The following is an interview with Lü Zhao, founder of one of the fastest-growing, innovative Chinese nonprofits to come along in recent years. NPI is emblematic of a new wave of nonprofits led by a younger, more professional generation of social activists who come with experience and skills learned in the corporate, media and international development sectors. Their approach to addressing China’s social problems differs in some respects from the earlier generation of activists, as they seek to mainstream their activities by forming closer ties with the government and business community, and bears close watching.
Ever since the NonProfit Incubator (公益孵化器，NPI) model achieved overnight success in 2007, NPI has become synonymous with the Shanghai Pudong Non-profit Development Center (上海浦东非营利组织发展中心) which registered in 2006. To date, NPI has provided or is currently providing start-up support services for approximately 40 grassroots organizations. Within the industry, the mere mention of the word “incubator” will bring to mind NPI. Yet, NPI is also gradually evoLüing. It only takes a second look to discover that NPI’s work is not limited to simply “incubation.” In 2008, NPI created a community service platform and in 2009 it established a public fundraising foundation. Under the guidance of its founder Lü Zhao, NPI’s “united fleet” is ready for action ((Editor’s Note: A public fundraising foundation is one of two categories of foundations in China, the other being nonpublic fundraising foundation or what is sometimes referred to as a private foundation. It is difficult to register as a public fundraising foundations in China, and most are GONGOs. NPI is one of the few grassroots or bottom-up public fundraising foundations.)).
The rapid development of NPI has attracted the ongoing attention of China Development Brief (CDB). In June 2010, we sat down with Lü Zhao for an interview to discuss NPI’s work, as well as how NGOs deal with the government and business sectors.
CDB: What’s the meaning of your slogan, “NPI, Not Just an Incubator”?
Lü Zhao: Actually, it doesn’t really have a particular meaning. Incubation is what we’re most known for and the name of our organization, NPI, is an abbreviation for NonProfitIncubator, so people unfamiliar with who we are think we’re solely focused on incubation. In reality, incubation is only one part of our work. Incubation probably comprises about a quarter of what we do in terms of staffing and revenues. We have other programs, like a community service platform, non-profit start-up services, our public fundraising foundation, corporate social responsibility (CSR), capacity building, and so on.
CDB: Your organization’s name, NPI, has been changed to “Enpai.” What was the reason behind this name change?
Lü Zhao: “Enpai” in Chinese phonetically sounds like NPI in English. But “Enpai” is not the same as NPI. Currently, the NPI family has eight legal entities, seven of which are non-profit organizations, as well as a fundraising foundation ((Editor’s Note: The seven nonprofits are registered as “minfei” (民办非企业), a category of nonprofits that are generally service providers.)). We call this team a “united fleet.” We’re large, but we’ve never wanted to be some sort of big aircraft carrier. What we mean by a “united fleet” is that we’re united in action with a common mission (as directed by our Shanghai headquarters). At the same time, our fleet is comprised of independent battalions, each with its respective captain (office manager) and each progressing towards a common goal.
Our “united fleet” can be divided into four parts. One is the “Enpai” system, which includes our Shanghai, Beijing, Chengdu and Shenzhen offices. These offices we call “Enpai” and their main work is a continuation of NPI’s traditional services: incubation, non-profit start-up services and capacity building. They provide all kinds of support for newly established organizations. These services are all related, but all revoLüe around capacity building.
Another part of the “united fleet” is the community service center. This is closely related to the cultivation of social organizations. Our Shanghai Wulixiang (which means “Home” in Shanghai dialect) has been entrusted with managing community services. Basically, the government provides the hardware for the community service center, and then through a bidding process, selects an NGO take responsibility for managing the center. Now, Chengdu is replicating the Shanghai model in starting a community development center.
In addition, there’s also the Shanghai United Foundation (a non-profit development fundraising foundation). During the incubation period, we really only need to supply start-up organizations with a small subsidy in order for them to survive. However once the incubation period is over these start-up organizations are still in need of sustained financial support. The foundation can fill this void and act as a fundraising platform for sustained financial support. At the same time, we’ve set up a ‘venture philanthropy’ fund under the foundation with the expectation that it will be able to serve social enterprises. It’s mainly for investing in these social enterprises. It is possible that in the future we will try to get a return on these investments , but any return would certainly not be for-profit, but rather this money would be used to help other social enterprises in need of support.
Lastly, the fourth part of the “united fleet” is CCiA or Corporate Citizenship in Action (明善道咨询公司). It mainly provides professional CSR (Corporate Social Responsibility) consulting services. In our communications with enterprises through CCiA we are also able to get some funding from them to support grassroots organizations
Recently, in Shanghai we have started a new program, officially called, “Shanghai Social Innovation Park,” or what we call the “Nest.” We wanted to develop an open public space for NGOs. This way, Shanghai’s NGO community can hold activities here like hosting parties or training sessions. Additionally, we use this space to design programs that demonstrate successful careers for the disabled community. For example, restaurant operation and management by disabled people, work studios for deaf people, and other self-operating businesses.
So this is the basic structure of the “united fleet.” Although it looks rather complicated, the goals of each part are actually all the same. We’re a support organization and those we provide support to are grassroots organizations in the startup or development phase. Our core ability is for the most part capacity building. All of our work is doing one of two things: the first is to connect resources with the grassroots organization we support. The second is to increase the capacity of these organizations and improve their current conditions.
CDB: At the beginning NPI focused on incubation, then it started a community service platform and then created a public fundraising foundation. It seems you have created a fully integrated philanthropy chain. Was this planned?
Lü Zhao: This expansion actually happened progressively over a 5-year period, it was not simply one large expansion. When we say progressive expansion, this just means when we have the capacity to do something we go out and do it. It’s definitely not blind expansion, but rather diversifying our ways of better supporting organizations.
CDB: Some of the early-stage organizations entering incubation, One Kilogram (多背一公斤) or China-Dolls (瓷娃娃) could be considered as improving already solid and well-run organizations and not really improving problematic organizations. Is this the standard incubation choice?
Lü Zhao: Actually there’s always a need to “put icing on the cake” or improve already well-run organizations. But in reality, this is clearly not our goal. We choose these relatively well-known organizations, because they’re good at what they do; they’re model organizations. But up to now, we’ve already incubated or are currently incubating more than forty organizations that don’t fall into the category that you are referring to.
Incubation should be helping organizations just starting up, organizations in the early development stage. This is the most ideal time to enter incubation. When you have an idea and you want to take your idea and make it into an organization, this crucial point is the most appropriate time to enter incubation. Too early or too late is not suitable. Too early, and they haven’t fully conceptualized the idea. Too late, and they’ve already formed a small team. In these situations, although they may claim they need incubation, in reality it’s not necessarily the right fit for them.
Of course, we’re still accumulating experience. In our earlier days, applicants would all say they needed incubation and our requirements weren’t very strict. But later on, our application process became more rigorous and stringent. And by stringent we don’t mean we started choosing the only the most well-run NGO applicants, but rather those organizations that showed the most potential and who were at a developmental stage most suitable for incubation. This is clearly embodied in the forty or more organizations we have served or currently support.
I’ve always believed you can’t overestimate the role of an incubator. Incubation acts as a means to grow faster and create a more standardized organization. But of course, it’s impossible to guarantee the successful development via incubation. We don’t interfere with these organizations’ daily operations. You will tend to find that the people in the incubation process go through rapid changes. Some of the founders of these organizations will know what they’re doing one minute and be confused the next. There’s a great problem of staff turn-over, and arguments and infighting are common, making the group unstable, and funding too is unstable. This is extremely normal. Startup organizations are all like this. In order to tackle this phenomenon, we try not to meddle with the daily operations. We need to remember that we’re not always the most capable. Actually, in these organizations’ specific domains, it should be they who are the most capable. The role that we play is simply as an advisor, or as a helping hand. We don’t participate on the board of any organization. All of our recommendations are only recommendations. If we feel it’s a good one, we will maintain our support for this recommendation.
CDB: NPI has started recruiting incubation partners nationwide, what’s considered when enlisting collaborators?
Lü Zhao: There has been a continuous stream of all sorts of partners coming here to learn and observe what we do. They also tend to want us to help out with some local work, however our capacity to do so is limited. We already operate in four areas, so our radius is already stretched close to full capacity. We hope every organization that undergoes incubation is successful, so our initial idea was that if an organization is willing to partner with us, then we can provide them with our incubation model. Incubation is an innovative model, if it can catch on in different areas and help local grassroots organizations in that area, then that’s fantastic and they’ve got our full support. Afterwards, we can provide partners with advisory support or implement a licensed-operating model.
Still, one place shouldn’t have too many incubators. I feel if one city or one area has one incubator, then that’s enough. I tend to encourage incubators to be located in an area with a lot of information and resources available, something like a large city, because in a smaller area or city, it’s more difficult to bring resources together. There is an extremely important element to the incubation model, and that is to bring resources together. There are always different people coming to the incubator organizations. To our incubators, whether it’s government officials, foundations or enterprises, this is always seen as an opportunity. Although, they’re not necessarily going to be able to instantly give you money every time, meeting these people in itself serves as an opportunity to gather experience and for communication, this can all be of potential use in the future.
CDB: For those organizations entering incubation, what is the content of the capacity building NPI provides? How do you target the specific needs of each organization? What about following up on the needs of organizations that have already gone through the incubation process?
Lü Zhao: We mostly provide legal advice, support for them to establish relationships with government and for registration and training on strategic planning, financial management, volunteer management, fundraising and so on. This is implemented in two ways: one is via a big classroom setting. Actually, this is what we provide to any organization we support. The other method is sort of a case-by-case advisory service. This is typically how we tackle the specific needs and issues of certain organizations. I mean, every one of our offices has competent staff responsible for these advisory services, but if there seems to be an unsoLüable problem, they can ask myself or another more experienced professional.
For those organizations that have already completed the incubation process, if NPI is meeting with enterprises and funders or is organizing relevant capacity building sessions, we encourage them to join in. This is what we would consider follow-up services. In addition, if these organizations have any issues after the incubation process they can come back and seek our support, but of course it really depends on their own needs, it is not something that we can plan in detail in advance.
CDB: Does the foundation only provide funds to those organizations that have undergone incubation? What is the function of the new fund-raising platform?
Lü Zhao: Not exactly, but the main function of the foundation is to satisfy the needs of organizations that have graduated from one of the four Enpai incubators. Other organizations if they have needs in the specific areas we support and meet the approved qualifications then our foundation can also help support them.
(The newly established) foundation was not in the initial NPI strategy. Then, with almost a year of hard work and a bit of good luck we managed to apply for the creation of the foundation. At the moment the foundation is not yet up and running, but rather it’s still in strategic planning mode.
The new fund-raising platform is aimed at organizations that after starting-up will continue to work on projects and will be in need of funds from society to maintain these programs, however generally these organizations don’t have sustainable channels for fund-raising. The foundation will try to provide support to a wide range of organizations. Organizations that undergo incubation are only one target group, aside from them, there are other grassroots organizations that need support. We can also provide funding for them.
CDB: Are you satisfied with the current development of NPI? Are you able to give us an idea of what NPI’s future looks like?
Lü Zhao: Satisfied? I wouldn’t say that. We don’t have a specific goal designed, to be honest, under these circumstances there are many things that we’re unable to achieve, so to be successful in having achieved one thing is basically like having earned one success. If we’re able to succeed in doing something, we should get on and do it quickly. If we’re not able to do something, it doesn’t matter, we don’t need to worry about it, nobody is forcing us to do it.
Our development has been quite fast, and this was not really anticipated. This isn’t because we’ve done things well, but rather that we have adapted to fit the current climate. The products we’ve created have been suitable to the “market”. In recent years, government policy has experienced some big changes. This includes the establishment of private foundations by enterprises, more philanthropists and corporate social responsibility programs, which all have contributed a lot of resources. In recent years, we’ve also seen a lot of young people willing to invest in NGOs, taking an interest in the industry. We are just trying to seize upon this opportunity.
In terms of the future, we basically want to continue moving forward according to our current plan. At the end of each year, we take a look at our current strategic plan and make any necessary adjustments. As for whether our big NPI tree will grow more and diverse branches, nothing is impossible, but at the moment we just don’t know.
CDB: How does an NGO with a spirit of innovative philanthropy compare with a traditional NGO? What’s the difference?
Lü Zhao: Many of the incubated organizations are representative of NGOs that have emerged in the past few years. They’ve developed as a direct response to the very real problems China faces today. Although the older-generation NGOs are also working to soLüe these problems, the difference is in that the older-generation NGOs’ funding comes from abroad. The financial support of international organizations has cultivated a great amount of talent and good programs across organizations working on different areas. The problem is how exactly the principles of international organizations correspond with real practice in China, this needs to be given some thought. On the other hand, there’s now a new generation of NGOs, many of which get the majority of their funding from domestic sources, which makes it relatively easy to soLüe domestic problems. I feel this is progress. The source of funding will shape how domestic issues are soLüed.
When domestic organizations apply for foreign funding, they will make their application to fit the principles and the format of the international organization. This has produced a whole batch of Chinese organizations that follow international principles. But there are also domestic issues that don’t draw international funding support. As a result, it’s very difficult for those organizations concerned with these issues to develop. If the government and other domestic groups don’t provide support to these domestic organizations, then they have little hope of surviving.
There’s another difference between traditional NGOs and the more innovative type. We’ve discovered that there are some really well-educated and experienced young people working in philanthropic organizations. Their ideas really differ from those of traditional NGOs. Traditional NGOs target disadvantaged groups and as such respond to various social problems. However, these social problems aren’t necessarily the problems of disadvantaged groups, but rather they can also be common people’s problems, so young people are also able to use their own methods to come up with solutions ((Editor’s Note: In this section, Lü Zhao makes some interesting observations regarding the contrast between the “traditional NGOs”, by which he means the older generation of NGOs established in the late 1990s and early 2000s, and the “innovative NGOs” established in the last few years by a generation of younger, educated professionals, many with background working in businesses and international organizations.)).
CDB: When Xu Yongguang was making an evaluation of NPI, he said, “You definitely want to be cooperating with the government.” What do you think of this remark? How do you define your relationship with government? As an NGO, what is NPI’s strategy when dealing with government?
Lü Zhao: In reality, we don’t emphasize cooperation solely with government. We emphasize cooperating with everyone, and do our best not to make enemies with anyone. In China, if you want to become a legally recognized NGO, you have to deal with the government, and it’s incredibly important to get that legal status. So from this perspective, you need to cooperate with government. In our cooperation with government, we are hoping they will establish a simplified channel for this. Having legal status definitely has its advantages for developing your work.
Of course, we also hope that the government will purchase our NGO services. We’ve done a fair bit towards this end, including the Shanghai venture philanthropy competition, Actually this is the first time government has come up with a lot of funding support for grassroots organizations. Originally, government had purchased NGO services, but this was mostly from government-organized NGOs (GONGOs).
Strategy? First, we don’t want to jump to conclusions. Don’t assume the government won’t support something. The relationship of trust between NPI and the government is a gradually developing one. Actually, the government is also made up of individuals. If you communicate with these people you can create trust and have them support you. In fact, this is pretty similar to any communication between you and anyone else, including donors from enterprises and foreign donors.
Moreover, the government in recent years has supported NPI not because NPI has done a good job, but rather because the government has slowly witnessed social organizations and NGOS genuinely doing something to help soLüe social problems and satisfy social needs. So I feel if I’m personally able to do something, then this is the most important thing.
CDB: Above we discussed the relationship between NGOs and the government. During the NGOs’ development process what do NGOs need to pay attention to in dealing with enterprises?
Lü Zhao: Dealing with enterprises, I feel the most important thing is to put yourself in the other person’s shoes. Many NGOs believe that it’s only natural that enterprises should support them, since enterprises should assume social responsibility, providing funding to philanthropic organizations. But my experience has made me acutely aware of the complete difference in operational logic of these two groups. Within an enterprise, social responsibility has to fit a commercial logic in order for it to operate. But NGOs have their own behavioral logic and operating methods. Between the two lies a substantial gap. If you wish to deal with another sector, you first need to understand its logic rather than just blindly rejecting it. Because an enterprise is driven by the need to maximize profits, getting invoLüed in philanthropy for them is not completely with a philanthropic goal in mind, sometimes it’s for commercial purposes. This is quite normal. If their philanthropic activities have nothing to do with their business strategy, I feel this is irresponsible. So NGOs need to fully understand the rules and language of enterprise, as well as their business strategies. Then, when you’re cooperating with them, at the same time as thinking about whether or not cooperation is beneficial to your NGO, you should also be thinking about whether it benefits the industry.
Why do we say the new generation of NGOs has an advantage? It’s because a lot of people in these organizations have a business background so naturally, they know how business works, and how to deal with people in this sector. NGOs could benefit from attracting more of these people with business backgrounds.
CDB: Why does NPI place so much emphasis on program innovation? Is this related to the current circumstances for NGOs needing to survive? Is innovation the right solution?
Lü Zhao: Innovation breaks up charitable monopolies and creates a healthy ecosystem. The entire industry is busy innovating. Everything NPI’s working on is related to innovation. We’re trying to make a contribution from the perspective of a supportive organization ((Editor’s Note: Social innovation (社会创新) is a fashionable term being used in China’s nonprofit community that generally refers to the use of innovative models and techniques borrowed from the business, technology and social media industries. Some of these innovative nonprofits are sometimes referred to as social enterprises (社会企业).)).
From 2007 and the start of incubation, to 2008 and the creation of the community service platform, and then to 2009 with the start of our foundation, NPI has been developing step by step. Our development reflects the current situation for NGO survival. Every program we design is related to the needs of these NGOs.
I think relying solely on innovation is of course no good. You also need to be able to execute, to handle all sorts of situations, and to protect yourself. The ability to develop yourself is one thing, another is the ability to protect oneself. If you don’t survive, then nothing else is possible.
