Four Types of International Development Organizations and How They Work
I recently wrote an article about “the revolving door problem,” which is when organizations find that multiple teams have approached prospective partners without communicating with one another.
This got me thinking about the root causes of this phenomenon. One is a lack of understanding of the social sector and the ecosystem of possible partners. Many of my corporate clients don’t have a clear understanding of social impact organizations, their incentives, and why they might want to work together (or not) to achieve a common goal. This is understandable. The social impact and international development sectors are different animals than most people in companies will have engaged with. For example, I’ve heard people at companies mislabel USAID or the UN as an NGO.
If you want to build social-impact partnerships, it’s first important to understand your own organization’s motivations, objectives, and assets. I can’t stress this enough. It’s very difficult to create effective and sustainable partnerships until you understand what you have to offer, why others would find this valuable, and what you are trying to achieve.
The next thing you should do is conduct a thorough landscape assessment of prospective partners working in the same geographical areas or working to solve the same problems. This will help create a targeted list of organizations and a greater understanding of what they might bring to the table. Key questions are:
How would this partner help advance my organization’s mission or goals in a particular area (geographic, crop, social mission, etc.)?
What assets do they bring to the table – funding, scale, research, etc.?
What other companies are they partnering with?
What is their mission, incentives, what are their overall objectives, and what kind of timelines do they work on?
What is their primary purpose – implementation, thought leadership, research, funding, scale, etc. – and how, generally do they work?
In this assessment you will inevitably come across a wide range of organizations with confusing overlaps. Below is a brief primer on some of the types of social-sector organizations you might run into. Keep in mind that this is not meant to be an exhaustive list or comprehensive categorization. As with anything, there are grey areas, lots of nuance, and different points of view. If you ever find yourself wondering about an organization, feel free to reach out. I’ve probably worked with them.
Bilateral Donors
Bilateral donors provide direct foreign assistance from one government to another. They usually have a permanent presence within the government and are often housed under the department of foreign affairs or another unit that executes foreign policy.
In the United States, the primary foreign aid agency is USAID, a 60-year-old Executive-branch agency which is a critical part of the US foreign assistance budget, which is approved by Congress each year. USAID Administrator Samantha Power was recently elevated to sit on the National Security Council, which shows the importance of this agency as it relates to foreign policy considerations. In addition to USAID, several other agencies also provide assistance under the same budget line item, including the Millennium Challenge Corporation (MCC) and Development Finance Corporation (DFC). Incidentally, the US Foreign Assistance budget is around 1 percent of the overall US Federal Budget, despite a public perception that it runs as high as 25%.
UKAID is a similar entity in the UK, sitting under the Foreign, Commonwealth and Development Office (FCDO). There’s an alphabet soup of other agencies across the Northern Hemisphere – SIDA (Sweden), DANIDA (Denmark), GIZ (Germany), JICA (Japan) – but all deliver aid to less-developed nations based on the geopolitical considerations of their governments.
Each bilateral organization has different procurement rules and funding cycles, but many typically use an RFP process that awards contracts or grants to implementers, which can be NGOs or for-profit consultancies. The implementers then execute long-term projects (often five years that run the gamut in terms of scope, sector (agriculture, humanitarian aid, etc.) and geographical focus.
There’s a growing trend among donors to include a partnership component in their work. USAID, in fact, launched a Private Sector Engagement Policy in 2021 that requires every office and project to include the private sector – whether local or multinational – in project planning and execution. As part of this initiative, USAID has identified partnership managers throughout the agency and has been training staff around the world on effective partnerships. Dozens of companies have formed successful partnerships with USAID as a result of the policy.
Multilateral Organizations
This is probably the broadest and most confusing category of social-sector organizations because it’s a wide universe with many different players. At a basic level, think about multilateral organizations as membership groups for sovereign states. They were often as a result of decades-old treaties or international agreements as a way for nations to work more effectively together. Examples include international bodies such as the United Nations, the European Union, the Organization for Economic Cooperation and Development (OECD), the World Economic Forum (WEF); and regional groups like the African Union, the Organization of American States (OAS), and the Association of Southeast Asian Nations (ASEAN).
I could probably write a thesis about each of these organizations (and I’m sure someone has!). While the all do important work, suffice it to say that they are often large, bureaucratic, and complex entities governed by member states with many competing priorities. The UN system alone, for example, is literally home to dozens of agencies with sometimes overlapping missions, geographies, and projects. For example, UNESCO, UNDP, and UNICEF all have projects and initiatives focused on secondary education.
Many multilaterals invest directly in government projects, research, or multinational missions (such as peacekeeping), although they do offer partnership opportunities with NGOs, corporations, and other organizations. The trick is finding the right person, in the right part of the organization, with the right remit. Unlike the bilateral donors, as a rule, don’t expect multilateral organizations to deploy large cash grants as part of a partnership.
Before developing a partnership with such an organization, make sure you have a strong understanding of the mission and work of each individual division of the agency or unit you might be working with and expect each organization to have its own jargon, timelines and ways of working.
A significant subset of multi-lateral organizations are development finance institutions (DFIs) such as The World Bank, The African Development Bank, and the InterAmerican Development Bank. These organizations are funded by member states and are designed to provide financing and funding to governments for a wide range of projects, from infrastructure to economic growth to agriculture. Different DFIs focus on different geographic areas, industries, or sectors.
DFIs are a driving force – although not the only one – behind the growth in innovative financing mechanisms, which seek to tap into the estimated $212 Trillion sitting in private capital today. Because these mechanisms rely partially on investments, rather than grants, there are many opportunities for partnership. However, go in with eyes wide open; these mechanisms are incredibly complex, time consuming, and somewhat experimental. Resonance published a good piece on DFIs several months ago.
Family Foundations
Family Foundations are set up by high-net-worth individuals as a way of transferring some of their assets to philanthropic causes that the principles care about. Some of these – The MacArthur Foundation and the Rockefeller Foundation for example – are venerable institutions that have been around for decades. A more recent generation of philanthropists have launched foundations in the last 20-25 years as well, including the Bill & Melinda Gates Foundation, the Chan-Zuckerberg Foundation, and the Lemelson Foundation. Thousands of other, lesser-known family foundations exist across the US (the foundation landscape is quite different in Europe; more on that in another article), and each has a unique focus based on the interests or passions of the founders.
There are many clear examples of strong, market-driven partnerships between family foundations and companies, especially in global health and financial inclusion. .
NGOs
In the US, we simply label these organizations as “non-profits,” but internationally, mission-driven organizations are more usually referred to as non-governmental organizations, or NGOs. Larger NGOs like Save the Children, World Vision, Oxfam International and CARE have dozens of offices around the world, receiving trillions of aggregate dollars from bilateral donors, multilateral organizations, and corporate and individual donors.
These organizations may employ hundreds of local staff who work in country or regional offices, often deploying several projects in a single country. Many NGOs operate on a “federated” model, with fundraising office in developed countries that raise money for programming. For example, although World Vision’s global headquarters is just south of Seattle, but it also has affiliate organizations in Europe, Australia, the UK and many other countries. Each raises money to support programs both domestically and in emerging markets. These federated systems leave plenty of room for confusion, lack of clear decision-making, and competing interests between country offices.
Because NGOs are mission-driven organizations, you should take the time to understand the history and motivations of the entity before reaching out for a partnership. Some have faith-based origins or missions – World Vision, Catholic Relief Services, Aga Khan Foundation – while others have grown to focus on single sectors or geographic regions. For example, CARE is strongly focused on providing opportunities for women and girls.
When partnering with NGOs, make sure that mutual goals are well defined and that you set expectations about funding. I was once burned by not understanding this dynamic. Earlier in my career, I developed what I thought was a partnership between a large, US-based education non-profit and the tech company where I worked. I assumed we would mutually bring content, programming and cash to help students gain better access to sciences. What I learned later was that the organization simply wanted a large check to execute on its own programs, with a “sponsorship” from my company. Because it was a transactional agreement, we ended up with very little long-term value. An important lesson in not making assumptions!
Hopefully this guide gives will help you as you navigate the sometimes complex world of social impact partnerships. Again, this is not a comprehensive list, and I recognize that there are many other categories I haven’t covered, including community-based organizations (CBOs), trade and industry associations, regional economic blocs, and academic institutions, to name a few.
If you’d like more information on these and other kinds of partnerships, I’d be happy to talk.