Friday, November 5, 2010

Musing of NGOs

The development of the first non-government organizations (NGOs) revolved around circumventing potential obstacles to giving aid which were brought on by political/philosophical consequences or bringing attention to ‘orphan’ causes. A recent book, “The Crisis Caravan” argues that the current concept of charity and foreign aid, most notably to other countries, largely from NGOs has warped the original altruistic intentions of the aid. Unfortunately in an effort to expand the effectiveness of these programs a number of NGOs have overestimated their own importance assuming that their involvement in giving aid or attention to oppression/discrimination in a given country will always be more beneficial than detrimental. Based on this continuing policy shift, the author argues that some NGOs inflate the importance of their causes as well as the overall effectiveness of their actions in addressing these problems. Support for this accusation comes in the form of a number of examples where aid organizations did in fact seem to exacerbate the problem instead of alleviate it. While the author does appear to cite certain situations where aid fails and the culture that seems to put aid on the ‘wrong’ track, going forward no straightforward solutions are offered to how to fix this supposed problem with NGOs.

One of the chief elements behind the problem of NGO behavior is sheer size. Not surprisingly most NGOs believe that expansion is an important element to furthering their mission. The larger the organization, the more influence it will have and the more money it can acquire for future aid distribution and publicity. However, bigger is not always better in that there is a ceiling for a NGO’s donation (working capital)/overhead ratio. While it is difficult to predict when this ratio will be attained, it is possible to identify when this ratio has been passed. Thus with regards to size it is important that an organization be honest with itself and continue to access how its donation/overhead ratio changes with size. Basically an NGO cannot begin to view itself as bigger than the problem it is addressing. If it needs to cut back and become ‘leaner and meaner’ as the saying goes so be it. The belief that just because something is being done means more than nothing being done is inappropriate. If the current action is causing more problems than taking no action, action should be ceased. For example if someone asks what 2 + 2 is it is better to say ‘I don’t know’ than ‘five’.

There is reason to argue that size has also created a ‘requirement to act’ attitude, which further creates problems that are much more difficult to solve than simply looking at a donation/overhead ratio. In order to justify their overall size, and to a greater extent their overall existences, a larger NGO may need to intervene at every realistic possible instance to demonstrate the effectiveness of the institution in order to facilitate further donations and the maintenance of size and prestige. For example if a particular NGO claims to take a stand against x and yet when x is happening in Country A this NGO does not act, then the NGO could easily lose credibility and with that loss in credibility comes a negative impact against its ability to request donations and recruit volunteers.

Furthermore this attitude may catalyze conflict and atrocities because despite their size NGOs rarely have any power to influence supply line distribution. A vast majority of the time those who are doing the oppressing also have access control to those who are oppressed, thus the ability to interact and rectify any wrongdoing to those who are oppressed is largely at the discretion of the oppressors. Lacking the ability to apply any serious political pressure or their own personal army, NGO do not have the ability to change this element, thus they frequently must associate with the oppressors as ‘middlemen’ of sorts.

Now if these oppressors were trustworthy then acting as the middleman would not be a problem, but of course individuals who oppress others in the name of expanding their own power can hardly be thought of as trustworthy. Thus it is very difficult for NGOs to distribute a majority of their aid to the original targets without excess waste. The oppressors realize that they control almost all, if not all, distribution nodes so all NGOs will have to deal with them if they want to continue to justify their existence. Sadly some oppressors really take advantage of this reality by creating an environment of greater oppression than would exist if certain NGOs did not exist, a point frequently made in “The Crisis Caravan”. Due to the belief that NGOs will come to the aid of a population afflicted with some form of oppression, the oppressors create a scenario of oppression solely to attract NGO money and shave off a significant portion of it for themselves. Without these NGOs it can be argued that the oppressors would not commit as many resources to expanding the very act of oppression because it would be not cost-effective.

So what is a method to correct this vicious cycle of NGOs potentially funding oppression? At first glace the situation seems bleak. The aforementioned restrictions limit the ability of NGOs to change the control of the various access points in a given country. Also while a NGO can control its overall size, the inherent problem of ‘requirement to act’ still exists. For example suppose a NGO states publicly that while they would like to provide assistance to Group A in Country A, they cannot because of a lack of certainty that the money/supplies will actually be effectively distributed; unfortunately while such an action may be viewed by a conscientious observer as responsible the probability that it results in an increase in donations from the general public is minute.

While the public may appreciate the fact that their money is not being wasted, they would also not see any positive results, thus it stands to reason that they would not be inclined to donate. Basically donors seem to take the attitude that they would rather donate 100 dollars and have 50 dollars go to those supported by the NGO and 50 dollars wasted on unnecessary overhead like excessive CEO salary over donating 100 dollars and have that 100 dollars just sit in an account and do nothing. The problem with this philosophy is that money almost never just sits in an account and does nothing. It is important to realize that if a NGO is behaving as a logical entity and is waiting for a better opportunity to distribute money or resources, any money donated is still making a difference drawing interest from a particular certificate of deposit or other no-risk investment or at least it should be.

Of course there is always the issues of overestimating public awareness. The ‘requirement to act’ attitude may not be as powerful as proposed in this piece solely based on a lack of dedicated interest by the public. For if the public continues to donate and takes no real interest in the overall actions of the NGO, then any real pressure to use that money effectively no longer exists.

Addressing the issue of CEO salary being commented as waste, one of the bigger issues with NGO size is that they now operate more like multi-national businesses, which include highly inflated salaries for their CEOs. Some would argue that because most NGOs believe they need to be as big as possible to maximize the probability that they actually accomplish something, they need to take more of a business mentality which includes attracting high quality talent for their leadership positions. Basically the belief is that these CEOs are now responsible for running multi-million dollars programs that are tackling difficult and widespread global problems, thus they should be compensated accordingly.

There appear to be two flaws in this logic. First, the nature of NGO is supposed to be altruistic. To turn around and make the statement that large salaries are required to attract high quality management level talent without first appealing to their moral character while at the same time continuing to ask for donations from other individuals to fund the NGO comes of as hypocritical. Such hypocrisy may not be that surprising seeing that a majority of NGOs receive a significant amount of funding from governments as well though. The ‘top talent’ should be attracted to a NGO based on its overall mission not because it can pay that individual a lot of money (yeah such a statement is incredibly na├»ve but it has to be said).

Second, CEOs, both in NGOs and other multi-nationals, receive compensation regardless of whether or not they are successful at accomplishing the overall mission statement for the NGO. They get paid for their effort not their results. Such a system makes sense only when the dollar values are reasonable. For most CEOs the dollar values are rarely reasonable. Overall all CEOs should function on a strict incentive program with a reasonable, but small base salary. For example instead of being paid 500,000 dollars a year for running NGO x the CEO should receive 100,000 dollars a year with specific, transparent and measurable accelerators which could augment salary. If such a system is rejected then one can begin to entertain the disturbing thought that such a NGO is not actually interested in solving the problem it testifies to in its mission statement, but would rather the problem persist to continue to attract money to line their own pockets.

Unfortunately unless a NGO can develop a deep meaningful relationship with a given country, those NGOs possessing goals which revolve around ending some form of oppression or disease will more than likely continue to have problems with efficiency due to lack of control regarding access points as long as they continue to function alone. Interestingly enough one possible strategy for these NGOs may actually be to involve their governments in their action. Depending on where the NGO is based it may be able to extract a more direct contact medium between the NGO and those being oppressed. However, the creation of this new contact medium is likely to cost some government resources, thus to expect the government to undertake such a task for each NGO seems on its face unreasonable unless the government is some how compensated.

One possible idea would be the government of the country in which the NGO was founded can ‘certify’ the NGO. Certification would imply two elements, first the NGO would have to present a detailed ‘plan of action’ describing the strategy used to distribute funds to those it purports to support and have the ‘plan of action’ approved. Second, a certified NGO would no longer receive special tax exemption status, but instead would be taxed by the particular home country some pre-determined rate. By abiding by these two principles the NGO could petition the government for assistance in easing the distribution of funds to an oppressed party.

Now one immediate criticism of this proposal may be that by becoming ‘certified’ a NGO loses its independence and instead can be viewed as an arm of the government, which may eliminate some of its ability to act as a neutral arbitrator between the oppressors and the oppressed. While a valid criticism on its face, initially the point of creating the ‘plan of action’ is not necessarily to carryout some form of government-backed plan, but instead to allow the government to understand the intentions of the NGO so to not end up wasting its time and/or resources in attempting to open a previously unattainable distribution channel. Basically as long as the government views the plan as plausible (note that it does not have to have a high probability of success, just a reasonable probability of success), the plan should be approved. It would have to acknowledged that the plans approved by the government are not government plans, but NGO plans that are promising enough to encourage the government to act in limited capacity on the NGO’s behalf.

Two remaining points about this issue are that anyone who finds fault with the removal of the tax exemption status should understand that the nature of the proposal is to save NGOs from taking wasteful actions and the tax revenue acquired from the NGOs is intended to cover any potential expenses required by the government to create the direct NGO-oppressed distribution channel. Also donations to a given NGO would remain tax deductible to eliminate any negative immediate impact on future donations. Finally a NGO does not have to become certified if it would like to maintain its tax exemption status. If a NGO elects not to be certified then it would be unable to petition the government for assistance in opening distribution channels.

Despite the potential involvement of government or even reducing size/overhead costs, the most important thing a NGO must remember is to ask the question: ‘what is the cause(s) of what drives our mission statement and how can we best create a solution?’ Such a question is easy for those NGOs and charities that function around disease treatment, but may be more difficult for those that target one particular portion of the globe. For example there are a number of groups that attempt to put political pressure on the U.S. government to intervene in the Darfur region of Sudan. However, rarely do these groups publicly ask the above question regarding the origins of the cause of the violence.

In Darfur there are two primary elements that drive the violence; first and foremost is the lack of resources, especially water, in the region and second is general religious strife between Islam and those not of Islamic faith. Without asking these questions the ability to understand the realities of the situation become less probable which fosters inefficient or even incorrect solutions. How is the U.S. putting ‘pressure’ on the mostly Islamic Northern Sudanese to ‘knock off’ the violence against their Western neighbors really going to end the violence? Without knowing the cause, the prospect for wasting vast amounts of resources become even more probable. Addressing the diminishing resource issue would be the first and most important step to solving the Darfur crisis.

Unfortunately despite all of the strategies that a NGO can employ, sometimes human psychology just wins out. For some the need to demonstrate superiority through the suppression of another is too powerful of a motivator that any funds directed towards that oppressed will simply continue to fund the oppressors. In such a situation NGOs must adjust strategies, such as instead of attempting to provide food and/or other survival resources, the NGO could arrange for the transfer of some number of the oppressed as refugees to another country.

Overall, even without books like “Crisis Caravan”, from an outsider looking in, there are a number of NGOs seem to raise a lot of money, but that money does not seem to generate viable and meaningful results, especially for those that operate across many boarders. This statement is not an indictment against all NGOs, but certainly NGOs can take a number of steps to improve efficiency in both the total overhead utilized to acquire donations and that used to execute their mission statements. Exploring other execution strategies such as temporary alliances with various governments should be constantly studied to ensure optimal NGO efficiency.

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