Australian development NGOs: the future is fragmented

Gruen screenshot (ABC iView)

Gruen screenshot (ABC iView)On a recent episode of ABC’s Gruen, a panel show looking at marketing and advertising, the proliferation of ‘awareness days’ and charities trying to claim a particular month or day or year or even a decade to promote their cause came up. (For example, did you know that 2016 is the International Year of Pulses?)

While the segment focused mainly on the glut of domestic-focused charities, many cancer-related, the overarching message was that there are too many, they don’t do enough to pool their fundraising and awareness-raising resources, and they should think about merging or being more strategic if they really want to direct more resources to the end-goal of their efforts – for example, medical research.

After all, as the panel argued, there’s only so many dates on the calendar to claim for awareness and only so many novelty fundraisers that the average person can fit into a year.

While international development NGOs weren’t targeted in this particular conversation, they are part of this competitive fundraising fray, and compete with each other and more domestic-focused charities for donation dollars (which have largely been flat for some time, while polling shows fewer Australians are donating to charity).

Many in the development sector are of the same view as the Gruen panellists. Outgoing World Vision CEO Tim Costello wrote an opinion piece on the issue last year, arguing that mergers and collaboration should be part of the discussion on NGO sustainability, and that “as a sector we need to be honest about the level of duplication in Australia and whether it is beneficial to the community”.

“It seems pretty clear that both smaller and larger organisations could do so much more if they supported each other and pooled resources rather than competing. This is as true in advocacy as it is in provision of direct services.”

The comments from Costello, as well as the CEO of the Community Council for Australia, David Crosbie, set about some conversation on the issue (here, here, here) – conversation that seems to have dissipated less than a year on.

Actual NGO mergers, while not unprecedented, are rare. In 2013, Save the Children took over international health charity Merlin after it found itself in financial trouble, hedged in by narrow donor priorities and project-based funding. At the time, a handful of mergers and acquisitions were enough for Devex to call it the start of a trend – but a few years on there is little evidence of this.

And there are some good arguments for why the future of the international development NGO sector is one of continued fragmentation rather than consolidation. Here we outline three.

First, there are a growing number of small NGOs. The Australian Council for International Development (ACFID), the peak body for development NGOs in Australia, has seen its membership increase from 118 in 2010 to 133 in 2015. Passionate people set up NGOs to support specific causes, and there are no shortage of those. If they can jump the various hurdles, new NGOs can not only get tax-deductibility, but also access to Australian government aid funding.

Second, in the NGO sector, unlike in the business world, if you merge you will probably lose your brand. When Google bought YouTube, it still called it YouTube. Merlin, by contrast, has disappeared. If, for example, ChildFund and Plan merged, one of those brands (or both, if it was decided to devise a new joint name) would disappear. That’s a heavy price to pay for mergers.

Third, large NGOs operate these days as international federations. Merger decisions would have to be made at the global level. But a merger that makes sense in one country might not in another. In addition, decision making within these international federations is often frustratingly slow. Getting consensus on something as radical as a merger would be almost impossible.

In summary, it seems to us that one might wish for consolidation but it isn’t going to happen soon. For better or for worse – and there are upsides related to diversity and vibrancy – a crowded development NGO world is with us to stay.

What about modes of cooperation that are less drastic than mergers? In many industries, we’ve seen the emergence of powerful platforms (e.g., Uber) that mediate between consumers and providers. There are a few such platforms in the NGO world (e.g., GiveWell), but they are tiny. Big NGOs are unlikely to invest in platforms which may advantage smaller competitors (whether other international or developing country NGOs). Perhaps in the future we will see significant amounts flowing through giving platforms, but there no signs of the NGO sector being disrupted in this way yet.

Pooled fundraising can work well for small NGOs. NSW Kids in Need does this for small cancer charities. Patrick Kilby’s history of ACFID reveals how, back in the 1980s, Australia’s development NGOs ran pooled disaster relief campaigns. These folded, however, once larger agencies started to think that they could do better on their own.

All of the above notwithstanding, we should not be fatalistic. More could be achieved by common action. Terence Wood has recently suggested that Australia’s development NGOs all contribute 0.7% of their income to a pooled advocacy campaign around Australian aid. That is the sort of ambitious but practical common endeavor that could unite Australia’s disparate and growing number of development NGOs.

Ashlee Betteridge is a Research Officer and Stephen Howes the Director of the Development Policy Centre.

Note: The ACFID membership numbers compare ACFID Code of Conduct signatories in 2010 with ACFID full members in 2015. It is no longer possible to sign the ACFID Code of Conduct and not be a member of ACFID.

Ashlee Betteridge

Ashlee Betteridge is the Program Manager (Research Communications and Outreach) at the Development Policy Centre. She was previously a Research Officer at the centre from 2013-2017. A former journalist, she holds a Master of Public Policy (Development Policy) from ANU and has development experience in Indonesia and Timor-Leste.

Stephen Howes

Stephen Howes is the Director of the Development Policy Centre and a Professor of Economics at the Crawford School.

9 Comments

  • This process might perhaps be better described as polarisation than fragmentation The larger agencies have tended to merge (presumably to foster growth and reduce overheads) while smaller agencies are being established and closed all the time. Much of the innovation in NGOs tends to come from smaller agencies because they can often respond more quickly to changing needs and priorities and pick up on new approaches. Larger NGOs inevitably become more bureaucratic, whether they wish to or not.

    Being taken over is not necessarily a sign of failure. Brand names are important. A reputation is hard earned and translates into revenue, but the support base will often follow the organisation into a new format. In the corporate world there are many examples of both plural and consolidated brands. VW Group, for instance, trades under several brand names (VW, Audi, Skoda, SEAT), while BMW and Daimler Benz have a single brand. Many small NGOs reach the limits of what they can do with the resources available to them and can benefit from being absorbed into a larger entity with greater resources. In addition, many smaller entities are driven by the one or two people who established them and often cannot survive the demise or retirement of these key people.

    In my corporate experience (I was for more than a decade a market analyst and corporate strategist) there are some mergers (the Brown Boveri-ASEA merger to form ABB is an example), but they are actually rare. Most mergers are in fact takeovers and if this is not the case the internal disputes over power, administrative systems and culture can soon bring the new entity down.

  • It would also be interesting to know of any lessons from the ActionAid/Austcare consolidation a few years ago? My outsider perception is that both this example and Janet’s CAA/FFH example looked more a takeover of a weaker agency by a stronger, rather than a merger of equals. Others will have more direct knowledge.

    Sitting in an Australian member of an international confederation, I can see there would be fantastic opportunities if two strong well-aligned global agencies chose to join forces – more effective work, greater reach, cost efficiencies, better appeal to the public. But I can also see the practical difficulties that the respective confederation structures would present in nutting through the issues raised by a process of merger. There would be winners and losers, and Boards and Members would need to concede power and take risks. While I’d like to keep such mergers in mind as a longer term vision, maybe the first step is to actively pursue closer cooperation in country where feasible, such as through more joint office facilities, consortium projects or other resource sharing?

  • One of the most significant mergers in Australia was the Freedom From Hunger merger with what was then Community Aid Abroad – which subsequently rebranded (in stages) to become Oxfam Australia. No-one would know Freedom from Hunger any more – it’s very good brand just disappeared over the years. As one who observed it from the outside, that ” merger” was quiet a takeover really.

  • Great article thanks Ashlee and Stephen. One of Philanthropy Australia’s 2016 Action Plan is ‘to facilitate member collaboration and co-funding opportunities through our digital channels.’
    This is certainly required, with the Australian Charities and Not-for-profits Commission (ACNC) currently registering over 37,000 charities in Australia. A great infographic that explains the profile of Australia’s charities is here. It reports that $1 billion of Australia’s $103 billion of charity income is in the international sector.

  • Yes. Every class in the school my kids go to (Majura Primary in Canberra) is named after a different type of pulse in recognition of the year of pulses!

    More seriously, I’m surprised there hasn’t been more brand proliferation with large NGOs using their back-office scale to start up a number of related NGOs. Regulation may explain this or perhaps large NGOs haven’t been nimble enough compared to new independent start ups. Is it really the case that in a hypothetical merger of ChildFund and Plan that one of the brands would be scrapped? Apart from regulatory issues, I don’t see why this would be any different from Google and YouTube.

    • I think the basic issue is that in the charitable world a brand has to equal an organization. If there was a merger, there would only be one organization, and therefore one brand. Perhaps brands and organizations could be de-coupled. But when you look at tax deductibility criteria as well as criteria to access government funding they are both very much focused on assessment of the organization concerned, so I think it would be hard to get government support for a separate brand without a separate organization.

    • Hey Tony,

      That is quite possibly the most inner north thing I have ever heard re the pulse-themed classrooms!

      I would say that communications and marketing is probably an area where savings/efficiencies could be easily achieved from a merger, if it was undertaken with the goal of increasing money spent on ‘development’ or project activities and reducing so-called administrative expenditure. Merging, but keeping separate brands that would have to be separately communicated and marketed and so on wouldn’t seem to make a lot of business sense in many ways, but there are also big costs to losing a well-known brand (unless the brand is on the nose due to a scandal or some such). So it would be possible to go either way, it just seems unlikely that communications and marketing would be left duplicated if a merger were to take place. As you said, perhaps there’s ways for big NGOs to be more innovative about this, but I guess it would depend on the motivations and circumstances of the mergers – the cases so far seem to be that they are forced by financial circumstance rather than strategy.

      • I think it might be whether charities do (or are perceived to do) the same thing that determines whether they would want to merge names or not. E.g. Merlin and Save the Children both provide services for disadvantaged children, but if two charities clearly provided different services (and had brands associated with that) it may be a different story, e.g. (hypothetically speaking) were Femili PNG and Fred Hollows to merge, I’m not sure it would make as much sense to consolidate the names.

  • The competition that exists among NGOs, would be better replaced or infused with collaboration. I draw on many experiences in dealing with them in difficult situations including among others, Timor-Leste, and Burma. It is no different domestically. I once brought four youth organisations into one, as they serviced the same people but did not collaborate. It took two years. Perhaps funding agreements could include a collaboration clause? No easy answers but leadership is required.

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