Challenges to formalisation

For the last 4 years, I have been leading the Business Innovation Facility (BIF). During this time, I have been involved in many facets of BIF’s work, but one that has consistently been particularly challenging is when we need to formalise the relationship with a company.

In this blog, I reflect on what these challenges are and share some of the lessons that the BIF team has learnt about how to do this successfully.

BIF is a programme funded by DFID that works in 3 countries. We use a market systems approach. This involves analyzing markets that have the potential to benefit a large number of poor people, understanding the constraints in those markets and developing interventions to address those constraints.

Below are the key challenges in engaging with the private sector and the key learnings from BIF’s work in more than 11 different markets in various countries.

So, what are the challenges?

Last summer, the BIF team met to reflect on what we have learnt over 3 years of running the programme. We met in working groups that included market managers and senior management from different countries and we dove deep into intensive discussions on various topics. This is what we identified as the main challenges in engaging with the private sector throughout the project cycle:

1. Identifying and recruiting the right partner firm can be tricky. During the initial stage when the teams were analyzing their markets, they were engaging with a large and diverse number of market players. Quite often, companies were forthcoming in providing the information required by the BIF market managers. Some companies went out of their way to help the BIF team work out how they could address the constraints identified. However, this was not the same with all companies.

The BIF team had some less positive experience working with some makers of agriculture radio programmes in Nigeria. Some hid their real motive for engaging with BIF. Others did not have the will or the interest to change their business model.

We also made some mistakes in the first few months of the programme. At the beginning, we did not have a holistic understanding of the market and the type of partners we were looking for. So we ended up spending time with companies for reasons other than their best ‘fit’ to the programme needs. For example, the market managers sometimes felt morally obliged to continue the discussions with a company only because they had offered BIF a lot of information. In other cases, we spent time selling the idea to someone who appeared to be the decisions maker in the company but it later transpired was not.

2. There is a need for different approaches, tools and agreements. If we wanted to facilitate change in the market and the way the private sector behaves, it became clear that we had to use different tools and identify the most appropriate type of agreement for the partnership. We signed a Service Recipient Agreement (SRA) when providing Technical Assistance and a Grant Agreement (GA) when providing a grant. However, in some cases, a Memorandum of Understanding (MoU) proved to be more suitable.

Signing the formal agreements such as SRA and GA took time. Quite often the companies, in particular larger firms, raised issues related to the intellectual property rights and sharing information about their project. The typical donor requirement of data provision and holding financial information for the number of years also became an issue on a number of projects.

Even after we signed the agreements we encountered issues. In countries such as Myanmar, many people are signing the contracts without reading them. As a result, they were surprised when we were asking them to honour various clauses in those agreements. On other projects, the companies did not have the capacity to implement their obligations stipulated in the agreement.

Quite often, projects stagnate or die when there is a change in ownership or champion. On a number of occasions we had to start all over again and get the buy in from other staff members. In some cases, the project did not go ahead.

 … So, what were the key learnings?

 1. Using industry knowledge, action learning and building redundancies. When identifying the partners, we found it important to use strict selection criteria and screening of partners. We also undertook in-depth backgrounds studies of potential partners and how we could add value to them.

In the case of the garments market in Myanmar, we used action learning to understand the sector and the business constraints. We also screened the selected factories and built in redundancies in case we could not continue working with some of them.

One of the key ways of building trust with the partners was by demonstrating industry knowledge and our understanding of their business and pain points. We did this by sharing case studies and results from pilots and from studies in other countries.

2. Having appropriate agreements in place and going through each clause of the agreement with the partners. In Myanmar, the team ended up having 3-5 meetings with each of the 40 factories. They spent a lot of time explaining each clause of the agreement to the companies we worked with. We also protected the confidentiality of individual data by sharing only the aggregated data with the wider market.

In all markets, it was important that the cost sharing was mentioned upfront and then reflected in the agreement. We also included full details of the responsibilities of both parties.

In the case of the larger companies/multinationals, we ended up negotiating the agreement with their lawyers. We looked at the systems they already had in place and leveraged them for: data collection, reporting on budgets and project activities, Key Performance Indicators, etc.

Overall, we believe that we are getting the best value when we:
• Provide consultancy or financial support to companies that have ‘will’ (i.e are willing to make the required change if they see the benefit in doing so) but low “skill” (i.e they do not have the capacity or access to the relevant expertise)
• Manage to inspire companies that have the required ‘skill’ but not the ‘will’ (i.e they were less interested to change)
• Signpost possibilities for improvements to companies that have both the required ‘skill’ and the ‘will’.

This blog is part of the January 2017 series on how, and why, donors and businesses work together for development impact. For more candid opinions on what works, and what doesn't, read the full series on demystifying donor-business collaborations.