Profit, social enterprise, or corporation, were “marching in the same direction” and that the shared goal was to increase impact by creating greater value for society.

“What this has done I believe is, [for] forward looking non-profit leaders, it’s given them the opportunity to broaden their strategic options as to how they grow their offering and they way they approach the problems,” he said.

“It’s not going to be easy. I can already reflect on it with what’s happening in the United States.

“…we should seize it as an opportunity and not get hung up on the difficulties.

“One way for them to have impact is to move to adjacent areas. Doing more of what you are doing is just going to increase output, not impact. So you start moving into adjacencies.”

Rangan said many organisations, however, may not have sufficient resources or capacity to do so.

“So if you move to adjacent areas, you have to look for collaborators. That’s something non-profit leaders aren’t very good at,” he said.  

“You absolutely need to cooperate, to collaborate with other institutions. Sometimes it might be with the Government, because it might be advocacy you’re trying… so it’s not just outputs, but it’s outcomes and impacts. A lot of non-profits are now looking at collaborative mechanisms.”

Rangan said funders themselves had begun to be more strategic to address the “rebellion” of Not for Profit organisations.  

“For funders, this has opened their eyes,” he said.  

“When non-profits said ‘no, it is your job’ – first of all, non-profits don’t control everything outside outputs, but you are the funder, you can be strategic… funders have become much smarter as a result.”

Rangan used the Bill and Melinda Gates Foundation as an example, praising them for their “very thoughtful funding”.

Rangan said funding bodies should look to the example set by early leaders who had “done some really good work”, particularly in terms of collaboration.

“I understand in Australia you don’t have big foundations yet, so for Australia to come in and have this collaborative view it is a little hard,” he said.

“Let’s go for it! Let’s make the world a better place.”