84354 DECEMBER 2013 Settling Down into a Long-Term ABOUT THE AUTHORS OLIVER ORTON Partnership: Successful Relationships is Corporate Governance Program Manager for Europe and Central Asia, based in Belgrade, Serbia. He joined IFC in May 2010 from the Asian Development Bank. for Sustainable Clients SOREN HEITMANN After many years delivering corporate governance programs in Europe and Central is a Results Measurement Specialist for Europe and Central Asia with in-house staff only, IFC moved to the next level with the objective Asia, based in Istanbul, Turkey. He joined IFC in November 2008 from a private sector energy of building local capacity to ensure the sustainability of corporate governance markets consultancy. services in the market. But how should you set about selecting a partner for a long-term relationship? How do you manage the relationship over the life of APPROVING MANAGER Darrin Hartzler, Manager, the program? What if the relationship isn’t working? Most important, how can Corporate Governance, Environment, Social and Governance Department; you measure whether partner capacity is indeed improving? This SmartLesson Patrick Luternauer, Regional Business Line Manager, Sustainable sets out some points to consider when engaging with a long-term partner in a Business Advisory, Europe and Central Asia. capacity-building program—and some ideas on measuring whether capacity is being effectively built. Background priority in markets where IFC has worked for a longer period. However, you still need to IFC started promoting corporate governance determine whether there will be sufficient best practices in the Europe and Central Asia demand in the market to justify such an region (ECA) in the 1990s, advising companies, intensive intervention. regulators, and other market players—mostly “going solo” (relying on IFC’s own staff). Be flexible: It doesn’t serve to be too On occasion, IFC would partner with a local prescriptive in approach. The program needs institution, but typically on an ad hoc basis to adjust to ever-changing realities—starting for a short-term purpose. The next stage during program design and then continually involved the development of local training during delivery. After all, you’re dealing and consulting institutions over a three-year with real people in real institutions with real period to ensure that corporate governance human circumstances that could influence advice would be available in the market success. beyond IFC’s engagement, and to achieve greater market impact. IFC and one of its Be humble: Just because IFC may be new main donors, SECO, realized the program to a market doesn’t mean there aren’t needed a method to measure qualitative sophisticated players already there. improvements in, and sustainability prospects of, the institutions that IFC was training. Lesson 2: How do you choose a long-term What we learned can apply to any program partner? (Preparation) for building local capacity to deliver services independently of IFC. Clarify the objective and vision: What will success look like? What does IFC want to Lesson 1: Is it too early to settle down? achieve? What outcomes would the program (Preparation) like to see at the end? For example, is the goal that the partner might be in a position Is the time right? Capacity building as a to serve IFC’s investment clients by program stand-alone objective should be a bigger end? SMARTLESSONS — DECEMBER 2013 1 Assess the market: Conduct due diligence on existing Lesson 4: What’s involved in living together? institutions—strengths, profiles, and ability to influence or (Implementation) inform. Consider those institutions that might already be well positioned and have commitment. Put them to the test early: Due diligence and indications of commitment cannot substitute for the experience of Who is available and eligible? Determine the types of working together. The stress of program delivery can institutions you should consider to help reach your goals. help with detection of potential risks for achievement of For example, regulators may be influential, but if the program objectives, and with devising mitigation strategies. goal is for the partner to deliver consulting services, is a Communication: It is critical for IFC to maintain close regulator really the best partner? Next, consider your key and constant communication with its partners. Consider criteria—whether the potential partner has the staff time to developing an outline for communication with each dedicate to what may be less lucrative than its mainstream partner to ensure that the partner feels supported and work for a period of time. What other obligations does it not overloaded, and that IFC properly assists the partner have? Does it have a network? Be sure to select neither toward the shared goal. too many partners nor too few. Keeping in mind the size of the market and your vision of success, assess the nature What’s the partner’s vision? At the outset, some partners of any likely contenders, the likely positive or negative may not have a clear vision of how they wish to grow, even consequences of creating competition among partners, and though they had to present some elements of their vision whether partners can complement each other. as part of the selection process. Their vision will evolve over time, along with their areas of interest. IFC needs to Familiarity: Consider the benefits of building on existing encourage—and assist with—this development of vision. relationships (where IFC has already invested resources and grown capacity) and the familiarity that comes with those Balance individual and group training: Program relationships. Then weigh that against the commitment design—including budget preparation—should cover that could come from a new partner institution. interactions between IFC and individual partners, interactions between the partners, and group interactions Competition: You may want to take a competitive approach between partners and IFC. Individual engagement works in selection, obtaining formal expressions of interest better for more intensive, tailored training and capacity (perhaps through open advertisement) and requesting building. Group training events—for which IFC should a motivation letter in which applicants describe their budget at least once a year—serve to 1) maintain partners’ capacity, staffing, current knowledge, other obligations, enthusiasm, 2) allow partners to develop networks among networks, and financial position. Even if there is no open themselves, 3) establish a sense of benchmarking among advertisement and even if an institution is already known the partners, and 4) repeat key messages. to IFC, such written expression of interest should still be obtained. Avoid a dependency culture: The goal is to ensure sustainable institutions that can deliver services Lesson 3: How do you make a move? (Preparation) independently of IFC. Thus IFC needs to gradually decrease dependency over program life by, for example, Be open: It’s all too easy to focus on what IFC wants without encouraging partners to 1) cover more of their own costs considering what’s in it for the partner. Demonstrate for events delivered, 2) critically consider their ability to to potential partners what they stand to gain, but also charge (thereby covering some or all of the costs), and 3) encourage them at the outset to be open about their ability deliver technical knowledge with increasing independence. to engage (rather than waste resources on a partner that IFC should not always rush to be in attendance, or should fails to deliver later on). Be aware that IFC’s name may keep attend as an equal rather than as a backup. To avoid the some from freely admitting they can no longer deliver. creation of a dependency culture (a key risk in capacity- building programs), IFC should become more critical in Getting buy-in: Include, for example, the following: assessing the provision of financial and technical support for • Memorandum of Understanding: Sign MoUs with partner initiatives. More generous financial support may be selected partners, even if—or indeed especially if— appropriate for “newer” partners. Technical support may they have worked with IFC in previous projects with be more effective as behind-the-scenes assistance. different relationship dynamics and less demanding requirements. Signing an MoU helps partners focus Client work: In engaging a client, consider tripartite project before commitment. services agreements between the client, the partner, and IFC. • Introductory workshop: Prior to implementation, hold This allows the partner to feel a greater sense of responsibility a workshop with all partners to explain relationship and raise its profile and the revenue that it shares with IFC. dynamics and practical requirements and expectations. An alternative is for IFC to sign an agreement with a partner • Contract: With the partner, sign a framework to support that partner in delivering services to a client. This cooperation agreement that outlines key targets and “frontline” approach for the partner may be appropriate deliverables as well as specific requirements, such as where the engagement is more limited and the partner is reporting and integrity due diligence (IDD). more confident. IFC also needs to consider carefully how to 2 SMARTLESSONS — DECEMBER 2013 manage IDD issues with a prospective client introduced by or to ask IFC to deliver work, for example, when they would a partner—and to explain to the partner at the outset that be better placed to do so themselves. Remind the partners the same IDD issues continue to apply if IFC is to be engaged of the shared objective and ensure them that IFC’s support with a given client. When working with IFC investment is solid even without meeting all requests unquestioningly. clients, consider whether to involve the partner—depending on partner ability, and keeping in mind the internal IFC Box ticking: Sometimes you may find that partners are not relationships involved. Furthermore, with certain partners abiding by their commitments to IFC. This does not bode the goal might also be for that partner to be able to deliver well for sustainability after program end and needs to be to investment clients in the future. managed sensitively. Explain the shared goal for long-term sustainability. If the partner is unwilling to change, it may Pricing: IFC wants to ensure real commitment from clients be time to revisit the vision shared with the partner or by charging on a financially sustainable basis. At the same consider an additional partner. time, the partner needs to earn revenue—to demonstrate the sustainability of its services and to remain motivated Termination: Terminating a relationship can be delicate in engaging with IFC. This may lead to sensitive discussions and could even jeopardize the program. While less dramatic, about how to split fees between the partner and IFC. engaging an additional partner must also be treated with The division of work should be the defining factor in care, especially if there is likely to be overlap. determining fee allocation, but take care that the partner does not feel that IFC is taking more than its fair share. Lesson 6: Is the relationship working? (Implementation) Networking: Encourage partners to develop a network How do we know whether we have succeeded in building among themselves, where IFC is not the focal point. Partners partner capacity to provide services sustainably in the can share ideas and support each other’s initiatives, and so market? Will the partners have a positive impact by on, and they may wish to sign MoUs with each other as part providing quality services in the market? One way to of this process. find out is by designing an evaluative study to assess the sustainability of client capacity-building engagements. Reporting: Early on, emphasize the importance of partner Figure 1, for example, shows evaluation results that are reporting to IFC, given that IFC may be a step removed included in a report to the donor on project performance. from a client reached by a partner. Providing easy-to-use templates can help achieve the goal of conveying the Designing the Study: Frame the study’s questions to necessary data. focus on the partner and the market (rather than just outputs). Meaningful answers require real-world context. Lesson 5: What if there are relationship difficulties? For example, the corporate governance program’s model (Implementation) looks to market-level impacts, so the study formulated the following questions: Keep your eyes open: If a dependency culture takes hold 1. Do partners have the capacity to supply the services? over time, partners may be quick to request funds from IFC This question brings out whether the client learned Figure 1: “Consolidated” Capacity Chart The chart shows capacity growth of four actual study partners over time, consolidated across the four framework metrics and relative to their baseline capacity. The timeline runs to project end, when partners are envisioned to show significant upward capacity change, both relative to baseline and in absolute terms, to reach the upper boundary of the chart, demonstrating ability to deliver best-practice corporate governance services sustainability in their markets. SMARTLESSONS — DECEMBER 2013 3 something—whether capacity was built. baseline at the start and illustrates how much 2. Is there a demand for services within changed by the end. a viable market? To be sustainable, the partner needs to engage the market and Get a full picture, but don’t burden successfully apply the new skills. This the partner: Our partners don’t want to question addresses whether the partner complete surveys every six months. IFC works is motivated to do so: Is there a business with them closely; we know what they’re case for its developed capacity? doing. Using our own expert opinion helps shift reporting burdens off them. Of course, Use a structured framework: Break a deeper understanding of their motivations, questions into categories, driven by commitment, and market assessment is a quantitative and qualitative data. Developing critical piece of the picture. For a full insight, these questions into a questionnaire can the assessment pairs in-depth baseline/ ensure consistent assessment over time. The midterm/end-line interviews with short, corporate governance study framework had structured biannual survey assessments four measurement points, which may be conducted by IFC. generally applicable: 1. Technical Capacity: Does the partner have Use expert opinion: IFC boasts technical the necessary skills, expertise, staffing, experts who are qualified to assess a partner’s and resources? ability and capacity. Expert judgment is 2. Delivery Capacity: How “much” services especially useful in assessing conditions are the partners supplying (volume of where effects can be greater than the “sum engagements), and how much is delivered of their parts”—such as in capacity building. jointly as opposed to independently of But to produce credible analysis, it must IFC, and with what quality? be structured, consistent, and controlled 3. Outreach Capacity: What level of for bias. Using a clear framework (such relevance, fit, or potential demand as the four measurement points) with a exists? How is the partner engaging structured assessment tool helps establish public advocacy or awareness-raising for this consistency. Corroborating quantitative the topic? What type of client feedback metrics—those underlying “parts”—helps is received? control bias. For the corporate governance 4. Institutional Capacity: Is the partner study, the same experts assess the same clients, committed to the agenda? How does while a program leader ensures consistency. it fit within the partner’s own strategy, Metrics—including client operational data, business model, and market position? volume of engagements, and number led in What level of resource is being allocated? partnership versus jointly—corroborate those assessments. For long-term capacity-building Collect data over time: Capacity building engagements, expert judgment helps control means growing, changing over time. Periodic biases that could arise if clients were surveyed assessments over program life provide the directly. most appropriate measurement of this growth, for two reasons: 1) understanding how a Conclusion partner learns and applies new capacities will highlight strengths and weaknesses that can A capacity-building program may need a DISCLAIMER focus program delivery, and this interplay longer and more careful preparation phase SmartLessons is an awards between delivery and client change is the to ensure that IFC selects the best partners program to share lessons learned in development-oriented basis for measuring progress; and 2) periodic available. It can be challenging to turn advisory services and investment data collection establishes a trend line. With around a selection of the wrong partner. operations. The findings, biannual surveys, the corporate governance Engaging with partners and monitoring their interpretations, and conclusions project expects about eight measurement progress also require keeping a watchful eye expressed in this paper are those of the author(s) and do not points for each study client by the end of for signs of frustration that could affect their necessarily reflect the views of engagement. This method establishes a clear motivation and, ultimately, program success. IFC or its partner organizations, the Executive Directors of The World Bank or the governments they represent. IFC does not assume any responsibility for the completeness or accuracy of the information contained in this document. Please see the terms and conditions at www.ifc.org/ smartlessons or contact the program at smartlessons@ifc.org. 4 SMARTLESSONS — DECEMBER 2013