The Indian state has made significant progress towards key development outcomes, and we have come a long way since independence on areas like education, health, and technology. However, when it comes to equitably ensuring the welfare of all Indians, much work remains.
We rank 132 out of 191 countries on the 2021 Human Development Index, 107 out of 121 on the 2022 Global Hunger Index, and 116 out of 174 countries on the 2020 Human Capital Index.
Historically, philanthropists, nonprofit organisations, and civil society have played a crucial role in supplementing the state’s efforts. Initiatives during the Covid-19 pandemic are a great testament to the role that the not-for-profit sector can play in India.
Despite playing a crucial role in the country’s development, most nonprofits struggle to survive, let alone grow or scale their impact. As per estimates, there are more than three million nonprofits in India, and most of them run operations at sub-scale levels and remain dwarfed both in terms of their reach and impact.
We surveyed 65 nonprofits of different sizes working across sectors to understand why they have not been able to scale and how philanthropy can help.
Scale is Crucial for nonprofits
Our research shows that scaling is extremely important for 74 per cent of nonprofits. Additionally, scaling becomes more significant if the NPO is large (64 per cent of small nonprofits versus 100 per cent of large nonprofits perceive scaling to be extremely important).
However, the meaning and implications of scale vary from one NPO to another. As Mona Mourshed, the CEO of Generation, writes, there are broadly three aspects of scaling: breadth, depth, and durability of impact. nonprofits either strive to optimise for a combination of these three aspects or all of them simultaneously. Few nonprofits saw scaling as a means of expanding their mission and purpose, as opposed to expanding their organisation, a particularly important distinction.
Key drivers of scaling
We identify three major factors that nonprofits find both extremely important and challenging to navigate in their scaling journey:
- The bandwidth of the organisation and leadership
- The ability to attract talent
Promising pathways to achieve scale
Our research reaffirmed the existing literature that although scaling is aspirational for most nonprofits, the majority of them struggle in the process. Through our interviews, we identify four mutually reinforcing themes that have helped nonprofits across different sectors and geographies in scaling:
1. Design for scale: The intervention or programme being proposed must be designed from the start with scale in mind.
A scale is not just a specific number to be reached. Rather, as Kevin Starr from the Mulago Foundation has pointed out, scale is the distant dream of achieving the full potential of a solution. Scaling means busting out of a linear trajectory into a non-linear, ever-steepening curve of impact over time. The journey to scale doesn’t end until a solution has achieved its potential for impact: it’s been implemented everywhere that it is a) needed and b) would work effectively. Sure, scale can be captured by numbers, but even a million pales in relation to a need on the order of a billion.
Multiple factors need to be considered at the design stage to achieve the full potential of a solution:
- Pilot ideas: Piloting ideas in small geographical areas helps in measuring the effectiveness and identifying the successful standardizable elements of the scalable program.
- Leverage technology: Technology can allow nonprofits to expand their reach and bring down the per-unit cost of programmes.
- Partnership at scale: nonprofits should look to partner with governments and/or other nonprofits with similar goals to implement their programmes at scale.
- Cost-effectiveness: Every step should be meticulously planned and executed to bring down the per-unit cost of the final scalable solution.
2. Scaling the mission: As opposed to partnering at scale, scaling the mission takes a more advocacy-based approach to scale. The core idea is to promote impactful interventions so that they can be contextualised and adopted by different Nonprofits and governments to achieve the mission.
3. Invest in hiring and retaining talent: The social sector faces unique problems such as non-competitive remuneration and limited career progression opportunities. nonprofits must find unique ways to circumvent such problems to hire and, more importantly, retain talent.
One of the NPO leaders lamented that ‘the reality is that the social sector organisations will never be able to match the compensation of for-profit companies. And most people who join the sector know this very well. They are there to make impact. Therefore, our endeavour is to always optimise for the motivation and passion of our employees, the rest of the things follow once we take care of this.’
Azeez Gupta, one of the co-founders of Rocket Learning, emphatically says: ‘we have intentionally carved out roles for talented people that is satisfactory to them. We are already 5 co-founders. We are also trying to identify 5-10 people who can be there for us for the rest of the journey. We will ensure that they have a lot of stake, ownership, autonomy over the organisation going forward, otherwise what is the incentive to stay?’
4. Expand sources of funding: Nonprofits should secure funding from multiple sources to achieve financial stability. We find that high-functioning nonprofits in India usually receive buy-in from anchor donors who provide multi-year, flexible funding and/or adopt innovative practices such as setting up US-based or other foreign-based entities to raise money.
The role of philanthropists in the scaling journey of nonprofits
Individual wealth has grown significantly in India since 1991. However, giving has lagged. Our research shows that 60 per cent of nonprofits receive less than 20 per cent of their total grants from HNIs and UHNIs. As per estimates, India can unlock an additional funding corpus of INR 60 – 100k crores if UHNIs start giving in proportion to their global peers.
We recommend the following principles that philanthropists can incorporate in their giving journey:
1. Be open to new ideas and opportunities: While it is important that philanthropy comes from a place of passion, it is equally crucial for philanthropists to remain open to conversations and opportunities in various sectors. They can start with issues that are close to their hearts and, once established, can branch out to other sectors. Ashish Dhawan, one of India’s leading philanthropists, is a great example of this: having started in education, his philanthropic endeavours have now branched out into economic growth, air pollution, sports and more. Others, like Rohini Nilekani, started their giving journey by being on the boards of different nonprofits to learn more about the social sector. Azim Premji Philanthropic Initiatives (APPI) has an outbound method of sourcing organisations where they openly invite grant applications from organisations to increase visibility in their funding processes. Additionally, to ensure equity and representation, they also source new organisations via their existing grassroots grantees, who are more likely to be aware of the promising organisations around them.
2. Provide multi-year unrestricted funding: Multi-year unrestricted funding provides nonprofits with the necessary autonomy to take long-term strategic bets in their interests. The narrative towards this goal appears to be shifting globally and in India as well. Initiatives like the Bridgespan’s Pay-What-It-Takes, which address chronic underfunding issues and recommend that funders focus on multi-year grants, are being supported by leading philanthropic organisations such as the A. T. E. Chandra Foundation, the Children’s Investment Fund, EdelGive Foundation, and the Ford Foundation in India. At the global level, wealthy individuals like MacKenzie Scott are driving the narrative on unrestricted funding by giving away billions of unrestricted dollars to nonprofits across the globe in possibly the shortest span of time. In her own words, Scott has been offering them (nonprofits) all the money upfront and then stepping out of their way, encouraging them to spend it however they choose. SNEHA, an NPO working in health in India. One of the recipients of the grants from Scott emphatically states that the nonprofit sector needs more Mackenzie Scotts – funders who will take big bets on good organisations that address intractable problems with a risk tolerance that allows for experimentation to effectively address systemic change.
3. Build better feedback loops: The relationship between donors and nonprofits should be that of equal partners. Acknowledging the power differential, donors should work towards building a relationship based on trust and transparency. Open channels of communication must be fostered with nonprofits in a way that allows both the donors and partner organisations to share their learning and challenges, and brainstorm solutions towards the shared goal. Building such strong feedback loops will allow both donors and nonprofits to have greater visibility and clear expectations of one another, enabling them to overcome any potential difficulties together.
4. Rationalise compliance processes: Compliance is a crucial part of the grantmaking process that ensures proper scrutiny over the work done by nonprofits. Donors must ask themselves, what are my key success metrics? And how should nonprofits report progress? To this end, nonprofits must be nudged to focus their compliance efforts towards specific and measurable outcomes as opposed to reporting just on inputs and outputs. Crucially, donors should also streamline and simplify their processes to minimise the burdensome compliance efforts required by nonprofits while maintaining a high standard of rigour.