Building Financial Sustainability in Development Organisations: You Can Do It!

When I was running an Apex non-governmental organisation (NGO) in the mid-1990s, our members were keen to learn how to become financially sustainable.  The mid-1990s was an exciting time in South Africa; but also challenging for NGOs. Donors were directing their money to the new government, leaving many NGOs, including mine, to figure out how they were going to survive. I was fortunate to meet Bill le Clair of the Institute for Development Research who invited me to attend a course on building sustainability; and later came to South Africa to work with us.

The course and Bill’s guidance showed me we could have a future with declining dependence on donor funding. I shared my learning with the staff and Board; and together we set out to define our sustainability strategy. The staff bought into this new approach because they saw that it would enhance their work; and there were incentives to generate income. My Board saw the long-term advantages of a strategy that diversified our sources of revenue. The core of our strategy was that, paid up members received a set of services which included a regular newsletter, information on best practices, policy and regulatory advocacy and participation in the annual conference. Then we provided specialised, accredited courses, information searches, published sectoral information and professional advisory services for fees which was paid for by members and external agents.  Of course, some members complained about paying for accredited courses. We emphasised we were delivering training that complied with international best practice; and their organisations were performing better as a result. 

 
Another key area of support was that our donors liked the idea and supported our strategy. I realised along the way that existing donors are partners and feel that their grant becomes an ‘investment’ destined for long-term impact when the organisation has a sustainability strategy. Once I had it all written up and our financial statements reflected our sustainability ratios, I showed it to prospective donors who were seriously impressed. Within three years, the team and I managed to generate 53 percent of our annual income from services, courses and fees delivered to members and external buyers.

 
In recent years, I have applied this experience in a number of programmes where I have worked, and have built a comprehensive suite of support services and materials for organisations that wish to build sustainability. My experience has taught me that a phased approach is needed, so organisations can ease their way into new ways of thinking and working while still maintaining focus on their mission.  One of the very first things I encourage people to recognise is that ‘building’ sustainability is just that!  It is not a one off event that will take you from total dependence to independence from donors.  It is a process that needs to be well-thought through and carefully managed. Organisations will need to continue to deliver their existing programmes while diversifying their sources of income.

 
While increasing income internally and declining donor dependence may be the most obvious benefits of building financial sustainability, there are others which include:

  • Organisations have greater freedom and independence in deciding on their strategies and activities when they generate their own resources;
  • In the process of building sustainability strategies, organisations need to examine their operations and procedures which leads to internal strengthening, enhanced management and team building;
  • When an organisation has a clear sustainability strategy and a record of generating internal income, these improve the image of the organisation in the eyes of potential and existing donors and can attract more external funding;
  • The relationship with partners in development programmes also benefits as organisations that generate internal income are more likely to negotiate on the basis of exchange rather than as benefactor and recipient.

Taking the first step – understanding your organisation

 
In order to start on this transition, organisations need to be strong enough to manage change. I use a sustainability assessment tool that enables organisations to gauge their readiness and support them in this analysis. The tool takes an organisation through a detailed examination of its current efficiency and performance across all its activities and management processes. It is important to conduct the assessment as an organisation wide process, with everyone – staff, management and board – fully involved; rather than a Director/MD/CEO conducting the assessment in isolation. In this way, the whole team builds consensus on strengths and areas for learning and strengthening.  I also focus on helping the teams to recognise the difference between practices that maintain and ones which sustain an organisation. Often good practices are in place; however, with more understanding of sustainability, organisations can readily enhance their practices and performance. The sustainability assessment may reveal that an organisation is ready to implement a sustainability strategy or there may be areas where strengthening or additional capacity may be required and the entire organisation needs to come together and jointly agree on the optimal ways to move forward.

 
Getting the organisation ready for sustainability

 
An organisation may be able to implement the strengthening processes with little guidance; or more substantial support may be needed. I can provide this or we can jointly find the best provider or method to meet the organisation’s need. Again, it is vital the leadership and staff work together to build these organisational foundations and prepare as a team for the new journey.
 
When the team feels ready, I provide case studies from around the world showing how different development organisations have achieved financial sustainability.  The case studies highlight a range of strategies and methods that have been used successfully. Some of the organisations featured in the case studies have been around and growing for over 40 years, which shows that sound strategies, can endure. A participant in a recent workshop in Ghana said: “I learnt it is possible to build a sustainable organisation even among the poorest people.” Some organisations that I have worked with believe sustainability can be achieved by finding donors who will assist in creating an endowment, the interest from which can sustain the organisation. Sadly, I have to say that in 29 years of working with and around donors, I have not come across any that have been willing to contribute to an NGO endowment fund.  Organisations can build endowments in other ways and these are good to explore when assessing revenue options.

 
Planning for financial sustainability

 
The next exciting stage is to start planning for financial sustainability. I have designed a highly participatory workshop, where organisations learn, plan and have fun! The workshop runs for three or four days, which gives people the time to try out new ideas, create plans and share them in the workshop. Peer relationships and support networks can be created, which organisations can continue and retain for shared learning after the workshop.

 
The objectives of the workshop are to: create the opportunity for NGOs to plan their sustainability strategies; generate a supportive atmosphere where participants can share, learn and plan jointly; and build supportive relationships that allow organisations to compare learning and winning strategies as they work alongside each other (such relationships can cut through the isolation of managing new processes).

 
The workshop introduces NGOs into new skill sets and ways of thinking and realising sustainability. Modules on change management, a model of social entrepreneurship, generating income, financial analysis, market planning, public relations and organisational reputation management bring new insights and tools to the participating organisations. Participants feel comfortable with the approach as the materials and tools are contextualised specifically for NGOs.  The feasibility of ideas for diversifying and generating income are tailored for NGOs. 

 
I strongly recommend at least three people per organisation participate in the workshop.  This is to allow for a team to strategise back-home plans and enable team members to support each other in change management and implementation of the new strategies.

 
Implementing the sustainability plan

 
Following the workshop, I will work with organisations to develop and finalise your plans and assess them. Once finalised, we can decide any arrangements for technical support that will probably be needed.  This can be done in mixed teams from different organisations which promotes peer learning and makes it more economical for NGOs.

 
Comments from organisations that I have worked with on sustainability include:

 
“You answered so many questions in my mind.”
“My ability to face and manage change was enhanced”
“We realised that we had missed several opportunities for sustainability!”
“The workshop and the process which followed was wonderful, timely, insightful and, useful!”
 
- Sharda Naidoo (
sharda@iafrica.com) is a senior economic development specialist who has worked on enterprise and financial sector development for more than 25 years.