Generous funders have fueled the spectacular growth of global NGOs in recent years. But the money comes with strings that thwart these organizations’ ability to create the platforms for scale needed to solve global problems.

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The Bridgespan Group’s interviews with more than two dozen global NGO leaders revealed both a shared desire to implement operational and systems changes that could make their organizations more effective and widespread consternation over how to pay for those changes. Fully 65 percent said strengthening their core functions to create platforms for scale remained a distant goal.

For most, the biggest obstacle is funders’ tight-fisted approach to spending on “indirect costs” or overhead, encompassing everything from strategic planning and staff training to program evaluations and computer systems upgrades. And it’s pervasive. Seventy percent of NGO leaders surveyed by Bridgespan named “insufficient indirect cost recovery” from funders as one of their most pressing problems.

Board members, especially those with corporate backgrounds who understand the importance of investment, must change the mindset that equates organizational effectiveness with the number of programs in the field and views low overhead as a proxy for managerial excellence. Instead, boards should push for investments in core capabilities and systems that will transform highly fragmented organizations into models of integration and efficiency.

For their part, funders must come to grips with the unintended consequences of restricting funding to specific programs and starving NGOs of the resources needed to invest in operational efficiency. And they should stop focusing on low overhead as an indication of well-run organizations. Rather, funders and NGO leaders must shift the conversation to impact per dollar and what investments are required to maximize measurable results and create platforms for scale.

And NGO leaders need to stop playing the low-overhead-is-good game and lead the charge for adequate general operating support. Without it, these organizations can’t live up to their potential as global platforms to transform the lives of the world’s poorest populations.

Read the source article at The Bridgespan Group

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