What can international NGOs learn from the co-op way?

Members of purchasing co-ops and representatives of non-governmental organisations met at the NCBA event to discuss the issue

Co-operators have been showing leaders of international non-governmental organisations (INGOs) how they can collaborate and share resources to achieve scale.

The benefits of the co-op purchasing model were explored during a session at the NCBA Impact Conference in Alexandria, Virginia, which was attended by leaders several INGOs.

Purchasing co-ops exist across different sectors in the US – notably ACE Hardware, True Value, Ocean Spray, Shoprite, Carpet One and Best Western. They enable organisations to collectively purchase inventory and share common services such as accounting, insurance, benefits, training, marketing and others.

Sam Worthington, chief executive of InterAction, said the world had become a better place also due to the work done by INGOs – but warned that fundamental forces are changing what international development means.

At the same time, NGOs face a number of challenges including a decline in support from the federal government, a drop in philanthropy and private sector actors entering the international development space.

Rosemary Mahoney, principal of Mahoney Consulting, said INGOs should collaborate and share costs for back-office expenses. She has been involved in the sector for 30 years, participating in international co-operative development projects and co-operative and nonprofit projects in the US.

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Tom Dente, president and chief executive of Humentum, said the increasing pressures on INGOs meant it would be hard for them to carry on as normal, and advised them to focus on efficiencies.

Humentum was formed with the merger of InsideNGO, LINGOs, and Mango. InsideNGO had been set up by APVOFM and the Personnel Co-op, which joined together to form a new organisation. It combines the three organisations’ areas of expertise in learning, capacity building, and essential operations capabilities, delivering nearly 400 learning events a year.

“There are opportunities to share spaces, travel expenses or health benefits. If you are larger you have more purchasing power but if you are small you don’t,” said Mr Dente.

The NCBA panel looks at the issues of purchasing faced by INGOs

Bruce Carrozzi, divisional vice president, Retail Growth, True Value, shared the experience of his organisation, which was founded as a buying co-op to compete with bigger stores.

One of the world’s largest member-owned co-operatives, True Value operates in 58 countries with more than 4,000 retail locations, 13 regional distribution centres and 2,500 associates. In 1972 it set up Member Insurance to meet the insurance needs of its members. The company grew rapidly and as the cost was getting out of hand, they offered three competitors a membership into the True Value Programme. The company acts as a separate organisation with each co-op represented on it.

Similarly, the Washington Interfaith Network established Community Purchasing Alliance, a purchasing co-op designed to help them save money on insurance, electricity and security.

“This co-op was formed out of an economic need in response to the recession of 2008-2009,” said Paul Hazen, executive director, U.S. Overseas Cooperative Development Council and president of the Community Purchasing Alliance.

The organisation realised utility expenses were a very significant portion of its members’ operating budgets and decided to facilitate a bulk purchasing effort. Twelve congregations purchased electricity together in 2011 and saved nearly $100,000. Two years later they conducted a feasibility study to explore the idea of becoming a self-sustaining purchasing co-operative. In 2014 CPA was officially incorporated as a co-op.

Panellists agreed that bringing together multiple organisations is not without difficulties. Tom Dente noted that they would have to agree on minimal standards for all INGOs. Mr Hazen pointed out that some organisations might be using different systems and technologies, which they might be reluctant to abandon just so they can use a common platform.

“The co-op allows you to have a level of specialisation that you don’t have on your own,” agreed Ms Mahoney. She added that the co-op would have to have some sort of audit function, just as individual organisations have in their in-house compliance.

What is needed to take the project off the ground? A key factor in making Community Purchasing Alliance a success was, said Mr Hazen, the high level of trust of all groups part of the Washington Interfaith Network – so that “people were keen to share information about their contracts”.

He added that new partners brought on board, as well as leaders, should share a vision. “We never go with the lowest price – sometimes maybe they are not paying employers a right wage or don’t recycle,” he said.

Another challenge is to maintain a personal relationship with members once the co-op scales up. “We had to use different types of technology, like remote meetings and webinars. We use the website for that type of interaction,” he added.

Mr Hazel believes the model could be applied to international development. “If we are doing that then we have more time for implementing programmes rather than spending it on negotiating contracts,” he argued.

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