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In Defence of Duplication, Waste, and Ineffeciency

 

Annnnnd, we’re back.

Sorry for the radio silence. I’ve not written anything for 8 weeks. Blogging about the aid industry, aid effectiveness, and the role of the private sector in development is one of my genuine pleasures. But sadly the “doing” frequently gets in the way of the “writing about the doing”.

There was one thing, however, that popped up several times over the last two months that almost coaxed me away from the spreadsheets and the email.   This is the issue of competition among NGOs.  Frequently aid-effectiveness wonks bemoan the fact that there are too many aid organizations on the ground. Lately, Haiti is a frequently discussed. For example:

“There does seem to be a real problem with too many NGOs, not well-coordinated, and duplicating services, while at the same time many Haitians are still not receiving any aid.”

The argument goes that too many NGOs needlessly duplicate services creating waste and inefficiency and force unneeded competition for limited donor funding.

I want to make it clear for the record that I am a member of the pro-duplication, pro-waste, pro-inefficiency camp.  I’ll explain why.

The structure of the non-profit sector is fundamentally flawed. Compare it to governments or the private sector.  The private sector provides goods and services to consumers who pay for it with their hard earned cash. If they fail to meet the expectations of the consumers, new companies move in with better and cheaper products.

Similarly, governments (democratic ones) provide services to citizens who pay for it with taxes. If they fail to meet the needs of the citizens they are voted out of power and a new government takes it place with a new plan to better deliver these services.

In each case, there is a direct feedback loop. The beneficiary, be it the consumer or tax payer, directly rewards or punishes the service provider.

Glengarry Glen Ross did not take place in Haiti. Alec Baldwin never worked for World Vision.

But not in the non-profit world. The beneficiary is not paying for the bag of rice, or the mosquito net, or the technical assistance.   When an NGO provides a good or service, it is paid for by a donor. If the NGO fails to meet the needs of the beneficiary, they cannot vote them out nor can they cut off the NGO’s funding.

The best-case scenario is that eventually a donor monitoring and evaluation team discovers that the refugee or bureaucrat is unhappy and get rid of the implementing partner.  But that happens so rarely that I honestly can’t think of an example right now. Perhaps one of you can.

Which brings me back to NGO overcrowding and duplication. I believe this is absolutely necessary if we really want the non-profit sector to improve, if we really want aid effectiveness to spread.

Competition is healthy, for clients and for donors.  In the case of clients, it provides beneficiaries with choice.  If there are two water distribution points being set up near each other, people will naturally gravitate to the one that offers the better water, in the safest and quickest fashion. Which will force the other water distribution NGO (and their donors, and the media – good Haiti example here) to ask themselves what’s wrong and make changes. Here’s a case in point.

In the case of the donors, it also provides them with choice. If there are several NGOs doing the same thing in the same area, donors are then forced to compare them based on how well they operate. When NGOs “coordinate” to divide up a country into different operational zones, they are effectively creating a cartel. (Ironically, those countries which donate the most are the least likely to tolerate cartels in their own domestic provide sector.)

To sum up, I am a Darwinist. I believe in survival of the fittest. If we want a fit and fast non-profit sector, we need some competition. We have very little right now.

 

Charles Darwin was not an aid worker.

 

 

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11 Comments

  1. Owen Barder says:

    Scott

    Quite so.

    Evolution requires variation and selection. The problem is not with the proliferation and duplication and overlap. That’s the variation. The problem is that we lack adequate mechanisms for selection. An NGO can be perfectly good, or perfectly awful, and it will get funded just the same.

    Evolution is sometimes characterised as ‘survival of the fittest’. But we don’t have to go quite that far. What we need is ‘non survival of the non-fittest’.

    That’s what we need to figure out, not how to harmonise and rationalise by committee.

    Owen

  2. Thom says:

    Hi,
    Good to see you back.

    Your points all makes a lot of sense until you breakdown the comparisons of government (vote it out, get a better one in), or private sector, (customer goes elsewhere) when things aren’t good enough. In the case of the poor performing NGO, donor money (be it Govt sponsored or charitable, business or any other form of donation) is still being used, (and wasted) to stay in the competition.
    In the case of the democratic government system we are not, in most cases, continuing to fund the former government to stay in the game and compete-(this part is subject to a bit of debate, i appreciate that), and in the case of business, it’s their own money they use to develop their product or service to a regain competitive edge. That all being said, I suppose what you’re getting at is that there is value to the donor (of any kind) in investing in putting players in the game so to speak, to drive improvements. My personal model of change and innovation is that failure is inevitable and useful, but (and this is obvious), it’s a tough one to communicate when stories abound of the kind you have highlighted. Blah blah, this is turning into ‘failure is useful’ trolling..I’ll stop now!

    Anyhows, glad you’re back and blogging again.

    T

  3. A couple of comments. Firstly I agree that what gets in the way of this is the information problem: it is very hard to evaluate the comparative effectiveness of organisations. Because most NGOs are funded through grants rather than contracts, they are even more likely to define and describe their work in ways which differentiates them from others. Also, many NGOs see their role as being not just one of providing services but also as including representation of communities and advocacy for accountability from other providers – including the state. So it would be necessary to find ways of evaluating performace in this area too.
    On the coordination point, I agree there’s a lot of wasted effort. However, coordination is sometimes operationally essential – for instance when a complex problem is being tackled which requires different actors to provide different, but complementary and linked up services. It’s not impossible, of course, to make sure this happens providing the right types of contracts and incentives are provided.

  4. Scott Gilmore says:

    Owen: I think you’ve got the strongest counter argument. Survival of the fittest requires more actual selection. Which I think would come from more transparency and the sort of public scrutiny that we’re now seeing.

    Thom: With you on the failure is useful.

    Matt: You are anticipating a much larger point I’ve been writing about but not drafted, which is I think much could be improved by donors tendering aid contracts based on impact metrics (as opposed to the predominant system of providing grants for processes). On coordination, a colleague is currently writing a PhD thesis which looks at the post-quake haiti water distribution. His data is showing that coordination dramatically slowed down the distribution and reduced the number assisted, while “cowboy” NGOs who did not coordinate had a significantly higher impact both in isolation and in the aggregate.

  5. J. says:

    I take your points, but…

    a) Not particularly new: http://talesfromethehood.com/2010/07/21/incentive/

    b) Not sure I agree that a for-profit supplier/client worldview is the one to take… http://talesfromethehood.com/2011/04/18/big-business/

    Cheers,

    ~J.

  6. Matt Greenall says:

    Hi again Scott;
    That sounds like useful research. Yes I think the principle is probably fine for interventions that don’t require an aggregate set of actions to have an impact. But in my area of work for instance – HIV – it is often the case that one organisation can’t handle all the different things that need to be done. The problem of fragmentation is often caused by the state or by donors separating out programmes that should be joined-up. So you get funding for HIV testing, funding for treatment, funding for condoms etc. Having said this I don’t believe the answer is heavy, top-down planning. But the evaluation criteria we are talking about need to look at combined effects not just the performance of individual organisations.
    Matt

  7. c-sez says:

    Several years ago the EC’s Non State Actors funding lines opened up eligibility from just being a closed shop of european-homed development NGOs, to allowing a much wider array of European and developing country organisations to apply: development NGOs, churches, trade unions, media organisations, universities & other research organisations, political organisations, you name it. I have only personal anecdote level info but I think in the main this pushes everyone to a higher standard. Your brand name dev NGO might still be the name on the application but they are much more likely to have had to be less internally focused, and instead scoped and invested in developing serious collaborative strategies and activities with research institutes (eg IFPRI, Tufts) and private sector stakeholders (eg in value chain work) as well to make a compelling, and competitive, funding proposal. Of course gone too far, and especially where donors want to fulfil mandates around competition but also want lower internal overheads and so send signals they want to award fewer larger grants, NGOs et al can end up cartelizing in ways that aren’t based on or necessarily promote programme quality and impact.

  8. Michael W. says:

    Scott –
    So I should read the blog more often than once every 6 weeks, as it does get one thinking. Figured you would appreciate a late reply, rather than none at all.

    While your argument is compelling in part because it is so straightforward (more competition = everyone forced to perform better = better aid = less poor people). However, this argument assumes that the marketplace for aid is built on a relatively even playing field; which will allow the competition you seek; which will force NGOs to perform better.

    But how do you see this happening if – as you say yourself – the structure of the non-profit sector is fundamentally flawed? Development environments are incredibly complex, where causality of problems and solutions are very hard to identify. Understanding impact metrics is a question of decades, and not the months or years a project took to implement. The political agendas of donors and local governments are affected minimally by periodic elections (how often is aid an issue – unless it needs to be cut for budget reasons?) or multilateral commitments (i.e. the Paris Declaration on Aid Effectiveness – the two biggest donors, USAID and EU, are still far from opening their funding envelopes to all NGOs). And as for beneficiaries having choice…really?

    So what do we need to shake up the marketplace? You advanced one option: cowboy NGOs. Why do they (sometimes) work? Not perhaps because they offer the best solutions, but because they ignore the market, flawed as it is; they ignore competition; they act more like dictators (or neo-colonialists?) in their spheres of work; and they sometimes get results. High risk, high reward. And if they don’t, well – not to be overly cynical – but what didn’t work in Zambia with one donor may well work in Nepal with another. And in the meantime, the marketplace, shifts under our feet: venture philanthropists, China, inexpensive aid professionals from developing countries that can price guys like you and me out of the “marketplace”, impact metrics or not.

    I guess my point is that we cannot expect the competition that you seek. So I am like you: a resigned member of the pro-duplication, pro-waste, pro-inefficiency camp. Every-time that I prepare a bid or project generated by the marketplace, I am contributing to that camp. But change comes from the way our organizations choose to work: a healthy dose of cowboy and co-ordination, I suppose. Which means we have to win projects. A cruel cycle.

  9. […] here – as I dive deeper I don’t want to speak for my colleagues) strongly believe that greater impact, innovation, and efficiencies will only come from greater competition. For example, imagine how heavy your laptop would be if IBM was still the only manufacturer on the […]

  10. hi scott,

    thanks for such an insightful read!

    i appreciate your view, but my experience has proven to me that sometimes the impacts of trial and error can be too expensive and too damaging to the poor, incapable beneficiaries, who end up left with the “curse” of unplanned, wasteful aid. survival of the fittest makes sense at the sector or industry level, but not at the target population’s level (at least not on the short and medium terms–waiting for the sector to mature through its own feedback loops is not good enough in my opinion).

    i am witnessing, daily, the damage caused by projects that have been funded by NGOs and that left entire populations worse off. for example, tragic scenes of “package wastewater treatment plants” in rural villages (in lebanon) that diverted sewage away from existing pits to designated sites in agricultural lands for treatment, only for the plants to fail miserably and permanently a year later, inundating the agricultural lands with sewage and leaving the farmers and the villages in a worse off condition (sanitarily, agriculturally, and financially).

    i’m all for competition, so i don’t disagree with you, but i’m also for a much better, more integrated system for organizational and sector-wide learning. it is all fine and rational to push the sector to behave like markets, but one of the most fatal markets failures is imperfect information. we need to learn, like living systems do. we need to integrate, and to use technology in the most efficient way. and we can. we need common, independent, crowd sourced platforms for sharing, learning and integrating data and learning.


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