Save the Children: can NGOs operate efficiently at a global scale?
What are some of the challenges faced by a leading global NGO to further its impact on 50+ million children across the globe?
Organization overview
Save the Children (SC) is a leading child-oriented global NGO. Founded in 1919, the organization is composed of ˜30 country members and an international governance body, SC International. Together, they are responsible for managing USD $2Bi worth of annual donations and delivering social programs in 100+ countries impacting the lives of ~55 million children. SC cross-thematic expertise and global presence, from health & nutrition to child protection, makes it a thought leaders in child-related issues.
Overview of Business and Operational Models
Governance model & Organizational Structure
SC operates in a network-ruled consensual governance model, composed of two major bodies. First, country members are responsible for defining the organization’s strategy and how it operates. Second, SC international is responsible for centralizing program management and delivering upon the membership priorities. Decision making processes are flat and consensus-driven between members with SC International subject to member’s decisions.
Organizational structures are mostly function-oriented, both at members and SC international. Typical functions at member level include fundraising, marketing, finance, quality and programs. At SC International, logistics and emergency response are also important functions.
Fundraising
SC taps into all major donor pools to source its funds. However, its income is heavily concentrated on “grants” donations from public institutions (58%) and corporations / foundations (13%). Individuals represent 25% of SC’s income. As a benchmark, World Vision sources over 50% of its funds from individuals.
Fundraising is decentralized at a country member level, from strategy to execution. Although strategy is agreed upon globally, there are limited enforcement mechanisms at a member level. A handful of support functions– such as market intel and growth strategy – are also centralized at SC international.
Operations
SC operates both emergency responses, such as Typhoon Haiyan in the Philippines, and longer-term social programs, such as Literacy Boost in Ethiopia. These two operational areas differ specially in terms of functional collaboration, resource requirements and mobilization, logistical complexity, and speed-to-scale. Launching emergency responses, for instance, require the ability to quickly mobilize resources and scale-up / scale-down local operations efficiently.
In addition to execution challenges, SC also faces difficulties to measure and quantify its impact. SC uses the total reach methodology, still unable to measure output (e.g.: # of deaths avoided) or financial impact of its programs. Although impact measurement remains a sector-wide major challenge, several NGOs are investing to develop this capability as a direct response to donor’s increasing demand for more tangible and quantified impact.
Summary of challenges
Although SC faces many challenges, from talent scarcity to overhead public-avoidance, in terms of the alignment between its business and operational models four challenges stand out.
i) Excessive concentration of fundraising on “grants”.
In a simplified manner, NGOs look at fundraising through 3 dimensions: scalability, financial sustainability and operational flexibility. While grants are usually a key scalability driver, they pose financial sustainability risks – large institutions are more volatile to economic downturns – also limiting operational flexibility – more complex and tighter rules on how funds can be used. Therefore, SC’s over reliance on grants poses a threat to the scale and effectiveness of its operation model, suggesting the NGO should target growing its individual giving segment and channels.
ii) Inability to accurately measure and quantify tangible results.
As more and more global organizations, such as the WFP, invest to develop impact measurement capabilities, SC’s business model may face an increasing risk of donor-loss if the organization is unable to keep up with this trend. Given its complex operational model and limited capabilities, SC should explore partnership opportunities (such as WFP and BCG) to prevent this challenge from becoming a source of competitive disadvantage in the future.
iii) Siloed functional organizational structures.
Although “program-oriented” structures are emerging, such as emergency response operational areas, the prevailing functional organizational mindset limits internal cooperation and alignment which results in operational inefficiency. An example is how limited cooperation between fundraising and emergency response teams reduces the scale of resources available limiting the effectiveness of emergency response campaigns.
iv) Inefficient time-consuming decision making process.
Finally, although technically a governance issue, SC’s network consensus-driven governance create challenges for long term operational efficiency. The absence of an overarching global board or a single decision-making point (e.g.: Global CEO) makes decision making and alignment across country members a slow and difficult process, hindering the speed and efficiency of change management initiatives.
Conclusion
Although SC is widely recognized for its impact and thought leadership on child-related issues, the organization faces several challenges related to its business, operational and governance models.
Rather then impediments, these challenges represent opportunities for further differentiation and competitive advantage. In addition, and above all else, they represent opportunities to further scale and efficiency increasing the impact on children’s lives.
References
[1] – https://www.savethechildren.net/about-us/our-story
[2] – https://www.savethechildren.net/sites/default/files/libraries/Annual%20Review_2014.pdf
[3] – http://www2.deloitte.com/global/en/pages/about-deloitte/articles/humanitarian-innovationprogramdeloittecasestudiesscalinghumanita.html
[4] – http://www.forbes.com/sites/rahimkanani/2014/03/15/how-to-measure-social-impact-new-research-and-insights/
[5] – http://www.charitynavigator.org/index.cfm?bay=search.summary&orgid=4768#.VmTsuITzhFJ
[6] – http://zimmerman-lehman.com/importanceofindividualgiving.htm
[7] – http://www.wvi.org/international/publication/world-vision-international-annual-review-2014
[8] – http://www.dailymail.co.uk/news/article-2550648/Fury-234-000-salary-boss-Save-Children-Charity-chiefs-huge-wages-reined-say-MPs.html
[9] – http://documents.wfp.org/stellent/groups/public/documents/newsroom/wfp225966.pdf
[10] – Professional experience at Save the Children International
Great post, Ivan! I think it is really interesting to look at this from a non-profit perspective. It seems like many of the four challenges you highlight are pervasive in this sector. Do you think a lack of alignment between the business and operating models is systematic in this sector because the business model is non-profit and it is that much harder to measure progress when the impact is social rather than financial? Is this something that Save the Children do any worse/ better than their peers or does everyone have the same problems?
Hi Alissa!
Impact measurement is definitely one the hottest trends in non-profit. Actually, it’s a key trend across the social spectrum, from social enterprises to non-profit organizations. In the case of NGOs, such as Save the Children, the issue can be simplified as two-fold: quantifying the “impact” of the organization and calculating the “returns” on donations (donor investments). Both are extremely hard due to the nature of the work (as you pointed out) as well as the scale of the organization. In terms of “impact”, it’s easier to explain with one example: how do you quantify the impact of an education program in Ethiopia? You can be more aware of your health and try to, therefore living healthier, longer and having a higher economical contribution to society. To measure that, you need studies to prove this happens, which are very hard to conduct. Or you can achieve higher education, get better jobs, be more productive and therefore create value for society. Then, what is the timeframe for that impact? How much of it is due to you vs everything else around? You see, in a simple paragraph the level of operational and intelectual complexity is already huge and you need a lot of resources to develop and implement this. Save the Children is definitely on the same boat as everyone else which is trying to understand what exactly donors want and how it can find “simple” suitable solutions to address that.
I think you hit on a great point when you mentioned the issues of having such a concentration of grant funding within SC. This is something that is a problem for a great number of nonprofits all over the globe. You touched on a few of the key issues of grant funding, namely sustainability and continuity. One of the challenges that many nonprofits face is that funders are always looking to fund something “new.” As a result, many funders do not offer renewals on their grants. At least in my experience, what this leads to is that many nonprofits will shift their focus over time to “follow” the grant money. At my previous employer, each grant would almost be its own startup, and then just as the program would hit a point of reaching sustainability, the funding would go away and the program wasn’t quite ready to make it on its own. This can lead to tremendous ineffectiveness within the sector, both for funders and the nonprofits themselves. It would be interesting to know more about how SC deals with the challenges that come with funders changing their focus areas over time.
This is very complicated Sam. As you get bigger, with a stronger brand and a greater scale you kind of earn your right to have a bigger say on how money gets spent. But it’s still a challenge. From my knowledge, Save the Children will usually try to pitch donors on specific projects (usually tailored to the donor area focus – such as education – and sometimes geography – such as Southern Africa – and iterate from there to get to the final scope. But still, the risk of chasing funds in itself exists and is a huge debate. That’s another great reason why you need revenue diversification so that you can allow yourself to turn a grant down, for instance, if it’s not aligned with what you think the social priorities are.
This is an excellent post Ivan. Before working in financial services, I used to work in the non-profit sector in Atlanta, and while working with Deutsche Bank, I dealt with non-profit leadership frequently in New York City. Many of these operational challenges represent a sea of change across the non-profit world. Diversifying your fundraising sources is key to long term sustainability in the sector, and SC’s reliance on “grants” can be very dangerous for the long term. I do have a few questions through. What is the right mix for a non-profit organization in this area? Should they be striving towards World Vision’s 50% from individuals? If so, what would the other 50% look like?
Your point on measurement is spot on as well. It’s so tough to quantify actions, and as a donor, I like to see tangible results. My only worry is that the focus on quantifiable results may bring on a tremendous pressure to get a results at all costs. That being said, there definitely needs to be something to prove that something is being accomplished, and if SC moves towards more individual donors, this will become more and more important. Once again, great post!