Building an ecosystem for the social sector

Date : May 17 , 2019 | Opinion

A set of intermediaries who create transparency and enable better decision-making is critical to India’s non-profit sector at this juncture, says Ashish Dhawan, founder of Central Square Foundation and Ashoka University.

Those of us familiar with the growth story of the corporate sector know how corporations, both big and small, owe a great deal of their ability to dream big and achieve great success to a strong supporting ecosystem, including  funders who provided capital to get ideas off the ground, consultants who provided strategic inputs, recruiters who helped get the right talent, specialists who helped build organisational capability, and so on. It took many actors in an interconnected ecosystem to enable businesses to achieve their potential.

At a critical time in the history of India’s social sector, an ‘ecosystem’ of this kind is the one factor that will decide how the sector grows in the years ahead. At the moment, though, this ecosystem is still an idea being discussed, sometimes vaguely, by a handful of people in the social sector.  So, what is this ‘ecosystem’ we are talking about, why do we need it and, importantly, who is to build it?

The role of intermediaries

As in the corporate sector, a set of intermediaries who create transparency and enable better decision-making is critical to India’s non-profit sector at this juncture. There is a range of possibilities and roles for these intermediaries but, to my mind, the most critical are those involved with talent and capital.

Let’s use a parallel from the Indian venture capital industry, where a sudden influx of capital from the likes of Sequoia, SoftBank and Tiger, allowed our entrepreneurs to dream bigger than ever before. However, as the capital came in, we also saw a situation where there was so much more to do, but not enough talent to seize those opportunities. Similarly, as the non-profit sector is poised for a phase of growth, talent could be one binding constraint in the near term.

The huge influx of capital, especially the INR 50,000 crore from CSR in just five years, has dealt a comparable kind of shock to the non-profit system. Domestic philanthropy has also seen a surge: who would have thought Mr Premji would give away another $20 billion! Whilst there isn’t, obviously, another donor of that size, many more people are now committing to give money and are willing to be much more active participants, not just donors, in the process of social development.

Just as the VCs demanded more accountability from Indian start-ups—the reason today’s start-ups are more professional than those of 20 years ago—today’s donors demand better processes, better utilisation of funds and more professionalisation within non-profits.

The talent factor

Having built successful for-profit companies, individual philanthropists are now demanding that non-profits focus on the talent piece. People like Amit Chandra, for example, focus specifically on capacity building grants. CSR is also demanding systems, processes, auditing, governance, etc. And so, this is the moment when the social sector needs to respond.

We are already seeing how organisations that have responded to these demands have grown rapidly. The likes of Magic Bus, Kaivalya Education Foundation and Teach for India have grown tremendously in the last five years because they realised they could tap into this pool of capital if they did the right things, hired good talent and professionalised.

Talent will have to be the single biggest investment in this sector going forward. We’re at a stage where good quality junior talent has started coming into the sector. What we will also need is a leadership pipeline; it’s going to be almost impossible to build the leadership and skills from within organisations in a short span of time. Which is why we now see initiatives like India Leaders for Social Sector, to bring in experience, talent and skills from the corporate sector.

Information and data

Another area where the social sector needs expertise is evidence, monitoring & evaluation, and reporting. If we want the quality of the sector to improve, we should demand more rigorous evaluation to determine whether something is genuinely working or not. Unless we see more rigour on this front, we will continue to compromise our ability to take informed decisions regarding our response to societal problems.

We certainly have a gap in terms of the information available in the public domain regarding how much philanthropists are giving, where they are giving, etc. I don’t think there are enough intermediaries that have done a good job at making such data available. In addition to more rigorous evidence, we also need evidence that is more readily digestible so that people don’t make the same mistakes that were being made 20 years ago.

Like Pratham created ASER, there is also a need to create similar tools or public good that can transcend their limited scope within programs and organisations to become useful to different organisations, across sectors. That way governments and organisations get access to a ready set of tested tools and won’t need to reinvent the wheel.

The role of philanthropy

The question, of course, is what will it take to build such an ecosystem? Philanthropy certainly has an important role to play here. Rather than fund organisations to just do more of what they’re doing, philanthropists must be willing to encourage testing of innovative models, making more risk capital available to non-profits.

Donors must make budgets available for capacity building and not just for programs. As organisations grow, donors need to be okay with, say, 20-25 percent of their grants going towards ‘administrative costs’ of grantee organisations, including investments in human capital, M&E, marketing, brand building, fundraising, technology and systems.

As India’s non-profits negotiate the opportunities that come with increased investment and interest, our ability to put in place an enabling ecosystem will be the key that decides how well, how quickly and how effectively they respond.

This article was first published in Financial Express. The original article can be found here

Ashish Dhawan is founder-chairman of Central Square Foundation and a founding member of Ashoka University. Prior to this, he worked for 20 years in the investment management business and ran one of India's leading private equity funds, ChrysCapital.