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Development in Practice
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Accountability and effectiveness of NGOs: adapting business tools successfully

Eoghan Walsh & Helena Lenihan
a a b

Oakhampton Consultants, Newport, Co., Tipperary, Ireland Email:

b

Department of Economics, Kemmy Business School, University of Limerick, Ireland E-mail: Available online: 20 Aug 2006

To cite this article: Eoghan Walsh & Helena Lenihan (2006): Accountability and effectiveness of NGOs: adapting business tools successfully, Development in Practice, 16:5, 412-424 To link to this article: http://dx.doi.org/10.1080/09614520600792309

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Development in Practice, Volume 16, Number 5, August 2006

Accountability and effectiveness of NGOs: adapting business tools successfully

Eoghan Walsh and Helena Lenihan
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The central argument of this article is that many of the tools developed to strengthen for-prot businesses can be applied to NGOs to make them more effective and accountable. The authors address a gap in the development literature by dening and describing how business tools can be effectively transferred to NGOs. They examine the implementation of ISO 9000 Quality Standard by one NGO, the Cambodia Trust. The experiences of the Cambodia Trust demonstrate that business tools have a place in NGO management. The article also questions the extent to which the Cambodian experience can be seen as best practice for NGOs.

Introduction
NGOs have become important partners in the development aid sector, controlling about 30 per cent of the total Overseas Development Aid (ODA) budget (UNDP 2002). Over the past 30 years, the number of NGOs and the scope of their work have expanded signicantly. Although there is little evidence to support this belief, NGOs are perceived as being more effective at delivering development aid, and more responsive and exible than governments and multilateral agencies. The success of NGOs and ofcial agencies over the past 50 years has been, at best, mixed. This lack of success is to some extent attributable to underdeveloped management structures (Smillie 1995; Bradley et al. 2003). In particular there is an absence of any useful or widely accepted measure of NGO performance. This means that inefciencies are hidden, and that donors nd it difcult to identify well-managed, highly effective NGOs. It also impedes NGOs themselves from setting clear goals and assessing progress towards them. Given the complexity of development work and the difcult environments in which NGOs often operate, it might be argued that they should have stronger and more developed management structures than for-prot businesses. The organisational structures of NGOs are often very similar to for-prot organisations, and many of the tools developed to strengthen businesses and make them more protable could be applied to NGOs to make them more effective and more accountable. In general, NGOs tend to be staffed by hardworking and dedicated employees. However, many NGOs fail to capitalise on these qualities, because of their inadequate organisational structures (Smillie 1999; Cracknell 2000). While this idea is not new (Unterman and Davis 1984; Speckbacher 2003; Lewis 2001, 2002), there is a lack of literature dening and describing how these business tools can, 412
ISSN 0961-4524 Print=ISSN 1364-9213 Online 050412-13 # 2006 Oxfam GB DOI: 10.1080=09614520600792309 Routledge Publishing

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in practice, be effectively transferred to NGOs. Although the structure of NGOs may be similar to businesses, the objectives of NGOs and the environment in which they operate differ signicantly. The extent to which such business tools can be successfully transferred, if at all, depends on both the NGO and the tool in question. This article highlights the case of one business tool, the Quality Management System (QMS), which was applied successfully to one NGO. It argues that applying such tools to NGOs provides them, and their employees, with a structure that enables them to become more effective. The article is based on research into the implementation of the ISO 9000 Quality Standard 1 by one NGO, the Cambodia Trust. The study showed that as well as increasing effectiveness, there were a number of incidental benets to the Trust, in particular in the vexed area of NGO accountability. It is widely acknowledged that NGOs need to demonstrate greater accountability to a variety of actors (Slim 2002; Ebrahim 2003; SustainAbility 2003). It is less widely discussed that NGOs tend to show more accountability upwards to those who hold the purse strings than downwards to those whom they serve (Smillie 1995; Hilhorst 2001). The customer focus in ISO 9001 has proved to be valuable in promoting downward accountability to the Trusts beneciaries. It should be acknowledged from the outset that challenges of accountability vary considerably among different types of NGOs. As argued by Ebrahim (2003:27), . . . the diversity among non-prot organisations suggests that accountability relationships and mechanisms necessarily vary with NGO type. The experiences of the Cambodia Trust show that certain business tools do have a place in NGO management, and that there is a signicant opportunity to investigate how other such tools can be applied appropriately to NGOs. Rather than reinvent the wheel, NGOs should adopt these proven tools and draw on the existing pool of literature and staff experienced in their operation.

Obstacles to good NGO management

Many of the problems faced by NGOs can be traced back to weak or non-existent structures. The environment in which NGOs operate in developing countries is often characterised by weak social structures (in terms of government, infrastructure, and civil society), while NGOs themselves, particularly the smaller and newer organisations, tend to have underdeveloped internal structures. Income streams are uncertain and unstructured, depending on the vagaries of governments, foundations, and public opinion. Finally, the culture of many NGOs does not encourage staff to adopt a structured approach to their work. What bottom line? The vast majority of for-prots have a very simple and discrete metric of success: annual prot or loss. While private-sector organisations are increasingly considering a triple bottom line (prot, environment, ethics), prot maximisation is still the overriding aim of most businesses. Development NGOs lack any clear metric of success. Typically they aim to meet some form of human need, such as clean water, better health, or better economic circumstances, or to strengthen civil society. Their bottom line, as such, is not so clear. Furthermore, NGO customers (henceforth beneciaries) seldom pay for the NGOs services. Instead, NGOs are funded by a mix of donations from governments, multilateral agencies, foundations, membership fees, and the general public. While NGOs do compete with each other for funding, they are largely shielded from the two main competitive forces that drive the private sector market share and protability that act as a form of natural selection in business, forcing for-prots Development in Practice, Volume 16, Number 5, August 2006 413

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either to become more efcient or to cease trading. Without these external pressures to perform, NGOs are typically less effective and efcient than their for-prot counterparts, and they also invest less in their organisation (Bradley et al. 2003). In the absence of a simple bottom line of organisational effectiveness, the proportion of costs spent on administration is often used as a proxy indicator, the assumption being that the greater the proportion of donations that reach the beneciaries, the more effective an NGO is. Most government support to NGOs is conditional on no more than 5 10 per cent of funds being used on overheads, whereas in fact the average real expenditure is probably up to three times higher (Bradley et al. 2003; Smillie 1999). The pressure to keep administrative costs low (or apparently low) has a number of undesirable consequences. One is that it encourages NGOs to bury these costs under other headings, where possible. A second is that NGOs must nd other sources of income to make up the shortfall, such as private donors or activities that bring in an income. Thirdly, and perhaps most seriously, it is a disincentive for NGOs to invest in their organisation and encourages them to cut corners (Bradley et al. 2003; Smillie 1999). This leaves NGOs in the invidious position of being called on to be more transparent, accountable, and professional, while simultaneously being under pressure to maintain administration costs at unfeasibly low levels. There is an optimum level of administration costs that maximises NGO effectiveness. If very little is spent on administration, the organisation is too weak to be effective, whereas very high levels suggest inefciencies and signicantly reduce the resources available to beneciaries. The optimum level varies from activity to activity, and from one organisation to another; it is not easy to quantify, partly due to the lack of good-quality data on NGO spending. A study by McKinsey consultants of the entire US non-prot area found that while there are small savings to be made in reducing the overheads in certain non-prots, there is far greater potential in investing in non-prots to improve their effectiveness (Bradley et al. 2003).

For-prot management systems for NGOs

There is a degree of suspicion among many in the development sector about employing business tools in the non-prot development arena (Lewis 2002). Equally, standards are not much loved by the development community: they are associated with rigidity, conformity, prescriptive norms, and dened levels of achievement. The ISO 9000 quality standard describes a structure to enable organisations to develop and dene what quality is for them, and how to achieve and maintain it. It does not stipulate a certain level of quality or a way of doing things. This article will argue that not only is the ISO 9000 standard applicable to NGOs, but that it offers certain benets specic to NGOs beyond those enjoyed by for-prots. It will examine the success, and difculties, of the rst implementation of ISO 9000 by an NGO in a developing country;2 it will consider how it was managed, and to what extent this example can be seen as best practice for NGO management. It will also examine what types of organisation are and are not in a position to adopt ISO 9000. Key principles of ISO 9000 . Stated objectives: an essential part of a system to manage quality is a clearly articulated and communicated statement of what the organisation wishes to achieve, and how it denes quality. The level of quality delivered by the organisation should be measured at the outset, to enable progress to be tracked over time. . Customer focus: if an organisation wishes to deliver a quality product or service, it must understand customers needs now and in the future. A development organisation typically 414 Development in Practice, Volume 16, Number 5, August 2006

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has two sets of customers: beneciaries and donors. Their needs will be very different: beneciaries want product or service delivery, and donors want to see value for money and positive outcomes. An NGO that understands and meets beneciaries needs should automatically satisfy those of most donors. . Process and systems approach: dening individual processes and the people and resources required by them makes it easier to reach the desired outcome with fewer unexpected results. Bringing these individual processes together into a coherent system adds to the organisations effectiveness and efciency. . Continuous improvement: as the organisation learns, the new knowledge should be incorporated into the system. Where problems arise, or quality is poor, the root causes should be investigated and the process and systems updated, to prevent or minimise the recurrence of errors. . Change management: regardless of the stimulus for change, if it is not well managed, change will tend to be disruptive. Having a system in place to modify practices, procedures, and behaviours in a controlled manner minimises disruption and can in fact be an opportunity to examine how processes can be improved. The mechanics of ISO 9000 are beyond the scope of this paper. See the ISO website (www.iso.ch) or the American Society for Quality (www.asq.org) for more information. How ISO 9000 provides organisational structure ISO 9000 develops organisational structure in a number of ways. First, by establishing a clear denition of the overall mission (as dened by the quality policy) and how this is to be achieved (the quality objectives). Second, by structuring institutional memory. Quality procedures document each process in the organisation and can thus be instructive to new staff and to those in other departments or branches of the organisation, as well as external partners (where appropriate). This may also be useful for NGOs that repeat similar projects, because it provides a kind of manual of operations. Third, ISO 9000 provides structure for the management of change. Each quality procedure details the departments and other quality procedures that are affected, which means that change does not occur in isolation. Effective change management is of particular importance to development organisations, given the complex interaction between actions and outcomes. There are numerous examples of weak or damaging development outcomes due to poor understanding of how systems interact.

Case study: the Cambodia Trust

The Cambodia Trust was founded in Oxford in 1989. It provides articial limbs and a range of services to mobility-impaired people in Cambodia. The Trust also runs a world-class Prosthetics and Orthotics school in Phnom Penh, to provide training for the next generation of staff in Cambodia and abroad. Implicit in the mission of every development NGO is ultimately that it will cease to exist. That is, once the development goals have been achieved, the NGO will move on, or close up shop completely. The Cambodia Trust (unlike many development NGOs) kept this goal in mind and set about the localisation of the Trust, so that it could be run entirely by national staff.3 Early in 1999, the (predominantly expatriate) management of the Trust in Cambodia initiated an Institutional Strengthening Project (funded by NZAID with a budget of US$ 100,000 over three years) to develop the capacity of national staff to take over its management. The existing management felt that, although the existing organisation was running well, more structure was needed to ensure future efciency. Not only would ISO 9000 provide this Development in Practice, Volume 16, Number 5, August 2006 415

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structure, it would also give the Trust a set of written procedures dening its work, which would act as a blueprint and facilitate its planned expansion to Sri Lanka and Timor Leste. The Institutional Strengthening Project (ISP) and the ISO 9000 project were closely intertwined: ISO 9000 was (and continues to be) a tool for institutional strengthening; but this strengthening was necessary for the Trust to gain ISO 9000 certication. Study method and sample The ndings of this paper are based on a research visit to Cambodia Trust during JulyAugust 2003, using a standard questionnaire to interview 13 national and four expatriate staff. The interviews were carried out 18 months after the Trust had gained ISO 9000 certication. It should be noted that the Trust might have been in a honeymoon period with respect to ISO 9000. Currently there is a great feeling of success within the Trust on gaining certication, and the long process of putting the QMS in place is showing returns in terms of greater organisational effectiveness, although it is still relatively easy to nd areas in which to tighten up systems and full the continuous improvement requirement of ISO 9000. A longitudinal study tracking the attitudes of staff and the effectiveness of the QMS over time would provide an even greater insight into the suitability of business tools such as this for NGOs in developing countries. Structure of the questionnaire The central objective of the questionnaire was to determine to what extent ISO 9000 could be implemented successfully by an NGO in the developing world. Can business tools like this be transferred to a development context? Are they effective in strengthening the organisation and developing the capacity of the national staff to run the organisation? Can this be seen as best practice for NGO management, and is this practice transferable to other NGOs? This was investigated by questioning how well staff understood the philosophy and concepts behind ISO 9000. All the staff members were very open and co-operative in their dealings with the researcher. They seemed to take pride in their ISO 9000 certication and were keen to publicise it in Cambodia and internationally. Organisational learning Organisations benet in two main ways by adopting ISO 9000: through the process and the product, both of which contribute to organisational learning. The process is important in a number of ways. By writing down a formal description of each procedure, people are forced to think about their job in an abstract way. They must step back from the everyday practice, which they know intuitively, and formalise what they do. This may enable them to see better ways of doing their job, or expose wasteful practices. People also tend to idealise their descriptions, presenting the way things should be, rather than the way they are. This presents an opportunity to change existing practice the way things are to how they should be. It is important at this point to reconcile the ideal with the reality and to record actual practice in the work procedure. The obstacles preventing things running properly can be addressed later. ISO 9000 encourages continuous improvement and recognises that there are always ways of doing things better. However, it is also an iterative process, acknowledging that everything cannot be done at once. Formally describing work practices can help to expose weaknesses or inconsistencies in how these are performed. Before a quality procedure is formalised, all those involved in it must consult with each other and agree on it. This denes responsibilities and delimits areas of 416 Development in Practice, Volume 16, Number 5, August 2006

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authority, which in turn reduces friction between departments. These processes also contribute to a valuable product in the form of the quality documents that it generates. The organisation as a whole learns by formally recording how processes are carried out. The organisational memory is not invested in a few key individuals, but becomes available to all. This reduces the organisations vulnerability when these key individuals leave; it also prevents people from making themselves indispensable. The QMS provides the structure often lacking in NGOs. It has been noted that NGOs have strong social capital4 in other words, strong interpersonal networks and levels of trust (Morris 2000). These assets are fertile ground on which ISO 9000 can build to make the organisation more effective. Empowerment of staff The focus of the Cambodia Trusts ISO 9000 project was the localisation of its operations in Cambodia by developing the capacity of the national staff to take over the running of the organisation. This has been successful in two main ways: the empowerment of national staff, and the strengthening of the organisation to enable it to be run without expatriate staff. Since the implementation of ISO 9000, the regional clinics have become nancially autonomous and have no expatriate staff. The rst language of the Cambodian staff is Khmer, but most speak some English and all those at management level do. Nonetheless, staff had to improve their English skills signicantly in order to understand the language of the ISO 9000 standard and associated literature. Local training courses were used to develop leadership, management by objectives, auditing skills, and the promotion of women within the Trust. As these skills developed, national staff increasingly drove the process. Management meetings that had previously been chaired by the expatriate staff were run by national staff on a rotating basis, giving them an opportunity to put their new skills into practice by setting agendas, writing up minutes, and following up on decisions reached in the meetings. As the stated and publicised aim within the Trust was localisation, national staff began to realise that they would have to develop these skills in order to manage operations and secure funding once the expatriate staff had left. The funding issue in particular focused minds: the continued success of the Trust equated to job security for the national staff. Moreover, the documentation of work practices in terms of quality procedures greatly empowered national staff. Job surveys were carried out throughout the organisation. As everyone was consulted, all the staff saw that their input was valued and important. The use of a consultation process to change a procedure further empowered staff. This is particularly important in the NGO context. Staff turnover tends to be much higher among expatriate staff than among national staff. In the Cambodia Trust, for instance, the average length of service for national staff at 8.2 years was signicantly longer than the average 1.4 years for expatiates. The latter are often employed on xedterm contracts (typically two years) and generally as senior managers. In organisations with little or no formalised procedures, this can lead to a situation where expatriates come into the NGO and impose a new set of work practices. Given that they tend to be in more powerful positions, expatriates may not be challenged by the national staff; the result may be that a well-meaning new foreign director could easily turn an NGO on its head. ISO 9000 prevents changes being made without consultation with those concerned. Unless it is seen as an improvement, the organisational structure provided by ISO 9000 gives a mechanism for national staff to block it. One aspect of national staff empowerment is culturally specic to Cambodia, but similar situations may also apply elsewhere. Cambodian society places great value on respecting elders and those in positions of power. Thus members of staff tend to defer to their seniors Development in Practice, Volume 16, Number 5, August 2006 417

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and may be slow to challenge their views and decisions. In addition, the legacy of Pol Pot and the Khmer Rouge still lives on from the 1970s. Under the Khmer Rouge, any challenge to power or any exhibition of leadership meant almost certain execution. Cambodians live with this legacy and tend to accept the decisions of people in authority without critically evaluating them. This highlights the sensitivity needed when transferring any management norms from one context to another. The structure of ISO 9000 depersonalises decision making and so makes it much easier for staff to challenge the status quo and question the system, rather than challenge an individual or a superior. This was illustrated by email correspondence in which a female junior secretary challenged one of the male clinic managers updates to the quality documentation. She was shown to be correct, and the managers suggestions were not acted on. Where organisations wish to address gender-equality issues, such formal mechanisms can enable individuals to act outside their prescribed gender roles. Strengthening of systems Failure is also depersonalised. This is of particular signicance in Cambodian culture, which places great value on saving face. When something goes wrong, it is not the individual who is at fault: the error reects a weakness of the system. It thus becomes an opportunity to improve the systems, to prevent a recurrence of the problem. Once the cause of failure has been identied, together with a method to prevent it happening again, the quality procedures are updated to reect this. ISO 9000 has also strengthened nancial control within the Trust. Each clinic now manages its own budget and has a quality procedure in place for dealing with procurement. Other direct savings include a 95 per cent reduction in the waste of polypropylene raw material in one process. This was due largely to section 7.6 of the standard: Control of monitoring and measuring devices. A quality procedure species that the temperature of the ovens must be checked daily, and this revealed that temperature variations were the main cause of wastage. There are many other examples of direct and indirect savings accruing to the Trust as a result of the institution strengthening through ISO 9000, but they have not been quantied. Customer service The customer focus of ISO 9000 has brought improvements to the Trust. While these developments have mainly helped the beneciaries, there have been side-effects beneting the rest of the organisation. The Trusts method of gathering information about customers perceptions is to ask patients to complete questionnaires. These have shown that patients can feel insecure and out of place in the clinic surroundings: in response, staff are now spending more time making them feel at home. Another issue that emerged was the length of time that patients spent waiting. Using the ISO 9000 structure, this issue was investigated and an improved system of handling patients les was developed. This reduced waiting time by 50 per cent and also cut by a similar amount the time spent by staff in looking for records. In interview, the Clinic Manager reported that previously, the casting for a prosthesis was made by the Prosthetist and Orthotist (P&O) in isolation, and the result was only later delivered to the patient and physiotherapist. As a result of the ISO 9000 consultation process, this practice was changed. The P&O now explains the process to the patient, asks permission to take a casting, and carries out a needs assessment with the patient and the physiotherapist before fabricating a prosthesis. The outcome is a better device for the patient, resulting in higher customer satisfaction, less re-working of the prosthesis, shorter physiotherapy, and a longer-lasting prosthesis. 418 Development in Practice, Volume 16, Number 5, August 2006

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When staff were asked whether they thought that their clients know about ISO 9000, 79 per cent thought not, although many qualied this, saying that while clients might not know what ISO 9000 was, they knew something was being done to improve customer satisfaction.

Disadvantages of the ISO 9000 Project This section draws on respondents answer to the question: What is the worst thing about ISO 9000? Twenty-seven per cent of the national staff (17 per cent of all interviewees) expressed no negative opinion at all, while the expatriate staff tended to be more critical. The most frequent criticisms concerned the volume of documentation and the cost to the organisation in maintaining it. This was associated with extra work, especially at times of internal audits. Some saw the nancial cost to the organisation as prohibitive; they feared that this might lead donors to assume that if the Trust had money to spend on ISO 9000, it would not require additional funding. A number of staff (29 per cent) found it difcult to remain committed to the project in the early days, when it created a lot of work for no obvious returns. Other staff (47 per cent) expressed some difculty in adjusting to a procedural way of working; the forms associated with ISO 9000 were viewed as time-consuming, tedious, or hard to understand. Also 31 per cent of national staff (24 per cent of all respondents) said that the philosophy of ISO 9000 was not fully understood by everyone in the organisation. There was concern about the possibility of losing certication in the future, and how this would reect on the organisation. Working with two languages was also seen as a problem. The complexity of the language and terminology used in the ISO 9000 standard and textbooks had been a considerable challenge to overcome. Some of these criticisms were beyond management control and some are bedding-in problems. Others could have been better handled, as discussed below. . Documentation burden: this is bound to be an issue in the initial stages, but should lessen somewhat over time. If it does not do so, then it indicates that the system is not working well and is too paper-intensive. . Time commitment: again, this is a bedding-in problem. Once the system has settled down, the procedures should save more time than is required by documentation. . Understanding of ISO 9000: the purpose and methodology take time to communicate fully to everyone. Overall the Trust seems to have done well on this front by educating and involving its staff, although there are still some outstanding issues. This may apply more to the regional clinics than to the head ofce. . Cost to the organisation: management needs to give serious attention to this issue, because it is undermining staff commitment to ISO 9000. There has been too little attention paid to the direct and indirect costs and benets of the project, and some staff have a grossly inated perception of the initial and ongoing costs. This perception may have arisen in part due to an effort to rationalise the cost base of the Trust, disguising this as ISO 9000 procedures. While this has done some damage to the ISO 9000 project, it is not irreversible. The ISO 9000 project was funded by the wider ISP, but little or no attempt was made to calculate the direct costs of ISO 9000 or apportion some of the ISPs costs to it. More should be done to quantify the direct savings to the organisation (for example, reduction in material wastage, staff time, and average patient costs). Direct and indirect savings that cannot be easily quantied should at least be listed, and a balance sheet presented to staff to demonstrate that net costs are far lower than assumed. If all savings and benets could be calculated, it might well emerge that ISO 9000 has resulted in a net saving for the Trust. Development in Practice, Volume 16, Number 5, August 2006 419

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. Role in securing additional funding: ISO 9000 certication can be used to leverage additional funding, because it demonstrates that the organisation is well managed, as certied by an independent third party (an index of due diligence). For instance, a group of businessmen from the Japanese Rotary Society were touring development projects in Cambodia. On seeing the ISO 9000 certicate at the Cambodia Trust, they were so impressed that they immediately committed themselves to funding the organisation. The Trust has been able directly to leverage an additional 2 per cent in funding from the ISO 9000 certication, and it is a contributory factor in approximately one third of the overall budget. . Loss of certication: this concern was phrased more in terms of the Trust choosing not to go for certication at some point in the future, rather than having it revoked. This is a valid concern: non-renewal, for whatever reason, would certainly damage the image of the Trust. Concluding remarks

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Some of these problems can be tackled by remedial action, some will be forgotten once the process has bedded-in, while others will persist. Overall it would appear that the benets of the ISO 9000 project far outweigh the costs. However, a rigorous cost benet analysis is impossible without an initial benchmark, quantication of the direct and indirect benets, and a separation of the costs of the ISO 9000 implementation from the wider ISP.

Best practice for NGOs?

Having looked at one implementation of ISO 9000 by one NGO, we will now question to what extent this can be proposed as best practice for the sector as a whole. Structural weakness: the bottom line As stated earlier, ISO 9000 does not prescribe a particular standard of quality and does not, therefore, provide a simple bottom line to enable an organisation to compare its performance year on year or against other NGOs. Rather, it establishes a set of objectives, in the form of a quality statement and quality objectives, that an organisation can aim for and against which it can measure its own performance. Importantly, ISO 9000 is an external validation of the effectiveness of an NGOs management structures. The absence of such a measure has led to the percentage of funds spent on administration being used as a proxy for organisational effectiveness an approach that has obvious limitations. ISO 9000 certication demonstrates that an independent third party has audited the management of the organisation and certied that it adheres to what is considered best practice by more than 560,000 businesses worldwide. In this instance, being among the rst to achieve certication may not be an advantage. If ISO 9000 becomes widely adopted by NGOs and enters the consciousness of donors public and private as the mark of a well-run, effective NGO, its authority will increase. Currently the Trust is an anomaly, and ISO 9000 certication may create more confusion among donors than instant recognition of a well-managed NGO. Structural weakness: NGO culture Many NGOs and their staff lack adequate organisational structures; they are value-driven and so tend to plan their activities inadequately. ISO 9000 does not give them the structure that they need, ready-made out of a box. Rather it offers a framework and system that they can use to 420 Development in Practice, Volume 16, Number 5, August 2006

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develop the structure appropriate to their work, their environment, and their style. The strong social capital within NGOs makes them very suitable for ISO 9000. This has probably been one of the reasons why it has been so effective at the Cambodia Trust: social networks make the process of consultation work smoothly, and high levels of trust between individuals allow them to rely on others in the process chain to honour their side of the deal. The quality procedures harness the hard work and dedication of NGO staff, channelling it into their respective responsibilities. Dened quality objectives prevent mission creep and organisational drift, without detracting from an NGOs exibility and responsiveness. There is also a strong motivational aspect to ISO 9000: staff see how the organisation is improving, that customer needs are being better met, and that progress is being made towards their dened goals. Accountability

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Customer satisfaction is one of the cornerstones of ISO 9000; as such, it can do a great deal to close the downward accountability gap. Furthermore, the standard stipulates effective arrangements for communicating with customers (ISO 2000, 7.2.3) on product information, customer feedback, and complaints. These formal methods are complemented by greater staff awareness of the importance of customer needs, views, and perceptions. ISO 9000 combines elements of a participatory approach and social audit methods of accountability, shown to provide the strongest downward accountability (Ebrahim 2003). This helps to redress the asymmetries in accountability, because the beneciaries are involved to a far greater extent than the donors. ISO 9000 also makes NGOs upwardly accountable through a third-party external audit. This should enhance donor condence and may also relieve them of some of the due diligence expected of them in overseeing grant funding. Were ISO 9000 to become the industry standard for NGOs, it is conceivable that this would largely full their requirements on the accountability side of evaluation, allowing them to focus on the lesson-learning side, which is ultimately more productive. Capacity building The Cambodia Trusts experience of ISO 9000 has also been very positive in terms of capacity building. Staff are able and willing to take on more responsibility and have developed many management skills as a result of the exercise of getting certication. Both the organisation and the individuals that comprise it have beneted. A word of caution is necessary here, however. The rst question is: what capacity is being developed by implementing ISO 9000? To what extent is this capacity only an ability to manage a developed-world quality system? One of the aims of the Trust is that national staff will have developed sufcient capacity to write their own funding proposals. Is this merely imposing a system of Northern values and skills on organisations in the South, dressed up as capacity building? Northern NGOs that contemplate adopting ISO 9000 should consider these questions carefully. The skills acquired and the capacity developed must be relevant to those acquiring them and to the environment in which they operate. Uncritical adoption of such systems may leave NGOs open to valid criticisms that they are fostering a new type of dependence (Hilhorst 2001). NGOs should also be aware that ISO 9000 is one of the many available Quality Management Systems. The Cambodia Trust chose ISO 9000 because it is externally audited, is seen as the gold standard of QMS, and because some of the staff were already familiar with the ISO 9000 family of standards. Development in Practice, Volume 16, Number 5, August 2006 421

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What type of NGO should consider ISO 9001? The decision to implement ISO 9000 must be appraised on an individual basis. ISO 9000 may be suitable for NGOs in the following cases: . Medium to large NGOs in which the complexity of the organisation requires a formalised management system. . NGOs that repeat similar projects. The experiences of one project can feed into the quality procedures to develop organisational memory. . As a capacity-building instrument. For NGOs that wish to become more professional, ISO 9000 provides a ready-made tool for doing so. This is also effective for the localisation of NGOs where expatriate staff are disengaging and passing the management and control of the organisation to national staff. . To address a downward accountability decit, using ISO 9000s ethos of focusing on the customer. . Where the quality of the product or service is lacking, this can be corrected by effective implementation of ISO 9000 (or other QMS). . To enable donors to distinguish one NGO from others working in the same eld. While this may be a contentious point, the reality is that NGOs compete for funds, and ISO 9000 may be the measure of competence that tips the balance. ISO 9000 is probably not suitable in the following cases: . Small NGOs where the time, energy, and expense of developing a formal QMS are unlikely to yield a positive return on investment. . NGOs without a clear mission. . NGOs that have already developed effective in-house management procedures. . Advocacy NGOs. While it is beyond the scope of this research, the authors feel, a priori, that ISO 9000 may be more suited to the direct delivery of products and services, whereas advocacy NGOs seek to assist their beneciaries indirectly by inuencing third parties.

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Conclusion
NGOs are signicant players in the development eld. They enjoy greater trust from the general public than do most governments or multilateral agencies. While there is little evidence to support the common perception that NGOs are more effective than government agencies, there is an opportunity for NGOs to strengthen their organisations and really earn this accolade. To do so is in NGOs own interests, because it will enable them to set the development agenda and also enhance their ability to raise funds. More research is needed into the spending patterns of NGOs. Better data on the true level of administrative overheads are necessary to determine the optimum level of investment in the organisation. The ever-louder calls for NGOs to be more accountable will eventually come to bear on donors too. As the idea that short-term project accounting, focused on the outputs of development aid, loses currency, donors will look for new ways to choose the agencies that they wish to fund. Donors will increasingly favour those NGOs that already have strong management systems or are in the process of putting them in place. Many NGOs are poorly run and/or managed by people with the wrong skills, and are thus using aid ineffectively. NGOs need to invest more resources in their organisations, set clear objectives, and become accountable to their beneciaries. The tools to do this already exist and have been proved to work in for-prot organisations, which have produced a wealth of literature and body of professionals versed in their operation. The boards of trustees and 422 Development in Practice, Volume 16, Number 5, August 2006

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management of NGOs owe it to their hard-working and dedicated staff to invest in their organisations in order to translate the efforts of people on the ground into meaningful outcomes. The experiences of the Cambodia Trust show that business tools like ISO 9000 can and do work well in an NGO setting. By improving its organisational management, the Trust has been able to reduce operating costs. By being seen to be a well-run organisation, it has secured extra funding. This has strengthened the Trust on a number of other fronts: as a capacity-building exercise; by empowering national staff, in particular women; and by bridging the accountability gap both downwards and upwards. The issue of downward accountability needs further examination in the academic literature and by practitioners on the ground. We suspect that an examination of those development projects that have been abject failures would reveal a strong correlation with a lack of downward accountability. The decision to adopt such management tools rests with the board of trustees and the management of an NGO. It is up to NGO managers to make use of such systems, in particular those that are designed to develop the capacity of national employees and empower them to take over the positions and the power held by expatriate staff.

Notes
1. Here, as elsewhere, ISO 9000 is used loosely to refer to the complete set of related ISO 9000 standards. The Cambodia Trust has ISO 9001:2000 certication. For further details, see the ISO website www.iso.ch. 2. To the best of the authors knowledge. In response to an enquiry, ISO said they were not aware of any NGOs in developing countries with ISO 9000 certication, but that it was difcult for them to comment, as they were not directly involved in the certication process. 3. As of 2003, only eight of the 100-plus staff of the Trust are foreigners, four of whom are employed by the School. To maintain its Category II ISPO accreditation, certain qualications are required which Cambodian nationals do not have at present, although it is envisaged that Cambodian graduates of the Trusts school will eventually ll these posts. 4. Morris (2000) denes social capital as the features of social organisation, such as trust, norms and networks, that can improve the efciency of society by facilitating co-coordinated actions.

References
Bradley, Bill, Paul Jansen, and Les Silverman (2003) The nonprot sectors $100 billion opportunity, Harvard Business Review 81(5): 94 104. Cracknell, Basil E. (2000) Evaluating Development Aid: Issues, Problems and Solutions, New Delhi and London: Sage. Ebrahim, Alnoor (2003) Accountability in practice: mechanism for NGOs, World Development 31(5): 813 29. Hilhorst, Dorothea (2001) Being Good at Doing Good? Review of Debates and Initiatives Concerning the Quality of Humanitarian Assistance, paper presented at the International Working Conference: Enhancing the Quality of Humanitarian Assistance, Netherlands Ministry of Foreign Affairs, The Hague, 12 October. ISO (2000) Quality Management Systems Requirements (ISO 9000), EN ISO 9000 E, CEN, Brussels: European Committee for Standardisation. Lewis, David (2001) The Management of Non-Governmental Organisations, London and New York: Routledge. Lewis, David (2002) Organisation and management in the third sector: towards a cross-cultural research agenda, Nonprot Management & Leadership 13(1): 67 83. Morris, Susannah (2000) Dening the Non-prot Sector: Some Lessons from History, Civil Society Working Paper 3, London: London School of Economics.

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Eoghan Walsh and Helena Lenihan Slim, Hugo (2002) By what authority? The legitimacy and accountability of non-governmental organisations, Journal of Humanitarian Assistance, at www.jha.ac/articles/a082.htm (retrieved 28 December 2003). Smillie, Ian (1995) The Alms Bazaar: Altruism under Fire Non-prot Organisations and International Development, London: IT Publications. Smillie, Ian (1999) At sea in a sieve? Trends and issues in the relationship between Northern NGOs and Northern governments, in Ian Smillie and Henny Helmlich (eds.) Stakeholders: Government NGO Partnerships for International Development, London: Earthscan. Speckbacher, Gerhard (2003) The economics of performance management in non-prot organisations, Nonprot Management & Leadership 13(3): 267 81. SustainAbility (2003) The 21st Century NGO: in the Market for Change, London: SustainAbility. UNDP (2002) Human Development Report 2002, New York, NY: Oxford University Press. Unterman, Israel and Richard H. Davies (1984) Strategic Management of Not-For-Prot Organizations: From Survival to Success, New York, NY: Praeger.

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The authors
Eoghan Walsh is an independent development consultant with extensive experience in the private sector as a management consultant. His research interests include the management of development organisations. Contact details: Oakhampton Consultants, Newport, Co. Tipperary, Ireland. ,MrEoghanWalsh@ eircom.net. Helena Lenihan is a Senior Lecturer in the Department of Economics at the University of Limerick. Her research interests include regional policy and its evaluation. Contact details: Department of Economics, Kemmy Business School, University of Limerick, Ireland. ,Helena.Lenihan@ul.ie.

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