Non-profit sector: The management scientists are coming
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China’s Ministry of Civil Affairs is campaigning to promote charitable giving, while also hoping to encourage higher standards of non-profit performance and accountability. Meanwhile, reports Chang Tianle (常天乐), multinational corporations and management consultants are also hoping to bring business models—or, at least, a more businesslike approach—to the non-profit sector.
Over the past decade China has seen a large increase in non-profit organisations engaging in public benefit programmes and this has been gradually recognised and encouraged by the government. Donations from businesses and individuals have become an important funding source to complement government’s role in social service delivery. This trend is expected to grow rapidly as corporations allocate more funds to “social responsibility” programmes and as better-off, urban Chinese donate money and time for the benefit of poorer compatriots.
Things seem to be promising: money coming on stream, plenty of goodwill, and a more supportive environment. But both government officials and donors say that, apart from external political and policy constraints, China’s non-profit sector faces key internal obstacles that hamper its development.
In April 2006, McKinsey, the world-renowned consulting company, completed a detailed research study of China’s non-profit sector. After more than 300 interviews with people in the community, including NGO leaders and staff and former and current government officials, McKinsey concluded that China needs a healthy, professional and effective nonprofit sector working in partnership with government to address social problems. But key stakeholders in the community feel the need for a better overall infrastructure—in terms of information, fundraising, professional standards, and accountability—in order for the non-profit sector to achieve its full potential.
Now the government and business sector are taking similar, but separate approaches to build the infrastructure that they think are desired. At least three new “platforms” for the non-profit sector are being constructed by different stakeholders.
One of these was launched by the Ministry of Civil Affairs in February. The China Charity and Donation Information Centre (中民慈善捐助信息中心), a non-profit organisation set up by the Ministry, means to collect information from various sources, including government agencies, media reports, and foundations, to form an authoritative database.
Most commentators from government agencies and the business community tend to use “public benefit” (公益), “charity” or “philanthropy” (慈善) to describe non-profit organisations' work, to stress their service provision role while avoiding more sensitive areas such as rights and advocacy.
According to Chen Tao (陈涛), a ministry official who heads the new Charity Centre, problems facing China’s charity sector include the absence of a fully developed regulatory framework, poor accountability, a low level of trust among public and inadequate information disclosure, particularly on the use of funds.
A recent scandal involving a well-known woman running an orphanage in Yunnan rang alarm bells among government and donors. Hu Manli (胡曼莉), a symbolic charity figure once known as “China Mom” (中国妈妈), was accused of misusing donations. After serious problems revealed by an official audit, Lijiang city government in Yunnan Province decided to take over Hu’s orphanage.
“Many organisations are not keen on publicising their projects and financial information,” Chen Tao says.
But he believes that a more transparent system and information platform will change the sector.
Through a charity web portal (www.juanzhu.gov.cn) and newsletters, the Centre aims to encourage better discipline and sound governance structures by publishing financial and other information on organisations’ programmes.
By facilitating information flows across China’s charitable sector and linking different stakeholders, the Centre expects to help foster a more favourable philanthropic environment for both donors and beneficiaries.
“As time goes by, organisations will recognise the importance of information disclosure, which will help them gain more trust and attract more donations. As for the general public, they will learn about the philanthropic sector and develop interests either in donating or in participating,” Chen adds.
The long-term goal is to forge the Centre into a Chinese equivalent of the US National Charities Information Bureau, an independent non-profit organisation that serves as a watchdog in charity sector, preventing abuses and providing guidelines for donations.
Meanwhile, the Ministry of Civil Affairs is also making great efforts to encourage public and corporate participation. This year, it adopted the slogan “Everyone can do charity” (人人可慈善), and staged a high-profile charity award to recognise big corporate donors, individual philanthropists and best-practice programmes. Approved by the State Council, the China Charity Award is the highest recognition in the sector and is expected to stimulate more donations in the future.
Last year, Civil Affairs departments across the country, whose responsibilities include disaster relief and care for orphans, received a total of nearly CNY 4 billion (USD 500 million) in donations. But Chen estimates that there must be at least CNY 6 billion more in donations that are off the Ministry’s radar.
However, the estimated total 10 billion donation is only about 0.05% of the nation’s GDP, compared with 0.09% in India, 0.84% in the United Kingdom and nearly 2% in the US, according to McKinsey’s report.
The report’s co-author and McKinsey’s senior adviser to China’s non-profit sector, Mark Yu-Ting Chen (陈宇廷), says corporations and people in China are showing more and more willingness to charitable work. The need for services from the non-government sector is also growing as China’s booming economy opens up social and economic disparities.
The key issue, the McKinsey’s report says, lies in the sector itself, which suffers from weak management and a lack of resources. The report identifies three main obstacles to the maturing of China’s non-profit sector: the lack of accountable standards for the industry, the need for professional support in areas such as finance, training, advertising and ITC, and the lack of funding for capacity building which leads to a shortage of skilled human resources in the sector.
Business leader step in
Some adventurous business leaders have already seen the gaps and decided to go beyond donations to help non-profits improve their performance.
In 2004, nearly 100 entrepreneurs established Alxa SEE Ecological Association (阿拉善SEE生态协会). Its bi-yearly environment award has become an important event in China’s environment protection community. The latest awards were given on April 18.
In addition to its own environment projects, the Association distributes CNY 2.5 million yuan (USD 321,000) each year to support other NGOs to work in Alxa, Inner Mongolia. It also designs trainings and exchange programs for small environmental NGOs to foster a more dynamic community.
While most people are looking inward, some set a more ambitious agenda for China’s non-profit sector: to be a central player in philanthropy in Asia.
Born out of the China Corporate Social Responsibility Alliance—a group of 12 corporate giants including China Merchants Bank, IBM, Hewlett-Packard, Cisco, and Nokia—the Asia Charity Forum (ACF) was founded in January 2007. Although a Chinese non-profit organisation—with a strong business background—its long term goal, as the name suggests, is to build the capacity of the philanthropic sector across Asia.
Facilitating communication and cooperation between business and non-profits tops ACF’s agenda and it is, like the Ministry of Civil Affairs, in the process of building a “communication platform” for stakeholders in the philanthropic sector, including non-profits, businesses, government and academia. It also hopes to enhance exchanges between Chinese and international organisations and is planning a bilingual charity website.
In addition, ACF says it will be working with Horizon (零点研究咨询集团), a leading Chinese market research firm, to develop a China Charity Index to measure China’s philanthropic environment, including public and corporate participation in the sector. The findings of the survey, ACF staff say, will be presented in a report submitted to a high-level, three-day forum that the group is planning to hold in late September in Beijing. A forum will be held in a different Asian city every year and will involve participation from civil society across Asia, according to Alexander Robin, ACF’s International Affairs Director.
Venture capitalist philanthropy
McKinsey’s Mark Chen feels that corporations should take a more pro-active approach to the non-profit sector.
Following his report, Chen brought seven multinationals and two government-backed non-profit organisations together to initiate the Non-Profit Partners Foundation (公益创投基金会, NPP) in October 2006, with a view to tackling the issues raised in the report by leveraging business ideas and skills into the non-profit sector.
Board members of NPP include top executives from multinational companies in China including McKinsey, Deloitte, Ogilvy, Novartis and Motorola, together with two mighty figures in China’s non-profit community: Xu Yongguang (徐永光), Vice-Chairman and Secretary General. China Youth Development Foundation (中国青少年发展基金会) and He Daofeng (何道峰), Vice-Chairman of China Foundation for Poverty Alleviation (中国扶贫基金会).
These members’ involvement makes it possible to mobilise their own staff and resources to participate in NPP’s projects.
Chen is also able to recruit senior managers from multinational companies to join his management team.
The diverse backgrounds of the Board and hands-on team members cover finance, non-profit management, consulting, law, IT, marketing, public relations and advertising. This fits into its strategy of bringing business expertise into the non-profit sector.
Part of NPP’s work is to identify and support small and medium-sized grassroots groups in an approach that is similar to that adopted by venture capitalists.
NPP chooses organisations that have some established programmes on an upward curve of development, but that need better management and resources for further development. Other criteria include the organisation’s impact, its model, the suitability of its experiences for replication elsewhere and whether the existing staff are willing to set up a board, capable leader and team. Last but not the least, NPP must feel that it has something of value to offer the organisation.
All of these criteria sound familiar to venture capitalists.
Unlike many CSR programs in which corporations mainly finance a programme or simply donate to a foundation, NPP looks at the long term development of the partner and its sustainability.
Having chosen an organisation, NPP will work with it to analyse its situation and the resources it needs. Usually, NPP will help set up a functional board, design a strategic plan, build up governance structure, seek funding and establish a sustainable team.
Since October 2006, NPP has approached or been approached by over a dozen organisations and has started working with five of them, including the China Foundation for Poverty Alleviation, the NPO Network (恩玖信息中心) and three social enterprises: a Tibetan school, a Shanghai group that trains and finds jobs for migrant women and a programme designed to help migrant children adjust to an urban environment.
If they are successful, the three social enterprises are expected to serve as a model that can be used elsewhere, or they can themselves set up branches across the country.
In this way, NPP plans to set up and promote 20-25 “model” organisations in the next five years. A non-profit organisation incubator and a seed fund are also in pipeline to facilitate the process.
McKinsey’s report estimated that 500-800 high-calibre non-profit organisations in China will have the scale, impact and expansion to benefit greatly from improved management skills and other kinds of support that corporations could offer. Such organisations, McKinsey believes, would be able to generate sustained income of their own while delivery services.
Again, NPP invests in non-profits in a way venture capitalists do in start-up companies.
Although the first of its kind in China, NPP is more than a venture philanthropy foundation. It’s mission is to become China’s main, non-profit intermediary organisation, and to provide supporting services that are professionalised but free.
It is also working with China’s NPO Network, which in 2003 drafted non-profit “self-discipline guidelines,” to create governance standards, codes of ethics and evaluation tools for non-profits.
On the information side, NPP plans to launch a website portal this summer, which will include 2,000 major non-profit organisations, 500 donors and corporations and 3,000 relevant blogs. The portal is intended to serve as an interactive platform for donors and beneficiaries. Corporate volunteers are playing an important role in the building the site.
Also on NPP’s 2007 agenda is a TV contest for non-profit business plans. After a selection process involving experts, donors, media and audience, final winners will receive funding to implement their projects. McKinsey used to run a similar contest in Yale University, and Chen feels this could work as a model for the Chinese version. “This event will attract public attention and encourage innovation in non-profit sector,” he adds.
Chen believes that human resources from the corporate world will be a key factor in NPP’s success. “They have received high-quality training and accumulated sufficient experience in corporations. Soft skills such as leadership, time management and how to handle pressure can be shared between business and non-profit sectors,” he says.
Although he acknowledges the difference between corporate and non-profit sectors, he doesn’t think the gap is difficult to bridge. “We do have problems while working with non-profits. Rather than caused by the culture difference between business and the non-profit world, I would rather say it’s like when multinationals meet Chinese private companies,” he explains.
But it remains to be seen how long it will take before the two sides speak the same language.
Chen Tao from Ministry of Civil Affairs is confident about the future. His centre and the Ministry’s other campaigns have received a positive response from the public and the business community, he says. He anticipates that charity giving will surge this year.
More importantly, he says, is the emergence of many innovative ideas from business and non-profit sector.
“We hope to see the charity sector eventually develop on its own with little government interference,” he says. “But at the current stage, government should work with business and non-profit sector to create a better environment for the sector to grow.”