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Building the Capacity of BMOs: Guiding Principles For Project Managers Table of Contents Acknowledgements 5 Introduction 6 Executive Summary 8 A. General Considerations Before Starting a Project 12 1. Rationale 12 2. Definitions and Overview of Existing BMO Systems 12 3. Why Assist BMOs? 17 4. Role of BMO Assistance within World Bank Strategy 19 B. Implementation of a Project 21 1. How to Make a Good Choice: Tools for the Selection of Beneficiary BMOs 21 2. Political, Economic, and Legal Environment 28 3. How to Assist BMOs: The Most Important Areas of Donor Intervention 29 3.1 Advocacy 30 3.2 Development and Management of Services 39 3.3 BMO Management 53 C. Impact Assessment of BMO Projects 64 1. Rationale for Impact Assessment 64 2. Definition and Scope of Impact Assessment 65 3. Challenges Involved in Impact Assessment 65 4. How to Measure Impact: Program Logic Model for BMO Projects 66 4.1 Impact Assessment and Program Logic Model 66 4.2 Logic Model Applied to BMO Projects 68 4.3 Indicators and Methods of Impact Assessment 71 5. Impact Assessment and Project Management 79 6. "Golden Rules" for the Introduction and Management of Impact Assessment Systems 82 D. The Way Forward 83 1. Ten Rules for Donor Intervention 83 2. Sustainable BMOs: What Next? 87 3. BMOs as Tools to Spur Policy Reforms 88 1 World Bank Group Building the Capacity of BMOs: Guiding Principles For Project Managers 4. What Can We Achieve Through Engaging BMOs in Public-Private Dialogue? 88 1. Implementation of policy reforms 88 2. Improving the relationship between the public sector and the business community 91 3. Creation of friendly business environments in post conflict countries 93 Index 95 Abbreviations 96 Appendix A: Checklist for BMO Analysis 97 Appendix B: Evaluation Form 100 Annotated Bibliography 104 2 World Bank Group Building the Capacity of BMOs: Guiding Principles For Project Managers Tables Table 1: Characteristics and Functions of Different Types of BMOs 15 Table 2: The Continental and Anglo-Saxon Models of Chamber Development 16 Table 3: A Tool for Partner Selection 26 Table 4: Types of Services Delivered by BMOs 44 Table 5: Decision-Making Grid for the Selection of Services 47 Table 6: Common Challenges Associated with Impact Assessment Systems 66 Table 7: Indicators and Methods of Impact Assessment 72 Table 8: Major Strengths and Weaknesses of the Methods 73 Table 9: Main Data Collection Instruments for Impact Assessment 75 Table 10: Example of Methodological Options to Assess an Indicator 76 Table 11: Outcome and Impact Indicators 77 Figures Figure 1: An Advocacy Strategy for BMOs 34 Figure 2: Decision Tree− How to Deliver a Service Activity 46 Figure 3: Phase Model of Service Development 50 Figure 4: Vicious Circle of Poor BMO Management 54 Figure 5: Phases of BMO Development 55 Figure 6: Impact Assessment Framework 67 Figure 7: Program Logic Model 68 Figure 8: Program Logic Model for Advocacy 69 Figure 9: Program Logic Model for Training 70 Figure 10: Program Logic Model for BMO Management 71 Figure 11: Project Management and Impact Assessment 81 3 World Bank Group Building the Capacity of BMOs: Guiding Principles For Project Managers Case Studies Case Study 1: Selecting Partner Business Associations in Albania, Bosnia and Herzegovina, FYR Macedonia, and Serbia and Montenegro 27 Case Study 2: Lobbying for New Vocational Training Centers in Brazil 35 Case Study 3: Creating A Grassroots Advocacy Program In Malawi 38 Case Study 4: Developing an International Trade Fair in Bangladesh 40 Case Study 5: Establishment of a Business Development Unit in Vietnam 48 Case Study 6: Workshops for BMO Capacity Building 57 Case Study 7: Successful Transformation from a Public Authority to a Market- Driven Service Provider 60 Case Study 8: Introducing an Administrative Database for BMOs in Ghana 63 Case Study 9: Developing a National Business Agenda in Montenegro 90 Case Study 10: Speaking with One Voice: Coalition of Business Associations Changing the Business Environment in Romania 92 Case Study 11: Post Conflict Reconstruction Efforts by the Private Sector in Afghanistan 94 4 World Bank Group Building the Capacity of BMOs: Guiding Principles For Project Managers Acknowledgements The second edition of the BMO Guide, "Building the Capacity of Business Membership Organizations: Guiding Principles for Project Managers", includes two new chapters that provide a more comprehensive approach to the World Bank Group work with BMOs. This new Guide covers some of the missing elements from the first edition, namely how to measure impact in BMO projects and the role of BMOs as driving forces for public-private dialogue. This second edition was prepared by the World Bank Group (SME Department) in collaboration with the Foundation for Economic Development and Vocational Training (SEQUA). The new chapters of the Guide were prepared by Alejandro Alvarez de la Campa from the Small and Medium Enterprise Department of the World Bank Group and by a team from SEQUA composed by Markus Pilgrim, Ralf Meier and Rolf Speit. We would like to express our special thanks to a number of people who contributed to the new edition of the guide. Special thanks to Andrei Mikhnev, Geeta Batra, Mark Bardini, and Rose Malcolm from the SME Department and to the Center for International Private Enterprise (CIPE) for their contributions through case studies. We would also like to acknowledge the valuable work of the people who prepared the first edition of this guide, the content of which is still very relevant and present in the new guide. The first edition of the Guide was prepared by Roland Strohmeyer, Markus Pilgrim, Florian Luetticken, Ralf Meier, Heiko G. Waesch, and Irene Arias. The initial design and lay out was developed by Kim Davis. Center for International Private Enterprise The Madison Office Building 1155 15th St., NW Suite 700 Washington, DC 20005 Tel: +1 202 721-9200 Fax: +1 202 721-9250 Website: www.cipe.org Canadian Manufacturers and Exporters 5995 Avebury Road, Suite 900 Mississauga, ON L5R 3P9, Canada Tel: +1 905 568-8300 Fax: +1 905 568-8155 Website: www.cme-mec.ca Confederation of Danish Industries H. C. Andersens Boulevard 18 Copenhagen V, 1787, Denmark Tel: +45 3377 3725 Fax: +45 3377 3300 Website: www.di.dk Foundation for Economic Development and Vocational Training Alexanderstr. 10 D-53111 Bonn Tel.: +49 / 228 / 98238-0 Fax: +49 / 228 / 98238-19 Website: www.sequa.de 5 World Bank Group Building the Capacity of BMOs: Guiding Principles For Project Managers Introduction For the purposes of this publication we use the term "Business Introduction Membership Organizations" (BMOs), which generally refer to various organizations where companies or individual entrepreneurs are members. The term BMOs include business associations, chambers of commerce, federation of business associations, employers' clubs, private sector forums, etcetera. BMOs can be a platform for promoting a better investment climate in developing countries. In order to be a strong and reputable representative of the private sector vis-à-vis the public sector, BMOs should have the capacity to advocate the interests and concerns of their members; to be strong organizations with a proper governance structure; and to respond to their members needs by delivering required services and information. From a donor perspective, BMOs are a channel to reach a large number of World Bank enterprises. Based on this premise, the World Bank Group's SME Group Department has been developing activities over the past few years to build initiatives in the capacity of BMOs as professional advocates and as demand-driven BMO capacity building service providers. In 2001, the World Bank Group created the Business Association Knowledge Network. Members of this network are BMOs from industrialized countries with long experience in assisting both similar organizations in developing countries and IFC-managed regional technical assistance programs (Project Development Facilities (PDFs) and the Private Enterprise Partnerships). A combination of human and financial resources of IFC and its international partners has provided for a number of successful projects aimed at building the BMOs capacity. Some of these projects are used in this publication as case studies. This experience together with similar experience from other projects provided us with extensive knowledge and lessons learned. There was a need to bring this knowledge together in one publication which would also provide task managers of BMO projects with operational guidelines. The objective of this publication is to help improve the effectiveness of Objectives BMO projects by providing: 1. Guiding principles on how to design, implement, and evaluate a project aimed at building the capacity of BMOs to become a strong and reputable representative of the private sector in reforming the investment climate in the developing countries; 2. A reference to key documents, organizations, and other resources in the field of BMO development. 3. Practical cases, which support the relevant sections of the publication 4. An analysis of typical issues faced by BMOs in developing countries in terms of internal management, service delivery, advocacy and practical recommendations to solve these problems, with reference to products and services available to cope with and address these weaknesses. The structure of this Guide roughly follows the project cycle: part A Structure addresses conceptual issues which have to be clarified before the start of a 6 World Bank Group Building the Capacity of BMOs: Guiding Principles For Project Managers project. It describes the rationale for BMO development projects and gives a short overview on BMO types and systems. Part B discusses more practical questions which may appear during the implementation phase of a project. It provides the reader with tools to assess beneficial project partners and the surrounding framework conditions for BMOs. It follows with a detailed analysis of possible instruments of donor intervention in the area of service provision, advocacy and BMO management. Part C helps to understand the need for measuring results and also provides specific tools for assessing the impact of the donor interventions using an impact assessment methodology. Finally, part D summarizes the recommendations given earlier coming up with ten basic rules for successful donor intervention. It also elaborates on the way forward and how the capable BMOs can play a more substantial role in spurring policy reforms and improving the business environment through public private dialogue. 7 World Bank Group Building the Capacity of BMOs: Guiding Principles For Project Managers Executive Summary 1. Support for small and medium enterprises (SMEs) has to be regarded Background as an integrative part of every strategy for private sector promotion in developing countries because of their contribution to poverty alleviation and equitable growth. In order to grow and prosper, all private enterprises, but especially SMEs, need a suitable legal and regulatory environment, a reliable infrastructure as well as different financial and business services. The most important actors, which can influence the SMEs' environment, are on the one hand government and public institutions, and on the other hand private business with business membership organizations (BMOs) in between. 2. BMOs can promote SME growth through facilitation or direct provision BMO of selected demand-driven services and through advocacy aimed at strengths creating a better business environment. BMOs are in the position to play this "dual role" because of certain characteristics: they are intermediary, networking, and self-regulative bodies. This unique combination of strengths makes them an effective tool to increase the growth of firms in a given country. 3. By supporting BMOs, donors can reach higher cost-effectiveness as Advantages well as greater outreach and sustainability. Because of their size, for donors BMOs can reach out to a large number of firms. Because of their membership nature and mandate, BMOs can represent and voice the concerns of their members at the policy level, creating a constituency for change that can lead to sustainable, bottom-up policy reforms. However, donors should also keep in mind that most BMOs have a mixed membership including smaller and larger enterprises with at times diverging interests. 4. Developing BMOs fits with the World Bank's broader strategic goals BMOs and and Private Sector Development Strategy in the areas of diagnostic WB strategy and policy analysis, local ownership and consensus building, monitoring and feedback of policy reforms, and SME promotion. 5. BMOs have to be defined as nonprofit and democratically guided Definition membership organizations that finance themselves by a mix of membership dues, service fees, and subsidies from government or donors. 6. BMOs can be divided into two major groups: business associations BMO typology and chambers of commerce and/or industry. Business associations (e.g., industry associations, small-scale enterprises' associations, women's associations, or employer's associations) are usually private law organizations concentrating on single branches, firm sizes or functions. They are characterized by a more homogeneous membership structure and include a relatively small number of (potential) members. Chambers combine the broad based business interests of a certain geographic region. The Anglo-Saxon model can be distinguished from the Continental model of chamber development. The latter is characterized by mandatory membership, and the former by voluntary membership. 8 World Bank Group Building the Capacity of BMOs: Guiding Principles For Project Managers 7. The ideal partner for BMO development projects combines the follow- Ideal partner ing characteristics: a high number and extensive coverage of characteristics dedicated members primarily from the SME community, a committed and visionary leadership, a democratic and efficient governance structure, sufficient financial, personnel and physical resources, and high-quality services and advocacy. 8. Using tools for BMO selection based on these criteria provides a Partner framework of a more structured decision-making process for partner selection selection. However, it is important to remember that only few real-life BMOs conform to ideal standards – and that it is necessary to remain open-minded and flexible while choosing partners. 9. A country's political, economic, and social conditions define the limits Environment of the scope of BMO development. The most important factors are the strength and structure of the private sector, general economic policies, the degree of decentralization, cultural traditions, and the legal framework. In this context, donors may be of great help by lobbying for a conducive environment in which BMOs can better operate. 10. BMOs in developing countries are typically characterized by poor BMOs in organizational capacity and technical skills, lack of proper accounting developing systems and governance, and lack of demand-driven orientation countries resulting in low levels of sustainability. The development objectives of BMO projects are to improve the functioning of BMOs and to create a better environment for their growth. The most important areas for donor intervention are the development of selected services, advocacy, and BMO management. 11. It can be argued that BMOs have competitive advantages in the BMOs and facilitation or provision of certain business development services and service that those BMOs and commercial service providers complement rather provision than compete with each other. However, most BMOs in developing countries only offer a limited range of low-level services because they lack the financial and human resources as well as the know-how needed to upgrade and diversify their service portfolio. 12. Membership services can be classified into trade and market Types of development, training, advice and consulting, information and services networking, office facilities and infrastructure services, and delegated government functions. 13. The present capabilities and experiences of BMOs, the competition Selection of and demand in service markets, the necessary financial and personnel services resources, and the potential short and long-term benefits will influence the composition of a BMO's service portfolio. The chosen area and method of service provision will also influence the scope of donor intervention. 14. The introduction of new services and the reorientation of existing ones Donor may be described as a sequence of seven steps, which constitutes a interventions phase model of service development. Donor interventions are most in service helpful during the pre- and post-delivery phases of a service provision transaction. Possible support measures include planning workshops and focus group meetings, staff training, seed financing, and commissioning background surveys and evaluation reports. 9 World Bank Group Building the Capacity of BMOs: Guiding Principles For Project Managers 15. Lobbying and advocacy for a more conducive economic environment BMOs and are another core activity of BMOs. By actively engaging in advocacy, a advocacy BMO raises its profile among policymakers and enhances its reputation within the business community. But most BMOs are not very successful in interest representation and advocacy, because of the interference and mistrust of government bodies, the political ambitions or closed shop mentality of the BMOs' leaders, missing know-how and contacts, the fragmentation of private sector interests, and a prevalent informal and ad-hoc style of lobbying. 16. The most important ways for BMOs to influence the policy-making Advocacy process are by using dialogue platforms, direct advocacy, grassroots instruments campaigns, public relations, and lawsuits. Since policymaking is a complex, multilevel process, these activities have to be used in combination to have a significant impact. 17. There are many ways by which donors may support the advocacy Donor efforts of BMOs. For example, donors may start off a National interventions Business Agenda, train their partner to use the media and in advocacy communicate its political message efficiently, or help in building networks and grassroots campaigns. 18. Better organized BMOs are more focused, enjoy greater membership Management participation and improve their public recognition and acceptance. of BMOs They are able to fulfill their responsibilities for the whole – small and large – business community and can therefore be regarded as genuine representatives of the private sector. However, BMOs in developing countries often suffer from organizational weaknesses. Low membership, a limited financial sustainability, and bad management practices reinforce each other, constituting a vicious circle of poor BMO management. 19. Capacity building is a gradual process. Therefore, BMO management Gradual capabilities will develop on an incremental basis. Donors have to capacity consider the different phases of organizational development while building designing suitable interventions. 20. Possible areas for donor intervention include the promotion of sound Donor accounting and sustainable financing practices, new income- interventions generating services, membership recruitment and retention measures, in BMO membership surveys and strategy workshops, modernization of management secretariat organization and administrative systems, and internal and external communication. 21. Donors worldwide are concerned with developing systems of impact Impact assessment, which, while providing funding and supervising agencies assessment of information on project results, also convince field staff that monitoring BMO projects impact is necessary and generates a lot of useful information for the field. Impact assessment deals with gathering and analyzing information to ascertain and measure the impact caused by the project. 10 World Bank Group Building the Capacity of BMOs: Guiding Principles For Project Managers 22. Public Private Partnerships (PPPs) have emerged as one of the most BMOs and powerful vehicles to conduct dialogue between the public and the public private private sector with the ultimate goal of fostering policy reforms to dialogue improve the business environment in developing countries. There are many ways to create a Public Private Partnership, and the most effective way of creating it will depend on the social, political and economic context of the particular country. This public-private dialogue can take many forms. One of the most common forms used is to engage with an existing BMO in order to pursue the implementation of policy reforms through policy advocacy fostering public-private dialogue. 11 World Bank Group Building the Capacity of BMOs: Guiding Principles For Project Managers A. General Considerations Before Starting a Project 1. Rationale The contribution of small and medium enterprises (SMEs) to economic Why assist growth and sustainable development is well documented and widely SMEs? acknowledged: these firms contribute to employment creation by using labor-intensive technologies, help mobilize otherwise underutilized physical resources as well as personal skills, and may therefore alleviate poverty and structural imbalances in the economy. 1 However, the most important argument for governments to support SMEs is that they constitute the overwhelming majority of private businesses in poor countries. 2 Every strategy for the development of a dynamic and viable private sector thus has to take into account the capabilities, existing local resources, and policy environment under which these smaller enterprises have to operate. All local actors, i.e., government bodies, private service providers, and Business Membership Organizations (BMOs) have to complement each other in private sector development. SMEs face a different set of opportunities and constraints than large firms do. As a consequence, the private sector in many developing countries exhibits a dual structure – a few large, modern, capital- as well as import- intensive enterprises on one end of the spectrum and a majority of micro and small enterprises serving local markets with simple and traditional technologies on the other. It is evident that SMEs cannot fulfill their potential role because of the various bottleneck factors, which include resource endowments, economies of scale, demand conditions, market size, as well as availability of technology and suitable institutions. Through the formation of BMOs, SMEs can address these problems Role of BMOs related to their size and improve their competitive position. It is also recognized that BMOs represent an increasingly important form of participatory development in developing countries. They can make a major contribution to the improvement of the environment SMEs operate in by serving as a vehicle for the expression of their views, taking collective action, delivering core services, and networking among members and other stakeholders. 2. Definitions and Overview of Existing BMO Systems The designation "Business Membership Organization" mirrors the Introduction outstanding importance of the members as the base of strength and power of this kind of business association. The main role of BMOs is to promote the growth and prosperity of their members and related business actors. In doing so, they act both as service facilitators or providers and as a representative body - members join because they want to access business development services and influence the political decision- making process to create a more favorable business environment. Diverse possible organizational settings result from the variety of business needs and interests, which are combined with the functional flexibility of BMOs. The following section is intended to familiarize the reader with the different types of BMOs. It will also discuss the pros and 1 See, for example, Little (1987). 2 Hallberg (2000), p. 5. 12 World Bank Group Building the Capacity of BMOs: Guiding Principles For Project Managers cons of existing BMO systems. All BMOs have certain common characteristics: First, they are nonprofit Common organizations. This does not mean that they are not allowed to charge for characteristics services but that their primary objective is to take collective action for of BMOs their members. Secondly, they are guided democratically by the decisions of their members (or elected representatives). It is important to note that membership should in principle be open to all eligible enterprises willing to join. Thirdly, they finance their operations by a mix of membership fees, service charges, voluntary grants, and public subsidies. These organizations can be divided into two major groups, which differ Two types of markedly in relation to their structure, membership, and functions (see BMOs table 1): Business associations are usually private law organizations Business concentrating on specific industries, firm sizes, or functions. They are associations characterized by a more homogeneous membership structure and include a relatively small number of (potential) members. These enterprises generally have corresponding interests and have to cope with similar problems and needs, e.g., how to sustain competitiveness or how to find export markets. Thus, they find it easier to harmonize the interests of their members and engage in advocacy on special economic issues. Their professional expertise qualifies them for providing selective services, e.g., an industry-wide exchange for raw materials, the formulation and implementation of industry standards, or gender-specific entrepreneurship training. The universe of business associations includes several subgroups: next Subgroups of to industry-specific groups, there are (among others) cooperatives or business associations of small-scale enterprises, women's organizations, and em- associations ployers' associations, etc: • Trade or industry associations are the most common subtypes of business associations in all countries. They consist of professionals or business owners of a more or less narrowly defined industrial sector or trade. Next to advocacy efforts, their most important function is the regulation of horizontal competition among their member companies and of vertical competition along the supply chain. For example, trade or industry associations engage in export quota allocation, the development of professional standards, and quality upgrading. 3 • Small-scale enterprises' associations mostly arise from the self-help efforts of the small producers of a certain region or enterprise cluster (e.g., an industrial park). Therefore, they offer services, which relate to the specific needs of SMEs such as microfinance schemes or group marketing instruments. 4 3 Doner and Schneider (2000), pp. 264-267. 4 See, for example, Gibson and Havers (1994). 13 World Bank Group Building the Capacity of BMOs: Guiding Principles For Project Managers • Women's organizations also develop from the need to alleviate economic biases against a certain group of entrepreneurs. In many ways comparable to small-scale enterprise associations, they focus more on women-specific concerns and engage in gender-related advocacy. • Employers' associations are essential players in the labor relations of every country. Thus, they are usually concerned with labor standards, wage level negotiations, staff training, etc. Most often, they combine all the enterprises of a specific trade or industry; however, they may also organize different sectors in accordance with their counterparts, the labor unions. (Con)federations are BMOs established mostly under private law and Confederations formed by other business associations. In general, confederations are working nationwide or at least cover larger regions, allowing local BMOs inside the respective area to join. Their membership can either be made up exclusively of business organizations or be mixed with individual enterprises. Sometimes, local BMOs are obliged by law to be a member of their respective national confederation. Confederations are preferably used for high-level interest representation, for mediation between different associations when it comes to forming a unified opinion of business, and for services, which are too costly for a single BMO. 5 Bi-national associations (chambers) are private law associations Bi-national specializing in the promotion of economic activities between two associations countries. They comprise individual enterprises and associations from (chambers) both partner countries, thus disposing of a unique pool of knowledge on two national markets. They are therefore a tool for bilateral trade promotion. 5 Müller-Falcke (1998), p. 2. 14 World Bank Group Building the Capacity of BMOs: Guiding Principles For Project Managers Table 1: Characteristics and Functions of Different Types of BMOs BMO Type Defining Factor Typical Functions and Services Business Associations • Trade/industry Occupation/Industry Arbitration, quota allocation, industry associations standards setting, lobbying, quality upgrading • SME associations Size of firm Entrepreneurship training and consulting, finance schemes, group services • Women's associations Gender Entrepreneurship training, microfinance, gender-specific advocacy • Employers' Labor relations Interest representation vis-à-vis unions, associations professional information, and training • Confederations Apex bodies High-level advocacy, general business information, research, coordination of member associations • Bi-national Transnationality Trade promotion, trade fairs, match- associations making Chambers Geographic region Delegated government functions, arbitration courts, basic information services, matchmaking, local economic development Chambers (of Commerce and/or Industry) are organizations under public Chambers or private law representing the business interests of a certain geographic region. Potentially, all enterprises in a respective region will be members of the chamber irrespective of the sector they belong to. Since a chamber has a heterogeneous membership, a chamber has to balance the often conflicting demands of all branches and sectors. Entrepreneurs may not find it very profitable to pay fees for this kind of general interest repre- sentation of regional businesses. Therefore, a chamber has to concentrate more on the delivery of interesting services for its members. 6 On the other hand, chambers are well suited for performing functions delegated by the government exactly because of their broad membership base and their regional coverage. Differing mainly with respect to the existence or absence of a special Basic features of chamber law and the question of mandatory or voluntary membership, two Continental and basic models of chamber systems have developed over time: the Anglo-Saxon Continental and the Anglo-Saxon model (see table 2). chamber models The Continental model is prevalent in many European and Middle Eastern countries. Under the Continental model, chambers are corporations under public law with mandatory membership. The public law status, under the Continental model, gives BMOs preferential treatment vis-à-vis the government, usually expressed through a formal consultative status and 6 Bennett (1996), p. 656. 15 World Bank Group the delegation of certain public functions. The Anglo-Saxon model, by contrast, does not have a specific legislation regulating chambers. Membership is voluntary. Therefore, chambers have to act in a more competitive and pluralistic environment. Table 2: The Continental and Anglo-Saxon Models of Chamber Development Continental Model Features Strengths Weaknesses 1. Special chamber • "Chamber" designation • Limited range of activities law (public law is legally protected status) 2. Mandatory • Fully representative • Incentive problems to work efficiently membership • No-free-rider behavior and be demand-oriented • Broad and stable income 3. Formal • Formal access to • Difficulty in presenting clear-cut consultative public administration positions owing to an obligation to status vis-à-vis present balanced view government 4. Regulated • Only one chamber per • Incentive problems owing to monopoly regional coverage location 5. Delegation of • Chambers are closer to • Identity conflict – public or private public tasks the private sector sector entity 6. Special public • Protection • Public interference supervision Anglo-Saxon Model Features Strengths Weaknesses No chamber legis- • Independence • Overlapping chambers in certain lation • Freedom of individual geographical locations businesses to join or establish a chamber Voluntary • Strong incentive to • Free-rider behavior membership work efficiently and • Limited influence because of low remain demand- membership oriented • Low financial income from membership dues No delegation of • Free decision of • Low financial income from fees for public tasks chamber on range of delegated services activities Source: Pilgrim and Meier (1995), pp. 50, 53. 16 World Bank Group Building the Capacity of BMOs: Guiding Principles For Project Managers Donors have to fit their interventions to the environment under which chambers have to operate. For example, chambers with mandatory membership are well suited for interventions in the field of public-private partnership and delegated government functions, because they are fully representative of the business of a specific region. In such a context, donors will face more incentive problems and public interference. As another example, BMOs with no legal protection and voluntary membership (as is the case in most developing countries) often perform very well in the fields of advocacy and self-regulation of business, but donors may have a hard time making them financially sustainable. However, these differences should not be overstated. Independently of the system, all BMOs, being member-based organizations, have the obligation to take care of the requests of their member enterprises. Furthermore, it is important to keep in mind that existing chamber systems always reflect a country's particular historical conditions. Thus, most "real world" chamber systems do not fit neatly into these two idealized models. In most developing countries elements of both models are present and these can therefore be described as mixed chamber systems. It becomes clear from this short organizational typology that BMOs may have very different legal structures, target membership, and functional specialization. Certainly, not every kind of BMO has to be adopted in every country. Especially developing countries may have a less structured system of business organizations, featuring a few bigger BMOs integrating very different members and functions in competition with a lot of smaller associations with little power and capacity ("mushrooming"). 3. Why Assist BMOs? The rationale for supporting BMOs rests on the catalytic role these bodies Potential role of can play in private sector development. This role is based on their (i) BMOs in SME network, (ii) self-regulative, and (iii) intermediary character, which makes promotion them interesting for SMEs and donors alike. In particular, • Networking: BMOs are well placed to act as a "hub" for the dissemi- Networking nation of information. Using their business network, they can acquire first-hand experiences about the problems and needs of SMEs. This specific knowledge base makes BMOs the "natural" first stop for SMEs seeking short-term advisory and referral services. • Self-regulation: Especially when BMOs cover large parts of the rele- Self-regulation vant business population, they may have the authority and legitimacy to take over regulative functions. For example, many BMOs are in- volved in business arbitration and standard setting. In doing so, they help in modernizing social and economic institutions and improve the business environment for SME growth. These self-help efforts allow governments to step back and promote objectives such as democratic participation, decentralization, and privatization. • Intermediation: BMOs function as a bridge between government and Intermediation SMEs. Most enterprises join them to have a voice in the political deci- sion-making process. This is particularly true for SMEs which are "too big to hide, but too small to fight". Left to their own devices, they do not have the power to influence government, but neither can they 17 World Bank Group Building the Capacity of BMOs: Guiding Principles For Project Managers escape into the informal economy to fight off predatory officials, bureaucratic procedures, and poor policies in general. As an intermediary, BMOs can articulate the demands of their membership and influence policies by showing the power and legitimacy of an authentic business advocate. On the other hand, they provide public bodies with valuable economic information and improve the acceptance as well as awareness of policy measures. A critical assumption throughout this Guide is that BMOs offer a unique Particular combination of strengths. They can influence the policy framework by strengths of giving firms (particularly SMEs) a collective voice. They can also deliver BMOs or facilitate selected services (including delegated government functions). Many BMOs in developing countries feel the need to upgrade their capacity with the help of external facilitators in order to maximize these opportunities. As for the donors' side, two major trends in promotional policies have Two trends in influenced the rationale for supporting BMOs and not SMEs or SME promotion government agencies as facilitators. One is the poor record of most policies: traditional support programs. The other is the decisive change of attitude regarding the role of the state and its relationship to civil society. Originally, most traditional promotion measures in developing countries Dissatisfaction concentrated on direct input support (subsidized credit, management with traditional training, etc.) by government agencies to a limited number of SMEs. approach However, these supply-side approaches often lacked integration with the general policy environment in the respective countries. In addition, they proved to have a poor cost-benefit ratio, which made it difficult to achieve wide reach and sustainability. Consequently, a new wave of cooperation between the public and the Closer coopera- private sector influencing the design of support programs became the tion between preferred tactic in many developing countries. Owing to the broader trend public and toward privatization and democratization ("good governance"), a private sector consensus on more market-led policies has emerged, implying a higher degree of congruency of public and private interest. Therefore, joint initiatives by government and businesses are nowadays common policy elements, and self-help activities are to be promoted. Another critical assumption of this Guide is therefore that, under certain Three circumstances and for particular interventions, donors can reach higher advantages of cost-effectiveness and greater outreach and sustainability by supporting SME promotion BMOs based on the following reasons: through BMOs: • Economies of scale and scope: Donors can reach more SMEs Economies of more effectively by promoting them indirectly through BMOs rather scale and scope than through direct measures. Better access to the target group may also be related to a broader regional coverage of enterprises. • Although BMOs are not the most effective provider of all Business Development Services (BDS), they have a comparative advantage in certain services (e.g., group insurance policies) and act as an effective facilitator for the rest (see reasons outlined above). • Integrative character: Because BMOs are able to offer a wide Integrative spectrum of services (direct services, industry-specific actions, gen- character eral business advocacy), they are a suitable tool to improve the overall situation of SMEs at several different policy levels at the same 18 World Bank Group Building the Capacity of BMOs: Guiding Principles For Project Managers time. Taking into account the increasingly complex framework for enterprise development in developing and developed countries, such an integrative approach becomes more and more important. Another advantage of working with BMOs is that their versatile nature allows for a flexible adaptation of interventions to industry- or country- specific circumstances. • Sustainability: Experience shows that the success of any policy re- Sustainability form effort depends upon creating widespread support for the in- tended changes. Without the support of all parts of society, especially the private sector, reforms will be inadequate, misdirected, or ephemeral. BMOs can represent a wider pool of local firms – including SMEs – which donors cannot reach by traditional "top- down" operations. Through the institutionalized participation of its members, BMOs can create a constituency for change and provide donors as well as government bodies with important feedback. Reform measures will thus have a lasting impact even after donor support has been phased out. 4. Role of BMO Assistance within World Bank Strategy Developing the capacity of BMOs fits in with the core objectives of the BMOs and World Bank Group's Private Sector Development Strategy, as well as World Bank with the goals of the Poverty Reduction Strategy Papers (PRSP) and strategy Country Assistance Strategy (CAS) in many countries. The PSD Strategy focuses on improving the business climate and supporting SME growth, while PRSP focuses increasingly on private sector development and emphasizes the importance of local stakeholder participation. Key areas BMOs can play a key role in supporting the Private Sector Development Strategy and broader World Bank strategic goals in four key areas: 1. Diagnostic and policy analysis: A large number of surveys are Diagnostic underway to analyze the cost of doing business in particular and policy countries, and improvements in the business conditions will be used analysis as triggers for increased development assistance to those countries. BMOs are often key counterparts of survey teams, as they have access to a large number of enterprises and staff that can help with data collection. Helping BMOs to develop a reliable member database and technical skills to collect and use data for policy formulation can contribute to the sustainability of future surveys and diagnostic work. 2. Policy reform and monitoring of changes in the business climate: Monitoring BMOs can help to implement World Bank Group PSD programs by and feedback monitoring progress and providing feedback from the firms on the on policy impact of the reforms. Helping BMOs to understand the reforms, reforms monitor changes in the business climate, and communicate changes to their members can contribute to the sustainability of the reforms. 19 World Bank Group Building the Capacity of BMOs: Guiding Principles For Project Managers 3. Promotion of SME growth through facilitation or provision of selected SME services: Although BMOs may not be the most efficient direct promotion providers of a number of business support services, they are in a unique position to reach out to a large number of members with information about providers and a selected number of services. Supporting BMOs to define their comparative advantage in business service delivery and develop services and products can have an impact on SME growth. 4. Local ownership and consensus-building of strategy and policy Local owner- reform processes: Based on their membership nature, BMOs can ship and voice the concerns of the private sector and create a constituency for consensus- change for policy reforms. As representatives of the private sector, building BMOs can also make important contributions in the PRSP and other strategy formulation processes. Supporting BMOs with advocacy training will make them more effective partners. 20 World Bank Group Building the Capacity of BMOs: Guiding Principles For Project Managers B. Implementation of a Project 1. How to Make a Good Choice: Tools for the Selection of Beneficiary BMOs The identification of suitable project partners certainly is critical for the Ideal partner success of BMO support projects. The selection process should balance characteristics two extremes: On the one hand, a minimum of organizational capacity and stability is necessary to ensure the long-term success of support measures. On the other hand, excessively strong BMOs tend to develop their own agenda, which may conflict with the objective of SME promotion; they may also no longer need donor support. 7 This section will discuss the critical elements of beneficial project partners in greater detail and deliver tools for partner analysis and selection. The ideal partner for BMO development projects combines the following characteristics: (i) a high number and extensive coverage of dedicated members mostly from the SME community; (ii) a committed and visionary leadership; (iii) a democratic and efficient governance structure; (iv) sufficient financial, personnel, and physical resources; and (v) high- quality services and advocacy. The following paragraphs elaborate on these criteria. They are intended to help project managers in the field to fill in the assessment tool presented in this section (as well as the checklist in appendix A): Membership: The first and most important element of a good project Membership partner is a committed membership base. Since it is the members who provide most of the money for operations, this aspect is especially relevant for voluntary BMOs. However, both voluntary and mandatory BMOs are based on the commitment of their members as the "owners" of the association. A strong membership base is also essential for acquiring political clout and thus influencing the political decision-making process. A strong membership base is based on (i) the membership size (the more members the better); (ii) the coverage (ratio of members to non-members in the respective geographical area, industry sector, etc.); diversity (sub- sectors covered; number of small, medium, large members); and relevance (financial status and political influence of members). A high rate of SME participation in a BMO is usually critical if the goal of the project is to promote SME growth. Membership growth is also an important factor, since it provides information on the attractiveness and success of a BMO. Younger associations, which are founded because of acute problems usually, show higher growth rates than older, more established bodies. It is important that BMOs maintain an efficient and updated list of members. A (computerized) database with comprehensive company information contributes greatly to the information services provided by the association's policy and business information units. Quite often, however, associations in developing countries have only insufficient and outdated membership records. As a consequence, nominal and non-paying members cannot be identified, making membership retention strategies and financial planning difficult to develop. 7 Gibson and Havers (1994), pp. 17-18. 21 World Bank Group Building the Capacity of BMOs: Guiding Principles For Project Managers It is also good practice to lay down membership categories and proce- dures in the bylaws of the BMO. Associations have different kinds of members just as they have different kinds of structures. 8 Usually, these include active ordinary or lifetime (voting) members as well as affiliated or associated members and honorary (nonvoting) members. The contribution of an enterprise to the association may depend on its membership category and/or size. Leadership: Apart from committed members, leadership is the most Leadership important asset of BMOs. Because of the difficulties in assembling the entire membership, most decisions are usually delegated to office bearers (president, vice presidents, secretary general, treasurer) and the executive board. These leaders set out the general policies and strategies, and supervise the secretariat (if there is one) and the day-to- day operations of the BMO. Additionally, the office bearers represent the organization vis-à-vis government and other business associations. Therefore, the reputation, foresight and experience of the Board members are vital to the BMO's success. 9 A good leader has a long-term vision and focus and provides for a strategic plan identifying goals, activities, and performance indicators. He communicates the BMO's priorities in a mission statement and takes care of their implementation. Planning helps to keep the organization focused and reduces transition problems from one set of leaders to the next. Additionally, committed leaders should be respected figures inside the business community who are able to communicate, compromise, and cooperate for the good of all members. Even with good leaders, the interests of donors and BMOs do not always coincide. Thus, donors have to be very clear and transparent about their objectives and strategies, study the vision of the targeted BMO and its expectations for the partnership, and match the objectives of both partners in a participatory process. Assuming that the main development goal is to support the growth of SMEs, the complementariness of interests between the donor and the BMO can only be taken for granted, when the membership of the prospective BMO is dominated by the intended target group (e.g., SMEs). However, there are few such "ideal" (SME dominated) BMOs in developing countries, and they are often small, locally oriented, and unstable. As a consequence, these organizations have only limited political influence and capacity to offer quality services to their members. With more established and larger BMOs, a clash of interests is more likely to occur, since they typically articulate the interests of large businesses. Therefore, cooperation with these organizations should concentrate on areas in which potential conflicts of interests can be minimized or in areas that address the specific needs of the smaller members of the BMO. Another possible strategy may involve the establishment of a dedicated subcommittee for SMEs within the BMO, which may function as a focus to represent the interests of the smaller members. 8 Milner (1999), p. 14. 9 Tan Lan Eng (2000), pp. 15-16. 22 World Bank Group Building the Capacity of BMOs: Guiding Principles For Project Managers Governance: There are certain structural features, which determine the Governance level of ownership, control, transparency, and accountability of a BMO. At least theoretically, most BMOs have a democratic structure, which ensures the participation and ownership of their members. In practice, however, structures may not work as intended. One possibility is that a few influential members (or the president) use the association to serve their private interests. Excessive government influence on the operations and staffing of a BMO can also be problematic. In both cases, BMOs will not be able to act as authentic representatives of their SME members. Therefore, the ideal governance structure of a beneficial project partner should be: • Democratically organized: Key issues here are legitimization and representation. There should be general meetings and elections on a regular basis following procedures adequately described in the bylaws. Term limits for board members can be useful, to avoid the indefinite prolongation of office terms and manipulation by those in charge. • Autonomous from government: Structures should allow the BMO to work without public intervention. The appointment of representatives, the stipulation of standards and conditions for the delivery of member services, as well as a strict monitoring and supervision by government bodies are not desirable in this context. • Open: BMOs should not view themselves as closed shops or entrepreneurs' clubs, but be willing to attract new members. Furthermore, donors should recognize that BMOs may also be used as a vehicle for influencing policies for private interests by influential membership groups. But supporting a particular interest group may lead to unintended distortions. Thus, donors should always scrutinize which group the BMO is actually representing, not only in terms of region, sector, trade or firm size but also in terms of other factors such as ethnic composition. 23 World Bank Group Building the Capacity of BMOs: Guiding Principles For Project Managers Box 1: Cooperation with Existing BMOs versus Creation of New BMOs Donors may basically follow two approaches in of the Soviet Union they not only had to redefine BMO promotion: they can either initiate their role, but also find new tasks and reestablish cooperative efforts with already existing BMOs or their legitimacy. Donors have been successful in help to establish new BMOs. A country's steering change, thus facilitating BMOs' transition institutional landscape evolves step by step over into authentic representatives of the private a long period of time. Therefore, jump-starting sector. intervention through the establishment of additional institutions has usually failed. In There is a great danger in creating organizations, general, donors should favor cooperation with which are not responsive to the needs of the existing organizations. targeted enterprises. The members do not feel that they are the owners of these BMOs, which Especially in countries with a tradition of collective leads to low levels of sustainability. Thus, newly organizations like BMOs combined with a created BMOs should always be attached to profound change in the institutional framework, already existing institutions (e.g., producer experience has shown that it is better to try to cooperatives, informal business meetings, etc.). In transform existing institutions than to create new this respect, the government has to play a crucial ones. Most countries in Eastern Europe and the role by giving the right incentives for the formation former Soviet Union, for instance, have opted for of BMOs. An example has been the creation of the former. Under the communist regime, BMOs regional government-business meetings (Joint completely lost their independence as Public-Private Consultative Committees) in representatives of the business sector and Thailand that stimulated the formation of local became integrated into the bureaucratic system of chambers. centrally planned economy. After the collapse Resources: BMOs differ considerably in terms of the quantity and Resources quality of resources available to them. Some of them are small bodies with no professional staffing and no permanent offices, surviving only through the commitment of their honorary officeholders. But others are bigger organizations which employ more than 100 staff and own splendid office complexes. Some poor BMOs are completely dependent on public subsidies or cash injections of big members. Other BMOs, on the contrary, are financially self-sustainable due to profitable services and valuable assets. In any case, a minimum level of resources seems to be necessary for a beneficial project partner so as to allow for effective advocacy and service provision, even when taking into account that organizational strengthening is one of the objectives of BMO projects. BMOs obtain financial resources primarily through the contributions of their members. If a BMO consistently fails to bring in the money that it spends, the organization will go out of business. Therefore, BMOs have to be innovative when seeking means to finance their activities and attain financial sustainability in the long run. 10 Sound financial practices include a mix of income from different sources (membership fees, service fees, sponsorships, subsidies and product sales), which allow for a certain degree of cross-financing. Additionally, accurate and transparent accounting procedures guarantee that there is enough money to cover the running expenses of the BMO. Personnel and physical resources are more difficult to assess. The number and educational background of the staff and the available office space and equipment give an indication of the BMO's actual capacity. 10 Financial sustainability can be defined in this context as a BMO's ability to cover its operating expenses as well as to finance a gradual expansion of activities without being overly dependent on external sources of finance, e.g., wealthy members, government bodies, or donors. 24 World Bank Group Building the Capacity of BMOs: Guiding Principles For Project Managers However, the quality of the secretariat and its internal organization are also crucial for success. It can be expected that these resources will evolve as the BMO develops its activities. Another aspect in the process of institutional building is functional specialization: a clear division of tasks between board members and professional staff helps to raise BMOs' institutional capacity. Advocacy and services: A final important aspect during the selection Advocacy and of a partner is the scope and reach of its activities. Enterprises expect services benefits from their membership, either directly through valuable services or indirectly through better economic policies. A BMO with a well-developed capacity for interest representation and service provision will be more attractive for existing as well as potential members. A broad range of beneficial services is possible in this respect; the following section will discuss the different activities in greater detail. BMOs will usually choose to specialize in only a few tasks, however. Experience shows that organizations, which stick to one area of specialization, show better results than "multipurpose" BMOs. 11 Policy advocacy is widely seen as a key role of BMOs. However, powerful interest representation is not an easy task. It requires estab- lished contacts with government bodies, which are based on the good reputation and track record of the association. Furthermore, the BMO has to track the legislative process proactively and participate in policy formulation and committees. A certain organizational capacity is also necessary to prepare expert position papers and media events. Enterprise services such as business advice or training will benefit BMO members more directly. The selection of services offered will ultimately depend on the members' wishes in combination with the BMO's experiences, available capacities, and resources. Measures of success will include outreach (how many members are served how often); diversity (how many different services and activities) and cost- effectiveness (generated income in relation to costs). A member satisfaction evaluation is certainly the most useful tool to measure the impact of the services. 11 Gibson and Havers (1994), p. 31. 25 World Bank Group Building the Capacity of BMOs: Guiding Principles For Project Managers Table 3: A Tool for Partner Selection Criteria for Partner Selection Weighing BMO A BMO B BMO C BMO D (example) Democratic governance and 10% 3 2 1 1 independence from government Number of SME members 20% 1 2 2 3 Commitment and vision of 20% 2 3 3 3 leadership Propensity to take up SME issues 10% 2 3 1 2 Financial sustainability 10% 2 1 2 3 Number and quality of staff 5% 1 2 1 3 Office, equipment 5% 2 3 2 2 Advocacy and services for SME 20% 1 1 1 2 Total 100% 1.65 2.05 1.75 2.15 Ranking 4 2 3 1 (Note: 1: low; 2: medium; 3: high relevance) Table 3 presents an example of the procedures that could be used to Tools for select BMOs. Each of the potential project partners will be evaluated selection of with respect to eight important characteristics, which are marked on a project three-point scale (with higher values indicating better performance). partners However, it is important to remember that only few real-life BMOs conform to ideal standards – and that it is necessary to remain open- minded and flexible when choosing partners. Thus, a donor may adapt the tool to his own priorities by changing the order of importance of individual items. As a result, the tested BMOs can be ranked by performance, indicating their appropriateness as project partners. Such a tool for BMO selection provides a framework for a more struc- tured assessment based on relevant criteria and can therefore shorten the decision-making process of partner selection. A more detailed checklist for partner analysis can be found in appendix A. 26 World Bank Group Building the Capacity of BMOs: Guiding Principles For Project Managers Case Study 1: Selecting Partner Business Associations in Albania, Bosnia and Herzegovina, FYR Macedonia, and Serbia and Montenegro At the end of the civil wars in Southeast Europe, the SEED was not trying to create new business countries of the region started their process of associations but rather to assist BAs that were already economic reconstruction. The business associations established (i.e., legally registered) and that showed were suffering from weak leadership and poor interest, commitment and capacity to take part in a institutional capacity, and the business environment longer-term technical assistance program. At the end of was extremely unpredictable. the assessment phase (January through March 2002), SEED had selected seven BAs to partner with. 12 There was therefore a need for strong, self-standing business associations, which led the Southeast Europe Over the course of the last four years of direct SEED Enterprise Development (SEED) to initiate an assistance SEED has succeeded strengthening extensive, regional program to enhance capacities of business associations in three main areas: the independent, voluntary business associations (BAs). In provision of business services to members, the creation choosing which business associations to provide of a pro-business legal and regulatory environment and assistance to, SEED used an extremely rigorous networking and the creation of market opportunities. In selection process that contributed to the success of the most of these areas SEED's assistance has delivered program. strong results. SEED sought business associations that had a specific As of July of 2005, regarding service to members, the profile. They wanted those that had the capacity to selected BMOs have delivered 70 trainings and 29 advocate on behalf of their members, that were consulting interventions to over 1,000 participants from focused on becoming able to sustain their operations SMEs. According to participant surveys, SEED's from income from fees and services, and that had the trainings led to increased business skills (97 %) and led competence to provide business services to their directly to changes in the participants' companies (60 members. %). Most participants (76%) felt that these changes led to an overall improvement in the company's First, SEED assessed the capacity of various performance. With regard to the improvement of the independent business associations in each country. regulatory environment, SEED's partner BMOs have They then created an individual country profile with a identified close to 80 issues as major obstacles for the brief overview of the current economic and growth of their members. In response to these sociopolitical situation, highlighting the most prominent obstacles, several BMOs developed position papers on obstacles private businesses were faced with. SEED issues, held round tables with relevant government was willing to invest in assisting selected business officials, and BMO leadership discussed issues with the associations to get started and develop commercial government. Finally, SEED's BMO partners have made products that would enable them to secure their progress, but have not yet achieved full financial financial independence and long-term sustainability. sustainability. There has been a significant increase in the costs covered by revenues, from 19% to 49%. SEED staff from each country, along with an expert Much of that increase is attributable to the increase in consultant from IFC's PEP Facility, visited and the number of paying BMO members, which increased conducted interviews at 35 BAs region-wide. During the from 279 to 1284 during the length of SEED's individual interviews, which generally lasted a couple of interaction. hours, the team focused on identifying key leadership in the BAs and assessing its motivation and the quality Lessons learned: of its governing mechanisms to act on behalf of and legitimately represent its members. The team also tried - Rigorous selection criteria are necessary to to achieve a balance in the type of BAs it selected. It ensure effective collaboration with business aimed for a balance of horizontal/general and associations. vertical/sector associations. Other criteria that - One of the most important selection criteria is the influenced the selection process were whether the BA's willingness to engage in a long-term association was already part of another donor partnership with the donor. assistance project, the level of assistance it was receiving, and which aspect of BA development that Case study contributed by Lada Busevac and Ivana assistance focused on. Curic, SEED And finally, it evaluated the quality and feasibility of the associations' development plans. 12 One business association withdrew from the program due to lack of capacity to commit to a six-month-long partnership. 27 World Bank Group Building the Capacity of BMOs: Guiding Principles For Project Managers 2. Political, Economic, and Legal Environment A country's political, economic, and social conditions define the Background possibilities for BMO development. Information on these conditions complements the selection process described above, because they affect the number, actual capacity and development potential of BMOs. The organizational background of BMO systems varies considerably Important between regions and countries. The division of tasks between govern- elements of ment, different BMOs and private service providers will depend on a environment variety of factors. Therefore, it is essential to analyze the existing environment in order to understand the constraints and opportunities for BMOs. The following are the most important aspects for the institutional development of a certain region: (i) strength and structure of private enterprises; (ii) general economic policies; (iii) legal environment; (iv) degree of decentralization; and (v) cultural traditions. • Strength and structure of private sector: This aspect refers to all Private sector the economic settings that may facilitate or hinder private initiative, development risk-taking, and competition. It includes the general orientation of the economic system, which can be state- or market-led. It also encompasses the question of whether monopolistic or oligopolistic structures are prevalent. These characteristics can, in turn, be attributed to the existing size structure of industries and the importance of natural and artificial barriers to entry. In this sense, BMO development relies on the existence of a minimum number of private enterprises, which feel the need for collective action. An inadequate physical infrastructure or noncompetitive behavior of established firms often gives rise to the formation of BMOs. • General economic policies: Appropriate monetary, fiscal and trade Economic policies are central to maintaining an enabling environment for policies private sector development. But apart from a conducive macroeconomic framework, the willingness of government officials to regard private businesses and their BMOs as partners and not as hostile competitors is also important. If the government is committed to the principles of good governance, i.e., participation, transparency, accountability and less corruption, there is more room for public- private-partnership action from which both parties can benefit. This cooperation may lead to the development of a more comprehensive and capable BMO system. • Legal environment: The laws and regulations of a country also in- Legal fluence the development of BMOs. In its most basic form, this applies environment to the freedom of coalition and expression. Some developing countries still have restrictions on the formation of business associations. Government bodies may exert strict surveillance over the formation and the operations of BMOs. Apart from the freedom of coalition, there may be specific laws stipulating the duties and rights of BMOs. For successful interest representation, associations have to have the right to criticize government and to use the courts for checking public decisions and actions. • Degree of Decentralization: Another important factor is geography, Decentraliza- namely the size of the country and its demography in combination tion with the state of the transportation and communications infrastructure. Taken together, these factors will ultimately determine the degree of economic decentralization. While it is desirable to locally deliver advocacy as well as business development services 28 World Bank Group Building the Capacity of BMOs: Guiding Principles For Project Managers through providers, which are close to the business community, some centralization of activities may be unavoidable. The organizational breakdown and the location of BMOs are also influenced by a country's administrative divisions (regions, provinces, states), i.e., the degree of political decentralization. The empowerment of regional administrative bodies that may have developed differs historically between countries. While federalist nations delegate ample competencies and responsibilities to their subdivisions, centralized countries prefer a more hierarchic and bundled decision-making process. Since effective interest representation requires a certain proximity to decision-makers, there usually are many more BMOs in a decentralized system focusing on regional issues. • Cultural Traditions: As a broader set of factors, social and cultural Cultural tradi- values, gender, and ethnicity shape the environment for production tions and exchange. For example, a high esteem for entrepreneurship has been a decisive factor for private sector growth in many countries. In developing countries, informal norms and relations can be used as a substitute for formal economic institutions by promoting social cohesion and penalizing the detrimental behavior of community members. In countries with a more individualistic tradition, there tends to be a larger number of BMOs than in a more pluralistic system. In contrast, a society featuring a high degree of collective bargaining will feature a more corporate BMO model. But sensitivity to the cultural and social context must not be mistaken for tolerance to collusive behavior or cronyism. However, BMOs are not only dependent on the prevalent framework Donors may conditions, but they may also be in a position to influence the help BMO circumstances surrounding their operations− especially policies, laws, and improve the regulations. In this context, donors can support BMO's advocacy efforts environment on the policy level for a more conducive environment. As an example, donors can lobby on behalf of their partner BMOs for a national law on business associations, which prescribes an institutionalized role for BMOs in the policy-making process. Or they can press for reviewing burdensome BMO registration rules and regulations. These direct ways of supporting BMO partners may be seen as part of broader efforts to introduce good governance and participatory development practices. 3. How to Assist BMOs: The Most Important Areas of Donor Intervention While an improvement in the environment as described in the previous section will assist BMOs only indirectly, donor interventions are designed to help specific partner organizations have a direct impact on their operations. The most important areas of interventions are the improvement of advocacy and interest representation and the development and management of selected services for the benefit of SMEs. But these functions must not be considered in isolation, since a BMO will not be able to deliver demand-led services and perform effective advocacy without sound financial and management practices. 29 World Bank Group Building the Capacity of BMOs: Guiding Principles For Project Managers 3.1 Advocacy Even with efficient BDS markets in place, the private sector cannot grow Unfavorable and flourish without an adequate framework of economic policies. In environment for most developing countries, SMEs in particular are unable to realize their SMEs require full economic potential due to distorted and/or over-regulated markets. strong advo- cates They are suffering from intended as well as unintended policy-induced constraints on their development: unsustainable and unstable macroeco- nomic conditions may be a general disadvantage, but more specifically an import-substituting foreign trade and exchange rate policy, biased tax laws, limited access to formal credit markets as well as burdensome bureaucratic procedures and administrative requirements may discriminate against SMEs. 13 Despite the fact that SME development has been assigned high political priority in most developing countries during the past several years, existing programs lack scope and sustainability, and in some cases have led to even more policy biases. As opposed to large companies, SMEs lack the power to influence BMOs are government policies or public opinion when they act individually. BMOs advocacy can be instrumental in expressing the needs and problems of the whole platforms for private sector, but especially of SMEs. Lobbying and advocating for a SMEs more conducive economic environment are therefore core activities of BMOs. In this context, business associations with a more homogeneous membership will find it easier to design a coherent advocacy strategy. Chambers, which usually have more members from very diverse branches and professions, are, on the other hand, often readily accepted by government bodies as true speakers of the entire business in a region. By actively engaging in advocacy, a BMO raises its profile among policy- makers and enhances its reputation within the business community. This helps in attracting new members and raising contributions from old ones. In return, BMOs with better funding can devote more resources to advo- cacy. Policymakers may profit from advocacy by getting access to first- hand business information and feedback on policies; they may also improve their reputation among the BMO's members as potential voters. Therefore, BMOs have to be regarded as instrumental for facilitating more democratic participation in decision-making. Despite their great importance, most BMOs are not very successful when Typical it comes to performing the task of interest representation. BMOs in problems faced developing countries commonly have to face the following challenges: by BMOs • An atmosphere of mistrust between private sector organizations and public bodies, leading to more political interference and supervision, • Insufficient capacities to monitor the policy-making process, analyze the impact of proposed laws and regulations on their membership, and prepare informative position papers. • A fragmentation of private sector interests and "mushrooming" of voluntary BMOs. • An informal style of interest representation, which favors influential bigger businesses and leads to frequent, unpredictable policy changes. 13 Meier and Pilgrim (1994), pp. 32-37. 30 World Bank Group Building the Capacity of BMOs: Guiding Principles For Project Managers • A closed shop mentality on the part of many BMOs (especially established chambers), which may not be too willing to accept SMEs or outsiders and therefore cannot be regarded as genuinely representative bodies. • Vested interests of influential members and executives, which may lead to self-serving behavior and a politicization of BMO advocacy efforts. All these factors can endanger the public prestige as well as the reputa- tion of BMOs and therefore diminish the effectiveness of advocacy efforts. In simple terms, advocacy is the act of "advocating" on behalf of a certain Definition of group in favor of or against something (or somebody). Policy advocacy of advocacy and BMOs is geared toward initiating new, changing existing, or abolishing available outdated laws and regulations concerning business. A BMO can become instruments involved at every step of the legislative process. Advocacy is also about communicating and influencing public opinion regarding business. Therefore, BMOs can participate in the decision-making process in several ways. The most important tools are (i) dialogue platforms; (ii) direct advocacy; (iii) grassroots campaigns; (iv) public relations, and (v) lawsuits. • Dialogue platforms: They can take the form of institutionalized Public-private (mandatory) public-private consultations, e.g., joint committees, advi- consultations sory councils, hearings, etc. All these forms allow for a formal participation and structured exchange of opinions between government officials and business representatives (mostly from BMOs) at regular intervals. Such institutionalized dialogue may evolve gradually as a customary right or may be explicitly prescribed by law. Public-private dialogue platforms may be national or regional and targeted toward specific industries or economic issues. BMOs should strive for representation in all joint committees whose decisions are relevant for their members. Next to these quasi- mandatory consultations, there may be more voluntary, unregulated dialogue platforms which are initiated by the BMO itself, e.g., confer- ences or an informative jour fixe on pressing economic issues. In or- der to substantiate their claims, BMOs have to create institutional capacity for tracking and analyzing the political process or preparing draft laws. • Direct advocacy: An informal way of interest representation, direct Direct advocacy measures can take many forms: letters, telephone calls or advocacy is an office visits. These measures are intended to guarantee the support informal way of interest of politicians on specific issues. Despite the more informal nature of representation these activities, BMOs should make sure that the positions they present are carefully prepared and that the delegate who establishes the contact has good communication skills. BMOs may also consider using the well-established relations of bigger member companies to support their case. However, they should make sure that these influential members do not follow their own agenda. • Grassroots campaigns: BMOs may ask their members to support Grassroots their initiatives by contacting politicians via e-mail, telephone calls, campaigns letters or fax messages. They can organize demonstrations in favor mobilize members of their political objectives. These grassroots campaigns may also 31 World Bank Group Building the Capacity of BMOs: Guiding Principles For Project Managers spread to other interested people and to nonmembers. Because of their established business network, BMOs can easily mobilize a substantial number of voters and therefore stand a good chance of influencing policymakers. To remain respected and serious dialogue partners, BMOs should be careful not to overdo such powerful actions. 14 • Public relations: Successful interest representation requires not only Media may the recognition by politicians but also the support of the public. BMOs transport should therefore produce useful and easily understandable BMOs' key messages information on how new laws and regulations affect businesses, employees, investors, suppliers, and customers. Member surveys as well as external research bodies can deliver necessary background information on pressing policy issues. By publishing press kits, news releases and FAQ fact sheets and organizing live appearances on TV shows etc., BMOs may use the media to convey their messages to politicians and the general public. • Lawsuits: Court action is the most extreme way of enforcing the Lawsuits should lawful claims of the business community against government bodies. only be used in Because of their inherent conflict potential, BMOs should use exceptional cases lawsuits with extreme care and only in extreme cases. In some countries BMOs may not even be allowed to file lawsuits. It can often be sufficient for a BMO not to engage in a case directly, but to support the court action of one of its members instead. Nevertheless, a BMO should be able to have access to a minimum pool of legal know-how, because in many countries the economic environment is greatly influenced by court decisions. Since policymaking is a complex, multilevel process, the above activities have to be used in combination to achieve an impact. The adequate form of activity is very much situation- and country-specific. For example, it will depend on whether the BMO is constituted under public law with mandatory membership or as a completely voluntary organization. Public law BMOs, which are partly government-funded or financed by mandatory fees, may face restrictions on the scope of their advocacy activities. Naturally, BMOs will have more freedom for interest representation in countries with democratic governance structures. The advocacy efforts of many BMOs in developing countries are focused Advocacy too much on current pressing issues. Such short-term thinking often strategies leads to highly personalized ad-hoc decisions on advocacy measures. To help BMOs represent the interests of their members in a more coherent and effective fashion, an eight-step strategy for successful advocacy should be followed (see figure 1). Donors can help BMOs achieve more effective advocacy activities. Possible donor However, both partners should keep in mind that the field of advocacy is interventions particularly susceptible to a collision of interests between donors and BMOs. Donors have legitimate political objectives, which they try to promote by their projects. These objectives should not necessarily be detrimental to the BMOs involved, but the agenda for advocacy should be defined primarily by the interests of the BMOs' members and representatives. 14 Milner (1999), p. 77. 32 World Bank Group Building the Capacity of BMOs: Guiding Principles For Project Managers Nevertheless, there are many ways by which donors may support the advocacy efforts of BMOs. Some of the instruments for donor intervention include: National business agenda: Especially in times of political crisis, when National the business climate is deteriorating, donors may support BMOs in business launching a national business agenda (NBA). Such an agenda is agenda unifies intended to stimulate investment and economic growth by setting several BMOs legislative and regulatory priorities and communicating them to policymakers. It consists of a collection of issue briefs, which identify key obstacles and give short-term, easily understandable recommendations on how to overcome them. Creating an NBA also educates the members of a country's business community about public policy issues and allows them to present their concerns with a unified voice, which attracts more attention and increases the likelihood that the agenda will be adopted. 33 World Bank Group Building the Capacity of BMOs: Guiding Principles For Project Managers Figure 1: An Advocacy Strategy for BMOs An Eight-step Advocacy Strategy for BMOs 1 2 3 4 Formation of Selection Step Membership Focus Group Step Advocacy of Issues to Survey Discussions Committee Advocate • 5-7 members • Preselect most • Develop • Hold workshops important issues questionnaire with selected • Suitable Important members Important chairperson Factors • Criteria: relevance • Distribute it Factors • Assigned to members, ease • Discuss relevant • Complete it by budget and staff of formulation, policies certain date chance of • Identify concerns • Regular success, potential meetings opposition • Manuals • Planning • Short-term • Moderate the Possible Donor Possible Donor Instruments workshops experts workshops Instruments • Brainstorming • Manuals • Prepare • Joint advocacy financing materials 5 6 7 8 Implementation Identification of Step Establishment Customization Step of Priorities of Strategy Key Leverage Points • Compilation of • Define tools • Key issues and • Tailor message concerns • Timeframe for policymakers • Appeal to self- Important • Budget available implementation • Proponents interest Important Factors Factors • Ranking of • Opponents • Be convincing issues and and concise • Understanding solutions • Work out agenda motivations • Selection • Include answers • Only minor • Media training • Spread contact • Short-term Possible Donor Possible Donor Instruments interventions information experts Instruments necessary • Coalitions • Background • Manuals • Planning • Manuals studies workshops • Support for public- private partnership Source: Adapted from CIPE (unpublished). 34 World Bank Group Building the Capacity of BMOs: Guiding Principles For Project Managers Case Study 2: Lobbying for New Vocational Training Centers in Brazil The state of Pernambuco in northeast Brazil is the A crucial factor for this successful expansion was least developed part of the country, with 60 the long-term twinning with the training centers of percent of the local urban population living below the Bavarian Employers' Associations (bfz) in the poverty line. With about 140,000 jobs, mainly Germany, which increased SINDIVEST-PE's for women, the clothing industry is the most credibility. Furthermore, the German partners important sector in Pernambuco; it consists advised SINDIVEST-PE's board and staff on how mainly of informal and formal SMEs. to improve their lobbying and assisted the new schools in the training of trainers. The yearly The growth of the sector is threatened by a lack of budget of the project funded by the German qualified textile technicians (middle management Ministry for Economic Cooperation and level). Until recently, training courses for these Development (BMZ) amounts to US$170,000. In technical managers were unavailable anywhere in addition, the state government of Pernambuco as the federal state. Today, three new vocational well as the parastatals - SENAI and SEBRAE - training centers have been established by the contributed approximately US$300,000 per year. parastatal national institution for vocational The project, which started 6 years ago, supported training SENAI, one in the SENAI-Center the establishment of the three training centers by CERTTEX in Recife, the main capital of providing equipment for computer-added design Pernambuco, and two in smaller towns of the (US$100,000) and by financing three short-term region. assignments of a German expert technician In Recife, 60 technicians for the garment industry (US$10,000). The donation of the equipment are trained per year. Each full-time course lasts proved to be an important stimulus for the three years and is financed by SENAI. Brazilian government to establish and conduct the Participants also receive a scholarship from training centers. As the centers are run by SENAI, SEBRAE, a parastatal advisory service for SMEs. which can draw on the resources from a The other two vocational training centers offer vocational training tax, their sustainability is not at special courses for the garment industry, which risk. last between 8 and 120 hours each. They are paid by the participants themselves, but partly Lessons learned: subsidized by SEBRAE. - Twinning up an organization with an The local association of the garment industry international partner can bring about new (SINDIVEST-PE) successfully lobbied for this ideas and a constituency for change. innovation. Instead of establishing its own training - The exchange of technical expertise and center, which would have been a heavy financial staff training lies at the heart of these burden for the small 300-member association, twinning arrangements. SINDIVEST-PE lobbied vis-à-vis local governments and parastatal institutions to adapt - A cooperation between government and existing training facilities to the needs of local BMOs can deliver better results than enterprises. Now SINDIVEST-PE is responsible activities of one party in isolation. for the supervision of the quality of the training and for the development of new curricula. In order - Successful public-private partnership to fulfill its duties, SINDIVEST-PE is a member of requires the participation of BMOs in the the advisory committee of SENAI, the decision-making boards and committees. administration and advisory committee of the regional textile project Polo Agreste and the organization for the development of fashion in Pernambuco. Case study contributed by Martin Wahl, project manager, training centers of Bavarian Employers' Associations 35 World Bank Group Building the Capacity of BMOs: Guiding Principles For Project Managers Donors may help BMOs by forging necessary alliances with other BMOs and interest groups and by encouraging the participation of the business community. Usually, a national confederation is the suitable partner for developing an NBA. Possible steps in this process include: 1. Conventions of key business leaders: Since they are recognized as a neutral party and have multiple business contacts at their disposal, donors may organize national conferences and high-level meetings. 2. Focus groups: Since it is necessary to address specific needs, regional and industry focus group discussions may provide the private sector with a sense of ownership. Donors are in a position to moderate and coordinate the discussion process. 3. A draft NBA: The results are synthesized into a draft agenda. At this point, donors can send experts to sharpen arguments and recommendations. 4. Feedback and revision: Again, donors can use their business network to help reach a consensus. They are, of course, also requested to make their own comments. 5. Publication and distribution: The presentation of the NBA can again be backed up by the organization of high-level conferences and meetings. Marketing support by donors can be very valuable. An NBA can be regarded as successful when its recommendations are implemented legislatively. However, even if there is no immediate impact on laws and regulations, an NBA influences public opinion in favor of a more business-friendly environment and helps foster closer relations between BMOs and government bodies which may lead to the formation of institutionalized dialogue platforms. Media training: Shaping public opinion in favor of a BMO's position will Training BMOs greatly increase the success of a policy advocacy campaign. In doing so, on the easiest and cheapest way to deliver the BMO's messages to the public how to is to use existing print and broadcast media resources. However, not all communicate the message BMOs are able to cooperate efficiently with the media. With the help of manuals, seminars and workshops, donors can train BMOs to improve their public appearance. Since media coverage can take different forms, there are various means of transmitting the BMO's message to the public that require specific training, including press releases, position papers, fact sheets, prepared speeches, press kits, TV appearances, etc. 15 Training should aim at improving the BMO's capacity to analyze proposed laws and regulations in easily understandable language, to deliver the message in a suitable way, and to follow up efficiently with media contacts. It is advisable to appoint a media relations representative from the board who has good communication skills and experience in dealing with the media. 15 For more details, see Milner (1999), pp. 68-81. 36 World Bank Group Building the Capacity of BMOs: Guiding Principles For Project Managers Donor efforts can be deemed successful when the supported BMO is able to earn the reputation of a "brand name contact" for first-hand business positions among the media. In this case, voluntary media coverage will usually be enough for the BMO's advocacy efforts. Donors may also actively promote their partner's interests by contracting external advertising and marketing specialists. They can also co-finance the production of media kits and ready-made advocacy material. Coalitions and grassroots networks: Networking can be a useful way to Coalitions and increase the number of organizations and individuals that support a BMO's grassroots stance on one or more issues. Coalitions and grassroots campaigns will networks enhance the visibility and credibility of advocacy measures. This is especially important if BMOs are too small or too specialized to be accepted by the government as representatives of a majority of businesses. Even larger BMOs will have to look for alliances and broad- based support in a more globalized world. Donors can assist BMOs in building these advocacy coalitions and grassroots networks. In many developing countries, the business sector is deeply divided. Do- nors, being regarded as independent and neutral players, can act as moderators and coordinators between different interest groups. They may: • Organize formal and informal meetings as well as conferences for BMO representatives • Share their knowledge about the proponents and opponents of advo- cacy issues • Offer contact information on possible alliance partners • Support the production of background studies and position papers • Leverage the interests of the coalition vis-à-vis the government It will not always be a simple task to maintain solidarity and commitment between the coalition members. Alliances including BMOs with a diverse membership base, which are working in other regions or in other industry sectors, are the most stable. Such coalitions may be the first step toward the development of formal apex bodies. Temporary cooperation with rival BMOs also has to be considered, however, because there are important policy issues where all private sector organizations are working toward the same goal. 37 World Bank Group Building the Capacity of BMOs: Guiding Principles For Project Managers Case Study 3: Creating A Grassroots Advocacy Program In Malawi Thanks to successful advocacy efforts initiated obtain property titles, which they could then use with the help of the Center for International as collateral to secure commercial loans. Private Enterprise (CIPE), the National NABW is keeping close tabs on the reform Association of Business Women (NABW) in process. With financing from CIPE, it has Malawi has been the driving force behind the launched a watchdog communications service growing empowerment of the country's women that reports on its own efforts and those of other entrepreneurs. In line with a bottom-up, stakeholders in implementing the sectoral consensus-building approach, NABW first held development programs it has drafted. The service regional meetings throughout Malawi to learn consists of periodic newsletters called Business about the most pressing needs of women entre- Alerts, which are distributed to NABW's members preneurs. Meeting attendance exceeded as well as to all key government officials and expectations, with some meetings drawing well agencies, NGOs, and — for good measure — the over a hundred participants. Just as important, local media. they included a large proportion of women from Not surprisingly, NABW has gained considerable rural areas where the majority of Malawi's clout in official circles. The government has included women-owned businesses are located. the association's executives in the high-level task force that is studying changes to the country's small- NABW has complemented the information it and medium-size enterprises in a major program with obtained at the grassroots level with detailed the United Nations Development Program. NABW background studies of its own. The studies con- also has representatives on the boards of parastatal tain not only specific data on the problems busi- organizations, which affect women-owned nesswomen are confronted with in the most im- businesses, and participates in both local and portant sectors, but also specific recommen- international trade fairs through the Malawi Export dations on the legal and institutional policies Promotion Council. which must be changed if women-owned businesses are to prosper. Lessons learned: Armed with these data, NABW has invited key - Advocacy campaigns are more powerful government officials and agencies to participate in when initiated from the bottom up. its membership meetings where the sectoral - Background studies are helpful to development plans and recommendations have complement the grassroots-level been discussed and fine-tuned. An impressive information. array of policymakers has participated, including officials from various ministries and other relevant - Government agencies have to be involved government bodies. as stakeholders in the advocacy process. - The campaign has to be accompanied by Turning government officials into stakeholders of newsletters and continuous the reforms NABW advocates is paying off communication efforts (which can be handsomely. Several laws and policies that supported by donors). negatively affected Malawi's businesswomen have been changed. Special government - Donors can bring in their media expertise extension services are now available to women and reputation vis-à-vis the government. running agribusinesses. The Ministry of Finance Case study contributed by CIPE Promotion has increased the funding of several ministries to Council carry out programs, which benefit women entrepreneurs. A new land law policy has been ____________________________________ drafted and is now up for parliamentary review. One of its key provisions would enable women to 38 World Bank Group Building the Capacity of BMOs: Guiding Principles For Project Managers 3.2 Development and Management of Services SMEs, which lack the financial and human capacities of their bigger Underdeve- competitors, need to resort to external service providers to operate their loped service businesses and make them grow. However, since markets for business markets for services are underdeveloped in most developing countries, SMEs do not SMEs have access to a sufficient number of services that are reasonably priced and useful for their operations. One reason for the weak development of service markets targeting SMEs may be low effective demand by enterprises and their hesitation to pay for services; this attitude stems from a lack of awareness as well as from no or negative experience with existing suppliers. Taking into account that the development and provision costs of many business services are considerable, it is extremely difficult for private service suppliers to work profitably in these markets. Owing to these disadvantages in servicing SMEs, most service providers in developing countries specialize in services for large-scale enterprises. Business services have also typically been restricted to the cities and are not available in the rural areas where many SMEs are located. During the last couple of years, a considerable learning process has been BDS initiated concerning the fundamental question donors are faced with, approach namely how to intervene in markets for business development services (BDS). 16 BDS practitioners now emphasize a more market-driven approach, which favors the commercial provision of BDS at cost-recovering prices. Ideally, a donor intervention should be of an indirect nature: it should create or strengthen so-called facilitators which support the development of BDS markets by providing technical assistance to private service providers. Do BMOs fit into this new picture, given their often dual character as both Role of BMOs providers and facilitators of BDS? Does mixing the roles lead to in- in the BDS efficiencies and a crowding-out of private providers? context It can be argued that BMOs have competitive advantages in the provision of Complemen- certain BDS and that BMOs and commercial service providers complement tarity of BMOs rather than compete with each other. First, due to the knowledge-based and BDS character and relevant network effects of most BDSs, providers with many providers business contacts and interrelated activities may be more efficient than less interactive, specialized suppliers. Secondly, BMOs offer a portfolio of low- cost, low-frequency and short-duration services, leaving BDS, which require more intensive and long-term interactions with commercial providers. It is not uncommon for BMOs to use external suppliers or outsource more complex activities. Thus, the actual level of competition between BMOs and commercial providers is very low. 16 See Committee of Donor Agencies for Small Enterprise Development (2001). 39 World Bank Group Building the Capacity of BMOs: Guiding Principles For Project Managers Case Study 4: Developing an International Trade Fair in Bangladesh In 1993 the Chittagong Chamber of by reducing its financial contributions), a concept the Commerce & Industry (Bangladesh) and the partner Chamber had to get used to. Charging cost- ZDH Partnership Program, which is funded by covering fees is often delayed ("we will charge the German government, ventured to conduct later"), as the emphasis is on service and not on a first technology exposition. It showcased income generation. The need to cover at least the products (most of them consumer goods) of 34 costs of activities (and not to subsidize them from SMEs and attracted 15,000 visitors. The fair other sources) is often only gradually accepted. grew continually in size and became The yearly budget of the ZDH program for BMO internationally recognized in the following support activities in Bangladesh was US$ 60,000 years. In 1999, the fair comprised 335 (excluding the cost of a regional long-term advisor exhibition booths and 40 larger pavilions and and a local resident representative). With this budget attracted 650,000 visitors. the program cooperated with six local chambers and While developing in size and outreach, the business associations. Cooperation with Chittagong Chittagong fair changed its orientation from Chamber went on for 8 years, from 1991 to 1998. consumer to industrial goods. There has also The ZDH program provided strategic advice in been growing participation by larger planning the trade fair. The seed money given as enterprises, but SMEs still outnumber them. grant for covering part of the trade fair cost amounted to US$5,000 excluding all overheads. This financial The first exhibitions were not generating contribution was reduced in the following years. sufficient income to pay for all costs, so the Chittagong Chamber and the ZDH program Lessons learned: had to cover the balance. When the fairs grew - Start with a small to medium-size measure and in size, they became profitable. By 1999, they grow with the partner. already netted an income of over 12 million Taka (now about US$200,000). ZDH phased - Make sure that it is the partner running the out its financial contributions when the fairs activity, not you (do not lecture; advise!). had passed their infant stage but kept in contact with the Chittagong Chamber for occa- - Share the financial risks, push for income sional advice on the fairs and other programs. generation and gradually withdraw financial contributions in line with income growth (from The fair organization capabilities of the the activity). Chittagong Chamber grew through "learning by doing" coupled with the advice that the ZDH - If the assisted partner agrees, use him as a Program provided. In the beginning, the board resource and as a networking center for others of the Chamber played a pivotal role in to learn. organizing the expositions. However, the professionalism of the Chamber's staff in organizing exhibitions grew together with the Case study contributed by Heiko G. Waesch, expansion of the Chittagong fair; a number of regional coordinator, ZDH Partnership Program fair tasks were outsourced. (www.zdh-connect.com.sg) From the beginning, the ZDH Program pushed for a fair that was income-generating (inter alia ___________________________________ 40 World Bank Group Building the Capacity of BMOs: Guiding Principles for Project Managers In the case of BMOs, a strict separation of BDS facilitation and provision BMOs in the would mean wasting substantial synergy effects. Using the income from area of service the provision of membership services, BMOs can cross-subsidize delivery advocacy efforts which are a public good. Based on the brand name and nature of BMOs as independent private sector organizations, SMEs may prefer BMOs to commercial providers with uncertain qualities. It may be argued that the promotion of BMOs as providers and facilitators can be justified as part of a larger concept of BDS market development, if a more flexible and systemic approach is adopted. In the case of developing countries, most BMOs only offer a limited range Typical of low-level services. Apart from advocacy, they organize business problems of meetings and seminars, publish newsletters and leaflets on pressing BMOs in the issues, and give advice and information on export markets, tax and legal area of service delivery matters, etc. The typical problems of the average BMO in developing countries include: • Lack of financial and manpower resources to upgrade and diversify the service portfolio • Lack of systematic needs assessment and market analysis • No strategic planning (ad-hoc introduction of new services) • No adequate cost analysis and controlling • Lack of qualified and dedicated staff and trainers • Lack of top-management support • No systematic monitoring and evaluation of existing services Especially in cases where donor funds have been available, some BMOs have rushed into multiple areas of service provision, e.g., running SME training centers, overstretching their actual capacities. Considering the low awareness and willingness to pay for business services in most developing countries, such a rapid expansion beyond BMO core functions has not been financially sustainable in many cases. Thus, a more gradual expansion of services – one that considers the existing resources and capabilities− seems advisable. BMOs around the world have developed a large number of different Classification membership services (see table below). These services comprise a wide of services range of activities. Business services are delivered directly to member companies, which pay for them with their annual contributions and/or individual fees. Conventionally, financial services and advocacy measures are not considered business services. Membership services can be classified into (i) trade and market development, (ii) training, (iii) advice and consulting, (iv) information and networking, (v) office facilities and infrastructure services, and (vi) delegated government functions. • Trade and market development: This group of services is concerned Trade and with matching prospective buyers and sellers. BMOs have an market important advantage when arranging these collective activities be- development cause they can utilize their network of domestic and international contacts. They can also build on their "brand name capital" as recog- nized and independent actors. BMOs are involved in these activities as both event providers and facilitators. 41 World Bank Group Building the Capacity of BMOs: Guiding Principles for Project Managers • Training: Another group of services relates to the upgrading of the Training know-how and skills of business owners as well as their staff. Most entrepreneurs in developing countries establish and expand their business on the basis of their informal market know-how and ad-hoc decisions. In the same way, apprentices and staff members are normally trained on the job. Despite remarkable achievements, SMEs need to enhance their knowledge base in more formal ways for long- term success in global markets. BMOs − especially industry-specific associations − are in a position to pool and deliver training and know- how. Their competitive advantage lies in the field of vocational training and the provision of specific business-related skills. BMOs may also develop training curricula and standards for their members. • Advice and consultancy: Similar to group training, consultancy and Advice and advice measures are intended to upgrade the know-how of enter- consultancy prises. But since they cover very specific business problems and projects, they are offered to individual firms. The need for consultancy often arises out of short-term economic pressures and trends, such as WTO accession, new industry standards, a reformulation of tax laws, etc. BMOs mostly specialize in low-cost, low-frequency and short-term services, which complement the activities of private providers. In this sense, they are the "one-stop shop" for SMEs' questions that can be used as a kind of insurance against infrequently occurring problems. 17 • Information and networking: These services concern the creation of Information relations between people and the facilitation of a continuous infor- and mation flow among them. Press releases, the BMOs' Web site, networking meetings, conferences and committees are the forum where net- working activities and communication takes place. BMOs are ideal places for networking since they act as hubs between government, other institutions, member and nonmember companies as well as international contacts. BMOs are therefore in a unique position to collect, analyze, and channel news and contacts to their membership. • Office facilities and infrastructure services: The institutional and Office facilities physical infrastructure in many developing countries is still underde- and infra- veloped. SMEs in particular have problems with accessing information structure services and telecommunications infrastructure, transport facilities, storage facilities and secretarial services. Especially when many members need the same kind of infrastructure support and there is no adequate private sector provider, BMOs may step in and deliver the service. In this case, BMOs profit from the pooling of resources. • Delegated government functions: In many countries, the provision Delegated of certain services for SMEs is the task of special government government agencies. Donors should assist BMOs in emphasizing that these functions services can be delivered more efficiently by private sector organizations, which are controlled by their members. Examples of possible functions to be delegated to BMOs include registering businesses, organizing and supervising vocational training, issuing certificates of origin, running courts of commercial arbitration, and industry regulation functions. 18 In doing so, the delegation of functions can also be seen as a step toward a privatization of public services. 17 Bennett (1996), p. 675. 18 ZDH-Technonet Asia (1995), p. 19. 42 World Bank Group Building the Capacity of BMOs: Guiding Principles for Project Managers Before such delegation can take place, there must be the minimum level of mutual trust and confidence between the government and BMOs. In order to deal with government functions, the concerned BMO has to possess the necessary organizational strength and capacity. Because of their full coverage of the businesses of a certain region (similar to public bodies) and their multisectoral characteristics, chambers are usually more suited to take over delegated functions from the government than business associations. The disadvantages of such a public-private partnership may be stronger government influence and the danger that BMOs may become inflexible, bureaucratic bodies. 43 World Bank Group Building the Capacity of BMOs: Guiding Principles for Project Managers Table 4: Types of Services Delivered by BMOs Services Examples Trade and market development • Organizing product exhibitions and trade fairs • Information on prospective (export) markets • Buyer-seller meetings and subcontracting ex- changes • Trade delegations • Facilitating market research • Marketing of samples and showrooms • Matchmaking Training • Management training • Technical training • Vocational training centers for staff members and Apprentices • Seminars and group consultancy • Development of training manuals • Training curricula and standards • Organizing legal aspects of staff training Advice and consultancy • Exchange visits and business tours • Best practice benchmarking among members • Individual counseling and mentoring • Legal services • Financial and taxation advice • Help with accountancy and bookkeeping • Quality standards and ISO 9000 • New technologies and environmental aspects Information and networking • Regular business meetings • Industry clubs and committees • Web site and Internet-based business contacts • Newsletters and publications • Membership directory and database • Conferences and high-level meetings • Annual report Office facilities and infrastructure • Secretarial services services • Computer services • Telecommunications • Internet access • Developing and managing industrial estates • Running testing facilities • Storage and port services Delegated government functions • Business registration • Issuing certificates of origin • Registration of samples • Organization of vocational training schools • Holding examinations and professional licensing • Export quota allocation • Running courts of arbitration • Developing and supervising industry standards Source: Own chart based on McVay and Miehlbradt (2001), p. 2. 44 World Bank Group Building the Capacity of BMOs: Guiding Principles for Project Managers The range of possible services is much greater than the outlined catalogue, and not each of the services suggested above is suited to every situation. Different socio-economic environments and different stages of organizational development lead to different problems and require different services. BMOs will perform best if they adapt their service portfolio closely to the specific needs of their members, thus helping them to improve their competitiveness and productivity. BMOs possess several ways of delivering these tangible services to Different ways members as well as nonmembers. There are some services, which can of delivery and have to be provided directly by internal staff members because they are closely related to the core competencies of the organization. In case the projected activity is only partially related to the BMO's existing capaci- ties, the BMO should adopt a more facilitating role: it can choose to out- source the work to other, more experienced suppliers, e.g. private con- sultants, training institutions, banks (referral/agency services), or – in case there is no market for the service yet − it can only stimulate the use of business services among their members (demand creation services; signposting). Depending on the individual circumstances, a BMO may naturally choose to use different delivery mechanisms for its various services both at the same time and on a case-by-case basis. For example, it is possible that a BMO in country A has an outstanding know-how in organizing trade fairs and exhibitions, but for a BMO in country B without that knowledge it is more advisable to subcontract the organization of such an event. It may also happen that a former consultancy service directly provided will be outsourced because there is an innovative new private provider in the field. There is therefore no one- for-all optimal solution for the specific group of services but a continuum of delivery modes with the varying degrees of BMO involvement (see figure 2). 45 World Bank Group Building the Capacity of BMOs: Guiding Principles for Project Managers Figure 2: Decision Tree− How to Deliver a Service Activity How to deliver a new service activity? YES NO BMO has competitive advantage/core competencies? NO YES Is there a private market for this service? Direct provision type Demand creation type Referral/ agency type Service provision Service facilitation High BMO involvement Low Source: Idea based on a contribution of Jim Tomecko (GTZ team leader of Private Sector Promotion Project, Nepal). The BMOs' decision of how to provide which services will be influenced Factors by the following factors: 19 determining whether to • The BMOs' capability and experience in the field (including synergies enter a with existing services) market • The existence and competitiveness of other suppliers of the respec- tive business services (private providers, other NGOs, government agencies) • The demand of the BMO's membership • The resources required to develop the service (finance, personnel, skills) • The potential short and long-term benefits for the BMO (more income through fees, reputation) 19 Gibson and Havers (1994), p. 25. 46 World Bank Group Building the Capacity of BMOs: Guiding Principles for Project Managers Especially during the euphoric start-up phase, many BMOs are in danger Tool for of losing direction by trying to introduce too many new services at the selecting same time. It is therefore better to concentrate first on two or three beneficial activities, based on the criteria mentioned. The following decision-making services grid may be used to focus a BMO's service strategy (see table 5). The more a decision-making factor applies to the new service under consideration, the higher the number of points awarded. Again, certain adjustments may be necessary for BMOs and donors so that the conditions of a particular country and the competitive situation of the respective BMO are taken into account. Table 5: Decision-Making Grid for the Selection of Services Decision-Making Factors Weighing A B C D (example) Service can be fully introduced 5% 3 2 1 1 with available staff resources Service has short-term (one-six 20% 1 2 2 3 months) income-generating potential Service has long-term (12 15% 2 3 3 3 months or more) income- generating potential Synergy effects with existing 10% 2 3 1 1 income-generating potential Low-intensity competition in 15% 2 1 2 3 market for new service (no competition with members) Service is highly useful to 20% 1 2 1 3 members No need to build up additional 5% 2 3 2 2 know-how No additional capital 10% 1 1 1 2 expenditures necessary Total 100% 1.55 2.05 1.7 2.55 Ranking 4 2 3 1 Note: (1: low; 2: medium; 3: high relevance) Source: Schumacher (1999), p.14. 47 World Bank Group Building the Capacity of BMOs: Guiding Principles for Project Managers Case Study 5: Establishment of a Business Development Unit in Vietnam The establishment of a Business Development preparing policy papers, drafting legal documents Unit was an element of the twinning arrangement and advising on changes in business regulations. between the Hanoi Business Association (HBA), Through the Business Development Unit, HBA Vietnam, and the Confederation of Danish has been able to advise members on a wider Industries (DI) commencing in 2002. range of issues, thereby becoming more attractive to members and potential members. The unit was introduced with the objective of increasing the number of specialized services that The yearly budget of the twinning program the association can provide and to generate between DI and HBA is US$200,000 (including all additional income. By setting up a Business overhead costs). Development Unit as profit center, the The project duration was 2 years. About 10 association's revenue base is improved through percent of the total project cost was spent for both service fees and more members. establishing and developing the business DI assisted HBA in the following activities: development unit. The most important • Training in business services instruments used in setting up the unit were short- • Preparation of a strategy for the unit term experts of DI who trained and coached the local staff of the unit. • Formalization of the approach for business support services Lessons learned: • Identification of projects • Members will pay for business • Assistance to companies development services, so a Business HBA provided staff time, office space and infra- Development Unit can generate structure, while the Danish International additional income. Development Agency (Danida) made a • An efficient Business Development contribution to basic office infrastructure, and DI Unit can attract new members and will provided training activities. The Business have a positive impact on other BMO Development Unit will receive training from DI activities. throughout the project period. • While donors contribute mainly their Establishing a Business Development Unit within technical expertise, the BMO should HBA resulted in an 8 percent increase in profit bring in underused physical resources ratio within the first year, and the ratio is (e.g., office space, local staff). increased to 18 percent in the following year, which is very satisfactory. The services provided Case study contributed by Confederation of have also been a contributing factor to the Danish Industries increase of members from 96 to 177 during the ______________________________________ first year of the project. Besides delivering services, the Business Deve- lopment Unit has assisted the HBA secretariat in 48 World Bank Group Building the Capacity of BMOs: Guiding Principles for Project Managers The chosen area and method of service provision will also influence the Phases of scope for donor intervention. To strengthen the capacity of a BMO and service facilitate effective business services, a comprehensive approach that development takes into account the pre- and post-delivery phase of a service transaction is also needed. The introduction of new services and the re- orientation of existing ones may be described as a sequence of seven steps, which constitute a phase model of service development (see figure 3). 1. Status quo analysis: Before introducing a new service, but also to Status-quo check the performance of current services, BMOs should keep a analysis record of their activities. If the price, income and costs of each event or activity are listed systematically, BMOs can determine the absolute profitability and structure of their service portfolio. With the help of this information they are in a position to compare their competitiveness with that of other providers. Therefore, an analysis of the status quo serves as an input not only for discussing new services but also for improving the management and quality of existing services. Donors may assist a BMO's self-analysis by conducting planning workshops with executives and staff members. Another way to improve the stock-taking process is to bring in local short-term experts in accounting and management practices. A donor can also support the benchmarking efforts of his partner BMO by spreading best practices of other BMOs, e.g., by sponsoring study visits or case study manuals. 49 World Bank Group Building the Capacity of BMOs: Guiding Principles for Project Managers Figure 3: Phase Model of Service Development T h e S e ve n -P h a s e M o d e l o f S e rv ic e D e ve lo p m e n t (1 ) Phase Phase 1 2 3 4 S ta tu s Q u o C a p a c ity N eeds P rio ritiz a tio n A n a ly s is Assessm ent Assessm ent • E v a lua tio n o f • J o b d e s c rip tio ns • R e p re se n ta tiv e • S e le c tio n o f a c urre nt s e rv ice s • C a pa c ity a nd s urv e y pro m is in g • Inc o m e a n d c o s t q ua lific a tio ns o f • S urv e y o f s e rv ice Important Important Factors s tru c tu re c u rre nt s ta ff d e c is io n-m a ke rs • Inte rn a l w o rk- Factors • O pe n d is c us s io n • C a pa c ity a nd • Info rm a l m a rke t s ho p p ro c e s s q ua lific a tio ns a na lys is • C o ntinuo us n e e d ed im pro v e m e n t • P la nnin g • S ta ff tra in ing • B a c kg ro u nd • C a re ful d o no r Possible Donor Possible Donor Instruments w o rks h o p s urv e ys inte rv e ntio n Instruments • C o -fina nc ing • N e tw o rkin g w ith o ffic e fa c ilitie s • F o c us gro up • M o d e ra tio n o f o the r B M O s m e e tin gs w o rks ho p • L o ca l e x pe rt fo r s to c k-ta kin g The Seven-Phase M odel of Service Developm ent (2) Phase Phase 5 6 7 Introduction M onitoring Expansion And Evaluation • C ost Estim ates • R epresentative • Stick to the • C lear • As Precise as Knittng R esponsibilities Possible Important • Step by Step Important Factors Factors • M arketing • O ngoing Q uality • U se Synergies of Strategy C ontrol R elated Activities • N ot Too M any • Assign Services at once R esponsibilities Possible Donor • Seed Financing • Strategic • Build long-term Possible Donor Instruments Instruments • Short-Term M anagem ent Relationship by C onsulting Tools Local • Feedback by Representatives • Test M arketing Local Experts • Don't Push O w n Agenda Source: Own chart adapted from Schumacher (1999), pp. 19-20. 2. Capacity assessment: After a thorough analysis of existing services, Capacity careful consideration must be given to the technical and human assessment resource requirements needed for delivering a new or modified service. Members always have a long "list of wishes" that cannot easily be brought in line with the BMO's resources. Therefore, a realistic, selective approach is essential for the successful implemen- tation of services. Critical questions arise about the availability of unused staff capacity, the need to hire more staff or the skills and qualifications necessary to introduce a new or modified activity. The most practicable way of analyzing staff capacities is through job descriptions. These descriptions show possible personnel shortages 50 World Bank Group Building the Capacity of BMOs: Guiding Principles for Project Managers or overlaps and help in the decision of which position is best suited to deal with the envisioned services. Donors can support BMOs in this phase by helping them explore underused resources and improve the skills of staff members. This may be achieved by sending in short- term experts to identify slack capacities and train staff members. Co- financing of critical office facilities and equipment may complement these instruments and can release additional personnel resources. 3. Needs assessment: It is important to provide BMOs with reliable Needs information on the needs of markets and SMEs, which are potential assessment clients. Feedback from members and other companies can be gathered by more informal means during events and enterprise visits (similar to rapid market appraisal techniques) or in a formal way by various representative surveys among members and nonmembers. Focus group discussions with relevant decision-makers will complement these instruments and provide for additional information on demand and markets. Survey and market research efforts are quite expensive and will often be unprofitable in the short run due to their public good character. Therefore, donors may help their partners by commissioning background surveys on various issues. For example, they can sponsor a survey asking nonmember companies about their opinion on the services of BMOs and which activities they would like to see from private sector organizations. An analysis of a specific service market may also help a BMO design their services in a more demand-oriented manner. Apart from improving services, the results of these surveys may also be used for advocacy purposes. 4. Prioritization: A comparison of the financial and personnel status Prioritization quo with the demand-side analysis now allows for a decision on how to expand the existing range of services. It is not only the selection of particular services, but also the best way of their delivery (using the decision-making grid depicted in table 5). It is a good practice to conduct a one-day internal workshop attended by selected executives and staff members to discuss service priorities. Since the decision to select services should be taken by the BMO, donors should only play a minor role during this phase. They may, however, send local representatives to moderate an internal workshop and, if necessary, provide additional information to facilitate the selection. 5. Introduction: The introductory phase can be regarded as the most Introduction critical phase of the implementation of new or modified services because BMOs should acquire expertise in how to deliver good results in slow fashion. Serious obstacles that commonly arise during this phase include incomplete and/or unsystematic cost accounting (especially neglecting marketing and overhead costs), a lack of clearly assigned responsibilities, and proactive marketing. 51 World Bank Group Building the Capacity of BMOs: Guiding Principles for Project Managers Donor technical assistance helps BMOs through this introductory phase when the services are not yet established. Different instru- ments may be suitable during this phase. The most important are the use of short-term consultants for alleviating start-up problems, and the production of guidebooks and manuals in order to spread international best practices. Donors may also assist BMOs in marketing new and innovative services, which need time to be accepted by the often risk-averse SME owners. For example, they can induce BMOs to produce SME radio programs, develop training material, co-finance trial periods, etc. 6. Monitoring and evaluation: BMOs usually spend far too little time in Monitoring ongoing supervision and the follow-up of activities. However, and evaluation systematic monitoring and evaluation are essential to improve the quality and efficiency of services. In this context, the selection of suitable indicators for monitoring purposes is very important. Possible instruments for monitoring and evaluation are the distribution of standardized questionnaires to users and participants after a service has been delivered, the appointment of a responsible quality control officer, direct interviews with selected users, or the hiring of external consultants (only for very important services). Relevant information that improves a BMO's demand-side analysis and cross-marketing efforts can then be gathered. Because evaluation is often "forgotten" during day-to-day operations, donors may perform two important functions in this phase: they should raise the awareness for systematic follow-up measures and give their feedback concerning the BMO's performance. Short-term experts combining local with international best practice knowledge are usually well suited for these tasks. Better evaluation efforts go hand-in-hand with the donors' emphasis on strategic planning and performance measurement. Through recurrent workshops with their partners, innovative tools and strategies on these issues can be shared. 7. Expansion: The range of services should be expanded only after all Expansion of the previously discussed steps have been carefully carried out. Members tend to prefer a well-focused BMO offering selected high- quality services over organizations performing a "mixed bag" of low quality activities. For smaller BMOs, it is therefore advisable to start by focusing on only two or three different services. To be active in very diverse activities may reduce risks by diversification. However, it is usually more advisable to stick to the knitting and introduce related services step by step. For example, a BMO may start with simple export information services, upgrade to a full-scale international supplier exchange and finally organize a related export trade fair. It may also be important to develop the referral capacity of BMOs, while the range of true services stays limited. Donors often take the initiative to start off more activities. The high cost of developing a certain product or service has induced some cross- marketing efforts. However, donors should ensure that they are not carried away by the urge to sell their standard product portfolio, but rather are open to new solutions. 52 World Bank Group Building the Capacity of BMOs: Guiding Principles for Project Managers Since individual steps differ in several aspects regarding their implementation and related critical success factors, donors may choose different instruments for intervention during each phase. While it used to be standard practice for donors to concentrate efforts during the introductory and delivery phase of services, interventions in other phases have gained importance in recent years. It has to be understood that good results in service provision cannot be expected without sound management practices in preparing and evaluating services. 3.3 BMO Management The previous sections have outlined the importance of BMOs as instru- Background ments to aggregate, coordinate and represent the interests of small businesses as well as to organize self-help efforts. Thus far, however, BMO structures in many developing countries are of very limited use for SME development. On the one hand, numerous organizations are willing to act as chambers, federations or business associations, but they are also wasting resources by competing with each other and are too weak and unstable to represent SMEs effectively. The established larger BMOs, on the other hand, are often dominated by large-scale enterprises because they are easier to organize and bring in more economic power and political influence. 20 Based on that BMOs should develop their organizational strength and Importance of management capacities to become more effective and ensure their long- BMO term prospects. Better organized BMOs are more focused, enjoy greater management membership participation and improve their public recognition and efficiency acceptance. They are able to fulfill their responsibilities for the whole – small and large – business community and can therefore be regarded as genuine representatives of the private sector. Bad management practices and organizational weaknesses will be Typical reflected by the following typical problems of BMOs in developing problems of countries: BMO management • Low membership • Poor leadership (lack of mission statement and strategic planning) • Lack of administrative skills • No clear-cut division of tasks between honorary representatives and secretarial staff • Negligible influence on government policy • Weak communication and public relations • Unattractive services • Inadequate funds and income generation 20 ZDH/Technonet Asia (1995), pp. 14-15. 53 World Bank Group Building the Capacity of BMOs: Guiding Principles For Project Managers ______ It is important to realize that these problems should not be seen in Strengthening isolation: by reinforcing each other, they cause a vicious circle of poor BMO BMO management (see figure 4). The central problem of many BMOs management lies in the lack of knowledge of what they should do now (mission) and is a precondition what they want to become in the future (vision). In the absence of a for improving meaningful mission and vision, BMOs will attract only a few members. service Thus, they often have to cope with insufficient financial resources that in delivery or turn limits the scope for good services and advocacy. Without attractive advocacy benefits of membership, however, companies will abstain from joining the BMO or decide to quit. Therefore, efforts to strengthen a BMO's management capacity have to be given consideration in the course of every donor intervention, even when the primary objective of the promotional activity is to enhance service delivery and/or policy advocacy. Figure 4: Vicious Circle of Poor BMO Management Low membership Poor membership development Lack of strategic vision and mission Poor organization and Poor accounting lack of strategies practices No financial Bad services and sustainability ineffective lobbying Capacity building is a gradual process. Therefore, BMO management Phases of capabilities will also develop incrementally. Donors have to consider the BMO different phases of organizational development when designing suitable development interventions (figure 5). While organizations in the first phase of their development are often trapped in the vicious circle of poor management practices, BMOs in phases two and three are suitable for donor support. The phases are not always distinct, however, and BMOs may often exhibit traits from two different phases. 54 World Bank Group Building the Capacity of BMOs: Guiding Principles For Project Managers ______ Five key issues of BMO management will be analyzed in greater detail: (i) Key issues finance; (ii) membership development; (iii) strategic planning; (iv) internal organization; and (v) communications. Furthermore, the discussion will be complemented by common strategies and areas for donor intervention. 1. Finance: Quite a few BMOs keep no accounts of an acceptable professional standard and have assigned the supervision of financial procedures to untrained persons, thus resembling the situation of many SMEs in developing countries. However, members as well as other contributors (government, donors) want to know what the BMO is doing with their money. Therefore, transparent accounting is not optional but a moral and often legal requirement. 21 Figure 5: Phases of BMO Development P h a s e s o f B M O d e v e lo p m e n t 1 2 3 4 Phase S m a ll Phase C lu b P ro fe s s io n a l K n o w le d g e S e c re ta ria t S e c re ta ria t S u p p lie r • F o ru m fo r n e t- • N e tw o rk in g a n d • S e ve ra l s e rv ice s & • A c tiv e in a ll w o rk in g a d vo ca cy a d vo ca cy im p o rta n t a re a s Characteristics • F e w tra in e d sta ff Characteristics • N o o r lim ite d s ta ff • C a p a b le a n d la rg e r • P ro fe s s io n a l e xp e rts m e m b e rs s e c re ta ria t • N o o rg a n iz a tio n a l • C a n se t th e a g e n d a s tru c tu re • E ffo rts in m e m b e r- • D ive rs ifie d fo r d isc u ss io n s s h ip re c ru itm e n t, m e m b e rs h ip b a se • H ig h re p u ta tio n a n d • M a n a g e d b y b o a rd m e m b e rs b u t n o t re te n tio n • R e co g n ize d p a rtn e r in flu e n ce • L a c k o f re so u rce s fo r g o v e rn m e n t a n d e xp e rie n ce • N o in te rve n tio n s : • S u ita b le fo r • S u ita b le fo r • N o in te rve n tio n s Possible Donor B M O to o w e a k in te rve n tio n s in te rve n tio n s n e ce s sa ry Possible Donor Instruments Instruments • M o s tly c a p a c ity • M o s tly in a d v o ca cy b u ild in g m e a su re s a n d s e rv ice p ro v is io n Source: Scheme developed by the Confederation of Danish Industries. 21 See, for example, CIPE (1998). 55 World Bank Group Building the Capacity of BMOs: Guiding Principles For Project Managers ______ Many BMOs have to operate in a fragile financial environment: particu- larly in conditions of voluntary membership, membership dues have to be set at a modest level to avoid deterring prospective members and facilitate their collection. Public subsidies are threatening a BMO's inde- pendence and may undermine its efficiency. Grants by donors and members are made on a case-by-case basis and are therefore not a sustainable source of finance. BMOs, whose members predominantly consist of SMEs, would always suffer from greater financial difficulties than organizations with bigger, wealthier members. In such conditions, donors should help BMOs reform their financial Possible management practices as a prerequisite for all other capacity-building donor inter- measures. The primary objectives of reform measures include the diver- ventions for sification of income, the provision of a steady cash-flow and the ability to upgrading financial build reserves for periods of financial strain. The most common areas of management donor intervention are: • Accounting practices: BMO staff members are trained to deliver basic financial statements (balance sheets, income statements, cash flow) in an understandable, accurate and timely manner. The use of external financial accountants for more complex issues and audits is encouraged. 22 • Membership fee administration: Partner BMOs receive help in adjusting their fee schedule (categories, graduation by size of membership, flat or fluctuating rate) and in how to improve the tracking and collection of dues, e.g., by facilitating workshops and staff exchanges, but also by supporting the introduction or improvement of a membership database. • Income-generating services: The promotion of new services for members should always be used to diversify the income base of the BMO. Twinning arrangements and workshops help BMOs to learn about the step-by-step implementation of new services and how to charge them adequately (see also section B.2.1). However, donors should keep in mind the possibility of crowding out existing commercial providers. 23 22 Milner (1999), pp. 42-49. 23 Schumacher (1999). 56 World Bank Group Building the Capacity of BMOs: Guiding Principles For Project Managers ______ Case Study 6: Workshops for BMO Capacity Building The ZDH Program, a German development aid During the workshops, manuals that the ZDH project, has conducted many BMO-management Program had published on various aspects of workshops with chambers and associations in BMO work were used to provide practical many Asian countries (Bangladesh, China, India, guidance and advice. In a number of countries, Indonesia, Nepal, Philippines, Vietnam). the ZDH Program supported the translation of these manuals into the local language so that The workshops were undertaken for individual their use were facilitated. The ZDH Program also and for groups of BMOs. The latter were often supported the publication of manuals by partner organized with national BMOs. Depending on the BMOs in various countries, which could focus topics, participants were elected BMO executives more on the specifics of the individual countries or staff, but often a combination since than could the more generic ZDH manuals. implementation of the learning of these workshops requires leadership backing and staff The yearly budget of the ZDH program for the work. At times, non-partner BMOs have been cooperation with BMOs in several Asian countries invited to increase the outreach of the program amounted to US$300,000 per year (excluding all and to facilitate the transfer of knowledge from overheads as well as the cost of the regional more to less advanced BMOs. coordinator). The cost of one workshop was between US$1,000 and 2,000 covering honoraria The topics of the workshops were chosen on the and travel cost for local resource people and a basis of need with the individual BMO (e.g., contribution for co-funding the venue. training services, membership development, strategic planning) or for group events on the Lessons learned: basis of a brief survey which asked the BMOs to - Select a good mix of participants (elected make priority choices on proposed topics. In most executives and staff, experienced and less cases the workshops had more than one topic. experienced BMO representatives). Resource persons were drawn from more - Keep presentation inputs brief and restrict advanced BMOs or other relevant organizations number of participants (15 –20) to allow from the respective country as well as a few from active participation. abroad. ZDH Program staff were another resource base. - Avoid program overloading; focus on priority topics (and organize extra The duration of the workshops was typically only workshops if the demand is high). one or two days, since it proved difficult to keep elected executives present for a longer period of - Equip participants with reference material time. (e.g., forms, manuals) and include planning sessions for next steps so that Major program elements of the workshops were: implementation of the discussed inputs by resource speakers; experience sharing measures is facilitated. sessions (how is this activity done by different BMOs?); and group working periods, at which Case study contributed by ZDH Partnership plans were made about how to implement specific Program future activities by the participating BMOs. _________________________________ 57 World Bank Group Building the Capacity of BMOs: Guiding Principles For Project Managers ______ 2. Membership development: The recruitment of new members and Membership the retention of existing ones are of fundamental importance for all development is BMOs. However, membership development may be given low a must for any priority because (i) leadership is satisfied with the present status BMO quo, (ii) the BMO acts more as a social club for a few big members, (iii) small groups are politicizing the work of the organization, or (iv) the membership base in a certain region is limited. Nevertheless, an attractive membership framework is important for BMO development. 24 Membership development covers marketing efforts for new Possible donor members (corporate identity, public relations) as well as the interventions to administration of existing members (membership database, struc- support ture and payment of dues). It is not enough to attract additional membership development members every year if a comparable number of enterprises drops from the BMO's membership list. Many BMOs have difficulty dealing with such a "revolving" membership structure. To achieve a significant increase in membership, the central secretariat should therefore develop a precise strategy for the recruitment and the retention of members. Instruments for membership development which can be supported by donors include: 25 • Recruitment: Marketing and awareness campaigns need to be conducted on a regular basis. Donors can offer manuals and training measures for new marketing instruments, e.g., member-to- member self-recruitment systems. With the help of consultants and experts BMOs can also be encouraged to make consistent use of branding techniques and logos, e.g., by issuing membership certificates. • Retention: Existing members need to be cared for intensively in order to give them a sense of ownership and allow for their participation. Technical assistance from donors will often be required to initiate membership satisfaction surveys that evaluate the BMO's performance. The organization of a hotline for complaints and inquiries is another instrument for enhancing members' confidence. • Administration: Membership administration will be much easier with a comprehensive and up-to-date list of members. Donors can develop electronic general-purpose database systems tailored to the specific needs of a particular organization. Such an electronic information system can also be used to upgrade other BMO services, e.g., by developing an electronic matchmaking tool. Finally, BMOs should think about appointing a specialized membership officer. Donors can help their partners find a suitable person and train the officer. 3. Strategic planning: Just like other public or private organizations, Strategic BMOs have found that planning instruments are a valuable tool for planning their development. With the help of strategic planning, a consensus about the organizational priorities can be reached among the stakeholders of a BMO. This helps to keep activities focused and 24 See, for example, Ernstthal and Jefferson (1988). 25 See also Schumacher (1997). 58 World Bank Group Building the Capacity of BMOs: Guiding Principles For Project Managers ______ reduces transition problems from one set of leaders to the next. 26 The most common tools for strategic planning are the BMO's vision (general ambitions), mission (more detailed objectives), work plans, and budget statements. Strategic planning does not have to be regarded as a highly technical exercise for bigger BMOs but can also be introduced step by step. Experience has shown that successful planners use realistic assumptions, monitor their leaders' impact, and make sure that leaders commit themselves to the strategic planning elaborated by BMOs. 27 Strategic planning is particularly important for newly created BMOs, How donors which are continuously expanding their functions and their staff. can support The short-term objective of strategic planning is an efficient planning efforts coordination of resources inside the BMO. However, as a long-term objective, it will also help to build a consensus about the key priorities to keep the BMO focused and directed among the BMO's stakeholders. Donors may support planning efforts in the following areas: 28 • Membership survey: Planning needs accurate background information about the performance of the BMO and the demands of its members. Donors may commission surveys to deliver the necessary information. • Strategy workshop: Based on the results of the membership survey, a planning workshop can be organized in which leading board and staff members participate and develop a consensus on the BMO's vision, mission statement, and long-term priorities. Donor representatives may act as counselors during these workshops. • Preparation of a business plan: A business plan outlines future activities (in a specified manner), a time frame, budget and training requirements. Short-term experts can help BMOs draft better business plans. _______________________________ 26 Milner (1999), p.83 27 See, for example, Ernstthal and Jefferson (1988). 28 Milner (1999), pp. 82-98. 59 World Bank Group Building the Capacity of BMOs: Guiding Principles For Project Managers ______ Case Study 7: Successful Transformation from a Public Authority to a Market- Driven Service Provider In the course of only ten years, the Latvian The preparation of job descriptions, staff training Chamber of Commerce and Industry (LTRP) by German experts, and internships in Germany transformed from a state-controlled authority with were important instruments to qualify the staff for less than 200 member enterprises to a modern the new tasks. market-oriented service provider with nearly 900 Furthermore, member committees were intro- members. duced as a completely new instrument for elabo- In 1990, most of its members were large state- rating the chamber's position on important eco- owned enterprises. Today, the majority of its nomic issues. The committees not only led to membership is made up of private small and closer membership involvement, they also helped medium-scale enterprises of all branches of the to recruit volunteers and made sure that the economy. The LTRP established seven regional chamber's position truly reflected the use offices and became one of the few business members made of it. organizations with a functioning regional network The yearly cost of the project amounted to in the country. It became more respected by the US$10,000 excluding overheads. The project government, was consulted in the legislation went on for 8 years (1993 to 2001). The most process and acted in advisory committees as the important tools used in assisting the Latvian representative of the interests of the private chamber were short-term expert assignments economy. recruited from the German chambers of Financing and the necessity to generate income commerce network, co-funding for the were not an issue in Soviet times. Today, the establishment of new branch offices and training LTRP does not receive any subsidies from the facilities, study visits for Latvian chamber staff to government. Chamber membership is voluntary. Germany and the United Kingdom, and training Income from membership fees is not guaranteed for elected officers and staff of the chamber. and covers about 22 percent of the chamber's Lessons learned: budget. About 14 percent is contributed by the issuing of certificates of origin. The LTRP made - Financial sustainability and independence big efforts to build up attractive services and lie at the heart of the transformation established is own training center. Nowadays, process. LTRP is thus able to generate approximately 64 percent of the chamber income from services - Twinning arrangements are long-term (information services, foreign trade documents, activities, because capacity building consulting on business promotion, trade missions, requires patience and time. fair participation, publications, training courses in - Voluntary membership participation as office work, IT, quality management, marketing, office bearers or committee members is etc.). crucial. The precondition for successful change was the - It may be more effective to transform an development of the chamber into a member- already existing BMO than to establish a driven organization. Long-term twinning with a new organization. German chamber facilitated the reform process. Most important were the introduction of a voluntary board elected from among the members, a clear division of tasks between the Case study contributed by SEQUA board and the staff, and delegation of the day-to- ______________________________ day management to the professionals. 60 World Bank Group Building the Capacity of BMOs: Guiding Principles For Project Managers ______ 4. Internal organization: A well-structured work flow and division of Internal responsibilities between executives and staff members (as laid organization down in the bylaws and job descriptions) are crucial for the efficiency and success of BMOs. If the secretariat is strong and well organized, it may become the main vehicle to deliver outputs and relieve voluntary representatives from day-to-day activities. But there are many BMOs whose internal structures are not very clear- cut, whose boards do not delegate responsibilities to staff members and where the style of work differs significantly between the BMO's stakeholders. Therefore, a suitable CEO with strong leadership skills, an attractive work environment for staff members and an efficient internal communication are necessary ingredients of a well- functioning BMO. Donors may support BMOs in their efforts to assign clear tasks and Donor instru- responsibilities – especially with regard to a separation of the roles ments for im- of the secretariat and board – and to improve the work of the staff proving the members by implementing effective administrative systems and internal or- ganization forming strategic partnerships with external service providers. 29 • Secretariat organization: Job descriptions and more detailed work plans need to be prepared to structure operations. Experts from "sister" BMOs (or external experts) may assist the certification of the internal processes of an organization (e.g., ISO 9000) to achieve and maintain a higher quality standard. • Administrative systems: In case the BMO faces bottlenecks regarding qualified staff or equipment, donors can help in the recruitment of qualified professionals and co-finance more modern equipment, e.g., workstations or internet services. Strategic partnerships: To keep a BMO's activities focused, it will be inevitable to make use of external partners in case of very specific or complex issues. These can be commercial service providers, other BMOs, universities, etc. Donors should share their information on these strategic partners with BMOs and facilitate contacts and meetings between them. 5. Communication: Communication with the public is quite often a Communication low priority for BMOs. Apart from the lack of relevant skills and re- sources, there may still be quite a few representatives who think that communication is a natural byproduct of other activities. Well- designed communication programs let people know about the mis- sion and achievements of a BMO and will help it reach its potential as well as gain reputation. Communication efforts may take various forms but are most commonly delivered by public relations activities, sponsoring, media events, advertising or meetings. For BMOs in developing countries, newsletters, annual reports and Web sites are the most frequently used modes of communication with the public; the mass media (radio, TV, newspapers) are a lesser used instrument. The messages of the BMO should be delivered competently to stand out from the plethora of other messages released every day. 29 See Tan (2000). 61 World Bank Group Building the Capacity of BMOs: Guiding Principles For Project Managers ______ Generally, a donor can help to develop an overall communication Possible donor concept and improve the information process, both internally within interventions for the membership and externally toward the public. 30 More improving specifically, communication • Communication concept: It can help BMOs to create a comprehensive public relations and information strategy. This includes a decision on the basic information to be delivered, the selection of the right communication channels as well as the formulation of targeted and easily understandable messages. PR consultants may help at this stage. • Internal communication: Newsletters and annual reports are effective tools to communicate regularly with members (and nonmembers). Donors can train BMOs in publishing interesting information regularly. When delivered in a cost-efficient and successful way, BMOs may generate some money with the help of these services, e.g., by advertising. • External communication: The means here include both printed and electronic information material, which specialists can assist in developing. For example, a donor can provide financial and technical support to set up a Web site or to develop press kits and presentation material. However, the donor should ensure that the concerned BMO has sufficient resources and qualifications to maintain the quality of the information material or electronic presentation. Donor intervention in the field of BMO management is always a sen- sitive issue, because it may interfere with the partner's autonomy and self-reliance. Participatory planning and co-funding are good practices to ensure that the recipient has a genuine interest in the intervention. It is also important that support measures are chosen in accordance with the wishes of the BMO's constituency – the members. These aspects reinforce the significance of a careful partner choice. 30 Milner (1999), pp. 51-67; Wong Chin Yeow (2000). 62 World Bank Group Building the Capacity of BMOs: Guiding Principles For Project Managers ______ Case Study 8: Introducing an Administrative Database for BMOs in Ghana A simple but essential tool for day-to-day It is now possible to distinguish paying from management of a business association is an nonpaying members, make strategic planning for efficient and user-friendly membership acquisition and retention, and streamline database and clear guidelines and administrative procedures and costs. responsibilities for updating the database. The The administrative database was set up as a minor Confederation of Danish Industries (DI) has part of the Twinning Arrangement between AGI and developed a generic membership database DI. This project took place from 1999 to 2002 and that can be tailored to the specific needs of was funded by the Danish International Development various organizations. Agency (Danida). Before the Association of Ghana Industries The database has also been implemented in a (AGI) improved their handling of membership, number of other DI partner associations. over half of the members failed to pay up their annual subscription fees. The introduction of a The total annual cost of this project amounted to membership database provided the US$200,000. The cost of developing the database administrative basis for increasing the number including the training provided for the local staff was of members paying their subscription fee from US$14,500. 43 percent to 95 percent over a three-year period, raising the annual membership fee Lessons learned: revenue by 128 percent. - BMOs can improve their administrative per- The database was developed by DI with assis- formance with the help of innovative software tance of an AGI membership officer. DI tools. provided manpower, know-how, hardware and - These tools should be tailored to the specific software to the project. During a two-week needs of the BMO, but they have a high potential stay in Ghana, DI experts developed and for cross-marketing efforts by donors. programmed the database interface. Through train-the-trainer method, users were educated - Careful documentation and training are and AGI staff became familiar with the use and necessary to ensure that knowledge is advantages of an administrative database. transferred to the BMO. Documentation and manuals were made in order to secure conservation of the knowledge in AGI. Case study contributed by the Confederation of Danish Industries The database has been customized for AGI, and it now enables the association to keep up- to-date records of all members at all times. 63 World Bank Group Building the Capacity of BMOs: Guiding Principles For Project Managers ______ C. Impact Assessment of BMO Projects 1. Rationale for Impact Assessment "Impact assessment (IA) requires too much time." It is a "complex and What have we difficult process to relate impact to our actions" or "in the end, we will achieved as end up assessing impacts rather than producing anything specific and result of the meaningful for our project partners." These are what some project project? managers say when asked to design and implement such systems within their projects. On the other hand, senior management at headquarters and donors are faced with a public increasingly concerned with proper utilization of taxpayers' money: "What, in the end, have we achieved, and was it worth our funding?" The debate on impact assessment is not a new phenomenon, but never has public pressure been so strong to effectively incorporate impact assessment into the design and day-to-day activities of development organizations, as today. Increasing budget constraints are spurring efforts to assure the effective use of public money. Thus, donors worldwide are concerned with developing systems of impact assessment, which, while providing funding and supervising agencies information on project results, also convince field staff that monitoring impact is necessary and generates a lot of useful information for their programs. More specifically, impact assessment deals with gathering and analyzing information to ascertain and measure the impact caused by the project. Impact assessments typically address the following questions: 31 • Has the project achieved its intended goal? Central questions • Can the changes in outcomes be explained by the project, or are they the result of other factors occurring simultaneously? • Do project impacts vary across different groups of beneficiaries (e.g., micro, small or larger companies; specific branches) and regions and over time? • Are there any unintended effects of the project, either positive or negative? • How effective is the project in comparison with alternative interventions? • Is the project worth the resources it consumes? 31 See World Bank Group's site on impact evaluation in programmes targeted at poverty alleviation www.worldbank.org/poverty/impact/overview/intro.htm 64 World Bank Group Building the Capacity of BMOs: Guiding Principles For Project Managers ______ Although funding agencies have a distinct interest in being informed of Target group or the final effect of any intervention, other groups exist among the target users of impact group or users of impact assessments, including the project assessment beneficiaries who are commonly micro, small and medium businesses, some of which may also be members of the association or chamber; board of directors of the BMO, project staff and BMO staff, for whom IA will be a powerful management tool, alerting them to whether the project is still on the right track and whether the designs and activities need to be adjusted; and finally program and project managers for whom a good IA system provides an excellent source of information and is therefore an important prerequisite for drafting sound reports. 2. Definition and Scope of Impact Assessment The goal of impact assessment is to observe and analyze changes and impacts occurring at the final and intermediary target group levels. These changes may be positive or negative, intended or unintended, or a result of the project intervention or external factors. Impact assessment asks: • What kind of changes occurred and who is affected by them, Definition • How these changes occurred, • Whether and to what extent the identified changes are attributable to the project's interventions, and • Why some of the intended changes did not materialize Some may argue that changes are already being observed by existing Impact project monitoring systems and may therefore ask "what the essential assessment vs. distinction is between this and impact assessment." The answer is that project the major difference lies in focus and scope. Project monitoring monitoring focuses on project performance in terms of service delivery. "Did we manage to get the training program on track according to our operational plan?" or "Has the media campaign already begun and have press releases been disseminated widely enough?" are typical questions addressed by a monitoring system. Impact assessment is different. It tries to analyze the effect of the Concentration project's activities on the final target group, e.g., micro, small and on final target medium enterprises (SMEs) and the intermediary target group, i.e. the group business membership organizations. Typical topics addressed by impact assessment systems include: "Are SMEs improving their performance?" or "Are member companies making effective use of the BMO counseling services and, as a result of this, improving their performance?" Or "Has the BMO effectively been strengthened and, thus, gained more influence with government and public administration?" 3. Challenges Involved in Impact Assessment Although the advantages of impact assessment as a learning and Challenges steering tool seem to be quite obvious, such systems may also involve certain challenges that may undermine their usefulness. The following table presents an overview of the most common challenges and some practical hints of how to tackle them. 65 World Bank Group Building the Capacity of BMOs: Guiding Principles For Project Managers ______ Table 6: Common Challenges Associated with Impact Assessment Systems Challenge How to tackle them 1. The system is complex, The system needs to be simple; working with plausibility is often time-consuming and more cost-effective than applying scientific methods. The clearer expensive and is therefore and more realistic project targets, results, and related indicators encountering a lot of are, the easier it will be to design a simple impact monitoring resistance on the part of the system. BMO. 2. Problems in attribution. BMO projects are only one among many other factors shaping Achievements in SME the environment for SMEs. Therefore, if SMEs are, for example, development are wrongly recording excellent growth rates of 8% per year, this may be attributed to the BMO mainly a result of a growing world economy rather than the project. BMOs' efforts of reducing bureaucratic red tape. So in interpreting the results of the impact monitoring, one has to take into account a whole range of factors and carefully identify those that are project-related. 3. The project itself is too A good impact assessment system requires realistic planning ambitious and therefore and the establishment of clear objectives at the beginning. unrealistic impact is Establishing a very ambitious objective will likely tempt project expected. managers to construct unrealistic impact and results. 4. "Low impact" impact There are two recommendations that might ease the problem, assessments – results and one more technical and the other more personal in nature: recommendations of the • Short, target-oriented impact assessment reports using impact monitoring is not simple terminology and straightforward recommendations intervening in project will make it easier to transform results into action. design and management • IA systems should be designed in a participatory manner, involving field staff actively. This will foster acceptance of the impact assessment. 4. How to Measure Impact: Program Logic Model for BMO Projects 4.1 Impact Assessment and Program Logic Model In the preceding section, we have outlined the rationale of IA and Impact highlighted some of the potential challenges involved in the Assessment establishment of such systems. Once we are determined about the Framework necessity of establishing such systems we need to define the program logic that will be part of the Impact Assessment Framework. The table below illustrates how the Impact Assessment Framework should look like. 66 World Bank Group Building the Capacity of BMOs: Guiding Principles For Project Managers ______ Figure 6: Impact Assessment Framework Impact Assessment Framework Activities/ Goal Objectives Output Outcome Impact Inputs Impact: Outcome: Desired final Output: The expected change. Direct results effect. Measures the Objectives: from the Measures the achievement Goal: What should Activities/ Activities. achievement of Goals. What do we be Inputs: want to Have of Objectives. Has effect implemented Physical change? immediate or Observed within 3-5 to achieve the actions and short term during the years or desired resources effect during project life longer after change? the project and up to 3 completion, timeframe. years after rarely during completion. the project timeframe. Source: adopted from Geeta Batra and Mark Bardini, SME Department, World Bank/IFC When designing the project with a BMO we would need to identify from the very beginning the goal and objectives of the project. What do we want to change and how are we going to achieve these changes? Once we have defined a clear goal and objectives, we would need to use program logic to tract the whole cycle of our interventions, that will lead to the final results (impact) and the achievement of our goal. The program logic is composed of four elements: • Inputs/Activities refer to financial, human, and other resources Program Logic needed to implement the project as well as particular actions or activities Model needed to achieve the outputs. • Output is the direct results/deliverables from the inputs or activities. Have immediate or short term effect during the project timeframe. • Outcome is the expected effect directly caused by the project outputs. Measures the achievement of Objectives. Outcomes are observed during the project life and up to 3 years after completion. • Impact is the desired final change. Measures the achievement of Goals. Has effect within 3-5 years or longer after completion, rarely during the project timeframe. The following table describes some of the general indicators (each project would use different ones) that could help us monitor the development of the project using the Program Logic and each of its elements. In the following chapter we will focus on how to use the Program Logic specifically in BMO projects and the kind of indicators that we should be looking at. 67 World Bank Group Building the Capacity of BMOs: Guiding Principles For Project Managers ______ Figure 7: Program Logic Model Program Logic Model Activities/ Output Outcome Impact Inputs • Human • Products • Change in • Increased Resources knowledge financing/sales • Studies/reports and/or behavior • Financial • Increased • Legislations • Improved Resources employment drafted practices • Material • Increased • Training • Increased Resources Profitability services • Improved legislation Source: adopted from Geeta Batra and Mark Bardini, SME Department, World Bank/ IFC After a brief introduction on the general characteristics of BMO projects, the following sections demonstrate how the Program Logic is used for three different areas of intervention with BMOs. 4.2 Logic Model Applied to BMO Projects 4.2.1. General Characteristics of BMO Projects BMOs can promote SME growth through facilitation or direct provision BMOs as of selected demand-driven services. They also promote advocacy instruments aimed at creating a better business environment. BMOs are in a for private position to play this "dual role," because they are intermediaries serving sector promotion as networking and self-regulative bodies. This combination of strengths makes them effective tools in accelerating the growth of private sector firms. However, BMOs in developing countries are typically characterized by poor organizational capacity and technical skills, a lack of proper accounting systems and good governance, and a demand-driven orientation, resulting in low sustainability. The development objective of BMO projects is to improve the functioning of BMOs and create a better environment for their growth. As described in previous chapters of the guide, the most important areas for donor intervention when working with BMOs are the development of selected services, advocacy, and BMO management. 4.2.2. Advocacy In most developing countries, SMEs, in particular, are unable to realize Business their full potential due to distorted and/or over-regulated markets. BMOs enabling can therefore be instrumental in expressing the concerns and needs of environment the whole private sector, especially SMEs. For the purposes of this manual, we are assuming the (fictional) case of an association for the wood-processing industry. The industry is of 68 World Bank Group Building the Capacity of BMOs: Guiding Principles For Project Managers ______ major importance to the region as an employer and generator of foreign exchange. However, the competitiveness of the industry on the local as well as international market is jeopardized due to the combination of various factors. One of them relates to the economic and institutional environment--the police are arbitrarily fining companies transporting raw timber by misinterpreting the existing legislation. Apart from this, foreign organizations find it very difficult to establish eco-labels in the country, as a result of complex legislation. The association, in an effort to secure medium-term credibility of the industry, wants to cooperate with these organizations. What would the basic Program Logic of an intervention aimed at improving the situation look like? Figure 8: Program Logic Model for Advocacy Program Logic Model for Advocacy Activities/ Output Outcome Impact Inputs • Assessment • Proposal to • Modifications to • Business of the include in the the law passed Environment in possibility of legislation in Parliament the Wood certifying references to and implemented Sector has wood with certified wood allowing for improved eco-labels to products certification with eco-labels • Growth of wood expand the exports export markets BMOs around the world have developed a large number of different Business membership services as described earlier. As described earlier they can support be classified into (i) trade and market development, (ii) training, (iii) services consulting and advisory, (iv) information and networking, (v) office facilities and infrastructure services and (vi) delegated government functions. For the purposes of this manual it is assumed that the BMO after doing a needs assessment or a baseline survey has identified a specific need for management and technical training. It is done by cooperating with a public technical training school and two small, private training providers. The logic of intervention in this specific field of services is exemplified in the following graph: 69 World Bank Group Building the Capacity of BMOs: Guiding Principles For Project Managers ______ Figure 9: Program Logic Model for Training Program Logic Model for Training Activities/ Output Outcome Impact Inputs • Define specific • Training • SMEs are • Sales in the training needs program is increasingly sub-sector are delivered and making use of growing and • Contact up-to-date meets the competitiveness potential training marketing, interest of has improved providers design and SMEs as SMEs have • Draft a training modern wood- enhanced program processing technical quality techniques and design of • Define gained through their products participants' fee the training 4.2.3. BMO Management Most BMOs in developing countries have yet to develop their organizational BMO strength and management capacities to become more effective and ensure organizational their long-term sustainability. Better organized BMOs are more focused, enjoy strengthening greater membership participation, and improve their public recognition and acceptance as stated earliest. Typical fields for donor intervention include (i) finance, (ii) membership development, (iii) strategic planning, (iv) internal organization, and (v) communication. It is assumed here that the association of the wood-processing industry has identified a need to improve its internal organization. The cooperation between professional staff and the Board of Directors is partly hampered by the fact that the former are not acting autonomously within clearly defined limits, but depending on ad-hoc instructions from board members. Sometimes staff cannot do anything, because there is simply no one available to provide instructions. Greater executive autonomy for the staff implies a sense of responsibility on their part and the technical capacity to meet this higher demand. Thus, staff training seems to be a prerequisite to making internal restructuring a success. The Program Logic that would describe the intervention in this area would be the following: 70 World Bank Group Building the Capacity of BMOs: Guiding Principles For Project Managers ______ Figure 10: Program Logic Model for BMO Management Program Logic Model for BMO Management Activities/ Output Outcome Impact Inputs ▪ Develop a new ▪ The BMO ▪ Membership ▪ SME's competitiveness restructured its increased competitiveess chart internal is strengthened organizations as their needs ▪ Draft job are taken care descriptions of in a more effective and ▪ Board of Directors participatory discusses way by the proposals and BMO takes final decisions 4.3 Indicators and Methods of Impact Assessment 4.3.1 What are Indicators Indicators form the core of any IA because they are used to measure Role of whether and to what extent any impact can be recorded. Indicators are indicators "quantitative and qualitative measures that describe how well a program is achieving its objectives". 32 For instance, people can have diverging opinions on what "strengthening competitiveness" means. One may insist that this goal can best be assessed by analyzing changes in the returns on investment of the association's member companies; others may feel that changes in the cost structure and the quality and origin of customers are indicators in this respect. Therefore, it is important to carefully define how to measure the project's advances and seek a common understanding on this among the major stakeholders Indicators are objectively verifiable in the sense that when different people follow the rules defined to assess indicators they should come to the same conclusions independently of each other. 32 Geeta Batra and Mark Bardini, SME Department World Bank/IFC 71 World Bank Group Building the Capacity of BMOs: Guiding Principles For Project Managers ______ 4.3.2 Methods and Instruments to Measure Impact Assessment The definition of indicators does not solve the problem of how the necessary data to verify the indicators are obtained and analyzed. The table below provides an overview of the different methods (indicators) and instruments that are most common to measure the impact of a project. Table 7: Indicators and Methods of Impact Assessment Approaches or Quantitative Indicators: Qualitative Indicators: measures of quality Methods measures of quantity Data Collection • Written Document • Interviews Instruments for Analysis • Testimonials Impact • Questionnaires • Focus Groups Assessment • Surveys • Observation • Census • Case studies Example The number of training courses The satisfaction of the that the BMO offers to its members regarding the training members has increased by 25%. courses has increased by 25%. The distinction between quantitative and qualitative indicators is also Quantitative important. At first glance, this seems confusing. Is quantity not always vs. measured by indicators? While this is correct, the distinction relates more to Qualitative the character of the information collected. An increase in training courses by 25% can be evidenced by hard facts, but assessing if these training courses were satisfactory to members entails a considerable degree of subjectivity and is therefore treated as qualitative. These approaches or methods have inherent strengths and weaknesses that are briefly presented in table 8: 72 World Bank Group Building the Capacity of BMOs: Guiding Principles For Project Managers ______ Table 8: Major Strengths and Weaknesses of the Methods Method Strengths Weaknesses Quantitative • Statistically robust • Statistical complexity methods • Use of a counterfactual • Danger of selection bias that can affect reliability • Simplicity in interpretation • Can be expensive • Can draw on existing data Qualitative • Provides insight into • Quite subjective methods processes and people's • Lack of a comparison group "minds" • Small sample sizes limit generalization • More methodological flexibility • Can be conducted in a participatory way In reality, project managers are probably more concerned with Instruments instruments for data collection than with selecting the general approach. for measuring These instruments generate the necessary information fed into the IA system. The following relevant instruments can be used for BMO projects: • Case Studies: In-depth information is collected on a single or small number of cases. For example, it may be the description of a small company and changes in its organization and management after its owner participated in a management training course. • Focus groups: These are small groups of people with similar characteristics who belong to the target group (e.g., entrepreneurs, employees). Information is collected by discussing issues relevant to assessing impacts likely to be induced by the project and recording the results. Focus group meetings save time compared to individual interviews; their dynamics also differ from individual meetings. • Observation: Information is collected not by recording verbal or written statements with figures, but by visual evidence. For example, a carpenter is about to participate in a training course on organization. The state of his workshop is documented by taking photos before the course and six months later. The comparison of the pictures documents that many changes have taken place: the workshop has become cleaner, the machines are placed in a more logical sequence, illumination has improved, and so on. • Questionnaires: A questionnaire is a set of questions in a logical sequence on one or several specific issues. They allow for a systematic analysis and documentation of the responses, particularly if the sample is quite large. Questionnaires often serve as supporting tools for interviews and surveys, sometimes for focus group meetings as well. They can be composed of closed ("Have the services delivered by the BMO been good or bad") or open ("What do you think about the services?") questions. 73 World Bank Group Building the Capacity of BMOs: Guiding Principles For Project Managers ______ • Surveys: A survey is a systematic study on a specific topic. It has two essential characteristics: sample sizes are quite large and the design of the survey allows for an easy compilation of the data obtained (e.g., by constructing questionnaires with closed questions). An important method for using this instrument is to conduct baseline and follow-up surveys ("before and after"). For example, collecting data on essential characteristics of the companies of a certain sub sector (e.g., number of employees, turnover, installed capacity) before the intervention and conducting the same survey one or two years later would produce some information on the development of the sector during the intervention period. • Written document analysis: This instrument allows for a review of existing written information. The analysis of data published by official statistical offices is one example; other sources for written documents are the administrative databases of the BMO, training materials, correspondence, and so on. Thus, this tool can include the analysis of external primary and secondary information as well as internal documents of the BMO. 74 World Bank Group Building the Capacity of BMOs: Guiding Principles For Project Managers ______ The following table gives an overview of the main data collection instruments and their respective strengths and weaknesses. Table 9: Main Data Collection Instruments for Impact Assessment Instruments Major strengths Major weaknesses Case • Can deal with a full variety of evidence • Good case studies require highly studies: from documents, interviews, and obser- skilled people vation • Findings cannot be generalized • Can add explanatory power when focus • Time consuming is on institutions, processes, programs, • Difficult to replicate and decisions Focus • People and institutions can explain their • Can be expensive and time con- groups: experiences in their own words and suming settings • Must be sensitive to the mixing of • Flexible: allows interviewers to pursue hierarchical levels unanticipated lines of inquiry and depth • Cannot be generalized • Particularly useful where participant interaction is desired Interviews: • Same as focus groups • Can be expensive and time con- • Greater likelihood of getting input from suming senior officials • If not done properly, the interviewer can influence interviewee's response Observation: • Provides descriptive information on • Can be time consuming context and observed changes • Quality and usefulness of data highly dependent on the observer's observational and writing skills • Findings can be open to interpre- tation Question- • Can reach a wide sample simultaneously • Quality of responses highly de- naires: • Allows respondents to think before they pendent on the clarity of questions . answer • Sometimes questionnaires are not • Can be answered anonymously returned • Impose uniformity by asking all respon- • Can involve forcing responses into dents the same things predetermined categories Surveys: • Can reach a wide sample • Can be expensive • The use of "before and after" studies can provide valuable information on impact Written • Can be inexpensive • Can be time consuming document • Can identify issues to investigate further • Information can wrongly suggest analysis: • Can support respondents' perceptions statistical robustness (e.g., official statistics in many developing coun- tries) Source: Adapted from Baker (2000) Some of these are confined to a specific method (e.g., case studies to qualitative methods), while others can be applied across all of them (e.g., questionnaires). Project managers therefore have different options to mix approaches with methods. Table 10 provides an example of the variety of options to assess a single indicator. 75 World Bank Group Building the Capacity of BMOs: Guiding Principles For Project Managers ______ Table 10: Example of Methodological Options to Assess an Indicator Indicator Method and instruments Options of methods SMEs record Quantitative: baseline survey Conduct baseline survey on sales of a significant sales growth of using structured question- number of SMEs (e.g., 80) that agreed to be at least 15% naires. surveyed and are located near the BMO's after having headquarters (non-random selection). After two benefited from years of having utilized the BMO's services, the BMOs consul- survey is repeated and compared with the base- tancy services line data. in a period of 2 Qualitative: Focus group Conduct meetings with small groups of SMEs years. meeting and individual using the BMO's services in order to explore interviews using semi- whether these affected the sales of the SME. structured questionnaire The same is done individually with a few other owners of SMEs. A questionnaire is used. However, according to the dynamics of the meetings/interviews, other questions are also posed and the responses recorded. The choice of the right methodology mix depends on factors such as the availability of data, time, and money. As regards BMO projects, statistically very complex, time-consuming, and expensive methods of IA should be treated with caution as the cost of the IA should be in proportion with the often strained budgets of such projects. Additionally, BMOs depend to a large degree on voluntary work, which further limits their capacity to deal with sophisticated IA systems. 4.3.3 Practical Example: Methods of Impact Assessment for any Type of BMO Project The preceding chapters have demonstrated a variety of existing methodological options and instruments. The following table is a final illustration of methods, instruments and indicators that could be used to assess the impact in any type of BMO project. However, we must add a few words of caution with regard to measuring impact with the indicators provided in the table. Task managers should be cautious and aware that the impact from the work with the BMO might be influenced by external factors and might be the single consequence of the capacity building provided with the technical assistance project. It will be difficult to prove by a project manager that the competitiveness of SMEs have improved due to the training provided by the BMO to its members, or that the business environment has improved in the country due to the policy advocacy work of the association. There is no counterfactual that supports this. Therefore, it has to be taken with caution. 76 World Bank Group Building the Capacity of BMOs: Guiding Principles For Project Managers ______ Table 11: Outcome and Impact Indicators Expected Possible indicators Feasible approaches and data outcomes collection instruments from BMO projects (project objectives) Service General: Written analysis (financial records, delivery is - Increase in number of clients project reports) and questionnaires improved. - Increase in revenues from service fees (evaluation sheets), which can be - Increase in range of services combined with interviews of a - % of evaluations by clients that are selected group of clients positive - % of cost recovery - Costs per unit delivered compared to other providers Training courses/workshops/ seminars: Written document analysis (training - Number of training courses conducted reports and financial records) - Number of participants trained - % of cost recovery Information services: Written analysis (records of the - Number of written requests for written requests, membership information from members directory, newsletter, project reports, - Internet connection and financial records) - Membership directory (e.g., less than two years old) - Existence of a regular newsletter - Number of publications - % of cost recovery on publications - Number of specific or general information/awareness raising events Trade facilitation (trade delegations, Written document analysis (reports of business-to-business meetings, fairs, the events and financial records) and exhibitions): - Number of events - Number of exhibitors - Number of visitors - Total budget for events - Total profit on events - Profit/budget x 100 - % contribution of income from events to total income of BMO Advisory services: Written analysis (documentation of - Number of requests received the requests and consultancies as - Number of consultancies given to well as financial records) clients - % of cost recovery 77 World Bank Group Building the Capacity of BMOs: Guiding Principles For Project Managers ______ Advocacy - Number of issues advocated Written document analysis (position has - Number of position papers / draft papers, press clippings on hearings improved. legislations presented to government and interviews, and approvals by authorities funding organizations) - Number of public hearings in which BMOs participated - Number of press clippings - Number of interviews given to the media - Number of successful project proposals submitted to national or international donors - BMO Representativeness: Written document analysis management - Increase in renewal of memberships or (membership records and statistical has become increase in number of members paying information on number of enterprises more their contributions on time in the region/sector) professional. - Increase in % of members as part of all enterprises in the region/sector covered by the BMO - % of satisfied members Financial sustainability: Written document analysis (financial - Increase in revenues from services and records) membership dues - Decrease in dependence on public subsidies/individual sponsors - Annual plan of expenditures/ revenues - Proper accounting system installed Legitimacy: Written analysis (report on annual - Regular democratic board elections assembly and committee meetings) take place Individual interviews/focus group - Committee meets at least (how often?) meetings and/or surveys on a year members' views (all of which require - Regular inquiries on members' views a questionnaire) Capacity building/personnel: Written document analysis (project - Visible dissemination of mission reports, staff files, training program) statement - Written annual plan - Number of capacity building workshops organized by BMO - Number of staff members trained - Increase in number of qualified professional staff employed - % of professionals with job description - Decrease in fluctuation 78 World Bank Group Building the Capacity of BMOs: Guiding Principles For Project Managers ______ Expected Possible indicators Feasible approaches and data impact from collection instruments BMO projects (project goal) Competitive- - Turnover Quantitative methods using ness of - Profit (net and before tax) baseline/follow-up studies SMEs has - Number of products sold Qualitative methods if "hard" evidence improved. - Return on investment is difficult to obtain - Changes in companies' cost structure Data collection instruments: - Changes in fixed assets All with the exception of observation - Access to the formal banking system techniques Socially - Number of jobs in formal and/or Quantitative methods using acceptable informal employment baseline/follow-up studies as well as employment - Changes in salaries "before/after" studies. has risen. - Characteristics of jobs Qualitative methods for 3rd indicator (skilled/unskilled, types of jobs) Data collection instruments: All are applicable; for the first two indicators, written analysis based on official statistics quite cost-effective The project - Environmental situation has modestly Quantitative methods using has improved due to member companies baseline/follow-up studies as well as contributed increasingly adhering to environmental "before and after" studies to laws and Agenda 21. 33 Qualitative methods if "hard" evidence environmen- is difficult to obtain tally Data collection instruments: sustainable Questionnaires, focus groups and development interviews . The - Legislative framework has been Quantitative methods using Business improved baseline/follow-up studies as well as Environment - Private sector is involved in the "before and after" studies has decision making process of business Qualitative methods for other improved regulations indicators - Public institutions have become more Data collection instruments: responsive to the private sector needs All are applicable - Public services to businesses have become more transparent and effective 5. Impact Assessment and Project Management As sketched out before, IA is a project management tool that may be IA throughout used in all phases of the project. Each stage of the project cycle the Project demands specific activities with regard to IA. Following is a brief Cycle description: 1. Identification: The starting point is the identification of a project or the generation of an idea that may finally evolve into a project. At this early point of the project cycle, IA does not yet play any role, as the birth of a project should be based on considerations regarding necessities and demands of the final target group, rather than on more technical issues such as IA. 2. Design and appraisal: The second stage of the project cycle is Start with very important because you are building the conceptual foundations impact 33 See http://www.un.org/esa/sustdev/documents/agenda21/index.htm 79 World Bank Group Building the Capacity of BMOs: Guiding Principles For Project Managers ______ of the project at this point. The better the design of the IA system assessment (even at this still early phase) and the better stakeholders are early informed and integrated into its design, the easier implementation will be. In the past, methods of IA have not constituted core issues of appraisal missions; in the future, this is likely to change. Ideally, appraisers should return from their missions with a detailed outline on the IA system for the project they are going to propose and an idea of what it will cost. This is easier said than done because it means that during such missions more time will be devoted to IA at the expense of other equally important topics. In practical terms, one could think of adding a section on IA to the project planning workshop, which is usually part of any appraisal mission. After having identified the overall objective, project purpose, results, and activities, one of the appraisers could do a presentation on the major features of IA. At this point it would be critical to hint at the importance of indicators as reference points for the assessment. The appraiser could briefly introduce some methods of IA and then ask the participants to come up with ideas on applicable methods for the project under discussion. It is likely that the workshop would not be able to design the system in detail; this would have to be left to the appraisal team and the project management team. However, having already introduced the issue in such a participatory manner will pave the way for its smooth implementation. 3. Approval: At this point, the funding departments or agencies are analyzing the findings of the appraisal mission and are taking the final decision on the proposal. In the future, the quality and credibility of the IA system will most likely be considered a significant aspect of the general project design. Often, there is intense interaction among the stakeholders at this stage, and as a result, the initial proposal for the IA system may undergo a number of changes until it is deemed technically feasible and able to produce the needed data. 4. Implementation: The log-frame matrix, further detailed by an Reserve some operational plan, is now put into practice. If the IA system is (partly time and or wholly) based on baseline studies, the first three to six months will money for be devoted to produce them. Although project managers are focused impact assessment during this time on just getting the project on track, these studies should receive the necessary attention, as they will serve as the "yardstick" for measuring project advances. In the following months and years, the IA system should be implemented as agreed upon in the project approval documents. However, it often happens that practice turns out to be different from what was initially planned. If this is the case, project management needs to inform the relevant stakeholders, present proposals to overcome problems, and redefine the method for IA assessment. The earlier this is done the better. The reports that project management submits to the funding agency should contain analyses on each of the indicators. Whether an indicator was achieved or not can often only be assessed after some time (e.g., three years after project inception). In the meantime, the authors of these reports should try to assess the likeliness of targets being finally met by a qualitative statement. 80 World Bank Group Building the Capacity of BMOs: Guiding Principles For Project Managers ______ 5. Review: The review mission will also evaluate the project on the basis of the log-frame, the operational plans, the IA system, and the achievement reports. The clearer the project's successes and failures are stated and balanced against external factors, the better because it will raise the project credibility and facilitate a decision on how to proceed, such as to expand, modify, or cancel? IA plays an essential role in all of the stages of the project cycle with the exception of the identification phase. As the design and appraisal stage lays the conceptual foundation of the project and therefore has a strong influence on all subsequent phases, much attention should be paid to IA at this point. Apart from this, the prominence of good reporting during the implementation phase should be emphasized once again. If IA effectively functions as a tool for preserving and reinforcing the credibility of BMO projects, the information collected as part of IA should be well presented and thoroughly analyzed. Figure 11: Project Management and Impact Assessment 1. Identification/ Programming ▪ Monitor indicators according to IA system 5. Review ▪ Prepare reports containing information on the degree to which indicators are beeing ▪ Assess achievements on the achieved basis of the indicators ▪ Decide on how to proceed: continue, replicate, lessons learned? 2. Design and Appraisal ▪ Define program logic model 4. Implementation including indicators ▪ Outline method for the ▪ Monitor indicators according assessment of each indicator to IA system ▪ Prepare a budget for IA ▪ Prepare reports containing ▪ Make sure, local stakeholders information on the degree to are participating in the design of which indicators are beeing the IA system achieved ▪ Inform approver properly on 3. Approval IA system ▪ Make adjustments according to feedback of approver 81 World Bank Group Building the Capacity of BMOs: Guiding Principles For Project Managers ______ 6. "Golden Rules" for the Introduction and Management of Impact Assessment Systems This final section gives an overview of the most essential rules to be observed when introducing and managing IA systems in BMO projects. These are not meant to serve as a rigid catalogue of "to do" and "not to do" actions, but rather as qualitative guidelines for project managers. It is also meant to demonstrate that IA systems for BMO projects do not necessarily require expert statistical knowledge and huge sums of money to be developed and implemented. On the contrary, these "golden rules" may assist the reader in designing IA systems that are pragmatic and credible at the same time. These rules are: Rule 1: Involve All the Major Stakeholders in the Design of the IA System Rule 2: Define Realistic Indicators Rule 3: Use the Mix of Different Methods without Developing a Too Complex IA System Rule 4: Impact Assessment is Playing an Important Role in Reporting and Project Management 82 World Bank Group Building the Capacity of BMOs: Guiding Principles For Project Managers ______ D. The Way Forward 1. Ten Rules for Donor Intervention 1. Objectives in program design: importance of an integrated approach The most important areas of donor intervention aimed at BMOs are: Integrated approach development and management of selected services, advocacy, BMO management, and development of a proper framework for BMO development (see Part B, chapter 2). Donors tend to focus on immediate results in the areas of advocacy and services, as opposed to institution and capacity-building measures. This is not only understandable but sometimes even recommendable in order to obtain quick results. Nevertheless, the overall institutional capacity of an organization plays a crucial role in achieving sustainable long-term results. It is therefore important to simultaneously provide support for BMOs related to all areas. Integrating support measures in all of these areas will boost a project's impact. The emphasis on each area will depend on present BMO performance and demonstrated demand. 2. Participatory approach and demand orientation For a project to succeed, the supported BMO needs to be actively Partner and involved in the planning and implementation phases in order to ensure demand orientation that the project responds to the relevant problems or issues. BMOs need to be the drivers of the change and development process. Truly partner and demand oriented programs will ensure BMO ownership, relevance of services and advocacy efforts, and sustainability of the activities. Participation allows both donors and their partners to generate new ideas on how to enhance the role and impact of the BMO. Donor interventions need to be flexible in order to continuously adapt the changing BMO needs. 3. Long-term view Successful BMO projects require a certain amount of institution-building Long-term support. Such institution building takes time because it needs to take view into account a BMO's vision, mission and strategies, its planning and organization, its board composition and staff capacity, and its membership and financial development. Thus, there should be a clear commitment on the side of the donor and the beneficiary to engage in a long-term cooperation. Depending on the starting point, a period of 5 to 10 years is not uncommon for successful institution-building projects. However, long-term commitment needs to evolve and should only come after a pilot phase (see below). Long-term cooperation should be sustained only if the environment remains positive (see below, selection of partners). 83 World Bank Group Building the Capacity of BMOs: Guiding Principles For Project Managers ______ 4. Striving for financial sustainability Without a sound financial basis, a BMO cannot survive. High de- Financial pendency on grants makes it vulnerable and undermines its position as Sustainability an independent organization. Donors should: • request partners to co-fund all activities (cost sharing is also an important element of participation and increases ownership; see Rule 2) • adjust funding to the beneficiaries' absorptive capacity. The degree of financial support may vary according to objectives and partners. As a general rule, financial assistance to BMOs should not exceed 20 to 30 percent of the beneficiaries' annual budget 34 and 30 to 50 percent with regard to co-financing the start-up phase of new activities. • expand services and activities gradually and according to the BMO's growing overall income generating capacity (the BMO does not need to deliver each individual service at full cost- recovering prices; cost-subsidization of services may be a good way to keep a relevant service which does not generate a lot of income). • encourage the beneficiaries to establish clear and transparent accounting systems and develop efficient financial monitoring tools. • choose the kind of support for BMOs, which can less easily be diverted to the benefit of individuals. Thus, training, counseling, information and advice are generally considered preferable to loans, vehicles and office equipment. • gradually reduce their support for BMO activities within a clear time frame to facilitate donor withdrawal, enhance an income- generating focus and the sustainability of activities (see next section). 5. Pilot or orientation phase Experience shows that an initial orientation phase (six to nine months) Pilot phase can be very beneficial. During this phase, the donor and the beneficiaries can learn about each other, share ideas, concepts and objectives, and gradually define a common strategy. A longer pilot phase (up to twelve months) can be helpful in order to test strategies or activities, particularly when donors need to select a partner among a number of potential beneficiaries. 34 Levitsky (1993), pp. 28-30. 84 World Bank Group Building the Capacity of BMOs: Guiding Principles For Project Managers ______ 6. Selection of partners Shared interests, e.g., SME development, are a prerequisite for Partner selec- successful cooperation. BMOs and donors have their own agenda, tion however, they should be open about their objectives and strategies. There are not many BMOs in developing and transition countries that donors will consider ideal. It is necessary to thoroughly study the vision of the BMOs and their expectations regarding future cooperation. If interests are shared only in some aspects or functions, it may still be possible and useful to undertake joint activities in some areas, or to support a subcommittee or a special department of the BMO. Donors will easily be attracted to BMOs with higher institutional capacity (which may result in some donor competition for better BMOs). Donors need to establish minimum standards and clear criteria for BMO selection: e.g., availability of a secretarial office and sufficient staff, the structure of the membership base, the level of acceptance of the BMO by the local government, the degree of autonomy from government influence, the commitment of its officers, its internal democratic procedures, and openness toward new members. Many interventions by donors (and also by governments) to establish new BMOs have failed. Too many developing and transition countries have BMOs (and SME Promotion Agencies) created by donors that will never achieve a reasonable level of sustainability. Experience indicates that it is better to help existing BMOs to grow, develop new services and products, change orientation, and become more democratic and equally representative of all members. 7. Number of partners Donors can support one or a few BMOs through intensive assistance, Number of several BMOs through extensive assistance, or both. partners There are pros and cons associated with each strategy. On the one hand, based on the advantages of following an integrated approach as explained above, limiting the number of partners can lead to greater efficiency and sustainability. On the other hand, a larger number of partners can facilitate better networking opportunities as well as better sharing of information and best practices. In some countries, there have been good results in promoting partnerships between stronger and weaker BMOs, since that leads to a delegation of development cooperation tasks to the partners themselves. A multiple partner structure is also less vulnerable to external disruptions (e.g., election of a less supportive board) and may enhance competition among partners. Another option is to have an open and flexible structure of revolving partners in which some BMOs can leave (depending on whether they have achieved certain standards or not) and others can join. In this case, keeping ex-partners linked is recommended, e.g., for visiting programs and staff exchange or for using them as best practice models. 85 World Bank Group Building the Capacity of BMOs: Guiding Principles For Project Managers ______ 8. Twinning arrangements Twinning arrangements between more developed and less developed Twinning BMOs represent an alternative to the conventional way of project arrangements implementation where donors themselves or consultants provide the technical advice to the beneficiary BMO. In this case, the donor delegates the implementation of an intervention to a similar but more developed BMO. Although BMO staff members may lack specific competences related to international development projects that professional consultants have− e.g., project management, language, pedagogical or intercultural skills, twinning arrangements offer several advantages. The direct cooperation of equal partners helps to create mutual understanding and acceptance. It leads to a practical know-how transfer as the staff members of developed BMOs have first-hand knowledge of the problems that commonly affect SMEs and BMO management, and they can therefore apply successful strategies based on their experience. Additionally, developed BMOs can offer specialists to lesser developed ones. The cooperation may also serve as a platform to establish direct business contacts. Experience proves that cooperation between twinning partners can go beyond the project's scope and often continues after the project ends. Another interesting benefit for donors is that cooperation with BMOs in developed countries can help to raise awareness in those countries about the importance and impact of development projects. Based on their network of private businesses, civil society groups and government officials, BMOs in developed countries can reach and convince important stakeholders, who might otherwise be skeptical, about the importance of spending scarce public resources on development cooperation. 9. Clear exit strategy In order to establish a consistent framework for BMO partnership Exit strategy projects, it is important to identify precise project targets and a time frame. Many partnership programs fail to identify precise targets (and indicators), leading to a lack of a clear exit strategy. Annual cooperation plans can be a good tool for reaching agreement with the partner on specific targets and indicators. An exit strategy may include four elements: 1. A description of the project targets 2. Criteria to measure (indicate) success and a time frame 3. Rules/standards for the project implementation which are crucial for the donor 4. Contingency measures, which will be enacted when the project targets are reached, or if the requirements have not been met by the BMO. 86 World Bank Group Building the Capacity of BMOs: Guiding Principles For Project Managers ______ 10. Avoidance of market distortions The design of BMO support interventions should include an explicit Market distor- assessment of possible risks. For example, donors should avoid tions supporting rent-seeking behavior and BMOs that represent only exclusive groups of companies. They should also avoid getting unintentionally involved in party politics, e.g., by supporting BMOs dominated by one particular political, social, or ethnic party. Donors should be careful not to create market distortions by establishing long-term subsidized services. Supply-driven donor assistance can create incentives for BMOs to become resource rather than member-driven, and every intervention holds the danger of crowding out already existing commercial providers. With the financial and technical assistance of donors, promoted BMOs may offer more sophisticated services at comparable or even lower prices. Thus, non- promoted private providers of the same services may be forced to exit the market. As a result, basic level services in functioning markets are displaced by subsidized services, which are less sustainable and may even induce negative effects (e.g., creating a dependency culture). 2. Sustainable BMOs: What Next? The previous chapters described how to transform Business Membership Focus on Organizations that had a weak financial and management structure into Policy self sustainable BMOs capable of advocating for policy reforms as well as Advocacy providing a whole range of services to the members. Ideally, after receiving technical assistance from donors and becoming sustainable, BMOs should be in a much better position to advocate than they were before. Therefore, the role of the BMOs as an advocate for the improvement of the business environment in the country becomes essential. Obviously, the BMOs will have to continue improving the services to their members and their good management practices, but their strategy at this stage should focus on policy advocacy. Donor intervention should not only be limited to building the capacity of Donor BMOs. Building the capacity of the BMO in the areas described Intervention (advocacy, development and management of services to members and BMO management) is very important to create solid institutions that can achieve the goal of becoming advocates for the private sector. However, donor intervention should not stop at providing capacity in these areas but at partnering with self sustainable and solid BMOs in developing countries to foster public-private dialogue that will eventually lead to policy reforms. In spite of the donor support, it is very important to ensure that the BMO develops a sense of ownership in the advocacy activities. All in all, BMOs can be an extremely useful tool to pursue policy reforms to improve the business environment. 87 World Bank Group Building the Capacity of BMOs: Guiding Principles For Project Managers ______ 3. BMOs as Tools to Spur Policy Reforms Public Private Partnerships (PPPs) have emerged as one of the most Background powerful vehicles to conduct dialogue between the public and the private sector with the ultimate goal of fostering policy reforms to improve the business environment in developing countries. There are many ways to create a Public Private Partnership, and the most effective way of creating it will depend on the social, political and economic context of the particular country. This public-private dialogue can take many forms. One of the most common used forms is to engage with an existing BMO in order to pursue the implementation of policy reforms through policy advocacy fostering public-private dialogue. When it comes to designing projects that would involve public private BMOs and dialogue initiated by BMOs, we need to understand how these Public Private partnerships work, what can we achieve through them and what are the Partnerships elements that would make these initiatives successful in achieving the final goals. 4. What Can We Achieve Through Engaging BMOs in Public-Private Dialogue? Public-private dialogue can have different objectives. The most common goals of public private partnerships are the following: 35 1. Implementation of policy reforms These reforms can include the creation of new legislation, the Policy reforms amendment of existing laws and regulations to improve the business environment, the elimination of administrative barriers to investment and red tape, the creation of institutions, the introduction of business standards aimed at improving the competitiveness of the private sector, etc. Public private dialogue should target the implementation of reforms in selected areas that are seen by the private sector as the most problematic for economic activity. These areas include the following (although this is not an exhaustive list): • Business registration procedures • Licenses and permits • Labor regulations • Taxes • Customs and trade • Access to finance and financial regulations • Technical standards 35 See "Competitiveness Partnerships: a resource for building and maintaining public private dialogues to improve the investment climate", 88 World Bank Group Building the Capacity of BMOs: Guiding Principles For Project Managers ______ • Access to land and property registration • Sub-national procedures • Access to infrastructure (telecom, water, electricity, etc) • Contract enforcement and Alternative Dispute Resolution 89 World Bank Group Building the Capacity of BMOs: Guiding Principles For Project Managers ______ Case Study 9: Developing a National Business Agenda in Montenegro To improve the policy impact of associations in MBA took ownership of this agenda. This was the Montenegro, the Center for International Private first time many business people in Montenegro Enterprise (CIPE) worked with the local business had ever expressed their views publicly. Since community to establish the Montenegro Business the organizational meeting of the MBA in Alliance (MBA). 36 September 2001 with ten members, the MBA has grown to over 350 dues-paying members. Originally an ad hoc coalition of associations and individual entrepreneurs, CIPE's assistance The National Business Agenda has had a helped the group establish a volunteer-based significant impact on the Government of governance structure that has transformed it into Montenegro (GoM). Through the agenda, the a registered and functioning business association. MBA was able to influence the public policy MBA quickly developed a membership campaign debate. This was accomplished through an allowing it to become Montenegro's largest intense advocacy campaign that involved the voluntary membership business association. members in meetings with the Prime Minister and Today, the MBA is Montenegro's most powerful key government officials. MBA members independent voice for business, advocating for appeared on the TV program "Ask the market reforms and private sector growth. Government." This campaign included policy forums, roundtable discussions, meetings with the One of its greatest accomplishments has been media and academia. The results of the MBA the creation of a National Business Agenda. After Advocacy Campaign so far have been: extensive consultations with the members and external stakeholders, the members unanimously • The Minister of Finance declared in 2004 that approved the National Business Agenda 2004 at the employer tax will be reduced by 10% (this their regular February Assembly Meeting. MBA is the first reduction of the taxes and mobilized the business community around its contributions after 24 years). This decision is National Business Agenda. The Agenda, called being now implemented by the Government; "Agenda for Higher Economic Freedom" consists • The GoM adopted part of the MBA's Business of seven challenges that will help shape the future Agenda as part of its Economic Reform of Montenegro. These challenges are: Agenda. • The MBA has been asked by the Minister of 1. Decrease the overall payments (taxes and Finance and the Deputy Prime Minister of contributions) on wages; Economy to establish a Public/Private 2. Decrease taxes and improve tax laws and Partnership to work on tax reductions for the regulations; business community; 3. Decrease state bureaucracy and business • A 5% increase concession was granted to barriers; private wood processing companies. For the 4. Promote better conditions for doing business in first time in Montenegro's history, the private the tourism sector; sector managed to get regulatory 5. Promote conditions for doing business in the concessions; wood- processing sector; • The MBA recommendations to the 6. Increase economic freedoms through: Commission on Economic Freedom for the • Support of the customs rules, which will reduction of corporate tax were accepted. increase competition; • Support for the rule of law; The MBA has improved economic conditions for • Reduction of the informal economy; doing business in Montenegro by creating a better 7. Ensure the stable sources of electric energy for business climate. the future. Case Study contributed by CIPE 36 The National Business Agenda and related policy issues can be found on the MBA web site at www.visit-mba.org 90 World Bank Group Building the Capacity of BMOs: Guiding Principles For Project Managers ______ 2. Improving the relationship between the public sector and the business community The business environment in any country is influenced by the level of Open and constructive existing dialogue between the public and the private sector. An open and dialogue honest dialogue between government representatives and the private sector community can facilitate enormously reform efforts. The absence of dialogue creates the distrust and lack of understanding between government officials and the business community. If the Government does not know the problems and concerns of the private sector, improvements in the business environment are less likely to happen. Often, businesses see the public sector as an enemy rather than as an allied, underestimating the importance of a constructive dialogue between the public and the private sector. This dialogue is particularly important in countries where traditionally there has been a difficult relationship between the government and the private sector. Former communist regimes, where there was so much antagonism between the business community and the government are the best examples of how public private dialogue can change the perception of an isolated private sector community, improving the investment climate and the image of the country. 91 World Bank Group Building the Capacity of BMOs: Guiding Principles For Project Managers ______ Case Study 10: Speaking with One Voice: Coalition of Business Associations Changing the Business Environment in Romania Romania went through a painful transition from a 7. To identify specific measures to protect small communist regime to a democratic society and and medium-sized enterprises; market economy. Old mentalities and suspicion 8. To involve the private sector in developing persisted in the Romanian society long after the economic polices. revolution. The lack of trust and communication among key socio-economic groups and the In order to achieve these objectives, SABA government divided the society. Moreover, this defined a six-point action plan: was aggravated by the persistence of the old rules of the game and weak or poorly enforced 1. Establish the organizational framework for the new laws and institutions. dialogue with decision makers and representatives of power; The Romanian business community faced a 2. Identify the problems common to private hostile business environment in general and a entrepreneurs; chaotic fiscal system that was suffocating the 3. Gather information on the business emerging private sector. Entrepreneurs quickly environment; realized that they needed to speak with one voice. 4. Develop strategies and programs; Hence, members of the business community 5. Disseminate and communicate recommended swiftly organized into independent business reform policies within the business associations. These associations then formed an associations, to mobilize them for advocacy; alliance, the Strategic Alliance of Business 6. Evaluate the efficiency of any dialogue Associations (SABA), in order to speak with one between the private sector, and the public voice and have a better chance of participating in sector. policymaking. SABA initiated an open dialogue between the Romanian business community and SABA's initiatives resulted in several key the president. business environment improvements in Romania. For example, SABA played an important role in SABA's mission statement indicates that "the developing the country's code of corporate strategic alliance is an informational system of governance. The coalition's efforts also resulted communication to identify the problems that are in the creation of a non-partisan, public-private common to all entrepreneurs and consequently to Commission for the Improvement of the Business lobby for a friendly and competitive business Environment, which drafted and advocated for a environment and to develop the market economy modern, Tax Code for Romania. After a slow and in Romania." In the early stages, SABA identified frustrating start, confidence between members of eight organizational objectives for itself: the public and private sectors was progressively built. In the end, representatives of the business 1. To open permanent dialogue with the community and the government agreed on a set representatives of the executive and of fundamental principles for a modern tax code. legislative bodies; The effectiveness and usefulness of this open 2. To improve the legislative framework and the dialogue for crafting responsive policies was business environment confirmed when government representatives 3. To offer expert analyses on laws and resumed the dialogue after the 2000 elections regulations to improve the business and used a similar model to overcome challenges environment; related to the Romania's accession to the EU. 4. To get involved in the privatization and restructuring of the Romanian economy; Case Study contributed by CIPE 5. To offer legislative solutions concerning the ________________________________ reform program; 6. To contribute to the growth of a powerful middle class in Romania; 92 World Bank Group Building the Capacity of BMOs: Guiding Principles For Project Managers ______ 3. Creation of friendly business environments in post conflict countries Peaceful transitions of political power are still too rare in much of the Post conflict world. Countries that experience the resolution of political conflicts through countries violence or that have regional wars destroy their physical infrastructures also witness their populations driven into poverty and their institutions of governance deteriorate to the point where complete rebuilding is necessary. In many instances, private sector associations can be the driving force of reconstruction and renewal of the economy. In post conflict countries, an essential element to start the reconstruction Private sector is the reestablishment of the rule of law and the creation of a contribution to reconstruction platform that can fill the void left in the political, social and reconstruction economic ground. Private sector associations can provide an essential support in all these areas, particularly in the economic front. The experience shows that countries such as Serbia and Montenegro, Bosnia Herzegovina and more recently Afghanistan, are using private sector association as tools to create trust, dialogue and improve the business and political environment in the countries. 93 World Bank Group Building the Capacity of BMOs: Guiding Principles For Project Managers ______ Case Study 11: Post Conflict Reconstruction Efforts by the Private Sector in Afghanistan Although there is a strong will on behalf of the climate. They also complained of opaque policy private sector to promote democratic values and making and little accountability on behalf of the an open-market economy, the tools for achieving government officials and representatives of state these goals are still quite limited inside agencies. AACC continued to hold similar Afghanistan. The business associations, think roundtables in the following months, gathering the tanks, foundations, and other business private sector views on reforms crucial to revival organizations with vested interests in a market of the Afghan economy. economy and a democratic political system are either nonexistent or are weak. Beyond roundtables, AACC also focused on creating a critical mass of entrepreneurs who will To establish a private sector voice in drive the reform process. The Chamber reconstruction of the country, Afghan-American approached this by mobilizing small and medium- businessmen, economists, survey research size enterprises and galvanizing support among specialists, analysts, and evaluators formed them that was essential to planning and Afghan- American Chamber of Commerce implementing economic and democratic reforms. (AACC). The mission of the AACC is to foster a AACC achieved this by forming partnerships with climate for a market economy by strengthening business associations through Afghanistan, business associations, think tanks, and other providing technical and limited financial business organizations inside Afghanistan to assistance to local business associations, ensure a more sustained and diversified effort assisting business associations to formulate plans from various stakeholders inside the country to of action, and soliciting business entrepreneurs to steer it toward democracy and market economy. join AACC. Such steps allowed AACC to create a network of business associations that will be able To kick off its activities in Afghanistan, the AACC to work together to affect policy and foster reform, gathered representatives of the business and it also raised the profile and credibility of the community at two one-day round tables in Kabul AACC as the leader and trustworthy and Kandahar. These roundtables provided a representative of the Afghan business sector, forum for entrepreneurs to voice their concerns which is a critical element of cultivating a regarding the administrative barriers to doing productive private-public partnership and business in Afghanistan. advancing reform. Entrepreneurs cited corruption, bureaucracy and Case Study contributed by CIPE lack of access to resources, as some of the most substantial barriers to creating a sound business __________________________________ 94 World Bank Group Building the Capacity of BMOs: Guiding Principles For Project Managers ______ Index accounting practices 56 intermediation 17 administration 58 internal organization 61 administrative systems 61 lawsuits 32 advice and consultancy 42 leadership 22 Advocacy 30, 83 legal framework 28 advocacy and available instruments 31 long-term view 83 advocacy and services 25 market distortions 87 advocacy strategies 32 Media training 36 Anglo-Saxon model 15, 16 membership 21 Autonomous from government 23 membership development 58 BDS 39 membership fee administration 56 bi-national chambers 14 membership survey 59 BMO Management 53, 83 National Business Agenda 33 BMOs in the BDS context 39 needs assessment 51 business associations 13 networking 17, 42 business development services 12 orientation phase 84 business environment 12 Participatory Approach 83 capacity assessment 50 participatory development 12 CAS 19 pilot phase 84 chambers 15 policy framework 18 classification of services 41 poverty 12 closed shops 23 Poverty Reduction Strategy Papers 19 coalitions 37 preparation of business plan 59 communication 61 prioritization 51 confederations 14 private sector development 17, 28 Continental model 15, 16 Private Sector Development Strategy 19 Country Assistance Strategy 19 problems of BMO management 53 Criteria for Partner Selection 26 Promotion of SME 20 cultural traditions 29 PRSP 19 decentralization 28 public-private consultation fora 31 Decision Making Grid for the Selection of rationale for supporting BMOs 17 Services 47 recruitment 58 delegated government functions 18, 42 retention 58 Demand Orientation 83 secretariat organization 61 Democratically organized 23 selecting beneficial services 47 donor interventions 32, 58, 62 selection of beneficiary BMOs 21 economic policies 28 Selection of Partners 85 Employers' associations 14 selection of project partners 26 employment creation 12 self-regulation 17 evaluation 52 service delivery 41 exit strategy 86 Services 39, 83 expansion 52 Small-scale enterprises' associations 13 finance 88, 91, 93 SME promotion 17 financial sustainability 84 status-quo analysis 49 framework conditions 12, 28 strategic partnerships 61 framework for BMO development 83 strategic planning 58 good governance 18 strategy workshop 59 governance 23 structure 6 grassroots campaigns 31 sustainability 19 grassroots networks 37 trade and market development 41 income-generating services 56 Trade or industry associations 13 indicators 87, 88 training 42 information 42 twinning arrangements 86 infrastructure services 42 Types of services 44 integrated approach 83 Women's organizations 14 interest representation 31 95 World Bank Group Building the Capacity of BMOs: Guiding Principles For Project Managers ______ Abbreviations AACC Afghan-American Chamber of Commerce ADR Alternative Dispute Resolution AGI Association of Ghana Industries BA Business Associations BDS Business Development Services BFZ Bavarian Employer's Association BMO Business Membership Organization BMZ Federal German Ministry for Economic Cooperation and Development CaCEC Chamber for Foreign Trade of Córdoba (Argentina) CAS Country Assistance Strategy CCCI Chittagong Chamber of Commerce and Industry (Bangladesh) CEJ Employers Association of Jalisco (Mexico) CEO Chief Executive Officer CERTTEX SENAI Training Center in Recife (Brazil) CIPE Center of International Private Enterprise CME Canadian Manufacturers and Exporters DI Confederation of Danish Industries FAQ Frequently Asked Questions HBA Hanoi Business Association IA Impact Assessment IFC International Finance Corporation LTRP Latvian Chamber of Commerce and Industry MBA Montenegro Business Alliance MSE Micro and Small Enterprises NABW National Association of Business Women (Malawi) NBA National Business Agenda NGO Nongovernmental Organization PDF Project Development Facilities PPPs Public Private Partnerships PRSP Poverty Reduction Strategy Paper SABA Strategic Alliance of Business Associations SEBRAE Small Business Administration (Brazil) SENAI National Industrial Training Service (Brazil) SEQUA Foundation for Economic Development and Vocational Training (Germany) SINDIVEST-PE Association of the Textile Industry in Pernambuco (Brazil) SME Small and Medium Enterprise WG Working Group WTO World Trade Organization ZDH German Confederation of Small Business and Skilled Crafts 96 World Bank Group Building the Capacity of BMOs: Guiding Principles For Project Managers ______ Appendix A: Checklist for BMO Analysis Checklist for Partner Evaluation (1) 1. BMO Profile Name of organization Year of foundation Who are the initiators Are there similar BMOs/competitors ( ) Registered under which law Is there a written statute or by-law Are the by-laws used and updated Are there any special government privileges ( ) Are there government-appointed representatives ( ) 2. Organizational Status Affiliations with other BMOs/organizations ( ) What geographical areas/sectors are covered Are there regional substructures/chapters ( ) Organizational chart/function structure ( ) Standing committees ( ) Is there an SME committee Who is the leader Who is responsible for day-to-day operations staff office bearers Are there any written job descriptions Are there general meetings annually ad-hoc Are there regular elections (how often) ( ) Which officers are elected/appointed • Chairman/President elected appointed • elected appointed Who is entitled to vote Who can be elected How many members participate in elections Term of office one year two years ( ) Re-election possible? (term limits) Are there any written job descriptions 3. Leadership Chairman/president a respected businessman Honorary or paid office bearers honorary paid Average time spent for BMO Chairman's vision for development of BMO Chairman interested in SME Is there a written mission statement/vision What are the primary objectives Activities in line with the mission statement Is there a strategic plan Is there a business/work plan Systematic follow-up and revision of plans Is there a specific SME promotion strategy ( ) 4. Staff Number of paid staff full time: part-time: Qualification: senior: support: Tasks assigned to staff Is an organizational chart available How is the staff turnover low high Systematic personnel development plans Salary and benefits (compared to other BMOs) higher same lower CEO experienced and well-trained ( ) Internal meetings (board and staff members) (how often: ) 97 World Bank Group Building the Capacity of BMOs: Guiding Principles For Project Managers ______ Checklist for Partner Evaluation (2) 5. Office Infrastructure Permanent office none rented own premises Rooms/office space available: Office equipment: • Typewriters ( ) • Work stations/Computers ( ) • Local area network/Intranet ( ) • Internet and e-mail ( ) • Website ( ) • Conference room ( ) • ( ) Other properties ( ) 6. Membership Number of paying members Membership development (5-year trend) up unchanged down Mandatory or voluntary membership voluntary mandatory Membership categories ( ) Membership fees admission fee annual fee other fees Are fees differentiated by member category ( ) % of non-paying members Concentration on specific sectors/industries ( ) Concentration on certain regions/areas ( ) % of SME membership % of coverage of target companies Membership recruitment/retention strategy ( ) Membership administration officer ( ) Membership database Is the database updated regularly ( ) 7. Services Trade and market development: Trade fairs and exhibitions how often: no. of users: paid free Business delegations how often: no. of users: paid free Matchmaking services which: no. of users: paid free no. of users: paid free Training: Seminars and workshops how often: no. of users: paid free Management training how often: no. of users: paid free Technical training how often: no. of users: paid free no. of users: paid free Advice and consultancy: Help desk for entrepreneurs topics: no. of users: paid free Consultancy topics: no. of users: paid free Exchange visits and business tours how often: no. of users: paid free Certification and standard setting which: no. of users: paid free : no. of users: paid free Information and networking Newsletters how often: no. of users: paid free Annual report updated? no. of users: paid free Membership directory updated? no. of users: paid free Business meetings how often: no. of users: paid free Conferences how often: no. of users: paid free Website updated?: no. of users: paid free how often: no. of users: paid free 98 World Bank Group Building the Capacity of BMOs: Guiding Principles For Project Managers ______ Checklist for Partner Evaluation (3) Office facilities and infrastructure services Office services which: no. of users: paid free IT and Internet access services which: no. of users: paid free Industrial estate no. of users: paid free Testing lab which: no. of users: paid free no. of users: paid free Delegated government functions Business registration which: no. of users: paid free Certificates of Origin which: no. of users: paid free Arbitration services which: no. of users: paid free no. of users: paid free Are services generating income ( ) Same fees for members and non-members ( ) Sufficient cost-accounting procedures ( ) Staff assigned for individual services ( ) Are services marketed actively ( ) Preceding demand analysis practiced Follow-up and evaluation practiced 8. Financial Situation Is there a trained accountant Are sound accounting procedures in place Frequency of budget follow-up monthly quarterly annually Cash or accrual accounting cash accrual % of income covered by: membership fees % service fees % voluntary grants % government subsidies % donor subsidies % Other % % of expenditure: staff payments % administrative overhead % service delivery % Other % Overall financial situation bad average good 9. Advocacy and External Relations BMO founded at government instigation Does government appoint delegates to BMO ( ) Cooperation with government: good average bad Is the BMO supervised by public bodies ( ) Advocacy efforts: • joint advisory boards/committees ( ) • regular consultations ( ) • correspondence ( ) • conferences and seminars ( ) • informal contacts ( ) • use of media ( ) • others ( ) Contacts with other BMOs ( ) Cooperation with donors ( ) Financial assistance by donors ( ) 99 World Bank Group Building the Capacity of BMOs: Guiding Principles For Project Managers ______ Appendix B: Evaluation Form (Your opinion and feedback are important for us. All information you give us will be treated confidentially.) Please send back to: <Name of Chamber/Business Association> <Street> <City> <Telephone/Fax> I. General Information 1. Name: .......................................................................................................... 2. Address: .......................................................................................................... 3. Phone/Fax: .............................................. Email:...........................................…. 4. Contact Person: ..................................Position:................................…………. . II. Basic Data on Enterprise 1. Legal Status: ........................................................................................................ 2. Year of establishment: .............(YYYY) 3. Sphere of Activities: Production Services Trade Subsector:.......................................................................... 4. Main products/services: 1)................................................................ 2)................................................................ 3)................................................................ 5. Number of employees: ................ 6. Foreign Trade: Exports: Volume in <year>:......................<US$ or local currency> Export country Product Share of exports .................................. ................................... ........% ................................. ................................... ........% ................................. ................................... ........% Imports: Volume in <year>:.......................<US$ or local currency> Country of origin Product Share of imports .................................. ................................... ........% ................................. ................................... ........% ................................. ................................... ........% 100 World Bank Group Building the Capacity of BMOs: Guiding Principles For Project Managers ______ III. Overall Performance of <Name of BMO> (Please rate by ticking the appropriate box (1: not important/satisfied; 10 very important/satisfied) 1. What have been the main reasons for your enterprise to join <Name BMO>? .................................................................................................................................. 2. Have your expectations been met? Yes No, because: ............................................................................... 3. Please rate the overall performance of <Name of BMO> in policy advocacy: Not 1 2 3 4 5 6 7 8 9 10 Very satisfied satisfied 4. Please rate the overall performance of <Name of BMO> in providing services Not 1 2 3 4 5 6 7 8 9 10 Very satisfied satisfied IV. Policy Advocacy/Interest Representation (Please rate by ticking the appropriate box (1: not important/satisfied; 10 very important/satisfied) 1. What are the most relevant policy issues for your enterprise? .................................................................................................................................. 2. Outlined below are some initiatives of <Name of BMO> in policy advocacy. How effective has <Name of BMO> been concerning the following activities? Not effective 1 2 3 4 5 6 7 8 9 10 Very effective <Advocacy measure 1> <Advocacy measure 2> <Advocacy measure 3> 3. What other policy initiatives would you like to see from <Name of BMO>? .................................................................................................................................. 4. How do you rate the performance of <Name of BMO> in policy advocacy for the last year? Has improved Unchanged Has deteriorated V. Services/Events (Please rate by ticking the appropriate box (1: not important/satisfied; 10 very important/satisfied) 1. In which services or events organized by <Name of BMO> have you participated during the last year? .................................................................................................................................. 2. <Chambers/Business Associations> can support their members in various ways. How important are the following activities for your enterprise? Not important 1 2 3 4 5 6 7 8 9 10 Very important Business news Legal advice Administrative advice Technical advice 101 World Bank Group Building the Capacity of BMOs: Guiding Principles For Project Managers ______ Training 102 World Bank Group Building the Capacity of BMOs: Guiding Principles For Project Managers ______ Trade fairs/exhibitions Meetings/social events International contacts ............................................. 3. Outlined below are some services or events organized by <Name of BMO>. How satisfied are you with the performance of <Name of BMO> concerning the following activities? Not effective 1 2 3 4 5 6 7 8 9 10 Very effective <Service/event 1> <Service/event 2> <Service/event 3> <Service/event 4> <Service/event 5> 4. What other policy initiatives would you like to see from <Name of BMO>? .................................................................................................................................. 5. Rate the performance of <Name of BMO> in organizing business services and events for the last year: Has improved Unchanged Has deteriorated Comments:...................................................................... Date: .../..../......... 103 World Bank Group Building the Capacity of BMOs: Guiding Principles For Project Managers ______ Annotated Bibliography General Bennett, Robert J.: Can Transaction Cost Economics Explain Voluntary Chambers of Commerce?, in: Journal of Institutional and Theoretical Economics, 1996, Vol. 152 No. 4, pp. 654-680. This article stresses transaction costs as a good explanatory factor of the service de- livery and interest representation of British chambers of commerce. Representation is found to be the key function with high transaction costs but low capacity to raise revenue. Gibson, Alan and Mark Havers: The Role of Small Business Membership Organizations (SBMOs) in Small Enterprise Development, Durham 1994. This report presents the findings of a research project about the role of small business membership organizations in small enterprise development. The main aim was to identify ways in which SBMOs can further develop themselves and how donor and other agencies can assist them. Hallberg, Kristin: A Market-oriented Strategy for Small and Medium-Scale Enterprises, IFC Discussion Paper No. 40, Washington D.C. 2000. This paper investigates the economic rationale for intervention in support of small- and medium-scale enterprises, on both theoretical and empirical grounds. It argues that the justification for SME intervention lies in market and institutional failures which bias the size distribution of firms, rather than in any inherent economic benefits provided by small firms. The role of the state is mainly to provide an enabling business environment that opens access to markets and reduces policy-induced biases against small firms. Levitsky, Jacob: Private Sector Support for Small Enterprises – Some Conclusions, International Small Business Series No. 16, Goettingen 1993. This contribution is primarily concerned with two related issues: the broad outline of the potential roles of government, commercial service providers and private sector membership organizations in providing services to SMEs, on the one hand, and the discussion of a number of important questions regarding the organizational structure of private sector institutions on the other. Little, Ian M. D., D. Mazumdar and J. M. Page: Small Manufacturing Enterprises, A Comparative Analysis of India and Other Economies, New York, Oxford 1987. In this classic book on SME development, the authors take a closer look on the relationship between firm size and economic performance in developing countries. Based on case studies of three industries in India, they try to explain changes in size and structure by differences in factor proportions and substitution, technical efficiency, and entrepreneurship. Meier, Ralf and Markus Pilgrim: Policy-induced Constraints on Small Enterprise Development in Asian Developing Countries, in: Small Enterprise Development, 1994, Vol. 5, No.2, pp. 32-38. This article examines the macroeconomic policy framework in developing countries and how it may work against SMEs. The article identifies critical areas of discrimination in some Asian countries and gives recommendations for the improvement of SME promotion policies. Müller-Falcke, Dietrich: Confederations of Chambers – Functions, Foundations and 104 World Bank Group Building the Capacity of BMOs: Guiding Principles For Project Managers ______ Organizational Structures, Singapore 1998. The author analyzes how confederations of chambers may be organized. Examining in detail the situation in six developed and developing countries, he gives recommendations for the development or reorganization of confederations of chambers. Pilgrim, Markus and Ralf Meier: A Primer on the Organization and Role of Chamber Systems, Washington D.C. 1995. The objective of this primer is to give an introduction to different chamber systems, both from developed and developing countries, including a comparative analysis of the structure, status, and range of activities of chambers in selected countries. ZDH Technonet Asia: The Role of Chambers and Associations in Small Business Promotion – Arguments for Private Sector Representatives, Vol. 1: Textbook, 2nd edition, Goettingen 1995. This paper gives an overview of the issue of SME promotion and the growing involvement of private sector organizations in it. It demonstrates the importance of small businesses in economic development, evaluates patterns of promotion programs, and clarifies the role that chambers and associations can play in implementing a more effective promotion policy. Service Delivery Committee of Donor Agencies for Small Enterprise Development: Business Development Services for Small Enterprises: Guiding Principles for Donor Intervention, Washington D.C. 2001. This working paper provides the findings and work to date of the Working Group on Business Development Services, which was formed by the Committee of Donor Agencies for Small Enterprise Development at its Annual Meeting in Budapest in June 1995. International Trade Center UNCTAD/GATT: Developing Country Chambers of Commerce, Organization and Services, Geneva 1994. This study on the organization and services of chambers of commerce and other busi- ness organizations in selected developing countries covers countries' organization profile, structure, relations at national and international levels, services offered, and changing policy. International Chamber of Commerce; ZDH Technonet Asia: Chambers of Commerce, Services to Small and Medium-sized Enterprises, Technical Paper, Geneva 1996. The study takes a closer look at the role of chambers of commerce in the provision of services for SMEs. It describes different services related to the domestic sector and foreign trade. It also provides recommendations for the introduction of such services. McVay, Mary and Alexandra Overy Miehlbradt: Developing Commercial Markets for BDS: Can This Give the Scale and Impact We Need?, Background Reader, Business Development Services, Second Annual Seminar, Turin, 10-14 September 2001. This reader gives an overview of the concept of developing service markets for SMEs. Apart from an explanation of the new concept, it includes tools for practitioners, case studies and best practices. Lessons learned and a review of current debates are also presented. 105 World Bank Group Building the Capacity of BMOs: Guiding Principles For Project Managers ______ Schumacher, Torsten: Manual on Income-Generating Services of Chambers and Trade Associations, 1999. This practical and practice-oriented manual covers the development of income- generating services by chambers and associations during the start-up phase, particularly in developing countries and the reform states of Central and Eastern Europe. Wong Chin Yeow: Manual on Developing and Operating an Information Service for Chambers and Trade Associations, Singapore 1998. This manual is intended for officials and staff of chambers and trade associations who are planning to set up a Business Information Center (BIC). It is designed as a step- by-step guide, with special emphasis on how to turn the BIC into a self-financing entity and the need to market the services of the BIC aggressively. Manual on Developing a Training Centre within a Chamber or Trade Association, Singapore 1997. This publication is designed to help the staff of chamber training centers develop a systematic approach to training based on the chamber training cycle. Manual on Setting up a Business Matching Service within a Chamber or Trade Association, Singapore 2000. This manual seeks to provide know-how on how to operate an effective business matching service. Drawing on the experiences of a number of chambers in the Asia- Pacific region, the manual is a practical step-by-step guide with numerous real-life examples. Advocacy and Public-private Dialogue Doner, Richard F. and Ben Ross Schneider: Business Associations and Economic Development: Why Some Associations Contribute More Than Others, in: Business and Politics, Vol. 2 (2000), No. 3, pp. 261-288. This article examines empirical research on business associations with a broad range of efficiency-enhancing activities in various developing countries. Strong associations, which address crucial development issues, are found to be well organized and staffed. Finally, institutional strength and performance are linked to a number of internal and external factors. Gray, Thomas A.: Private Business Organizations and the Legislative Process, GEMINI Working Paper No. 40, Washington D.C. 1993. This paper asks how small and medium enterprises in the United States organize themselves to protect their interest before the federal government. The paper concludes that there is no standard form of organization, because a variety of organi- zations appear to be effective representatives in different parts of the United States and in different industries. Moore, Mick and Ladi Hamalai: Economic Liberalization, Political Pluralism and Business Associations in Developing Countries, in: World Development, 1993, Vol. 21, No. 1, pp. 1895-1912. Trends toward economic liberalization and political pluralism in developing countries seem to presage a more active and economic role for business associations. In this context, the article examines the practice of interest representation in developing countries, describing chances and problems alike. The more effective associations are those that are not primarily dependent on membership fees. 106 World Bank Group Building the Capacity of BMOs: Guiding Principles For Project Managers ______ Strohmeyer, Roland: Public-Private Partnership in SSI Promotion: An Assessment of the Roles of Chambers and Trade Associations in Different Countries, International Small Business Series No. 26, Goettingen 2000. In many developing countries, cooperative efforts between the government and the private sector are becoming more common. The services of business associations for SMEs can be regarded as an important example of public-private partnership. Ana- lyzing the situation in seven different countries, the author identifies the underlying factors, which determine the different role of chambers and business associations in such SME promotion partnerships. Center for International Private Enterprise (CIPE): How to Advocate Effectively: A Guidebook for Business Associations, Washington DC, 2003. Benjamin Herzberg and Andrew Wright: Competitiveness Partnerships: A resource for Building and Maintaining Public-Private Dialogues to Improve the Investment Climate, Washington DC, 2005. CIPE 2004 Annual Report, Washington DC, 2004. BMO Management Boleat, Mark: Good Practice in Trade Association Governance, London 2001. This publication seeks to draw together relevant literature on the governance of trade associations as well as the author's own experience, as chief executive of five trade associations and subsequently as a consultant. The book is written from the per- spective of a medium-size or large association, but is largely applicable to associ- ations of any size. Center for International Private Enterprise (CIPE): Financial Management Handbook, Washington D.C. 1998. This handbook on financial management is directed to those responsible for the financial affairs of a nonprofit organization. It is intended to be a source of information on the fundamentals of accounting, budgeting, control of finances, and the preparation of financial reports. Center for International Private Enterprise (CIPE): The Virtual Business Association (www.cipe.org). The Virtual Business Association is an interactive tool on CIPE's Web site offering a self-diagnostic survey as well as best ideas, sample documents, and resources of five virtual offices of an association (chief staff officer, financial manager, communication manager, membership manager, public policy advocate) The information provided by the Virtual Business Association is free of charge. Department of Trade and Industry (DTI): The "Best Practice Guide" for the Model Trade Association, London 1996. The Model Trade Association has been developed by DTI in consultation with a wide range of representative bodies in industry and commerce. It sets out the key characteristics that a modern best practice trade association should display and the services it should provide. Ernstthal, Henry and Vivian Jefferson (eds.): Principles of Association Management. A Professional Handbook, American Society of Association Executives, Washington, D.C. 1988. 107 World Bank Group Building the Capacity of BMOs: Guiding Principles For Project Managers ______ This volume familiarizes the reader with the basics of association management based on professional standards. It focuses on financial and membership development. Center for International Private Enterprise (CIPE): Business Associations for the 21st Century, A Blueprint for the Future, 2nd Edition, Washington, D.C. 1999. This book is intended to aid executives and voluntary leaders of employers' or trade associations, professional societies, and chambers of commerce who seek to improve their own management effectiveness and design action programs to build stronger organizations. Schumacher, Torsten: Attracting New Members/Membership Administration, 1997. Through concrete recommendation, this publication is intended to supplement and expand the basic knowledge of the general principles of membership administration and the various strategies for the attraction of new members to chambers and business associations. Tan Lan Eng, Judy: Manual on Organizing and Managing Chambers of Commerce and Industry, 2000. The aim of this manual is to provide chamber staff and active board members with a practical compendium to be used for all chamber operations. It provides insight into the administrative machinery of chambers and the problems that occur in running a chamber, and offers and recommendations on how to solve them. Impact Assessment Baker, J.L., World Bank Group: Evaluating the Impact of Development Projects on Poverty – A Handbook for Practitioners, Washington D.C. 2000. Strohmeyer, Roland et al.; World Bank Group, Small and Medium Enterprise Department: Building the Capacity of Business Membership Organizations – Guiding Principles for Project Managers, Washington D.C. 2003. Oldsman, Eric and Kris Hallberg: Framework for Evaluating the Impact of Small Enterprise Initiatives, SED Working Paper No. 3, 2002. Vahlhaus, Martina and Thomas Kuby, Deutsche Gesellschaft für Technische Zusammenarbeit (GTZ) GmbH: Orientierungsrahmen für das Wirkungsmonitoring in Projekten der Wirtschafts- und Beschäftigungsförderung unter besonderer Be- rücksichtigung armutsmindernder Wirkungen. Teil I: Wozu Wirkungsmonitoring? – Eine Orientierungshilfe, Eschborn 2000. Vahlhaus, Martina, Deutsche Gesellschaft für Technische Zusammenarbeit (GTZ) GmbH: Orientierungsrahmen für das Wirkungsmonitoring in Projekten der Wirtschafts- und Beschäftigungsförderung unter besonderer Berücksichtigung ar- mutsmindernder Wirkungen. Teil II: Ein- und Durchführung eines Wirkungsmonitorings – Hinweise, Methoden und Instrumente, Eschborn 2000. 108 World Bank Group Building the Capacity of BMOs: Guiding Principles For Project Managers ______ Important Websites www.enterprise-impact.org.uk The website of the Enterprise Development Impact Assessment Information Service (EDIAIS) provides information and expertise to Department For International Development (DFID) and the wider development community. www.iaia.org This is the website of the International Association of Impact Assessment. The website seeks to serve as a forum for innovation, development, and communication of best practice in impact assessment. www.worldbank.org/poverty/impact/ This website aims to disseminate information and provide resources for people and organizations working to assess and improve the effectiveness of interventions aimed at reducing poverty www.un.org/esa/sustdev/documents/agenda21/index.htm This website gives information about the Agenda 21 and the UN environmental policy agenda www.visit-mba.org This website gives information about the MBA and the advocacy process in which MBA engaged. 109 World Bank Group Building the Capacity of BMOs: Guiding Principles For Project Managers ______ Notes 110 World Bank Group Building the Capacity of BMOs: Guiding Principles For Project Managers ______ 111 World Bank Group Building the Capacity of BMOs: Guiding Principles For Project Managers ______ 112 World Bank Group wb12492 S:\PSI-IFC-Share\SME\Staff\Rose\Business Environment Unit\Publications\GUIDE\FinalRevOctober~ BMOGuide.doc 10/28/2005 1:31:00 PM
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