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Corporate-NGO Inclusive Business Partnerships: Why They Work and Why They Don't

04/30/2015 05:11 pm ET | Updated Jun 30, 2015

At our Inclusion Inc. conference at The Fletcher School, there was a fascinating conversation between Tim Cross, President of YouthBuild International, and two of YouthBuild's corporate partners, Lata Reddy, President of The Prudential Foundation and Dina Silver Pokedoff, Senior Manager of Branding for the Saint-Gobain Corporation. What I particularly enjoyed about the discussion was that it offered a close-up look at a single NGO's experience with multiple corporate partners, representing industries as different as insurance and building materials. It provided insights into what it takes to get a partnership started with two very different kinds of entities, and, more critically, what it takes to ensure that the partnerships endure.

More broadly, there are several patterns that are useful for understanding the overall context for such partnerships. Corporations and NGOs are very different in their goals, organization structure, motivating factors and culture. They enter into relationships with each other with differing objectives. As these relationships have matured, both types of entities are getting somewhat less wary of the other. They are also beginning to invest in fewer partnerships and focusing on more "strategic" relationships. However, there are still many bumps on the road ahead.

Consider the question of differing motivations. According to the Corporate-NGO Partnerships Barometer, the primary motivation for a corporation to enter such a partnership is to enhance brand, corporate reputation and credibility; in parallel, according to the same Corporate-NGO Partnerships Barometer, an NGO enters such a partnership primarily to access funds. It is particularly telling that long-term stability and impact are the second most important motivation for both parties. This suggests that each has an incentive to build towards a longer-term relationship.

A key point to note in the Corporate-NGO Partnership Barometer for 2014 is that for the fifth year in a row, the relationship between Marks & Spencer and Oxfam was voted to be the one most admired. This leads to a natural question? What are the factors behind a strong - and admirable - relationship? What can companies and NGOs do to develop such relationships? In YouthBuild's case, Tim Cross mentioned five ways in which corporate partners are valuable to his organization; I find that his rationale applies widely:

1. Companies have the jobs. They represent the demand side for their service -- YouthBuild helps young people develop essential skills.
2. Companies have technical expertise that YothBuild does not have.
3. Corporate volunteers are key resources that YouthBuild can draw upon to train youth with practical and relevant skills.
4. Companies have leverage with many of the enabling institutions, key actors and the environment, including the government.
5. Companies can provide essential funding for YouthBuild's programs.

From the multi-year research study that we are conducting in collaboration with Citi Foundation into the question of what motivates investment in sustainable and inclusive business, we have learnt that companies consider social enterprises and NGOs as essential partners to close gaps in several key areas. The relative importance of these gaps varies by company, industry and the region. These areas include:

1. Knowledge about execution challenges, facilitating factors and inhibitors on-the-ground, particularly in unfamiliar territory, such as in relatively inaccessible parts of a developing country.
2. Talent acquisition from communities where the company has limited reach.
3. Mechanisms for scaling up their operations by creating extensions of the corporate organization.
4. Establishing key relationships with local actors and communities and building brand equity. This would include building credibility and goodwill with political and regulatory bodies as well.
5. Mechanisms for developing market insight by tapping into local customer needs, doing market research and learning from pilots.

I find this 5X5 construct to be a useful framing device for testing the robustness of corporate-NGO partnerships. The more reasons that each party can cite as their rationale for entering into the relationship, the greater is the potential for a longer-term, "strategic" relationship.

Of course, there are many stumbling blocks that both partner entities, corporate and NGO, have experienced. To round out the picture, consider 5 common issue areas that systematically present challenges in initiating, scaling up and sustaining the partnerships. They are:

1. How compatible are the goals, sensibility and cultures of the two parties?
2. Are there mutually accepted metrics to gauge the success of the relationship and its impact? Does the relationship lead to tangible business value for the company and measurably contribute to the NGO's social purpose?
3. Given the inherently asymmetric nature of the relationship, does this lead to the party with greater negotiating leverage to assert itself and seek a disproportionate share of the shared value created, thereby leading to friction?
4. To what extent is the relationship dependent on personal connections and chemistry among key individuals?
5. Given the differences in time horizons and potential shifts in priorities -- particularly from the corporate side because of budgetary or business cycles -- does this prevent the relationship from developing into a longer-term, more "strategic" one?

I had the opportunity to take a second bite of the apple and dive deeper into the question of how corporate-NGO partnerships for inclusive business can scale up. We posed several of these questions to Tim Cross and to the delegates attending the Skoll World Forum at Oxford in a session on partnerships at scale a week after our own conference. We surfaced several fresh insights that I will cover in a future post.

Needless to say, any discussion about how to do corporate-NGO partnerships right also surfaces several new questions. Partnerships are key to executing in a complex and varied world. They are challenging to pull off successfully. The learnings about best practice and risks often come from experience. Scaling-up inclusive business activity means venturing into unfamiliar territory. This unfamiliar territory certainly covers new market segments. It also covers new entities that are the partners so essential for the pursuit of new market segments.

Help us move the needle by telling us how you initiate and evaluate inclusive business activities at your organization: take a survey conducted by The Fletcher School in collaboration with Citi Foundation.

Bhaskar Chakravorti is the Senior Associate Dean of International Business & Finance at The Fletcher School at Tufts University and the founding Executive Director of the Institute for Business in the Global Context. He is co-author of the study "Growth for Good or Good for Growth".