Should we look for good businesses or for good investments in international aid?

A response to “The ‘Business’ of International AidWhat if Marriot paid hotel guests $50 per night, then bragged about its occupancy rates?” in the Wall St Journal Europe.  By Kristin Majeska

Run an efficient organization, absolutely.   But ensuring staff effectiveness and highest leverage use of dollars matter too.

I applaud Mr. Starr’s call to dramatically increase the focus on the beneficiaries, the end “customers” of international aid programs, and to hold managers accountable for end results, not time spent in the field.   As a business person who spent years guiding nonprofits how to apply useful business practices,  I am a strong advocate of effective and efficient management, preferably the on ground “walk  around” variety, and I have zero tolerance for useless bureaucracy.

And sure, as the Peace Corps has been demonstrating for 50 years, you can attract extremely smart, talented and committed people to live on next to nothing for a couple of years because they are passionate about being able to help others.  In fact, many of the international aid groups with operations in multiple countries the author describes do an excellent job taking advantage of the skills of highly trained, specialized professionals extremely cheaply– they come as volunteers and often even pay the costs of their travel and lodging!

However, high leverage international development work is rarely as simple as teaching English, or even teaching business, to a small number of eager students.   In many types of development, just as in traditional for profit businesses, to provide outstanding value to your customers you need employees with specialized skills,  an understanding of the local culture and market, and years of relevant experience (so they are not learning on the job and making costly mistakes at the expense of the customers!).  If you don’t want constant turnover, which is inefficient for any organization, it may in fact be a very good business decision to hire and be able to retain committed and expert staff, even if it means paying them a wages that allows for more than Pringles… maybe even supporting a family?

Starting a school for talented youth, regardless of their ability to pay is a laudable endeavor, even more so when it’s the founder/funder’s lifelong dream.   But just as Marriott seeks tirelessly to maximize its return on investment, an international development “business” should seek the highest possible social return on its philanthropic dollars for the community it serves.  What type of international development programs you create or you fund matters tremendously because of the opportunity cost of your capital.  As Bill Gates explained in a recent interview,

“If you buy additional vaccines, you’re basically saving a life for about $1,000 per life. And you’re avoiding sickness, and you’re reducing population growth. So it’s a pretty phenomenal thing. So whenever I review another program, and I see that they’re being a little bit sloppy about how they’re spending money, I think, OK, they’re being sloppy about $1 million. They just killed 1,000 children, because I could have taken the money and put it over in that other program.”

I’d also encourage readers to review the work of the Global Development Center and others before they decide to fund, much less launch, an international aid program.  The GDC head told Council on Foundations members this week that New philanthropy shouldn’t crowd in where established donors already have a comparative advantage. Instead of spending $100,000 building a few schools in Tanzania (which might be a perfectly reasonable intervention but adds to the already heavy burden of recipient countries balancing multiple donors), foundations might gain more real-life impact by using those same resources to ensure that the $698 million compact that American taxpayers are giving Tanzania through the MCC  is s well spent. Influencing the big players by improving their policies and holding their feet to the fire is a good way to leverage philanthropic dollars.” Good food for thought.

Conclusion: We need to make international aid programs better investments as well as better businesses.

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