The trustees’ role in shaping resilient INGO funding strategies

Following the launch of “Governance: a guide for international NGOs” Buzzacott and Bond have launched a programme of events designed to take trustees through the key challenges boards of international development organisations face. This event was the fourth in the series.

The funding environment has become increasingly challenging for international NGOs over the past few years. In this rapidly changing context, trustees are at the forefront of working with the executive to adapt existing funding strategies, or even transform them completely, while still trying to ensure that the organisation is both financially viable and able to fulfil its charitable objectives.

Many organisations do not have trustees with any specialist experience of developing funding strategies, and have tended, in the past, to adopt a “growth at all cost” approach, which is no longer viable in the current circumstances. With so much changing, how can trustees contribute meaningfully to new thinking around the financing of their organisations, and what are the key things they need to know and consider?

There was a managed discussion with participants and speakers.

Introduction

The session was led by Eddie Finch, Partner at Buzzacott.

Speakers:

Jasmina Haynes, CEO at Integrity Action
Matthew Jackson, trustee at ADD International

In his introduction, Eddie discussed the importance of INGOs considering strategic shifts in their funding sources and structures. He emphasised the potential need to reduce their role and direct more funds to partners in the countries they serve, and how this could involve significant organisational changes, such as shifting from institutional funding to broader donor bases or refining donor relationships. The considerations include assessing donor reputations and constraints, determining the financial investment needed for fundraising initiatives and evaluating the skills required for implementing new strategies.

Regarding resourcing, Boards would discuss with the executive team whether to use reserves, seek external financing or rely on donors to fund initiatives. Trustees play a crucial role in setting parameters, monitoring progress, and ensuring accountability – this might include establishing indicators to track performance and maintain transparency with stakeholders. The cost of maintaining donor relationships should also be recognised as part of the financial considerations. Ultimately, the goal is to align funding strategies with organisational objectives and ensure effective stewardship of resources.

Case study: Jasmina Haynes, CEO at Integrity Action

Collaboration between Integrity Action’s board and executive is essential in crafting and executing their funding strategies. Together they assess programme goals and evidence of impact, ensuring that funded programmes align with their unique value proposition. If a programme lacks evidence or alignment, funding is not pursued even if favoured by some donors meaning that they have discontinued certain programmes and redirected funders to more suitable partners. They align funding prospects with the organisation’s likelihood of success. The board provides oversight while ensuring accountability without burdening the executive team with excessive reporting. This approach fosters transparency and enhances the board’s understanding of operational challenges and decisions, enabling meaningful contributions even from non-finance-oriented trustees. This collaborative model proved invaluable when the funding landscape shifted dramatically, prompting the organisation to consider closure, programmatic pivots or merger. Integrity Action opted for a merger, a strategic move to access larger funding opportunities previously beyond reach. This decision was informed by a deep understanding of the organisation’s operational environment and the identification of a suitable partner to address funding challenges.

The merger has facilitated access to diverse funding sources, reflecting a successful adaptation to changing circumstances while maintaining the organisation’s core mission and quality of programming. The process underscores the importance of open dialogue and strategic decision-making between board and executive.

What was the role of the trustees in the merger process? Did they help with the selection that shaped the business plan or take a light touch throughout?

The trustees played a substantial role throughout the merger process. With nine trustees on the board, a smaller committee was formed to handle different stages. They actively contributed to shaping the business plan, participated in selection processes, and were deeply involved in due diligence and the merger itself. Their support and intimate understanding of the organisation ensured a swift process, without which would have been much more challenging.

How did they understand the areas you wanted to fund, given trustees tend to have limited time available?

The trustees had a high-level understanding of the charity’s work but it was equally important for them to take an interest in more granular aspects without burdening the staff. The executive team facilitated effective decision-making by presenting high-level discussions with tangible evidence supporting priority areas. Trustees then added value by understanding the organisation’s work deeply, despite time constraints.

Is the organisation only running programmes that it feels it has a unique contribution to make?

They employ robust monitoring, evaluation, and learning frameworks to determine programme selection, and engage partners in discussions, leveraging live data from community feedback to assess programme effectiveness and prioritise accordingly. While emotions can cloud judgment, the organisation’s focus on impact and evidence-based decision-making mitigates this. Cultivating an internal culture centred on impact rather than individual interests further reinforces objective programme selection.

Case study: Matthew Jackson, co-chair at ADD International

Matt discussed the transformation process and the impact it had on their funding strategy.

Initially, ADD International operated as a traditional NGO, heavily reliant on institutional project funding. However, changes in funding trends and shifts in the aid sector led them to reassess their role and funding model. During in-depth discussions, the Board and executive team recognised that their funding model was no longer aligned with their strategic goals and purpose and decided to embark on a significant transformation journey to shift away from institutional funding and delivering projects to focus on redistributing resources and power directly to disabled people’s organisations. They developed a five-year funding plan centred on de-growth (shrinking operations and becoming leaner) and reallocating resources to increase direct funding to civil society organisations in the global south. A key metric they adopted is the percentage of income directly allocated to CSOs, aiming to increase it to over 60% in five years. This metric guides their funding decisions and measures their success. Matt also recognised that the blurring line between unrestricted and restricted funding – that restricted funds can still be used to provide unrestricted support to partners – prompted them to rethink their approach to funding allocation. Their journey highlights the importance of aligning funding strategies with organisational goals. By focusing on de-growth and strategic reallocation, ADD International better serves their mission and stakeholders.

Could ADD share how they communicated the decision and how internal teams responded, and whether you received support from your donors in making the changes?

They created a communication strategy to convey their decision and crafted a concise paper outlining their transition from old practices to new ones. A pivotal aspect was utilising a portion of unrestricted funds to pilot the new model, a move that proved immensely beneficial with minimal cost. They earmarked around USD10,000 to trial the model initially in Tanzania, and the feedback was exceedingly positive. The pilot was then extended to other locations, garnering similarly favourable responses and all achieved with modest financial investments. This evidence allowed them to confidently articulate their trajectory to their donors.

They engaged their existing donors, and while some showed enthusiasm and increased their support, others expressed curiosity or remained neutral. Two foundations were particularly supportive, even augmenting their funding to accommodate the transformation costs. They also maintained active communication with their UK-based donors, many of whom held assumptions that aligned with their newfound approach.

The communication strategy aimed to reconnect them with their organisational roots. They positioned the shift as a return to their origins, reflecting on the radical ethos of their inception. This narrative resonated well with their regular contributors and legacy donors, fostering a sense of continuity amid transformation. They also explored novel avenues such as establishing giving circles to engage supporters in participatory funding models. This endeavour not only aligned with their strategic objectives but also promised fresh opportunities for donor engagement. In essence, their communication approach emphasised transparency, alignment with organisational ethos and a forward-looking perspective aimed at securing support for their evolving mission.

How did the process of challenging their organisation’s strategic direction unfold, particularly concerning whether they remained a strategic, as well as financial, going concern?

The introspective process emerged organically during the annual audit review sessions. As they scrutinised their financial projections and donor relationships, a realisation dawned: a significant portion of their activities were dictated by the expectations of institutional donors, draining their unrestricted funds in the process. They found themselves questioning whether this trajectory truly aligned with their founding principles.

The fundamental question revolved around their identity as an organisation based in the UK, executing projects on behalf of marginalised communities in the Global South. This introspection propelled them to reassess their strategic purpose and operational modalities. Moving forward, they committed to periodically reassessing their status as a strategic going concern. With a revamped strategy and operational framework, they anticipate affirming their strategic relevance in the foreseeable future. However, they acknowledge the dynamic nature of the sector and remain open to reassessing their trajectory in the years to come.

Embracing the notion of ‘de-growth’ and potential mergers as legitimate pathways to organisational evolution, they fostered an environment conducive to candid discussions among trustees. Encouraging a shift in perception, they viewed organisational evolution not as a sign of failure but as a testament to adaptability and strategic foresight. The journey toward challenging their strategic direction involved introspection, dialogue and a commitment to embracing change as an integral part of organisational growth and relevance in a dynamic sector.

How Bond and Buzzacott supports INGO trustees

Join quarterly meetings in 2024-25 – details will be on the Bond events page.
Read the Buzzacott and Bond guide. Governance: A guide for international NGOsis an up-to-date, relevant resource and reference point for practical support and guidance.
Join the online Governance Forum for Trustees of INGOs, a private online forum for trustees of international NGOs to share learnings, discuss concerns and hear from governance experts. Curated by Buzzacott and Bond. Contact Jemma Ashmanfor more details and to sign up.