One of the biggest and most obvious differences between for-profit companies and non-profits is that the former has customers; the latter, beneficiaries or recipients of services. Because no money changes hands in the NGO scenario, we often think of customer relationships as reciprocal and beneficiary engagement as one-way. However, it’s not enough for NGOs to simply put assistance, products, and provisions into the hands of beneficiaries. They must also ensure that donated resources suit beneficiaries’ needs and capabilities, so that the resources can and will be used.
Overcoming information asymmetry so as to tailor supply to demand, therefore, is as critical an operational challenge for non-profits as it is for corporates. The severe budget constraints under which most NGOs operate make this issue even more daunting. Finding out what recipients want and what works for them — not to mention putting this information into practice via customized offerings — can be prohibitively expensive. One way to achieve impact at scale in the face of these difficulties is to remove info-gathering from the process entirely and provide unfinished products that recipients can complete according to their own tastes and abilities. In essence, this means moving from an off-the-shelf mode of delivery to a partial-DIY paradigm.
Some NGOs have already found success with this strategy. In a recent paper (forthcoming in Manufacturing & Service Operations Management) co-written by Can Zhang of Fuqua School of Business and Kathik Ramachandran of Scheller School of Business, I draw upon two of these organizations to develop a model for determining when, and to what extent, leaving products incomplete can help NGOs improve more lives without breaking their budget.
Elemental and Daya
Elemental is a Chilean architecture firm co-founded by “starchitect” Alejandro Aravena that specializes in unfinished social housing that meets the bare minimum requirements for shelter but features blank, undifferentiated sections comprising about half the total space. Residents are expected to complete the houses at their own expense and to supply the personal touches (e.g. painting the façade) that make a house a home.
An aid organization based in Houston, Texas, Daya helps women in the local South Asian community leave abusive relationships and establish financial independence. Unlike Elemental, Daya does not build new homes for its recipients; rather, the organization helps them find suitable temporary housing, pays the rent for a limited time period and provides legal support so that the women can get a headstart on their new life. Note that for the average client, the duration of Daya’s involvement is only four months, while the NGO estimates that it takes six months or more for women in this tough situation to find jobs, become financially self-sufficient, etc.
In their own ways, Daya and Elemental’s partial-service delivery models both work toward welfare maximization. For Elemental, constructing half a house and leaving the rest up to residents allows the firm to shelter twice as many families without spending more money. It also improves overall quality of services rendered, since most people would take more pride in — and hence better care of — a house they helped to build than one constructed without even consulting them. For Daya, limiting the duration of help to a few months creates budgetary breathing room for recipients to select the type and location of short-term housing that is best for them, while motivating the women to work hard to become independent.
How much should you give?
Daya and Elemental appear to be success stories, but that doesn’t mean their model would work for all welfare organizations. Our research jumps off from two main assumptions. First, partial completion’s value as a delivery strategy is contextual, not universal. Second, organizations whose contexts call for partial completion will nonetheless differ in the level of completion (30 percent, 50 percent, etc.) that is optimal for them.
Based on the Daya and Elemental examples, we developed a stylized analytical model to tease out the operational considerations at play. In addition to budget constraints, we found that optimal completion levels are dictated by the interaction of three factors: the diversity of needs in the beneficiary pool, how easy or difficult it is for beneficiaries to complete products and services for themselves, and the importance of fairness to the organizational mission.
Daya and Elemental’s recipients have diverse needs. Both NGOs deal with housing, which cannot be a cookie-cutter service but must cater to the size, age range, income, etc. of each family. Daya’s case is especially complicated because accommodations must be chosen from Houston’s existing stock rather than being built from scratch, plus recipients will have pressing location-based requirements (for example, apartments should be far enough away from where the abusive partner lives but not too far from children’s schools). The mission of welfare maximization would be best served, therefore, by offering recipients more choices of where to stay. Given budget constraints, more diversity will inevitably mean reduced duration of services (i.e., partial completion). Moreover, the contextual dynamics of Daya’s case are particularly congenial to partial completion, because each dollar saved on duration would pay off in a much wider expansion of choice. Offering 12 apartments to choose from instead of eight could help Daya’s recipients find a place that met their needs perfectly — which would perhaps be better from a welfare-maximization perspective than staying in a less conveniently situated apartment for slightly longer.
However, not all recipients are equally equipped to carry services through to completion. For example, Daya’s beneficiaries’ English skills may vary, and not all residents of Elemental housing may know how to handle tools. Generally, variance in capabilities would translate into higher optimal completion levels, so that low-ability recipients would have a greater chance of a successful outcome. This is especially true for NGOs with a high emphasis on fairness, i.e., prioritizing successful outcomes for all over and above giving everyone a fighting chance.
Of course, completion levels can also directly affect the recipient’s ability to follow through. For example, if Elemental provided only building materials instead of half-finished houses, the proportion of recipients who could reach the end goal would be much diminished. Interestingly, we find that even in these cases, lowering completion levels could still be a good idea. The reasons behind this are quite nuanced. A distinction is necessary between variance in recipients’ innate abilities and variance in ability that stems from raising or lowering the level of completion. The former has a lot more to do with shaping the ultimate outcome than the latter.
A choice, not a compromise
Our model finds that partial completion is an option worth considering, even when money is no object. As long as beneficiaries have diverse needs as well as some ability to self-complete, bringing them on board as co-creators can help NGOs achieve scale. However, if the needs of the target group are fairly homogenous and they lack the resources or ability to fulfill the final objective, then finished, standardized products are the way to go.
The NGO world seems to be catching onto the benefits of partial completion. In a previous article, I described the medical surplus recovery organization MedShare, which uses a partial-completion strategy to squeeze the most value out of its shipments to underresourced healthcare clinics. MedShare collaborates with recipients on the composition of its containers, at times partly filling them based on anticipated needs and letting recipients choose the rest.
Scott Merrill, senior global director at Habitat for Humanity’s Terwilliger Center for Innovation in Shelter, told us that “Models like this can generate more impact by getting more people into quality housing than traditional approaches, while at the same time giving homeowners the agency to build the homes that they want…I have even seen some for-profit developers based in India ([for example,] First Home Realty Solutions Private Limited, co-founded by Dhaval Monani who sits on Terwilliger’s advisory board) use a similar model of using a very basic starter unit which buyers upgrade and expand at their own pace. This allows families to get into a home at a lower price point, and can be more cost-effective for the developer.”
Merrill’s example suggests that the pivot to stakeholder capitalism may see more and more for-profit companies adopt welfare maximization strategies initiated by NGOs. Models such as partial completion can help companies integrate an ESG or SDG focus into their strategy without tipping the balance too far from conventional standards of financial performance.
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