Improving the credibility and effectiveness of non-governmental organizations

I Accountability and transparency

The NGO sector faces the problem of lack of public trust due to improper activities of some member organizations (Gilberman and Gelman, 2004; Prugsamatz, 2010; Vangen and Huxman, 2003). Despite, or perhaps because of, the fact that NGOs are becoming established organizations within development policy and practice, critical questions are increasingly being asked about their accountability and effectiveness (Morf et al., 2013; Stohl and Stohl, 2010). NGO legitimacy and accountability are being increasingly linked to their resource base. Najam (1996) provides three categories of NGO accountability, which is premised on how NGOs interact with patrons and clients (accountability to patrons, accountability to clients and accountability to themselves). NGO accountability to patrons includes the relationship between NGOs and donors (internal and external). Internal donors are individuals who make small contributions usually for much broader activities of NGOs, while governments, foundations and other NGOs constitute external donors. This mode of accountability implies that donors make NGOs responsible by ensuring that their financial contribution is spent for specific and designated purposes. Resource providers can demand a certain type of accountability (that which has to do with efficient and purposive use of resources provided by them). Thus, because of their dependence on donor funding, NGO accountability gets shifted ‘upwards’ (to donors) rather than ‘downwards’ to the grassroots (Zaidi, 1999). The orientation of accountability (to donors) away from the grassroots is a particular threat to NGOs. NGO accountability to clients comprises beneficiaries of their programmes. The beneficiaries receive goods and services from NGOs and the NGOs feel obligated by their core values to fulfil these responsibilities. NGOs’ accountability to themselves means internal accountability (i.e., accountability to their goals, aspirations, mission and staff). According to Clark (1991), it is the performance of the staff and appropriateness of their judgment for which NGOs must be held accountable. Edwards and Hulme (1995) refer to this issue of ‘multiple accountabilities’ as a problem for all NGOs, in terms of their representativeness and legitimacy.

While governments in democratic societies are accountable to the voters who elected them, and corporate leaders are accountable to stockholder-elected boards of directors, leaders of NGOs are accountable to a self-perpetuating board of directors or similar governing groups. In some cases, the management tends to dominate the board membership and decision-making. Thus, the ordinary member or supporter usually has no opportunity to vote on the membership of the board or on organizational policies (Weidenbaum, 2009). Issues of NGOs’ accountability have often coalesced around concerns from donors regarding how money is spent. Many NGOs are dependent on major bodies, such as governments for their funding, and this resource dependency has significant implications for the forms of accountability promoted and practiced within the sector (Kelly and Lewis, 2010). As a consequence, NGO–funder accountability relations have traditionally fixated on functional accountability, which is short term in orientation and focuses on accountability from NGOs to funder organizations for resources and immediate impacts (O’Dwyer and Unerman, 2007). In practice, however, NGO accountability should focus on stakeholder groups, notwithstanding the fact that many NGOs claim that their values and mission are their primary point of accountability (Gray et al., 2006).

Since nonprofits receive their funding on the basis of donors’ (citizens and funding bodies) trust, revelations of impropriety create a lack of confidence and trust. Implications of erosion of trust could include difficulties raising money, loss of board members who want to dissociate and save their reputation and calls for greater accountability by citizens and governments. According to Khan (2003), these revelations of improprieties have led to questions about NGO legitimacy and accountability and resulted in NGOs being put under closer scrutiny. A worldwide response to NGO wrongdoing has been calls for heightened accountability (Gibelman and Gelman, 2004). However, according to Weidenbaum (2009), much of what needs to be done in response to NGOs’ impropriety depends on societal context. For example, what may work in the United States or Canada may be inappropriate in Russia, Ukraine or Uganda. Furthermore, in nations where the third sector is in its infancy, a different kind of oversight may be required. Suggestions for voluntarily enhancing the public accountability of NGOs include: election of officers and/or board members by the membership; referenda of the membership on key issues; and more complete public reporting (i.e., transparency) of activities and financial condition. In Bangladesh, a country that is home to one of the largest southern-based development NGOs, there are a number of accountability mechanisms. A good example is the Bangladesh Rural Advancement Committee (BRAC) that was established in 1972 and is a multifaceted development organization. BRAC has the objective of poverty reductions and employment of the poor and is accountable to multiple parties (Khan, 2003). Its governing body (which is composed of seven members, six of whom are outsiders) ensures accountability internally. Like other NGOs in Bangladesh, BRAC obtains prior approval from the NGO Affairs Bureau for all its projects. A donor consortium coordinates its activities and reviews its financial and normative aspects every six months. Funded projects are audited by both international auditing firms and government-approved local firms. The annual and audited reports are submitted to both donors and the NGO Affairs Bureau (Khan, 2003). Thus, a mix of watchdog agencies, government oversight and codes of conduct for NGOs could be the most feasible mechanisms to increase accountability and avoid questionable business and ethical practices (Gibelman and Gelman, 2004).

II Watchdog agencies and government oversight

Watchdog agencies are oversight bodies established either by governments, the private sector or nonprofits to monitor and assess the activities of NGOs. Sometimes, such bodies are a form of NGOs themselves, with a mission to assist other NGOs develop and maintain ethical and practice standards. Different countries have their own watchdog agencies. For example, in the United States, the Better Business Bureau (BBB) Wise Giving Alliance was formed in 2001 as a watchdog agency (Gray et al., 2006; Weidenbaum, 2009). The BBB Wise Giving Standards for Charity Accountability constitutes a set of measures developed to aid donors in making sound giving decisions, and includes requirements related to governance, financial management, disclosures of information to the public and truthful representations of the status of nonprofit organizations (Burgos, 2013; Gibelman and Gelman, 2004). The main aim of BBB’s Wise Giving Alliance is to enhance public confidence in charitable organizations. While some nonprofit advocacy groups argue that voluntary adoption of some form of governance provisions is the best way to monitor and control ethical improprieties in the third sector, some governments have established regulatory frameworks under which civil societies operate. Through such oversights, governments are able to set stricter regulations to monitor activities of nonprofits. This may include increasing disclosure requirements (conflict of interest, how money is used, revenues against expenditures, etc.), requiring outside audits and requiring charities to periodically re-file with tax agencies to ensure that their tax-exempt status is still warranted (Gray et al., 2006; Morf et al., 2013). In the UK, the Charity Commission acts as a form of watchdog agency. Examples of watchdog agencies for NGO oversight abound in southern countries. In Philippines, the Philippine Council for NGO Certification (PCNC) is a body authorized by the government to certify NGOs for tax benefit purposes (Weidenbaum, 2009). In Bangladesh, the government controls and monitors the activities and funding of NGOs through a number of laws, rules and procedures. The NGO Affairs Bureau registers and regulates all NGOs receiving foreign funds. Similar regulatory agencies exist in other countries to monitor the activities of NGOs.

III Codes of conduct

NGO codes of conduct are ethical standards established by the sector to monitor activities of member organizations, offer advice and impose sanctions when acts of improprieties occur. They serve as self-regulatory and voluntary oversight measures aimed to mitigate wrongdoing.

Some codes of conduct operate on a global level for member NGOs, while others operate on a national level. For example, the World Association of NGOs (WANGO) has its own Codes of Ethics and Conduct for NGOs worldwide. Its codes of conduct establish principles and standards to guide NGO management, operations and behaviour (Gibelman and Gelman, 2004; Mwenja and Lewis, 2009). According to Henderson (1997), the International Committee of the Red Cross and other agencies, such as Oxfam and Save the Children, established codes of conduct in 1994 for their work in disaster areas, including relationships with government officials. The purpose of the codes of conduct (concerned with disaster relief) is to guard the NGOs’ standards of behaviour, maintain independence and conform to international humanitarian law. It also attempts to build disaster response on local capacities and involve programme beneficiaries in the management of relief aid (Kamaria and Lewis, 2009).

On a national level, some codes of conduct are written by country-specific NGO associations and national governments to address local concerns. The American Association of Fundraising Counsel (AAFRC) has established standards of practice and professional code of ethics. It also publishes the Giving USA (a yearbook on American philanthropy), and supports NGO research and education. There is also the Association of Fundraising Professionals, consisting of members in several NGO chapters in the United States, Canada, Mexico and China. The association aims to advance philanthropy through advocacy, research, education and certification programmes (Gibelman and Gelman, 2004; Weidenbaum, 2009). Additionally, various organizations have evolved to formulate their own standards in specialized service areas, and to enforce them through an accreditation process. For example, the Council on Accreditation for Services to Families and Children is the largest independent accrediting body for agencies providing behavioural health care, social services, counselling and other community services to families, children and other individuals in the United States (Weidenbaum, 2009). Other accrediting organizations include the Joint Commission on Accreditation of Health Care Organizations and the Accreditation Council for People with Developmental Disabilities. Similar accrediting agencies with their own codes of conduct abound in Africa. In Kenya, the NGO Coordination Act gives the government-controlled NGO Board the sole power to register NGOs and created a National NGO Council. The council has a legal mandate to develop its own governance structures and codes of conduct and requires all NGOs to be members of the council. It also requires that all NGOs abide by the provisions of the NGO Code of Conduct as a condition of registration with the government (Gugerty, 2010). In Malawi, the Council of NGOs in Malawi (CONGOMA) helped enact the country’s NGO Act in late 2000 (Gugerty, 2010). The act designates CONGOMA as the official coordinating body for NGOs and requires that all NGOs join the association. It also requires that CONGOMA develop and maintain a code of conduct for the NGO sector. Similarly, in Tanzania, an NGO Act was enacted in 2002 but without consultation with the sector (Irish and Simon, 2003). The act mandated the creation of a national umbrella association that would develop a code of conduct. The National Council on NGOs (NACONGO) was subsequently formed. NACONGO unveiled a National NGO Code of Ethics in 2008. The code seeks to establish an ethics committee at the national, regional and local levels to oversee implementation of the code. In sum, these agencies and their codes of conduct aim to enhance public trust in the NGO sector in order to improve NGO credibility.

IV Enhancing NGO’s effectiveness and efficiency

One reason for the enhanced role of NGOs in the development process is their presumed efficiency and effectiveness in terms of programme delivery and meeting the needs of the underprivileged. The legitimacy and credibility of NGOs are based on their effectiveness in the service of a social need and their role as an instrument of voluntary citizen action in accordance with their distinctive value commitments (Korten, 1987). While the credibility of NGOs are most times assessed by their ability to deliver on development goals and alleviating poverty, Edwards and Hulme (1995) argue that sometimes it is difficult to measure the effectiveness of NGO development interventions because they usually are not able to control all the factors that influence the outcome of their work. It is true that NGOs play a significant role in society. They also face a number of challenges that impact their performance. Thus, a number of factors have implications for NGO effectiveness and efficiency. These factors include long-term sustainability; core functions; strategic planning; governance and image building; boards of directors; funding; performance management; human resources; and partnerships. These factors have been cited in the literature (see Atack, 1999; Fowler, 1998; Gibelman and Gelman, 2004; Gray et al., 2006; Miltin et al., 2007; Mwenja and Lewis, 2009; Weidenbaum, 2009) as essential for organizational effectiveness in the third sector.

V Long-term sustainability

The issue of long-term sustainability is a major problem with implications for NGO efficiency and effectiveness. NGO effectiveness is enhanced when they engage in projects that are sustainable over the long run. Most project support from donor agencies encourages a piecemeal approach to development activities and requires specific contracted outcomes that emphasize mechanistic project evaluations (Edwards, 1996; Fowler, 1997). This makes NGOs focus on short-term results without focusing on long-term impacts. Long-term sustainability of development activities requires long-term strategic planning by NGOs and donors as a crucial element of successful development.

In concert with long-term sustainability is the issue of replicability of projects. The fact that a project is successful in one context does not necessarily mean it will do so in another context. This is because very specific conditions, which may result in the success of a project in one context, may not be applicable elsewhere. For example, the success of a project in one region or country often depends upon the quality and leadership of the NGO, the responsiveness of local population and local conditions and a host of other factors. If these conditions are not present in another region or country, the replicability of such a project may not be feasible. Sustainability and possible replicability of development projects is enhanced when NGOs understand the complexity of the national and international contexts in which they work and incorporate that understanding into their problem solving approach (Edwards, 1996; Miltin et al., 2007). Such an understanding will go a long way in helping NGOs appreciate the factors that may hinder the replicability of similar projects in other contexts. For example, in India, long-term sustainable impact was made by the People’s Rural Education Movement (PREM), which supports the development of grassroots organizations. PREM was successful in providing the appropriate mix of technical, financial and capacity-building support by working closely with grassroots organizations. Through this mix of support, PREM was able to improve the living conditions of local populations and enhance the organizational skills, capacities and political empowerment of grassroots organizations. Similar findings come from other studies that explored the performance of NGOs in different contexts. In their work, Esman and Uphoff (1984: 181) concluded that ‘the ability of rural residents to advance their…interests depends substantially…on their success in sustaining local organizations beyond the immediate tasks that precipitated them’. The same conclusion was reached in NGO–municipal collaboration throughout Latin America (Reilly, 1995); peasant federations in Ecuador and Bolivia (Bebbington, 1996); demand-driven small-scale enterprise programmes in Brazil (Tendler and Amorim, 1996); and Ndegwa’s (1996) comparison of the Undugu Society and the Green Belt Movement in Kenya. In all these cases, it was the long-term outlook that focused on the balance between increased economic security, success in social organization and the ability to influence the political process, coupled with strong and active linkages between grassroots organizations, NGOs, governments and the private sector (Evans, 1996).

VI Core functions

There is some debate about the emphasis on core functions by NGOs with regard to their efficiency and legitimacy. The debate centres on whether NGOs should focus solely on their core functions or be multifunctional in order to be able to respond to different situations. Some scholars advise that NGOs should focus on their core functions (as defined in their mission statements), standardize their procedures and concentrate on maximizing operational performance (*9Jain, 1996). On the other hand, other scholars advocate the flexibility of NGOs to respond in different ways across a diverse set of activities, with an underlying emphasis on grassroots-level empowerment (Edwards and Hulme, 1995; Fowler, 1997). For example, Zaidi (1999) states that the legitimacy for development NGOs is based on a reliance on core functions associated with their work, and that the values of solidarity and voluntarism associated with their core values provide a distinctive source of legitimacy, normative support or moral justification for their role as agents of development. While both arguments seem to be valid, it seems that for an NGO to be able to respond to a wide range of activities, it needs to be able to have significant funding and expertise (i.e., human and other resources) in various spheres of development activities. Regardless of where one falls on this debate, it is necessary for NGOs to have continuous improvement strategies in their functions. This includes continuous evaluation in terms of learning and impact assessments on what has been accomplished. This is necessary both as an internal exercise for growth and improvement and as an external public relations exercise to maintain public confidence and support for development initiatives (Edwards, 1996).

VII Strategic planning

A strategic plan is a comprehensive action plan that identifies the long-term direction for an organization and guides resource utilization to accomplish goals and maintain sustainable competitive advantage. It involves determining future vision and goals, and how they will be achieved (Diochin, 2010). A comprehensive strategic plan needs to be appropriately managed in order to achieve organizational objectives. Pearce and Robinson (2007) define organizational strategic management model as the structure that promotes understanding and integration of all the main stages of strategy formulation and implementation. The model consists of four phases:

Awareness: understanding the strategic situation.

According to Kamaria and Lewis (2009), the NGO sector has been seriously challenged by the problem of how to accommodate tools of strategic management that would improve organizational performance. Similarly, Akingbola (2006) emphasizes that more than ever NGOs need to embrace strategy in response to the rapid changes in their operating environment. A fundamental concept in strategic management is the idea of matching an organization’s competence and resources with the opportunities in its environment through actions (such as scanning the environment in search of information, selecting relevant data and interpreting and testing them in order to put them into action) (Benevene and Cortini, 2010). Although the effects of the external environment are important, what drives performance are the internal managerial activities that allow the organization to practice over an extended period of time how to excel in certain areas (hence developing strategic core competencies) (Courtney, 2002). This can significantly increase the ability of NGOs to adapt to global contexts (Kamaria and Lewis, 2010). Stid and Bradach (2009) identify five critical components of strategic management that would enhance NGOs’ effectiveness:

Strategic clarity (concretely stating in the organization’s mission what impact the organization is prepared to be held accountable for, and what it needs to do or not do in order to achieve such impact);

The time span covered in an NGO’s strategy is also important as it allows for the development of collective learning. According to Gil-Estallo et al. (2006), a shortage of long-term planning and coordination for NGOs has led to a lack of maintenance follow-up by sponsoring organizations. Therefore, it is important to note that achieving organizational goals, surviving and flourishing require nonprofits to have long-range strategic plans that continually respond and adjust to social, economic and political environments, and the changes therein. Long-term planning supports joint planning and implementation by major stakeholders, and the strengthening of existing administrative and managerial structures. It strengthens the management capacity of local and national governments (Pfeiffer and Johnson, 2008). An example of long-term planning is maintaining strong local presence over time to promote links between government authorities, community groups and development organizations. This can greatly facilitate the ability of NGOs to reach their objectives, especially when dealing with clients of multiple layers (Chalhoub, 2009). While some NGOs lack financial resources to closely follow-up on other NGOs’ results, having a long-range strategic plan could help develop synergies by clustering up experiences and leveraging knowledge from one project to another (Akingbola, 2006).

VIII Governance and image building

Governance refers to leadership and management practices that set organizational direction, and thus have implications for performance (Diochin, 2010). Effective corporate systems of governance are best-practice rules that guide the behaviour of the board of directors and are intended to address deficiencies in corporate governance. Governance practices are based on codes, which are a set of norms governing the role and composition of directors, relationships within it, auditing and information disclosure and the selection and dismissal of directors and senior managers (Barros and Nunes, 2007). The main concerns of corporate governance are to:

Ensure that conditions apply whereby NGO directors and managers act in the interest of the organization and of its stockholders as well as its workers; and

Those involved in governance help define and shape work contexts that contribute to organizational innovation and are responsible for organizational direction and performance. A prerequisite to organizational success is how leaders apply management techniques (such as mechanisms to ensure commitment, communication, quality management, benchmarking, process improvement and measurement) (Mwenja and Lewis, 2009; Rodríguez et al., 2007). The issue of effective leadership (an essential component of corporate governance) is especially relevant in the nonprofit sector. For example, a study by the Urban Institute using a sample of 3,000 nonprofits in the United States identified the lack of effective leadership as one of the factors that affect the ability of nonprofits to manage volunteer workers and set long-term organizational direction (Schneider and George, 2011). Thus, for nonprofits, organizational effectiveness depends on providing visionary leadership and making a compelling case for a cause. This helps to attract and motivate staff and volunteers and drive fundraising (Stid and Bradach, 2009). Effective governance mechanism entails managing the delicate balance between efficiency, effectiveness, mission and passion that drive the cause of nonprofit organizations (Sarros et al., 2011).

A compelling case can be made that NGOs’ credibility could be enhanced if the sector strives to improve its image. Image building constitutes a form of branding that seeks to appeal to public sensitivities by building on perceptions. According to Prugsamatz (2010), the logic behind image building is that since NGO deliverables are public spirited by nature, the perception of the public end user is critical in judging whether or not the NGO is delivering upon its promise. Over the years, some NGOs, especially those sharing missions on issues that transcend national boundaries (such as ecosystem preservation, the environment, world hunger and epidemics), have developed an image consistent with their mission, and thus strive on that image (Chalhoub, 2009). On the other hand, several NGOs have a limited marketing skill set of staff and volunteers that can help in this regard. Thus, there is a need for further education and training to develop an awareness of how to establish a brand in the NGO sector. In addition, integral to the governance structure of an organization is the board of directors. For NGOs, this is very important in setting organizational vision and direction.

IX Boards of directors

Boards of directors constitute the policymaking body of an organization, and their members assume fiduciary responsibility (a duty to act for the good of others) (Amagoh and Kabdiyeva, 2012; Gibelman and Gelman, 2004). Boards are charged with overseeing and scrutinizing all aspects of an organization’s operations (McMurray et al., 2010). When boards fail in their responsibilities, the result is governance failures that negatively affect overall organizational performance. Symptoms of governance failures include: failure to supervise operations; improper delegation of authority; lack of oversight of the CEO; failure to institute internal controls; absence of checks and balances in procedures and practices; and isolation of board members from staff, programmes and clients (Schneider and George, 2011). Mwenja and Lewis (2009) identify six competencies of effective board of directors:

Contextual: effective boards understand and take into consideration the culture and norms of the organization they govern;

Most NGOs of sufficient size have boards of directors who oversee the functioning of organizational management, in the same sort of structure that a for-profit corporation might have (Diochin, 2010). A key role of NGOs’ governing boards is that of trustee of the interests of the various constituencies and groups. They serve to ensure the fiscal responsibility of NGOs, and to protect the mission of the organization. It is argued that the crucial role of NGOs’ boards of directors’ lies in ensuring transparency and accountability that goes with organizational mission in order to gain the trust of citizens (Puplampu, 2010). According to Kamaria and Lewis (2009), this may create a dilemma, because for NGOs the main concern is safeguarding interests of stakeholders as opposed to organizational growth and development. A number of NGOs are also faced with the problem of high turnover among their boards (McMurray et al., 2010). In some cases, governing boards serve a limited term, such that leadership and management roles tend to be transient (Sarros et al., 2011). This can lead to a significant shift in strategic goals and objectives, and affect overall organizational effectiveness (Akingbola, 2006; Mwenja and Lewis, 2009).

X Funding

The changing socio-economic–political environment demands that nonprofits diversify their funding sources, which tend to be volatile, and consist of government grants, donations, fees and payments for commercial offering of products and services and endowed earnings (Kelly and Lewis, 2010). NGO funding has implications for the ability to sustain projects over the long run. The unreliable and sometimes unsustainable donor funding means that NGOs should explore different strategies to ensure their long-term survival (Silverman and Patterson, 2011; Soakell-Ho and Myers, 2011). As explained earlier while discussing the issue of long-term sustainability, a major problem in NGO funding is that some of the funding sources focus on specific programmes rather than on long-term sustainable projects. Furthermore, reliance on financial support from donors, who believe in specific causes, ensures that NGOs expend funds on operational activities with immediate outcomes rather than on projects where short-term pay-offs are intangible. The inherent danger for NGOs who depend on specific donors lies in the fact that the NGOs may become more like the bodies from which they attract funding, rather than the societies whose interests they intend to represent.

Increasing financial dependence on donors can tempt NGOs to be complacent in seeking to mobilize funds from within, thereby making their agendas donor driven. This concern is echoed by Najam (1996) who states that the intellectual undertaking of NGO enquiry remains predominantly donor driven, giving rise to a patron/client relationship between NGOs and donors. It creates a relationship of patronage whereby failure to fulfil the stated or implied responsibility can lead to a withdrawal of support being provided to an NGO. Similarly, Fowler (1997) and Sadoun (2006) argue that the fads that are important for some northern donors become translated into the policy agenda for NGOs in developing countries, as has been the case with environmental issues. Among the implications of extensive dependence on foreign donor funds is the fact that southern NGOs lose their autonomy and compromise on their priorities and institutional identity in the way they approach donors for funds. The question of financial autonomy is important in all phases of donor–NGO relationships and determines the selection of NGOs, and the implementation and evaluation of projects (Sadoun, 2006). The financial autonomy of NGOs becomes important when donors want to strengthen civil society. Thus, funds given under these conditions are seen as attributing to capacity building and organizational development. A causal link is established between the legitimacy of the civil society organizations and its impacts on local democratization process.

Despite the importance of the government as a source of funding for a number of NGOs worldwide, most successful NGOs tend not to rely on the government. They usually have strategic activities (such as strong marketing and financial orientations), while the unsuccessful ones tend to be less focused, place little importance on marketing and financial issues and have high percentage of government funding (Andreoni and Payne, 2003; Kelly and Lewis, 2010). In fact, reliance on government funding may be counterproductive in the long run. Hager and Brudney (2004) found that government funding tends to increase the likelihood of closure of an NGO, while the size of the organization and dependence on volunteers and donations reduced the likelihood of closure. According to Silverman and Patterson (2011), government contracts tend to require more information about performance and outcome in order to improve efficiency and effectiveness from the funds granted. Thus, Hager and Brudney (2004) conclude that government’s demand for accountability might put too much pressure and additional costs on NGOs, putting them at a competitive disadvantage. Furthermore, Kelly and Lewis (2010) found that in nonprofits that depend heavily on government funds, it was common to have outdated mailing lists to reach potential donors, and that such nonprofits were slow to incorporate new technology.

XI Performance management

There has been a gradual but tangible shift in the call for more appropriate and sympathetic approaches to measure and report performance in third-sector organizations (Conaty, 2012). According to Sole (2009), there is a need to understand the distinction between performance measurement and performance management. Performance measures are indicators that are monitored and used most effectively through performance measurement systems to assess performance and enhance programmatic or organizational decision-making and accountability. Performance measurement represents the process of adopting measures and performance dimensions (outcomes, productivity, output, efficiency, etc.) and the elements characterizing this process. On the other hand, performance management refers to the actual use of performance measures. Thus, performance measurement is a necessary but not sufficient condition for performance management. The main goals of a performance measurement and management system are:

Assure transparency to stakeholders through a systematic internal and external accountability process; and

Most NGOs lack clear performance management standards, including performance measurement criteria. Intangibility of results and challenge in performance measurement is a major issue in NGO performance management. Theoretically, some NGOs are under increasing pressures to become accountable against corporate performance measurement criteria. Such measures involve the volume of the NGO’s operations, its capacity to attract funds, the quality of its human resources and ability to execute projects and its administrative structure and management models (Chalhoub, 2009). However, there seem to be a consensus that auditing approaches largely based on financial audit procedures used in the private and public sectors fail to capture the true value of third-sector organizations’ activities, outputs and achievements. Thus, there have been calls for more appropriate approaches to measure and report performance for NGOs.

Schaltegger and Wagner (2006) argue that because the importance and recognition of NGOs’ deliverables to the end user or beneficiary communities is faced with the problem of lack of empirical results and analysis, there should be greater flexibility in the application of private financial management measurement models to nonprofit organizations. They advocate the development of integrated social accounting (which combines economic and social impact reporting) as more appropriate to the objectives and challenges of nonprofit organizations. As Greatbanks et al. (2010) explain, using private sector financial auditing procedures fails to capture the true value of third sectors’ activities, outputs and achievements. Baxter and Chau (2003) cite the difficulties of measuring the intangible social aspects of nonprofit activities, and argue that there should be greater flexibility in the applications of private financial measurement models to nonprofit organizations. In fact, the balanced scorecard was adapted for third-sector organizations by Kaplan (2001) to account for factors unique in the third sector. More recently, there has been support for impact measurement as a form of assessment criteria (Eccles and Saltzman, 2011). Impact measurement approaches can be used to measure the effect of an organization on specific aspects of the environment within which it operates (Greatbanks et al., 2010). However, according to Lindenberg (2001), it is a major challenge to measure outcomes related to typical NGO project deliverables, such as alleviating poverty, building capacity, improving literacy levels, protecting biodiversity or decreasing mortality. This is because such outcomes involve developmental projects that take a long time to mature and bear results.

XII Human resources

The ability of an NGO to build a culture of devout staff and volunteers is of paramount importance to its performance. NGOs need a comprehensive and coherent human resources policy in order to remain viable. This would allow them to attract and retain competent and quality staff, and increase their ability to be more effective in meeting their goals and objectives (Borwankar and Velamuri, 2009). According to Kamaria and Lewis (2009), attracting and retaining skilled and motivated personnel, especially at the top level is a structural challenge in the NGO sector because of high turnover rate. In particular, managers’ education and training are not fully developed in the NGO sector compared to the private sector, where the disciplines of human and intellectual capitals have long flourished (Stid and Bradach, 2009). NGOs further face the problem of integrating volunteers into the organizational structure, and in some cases making appropriate use of volunteers’ skills. Generally, volunteerism is directly related to cultural initiatives emanating from the individual’s motives and passion for an idea or a cause. It relates to the person’s eagerness to see results in a cause that he or she deeply believes in. As a result, it is necessary for NGOs’ management to harness volunteers’ skills and enthusiasm in advancing organizational goals.

According to Choudhury (2010), a number of factors affect the demand and supply of volunteers. They range from demographic (growth of senior citizens and value shifts among the youth) to the mode of political participation (electronic, social and cultural). The difficulty in volunteer management relates to trying to identify roles that would use volunteers’ skills in meaningful ways besides fundraising duties. Such integration difficulties occur due to a lack of best practice for volunteer management in the NGO sector (Kamaria and Lewis, 2010; Okorley and Nkrumah, 2012). In fact, Salazar (2010) argues that the ability of an NGO to attract and motivate human resources, acquire project funds and reach as many disadvantaged people as possible should be a major performance measure. In recent years, a number of organizations are making efforts to address the human resources problem in the NGO sector. For example, the Canadian International Development Agency (CIDA) identifies factors that would help NGOs deploy organizational resources effectively and efficiently (including personnel, skill sets and operating structures). CIDA emphasizes the role of NGO human resources in strategic planning, service delivery and job training (Kamaria and Lewis, 2009; Randle and Dolnicar, 2011). Effective human capital development, facilitated by training, can play a major role in organizational innovation and improve the overall performance of the NGO sector (Benevene and Cortini, 2010). Southern NGOs should recognize that resource transfers include more than just money. To strengthen the capacity of southern NGOs, there should be the provision and exchange of information as a crucial resource in enhancing their human resources, especially technical and organizational skills (Miltin et al., 2007).

XIII Partnerships

NGOs can greatly increase their impacts through collaborations with other sectors (business and government) and other NGOs. The process of inter-sectoral collaboration has emerged as a joint response to social problems that would be hard to solve if a sector (government, business or nonprofit) would try to do it on its own (Burgos, 2013; Dahan et al., 2010). Brinkerhoff and Brinkerhoff (2004) identify four reasons why actors choose to enter partnerships:

To enhance efficiency through a reliance on comparative advantages and rational division of labour;

On the other hand, two factors may limit the achievement of partnership potential. First, the power imbalance between donors and NGOs may inhibit the mutuality required for partnership work. Second, administrative procedures and practices of donor agencies can undercut the full expression of partnership principles.

In order to satisfy the requirements of traditional northern donors who ask for evidence of financial sustainability, southern development NGOs are entering into partnerships with the corporate sector, as this represents a potential source of sustained flows of financial resources (Fowler, 2000). Business organizations have also begun to perceive NGOs as valuable partners who may play a role in linking business with society. The advantage of collaboration as an inter-sectoral strategic alliance is that it generates innovative solutions for different social problems. According to Hansen and Spitzeck (2011), the contributions NGOs can deliver through partnerships with the private sector include: local knowledge; capacity to mobilize community participation; provision of local leadership; possibility of ensuring relevance to local need; offer of independent monitoring; emphasis on sustainability; etc. For business organizations, such collaborations can bring a new channel of communication between the company and local community, and can help manage social conflicts. Collaborations and partnerships can also form an essential part of a company’s corporate social responsibility (CSR) programme. According to Rodríguez et al. (2007), such collaborative arrangements are more effective when built on trust between the partners. The following principles help enhance trust in inter-sectoral collaborations:

Mutual understanding and meaningful communication;

With regard to NGO–government partnerships and collaborations with other NGOs, Jonker and Nijhof (2006) state that NGOs should partner with governments and other NGOs in order to scale up their impacts. According to Conaty (2012), an NGO– government partnership is actually commonplace. A review of practices in the delivery of family services in European Union (EU) states by Appleton (2005) found that there was extensive use of NGOs in the provision of such services. Such is the case in the United States and a number of other countries. Borwankar and Velamuri (2009) suggest that such partnering enhances capacity building and organizational efficiency, and can provide NGOs with needed financial resources, technical know-how, improved profile in the community, access to products and services demanded by low income communities and expertise for advocacy. In fact, in some cases, it may be in the long-term interest of end users to have NGOs collaborate with the government as a means of enlightening the government on various issues facing the population. They may engage in joint planning and implementation with government and other NGOs to support the strengthening of existing administrative and managerial structures, and enhance management capacity of local and national governments (Hansen and Spitzeck, 2011; Lindenberg, 2001). According to Bar-Nir and Gal (2011), the role of NGOs as providers of social services for governments has allowed NGOs to become important actors in the welfare economy. It should be noted that while it is advisable for NGOs to partner with their governments, this type of arrangement may be different in each country or region. For example, NGOs in certain countries (such as India and Bangladesh) derive much support and encouragement from their government. They are registered with the government and tend to work in close collaboration with it. Similarly, in Africa, NGOs acknowledge the frequent need to work closely with the government or at least to avoid antagonizing the authorities (Edwards, 1999). On the other hand, most NGOs from Latin America have functioned historically as an opposition to the government. In many of the newly democratic countries, these NGOs see themselves as playing a crucial role in the strengthening of civil society (Edwards, 1996).

Emphasis should also be placed on stronger partnerships between northern and southern NGOs. According to Ahmad (2006), NGO efficiency and effectiveness will be enhanced if there is genuine partnership and collaboration between northern and southern NGOs that replaces a partnership of dependence, mistrust and paternalism that currently occurs in some cases. Fowler (1998) argues that northern NGOs need to enhance their skills at building authentic partnerships with their southern counterparts, as opposed to project-/product-based relationships. Such a north/south collaborative relationship should include mutual respect and trust; transparency or reciprocal accountability; understanding of each others’ political/economic/cultural contexts and of institutional constraints; openness to learning from each other; and a long-term commitment to working together. An improved partnership arrangement will lead to increased communication; efficient use of existing resources; mutual evaluation; examination of institutional structures to determine which are most useful; and mechanisms to ensure that NGOs’ internal structures replicate the values they espouse (Fowler, 2000).

XIV Implications

This study examines the relevant issues of NGO credibility, and factors aimed at improving NGOs’ effectiveness and performance. These factors refer not just to financial indicators as used in the private sector but also to the impacts (in both the short and long run) NGOs’ activities have on communities, based on their mission statements. Factors that would improve accountability and transparency include watchdog agencies and sector-wide codes of conduct (on both country-specific and global levels). This implies that there should be, at a minimum, basic standards and norms against which the conduct and performance of the sector are assessed. The study suggests that the effectiveness of NGOs can be enhanced by focusing on a number of areas, such as long-term sustainability, core functions, strategic planning, governance and image building, funding, performance management, human resources and partnerships. A piecemeal approach to development projects with project evaluation that focuses on immediate results only leads to temporary impacts, which if not sustained hardly justifies all the efforts and resources employed. The ability of NGOs to focus on core functions will lead to enhanced operational efficiency due to standardization of procedures and experiences gained from repeat operations. While there is a debate on whether NGOs should focus on their core functions or have the flexibility to respond to different situations, a more viable option will be for NGOs to focus on their core functions while maintaining the flexibility to respond to a number of basic societal activities.

To be really effective and relevant with respect to their mission over time, NGOs need to continuously anticipate and adapt their strategy to changing industry conditions. Strategic planning increases the ability to adapt to global contexts. Long-range strategic plans allow for the development of collective learning in organizations, help nurture synergies by clustering up experiences and leverage knowledge over multiple projects and programmes (Courtney, 2002). Boards of directors, as an integral component of organizational governance, are agents of change that set organizational vision and direction. They have the overall responsibility and accountability for an organization’s strategic direction and performance (Akingbola, 2006). More importantly, supportive and visionary leadership is an essential ingredient and determinant of NGOs’ long-term sustainability.

NGOs also need to make concerted efforts to diversify their funding sources. While it is true that some NGOs derive a significant part of their funding from donors or governments, the study suggests that excessive reliance on a particular funding source may be counterproductive in the long run, especially when such donors change their mission or priorities. Studies have shown that NGOs that derive most of their funding from governments are more likely to be at a competitive disadvantage when compared to other NGOs (Hager and Brudney, 2004; Kelly and Lewis, 2010; Silverman and Pattersen, 2011). The efficacy and value of private and public sector performance measures fall short in assessing the performance of NGOs, because financial audit procedures used in other sectors fail to capture the true value of nonprofits’ activities, outputs and achievements (Greatbanks et al., 2010). Thus, a balanced assessment mechanism that takes into account the intangible social aspects of NGOs’ activities is needed. This may be in form of an integrated social accounting framework, which combines economic, financial and social impact reporting (Eccles and Saltzman, 2011). Even with this caution and flexibility, a dilemma still exists, because a major challenge with impact indicators is determining to what extent observed impacts exclusively stem from an NGO’s activities, and not from other external influences (Conaty, 2012). Further research on this issue needs to isolate other contributory variables that might impact community benefits.

A viable and coherent human resources policy is essential for NGOs’ long-term sustainability. The study suggests that to improve organizational viability, there is a need for NGOs to broaden their scope of sustainability factors to include human resource management capability (especially programme development, general management and material resources) (Schaltegger and Wagner, 2006). In this regard, managerial leadership, technical competence and staff motivation are three critical factors that can influence the long-term survival of NGOs (Kamaria and Lewis, 2009). These factors can be achieved through merit and volunteer recruitment, and regular on-the-job training (especially in leadership, project management, prudent financial management, lobbying, etc.) (Benevene and Cortini, 2010; McMurray et al., 2010). In fact, Prugsamatz (2010) suggests that there is need for the formation of a significant number of NGO institutes that would provide training in managerial, goal setting, fund raising and other operational skills designed exclusively for the NGO sector. Finally, collaborative arrangements between NGOs and other sectors are essential if NGOs are to magnify their effectiveness and impacts. Partnerships make it easier to generate innovative solutions to social problems that would otherwise be difficult for the NGO sector to solve alone (see Dahan et al., 2010; Warner and Sullivan, 2004).

XV Conclusion

The NGO sector faces substantial challenges, some of which can be addressed with increased accountability and transparency. With the prevalence of NGOs around the globe, and reports of improprieties in some cases (Gibelman and Gelman, 2004; Gray et al., 2006; Weidenbaum, 2009), understanding and better addressing the challenges of transparency and accountability would help to enhance trust in NGOs, and improve their credibility. Additionally, systemic changes are needed in a number of areas to improve NGOs’ effectiveness and sustainability. Improving NGOs’ performance and effectiveness requires that issues of long-term sustainability, core functions, strategic planning, governance, funding, performance management, human resources and partnerships be properly addressed. In totality, NGOs perform a very laudable role for society; thus, it is necessary that measures be taken to improve their effectiveness. In fact, Silverman and Patterson (2011) state that there is a continued need for increased activities and contributions to society by the nonprofit sector. NGOs can serve as incubators for policy innovation and mechanisms to connect grassroots interests with policymakers. Encouraging and legitimizing advocacy activities within the broader context of policymaking and harnessing the varied benefits of NGOs activities could serve as effective mechanisms for institutionalized change and societal development.