Facilitation can be defined as an action or agent that stimulates a value chain to develop and grow but does not become part of the chain. The activities that facilitators do are often the same as those that implementers have always done: providing training and technical assistance, subsidizing activities, and providing a range of support services. The differences are in why and how the interventions are conducted. The why refers to determining if the intervention will result in the industry moving towards increased competitiveness with a broad-based distribution of benefits. The how refers to ensuring that the donor-funded intervention results in more effective, sustainable relationships between value chain and support market actors, more competition based on ongoing upgrading and innovation, and more rational and transparent benefits that support effective relationships and constant upgrading.
Click the video below to see how various implementers view facilitation:
Value chain constraints will lead designers to a number of potential facilitation activities to improve the competitiveness of the value chain. These can be reviewed in relation to specific criteria established by the implementing organization in order to select which activities to pursue during program implementation. Examples of possible criteria include the following:
- extent of impact on micro- and small enterprises (leveraged effect)
- number of MSEs that will benefit
- cost effectiveness of the intervention (relationship between cost and impact)
- chances of the intervention resulting in sustainable, commercially viable solutions
- capacity of existing, commercially viable facilitators to implement or manage the interventions
- timeframe for completing the intervention
- synergy of interventions among various commercially viable solutions
- ability to promote win-win relationships among MSEs and larger firms
Value chain participants should feel a sense of ownership over the change process. The facilitator should avoid engaging in any direct transactions and be one step removed from interactions among MSEs and service providers. Unless value chain actors take responsibility and ownership of the management and operations of the competitiveness process, long-term success is unlikely.
Recognizing that traditional information campaigns have a limited effect on changing behavior, SDCAsia uses comics to communicate a change agenda to value chain actors and generate their buy-in to the process. Learn more about how to use this tool here.
Governance structures and relationships between value chain participants are always in a state of flux. A good facilitator is able to transform a parasitic or indifferent relationship into a more symbiotic, mutually beneficial relationship by demonstrating the benefits of collaboration to both MSEs as well as lead firms. This transformative nature of value chain facilitation creates synergies and paves the way for competitiveness. For more on transforming relationships, click here.
Buying Down Risk
New ways of relating among actors in a value chain often carry substantial perceived risks. Concerns relating to commitment failure, free rider behavior, theft, rent seeking and a loss of profits may limit the willingness of a value chain actor to engage with other actors. These risks are often more intense when developing commercial relationships with and between MSEs--the relationships that value chain facilitation projects are tasked with fostering. The starting point for establishing any commercial relationship is the transaction. In weak and highly confused markets, the perceived risks associated with initial transactions--where trust is established--can be prohibitive. As a result, a project can use its subsidy to reduce (or buy down) the risks leading into a transaction, especially for new clients or for firms entering new markets where risks are perceived as too high to warrant investment.
When facilitating the establishment of commercial relationship, the project cannot be seen as the primary contact for either party to the transaction. The project has to be the matchmaker or bridge--and this may require masking its supporting role from one party or the other as a means of maintaining the focus on the core relationship between the parties engaging in the transaction. Project involvement can often be more effective through low-profile interventions than through highly promoted ones. Assessing critical tipping points in terms of reducing risks sufficiently to enable transactions to happen and then fostering more supportive lead up and follow through on transactions can provide the foundation for shifting adversarial relationships into supportive ones. The key is that the project cannot be seen as mediating the transaction. For more on buying down risk, click here.
Self-Selection and Rolling Exit
Self-selection is the process of setting a precondition to any form of project assistance. The precondition has to be directly related to the change in behavior being sought by the project. For example, agricultural input firms have to use their own funds to conduct promotional events in various communities before being able to participate in a project’s program to increase agricultural input sales in rural areas. Self-selection tools are tied to commercial goals, so they have value from the perspective of a serious business. Businesses that are uninterested in taking on risks or are interested in obtaining “free” donor funds would self-select out of the program by not performing the action. A project can use self-selection tools at multiple levels and in all programmatic areas.
A project that actively uses self-selection tools can be seen as applying a rolling exit strategy. A rolling exit strategy uses self-selection tools with wait-and-see tactics to constantly test and challenge private-sector partners’ (including microenterprises' and farmers') ownership and capacity to function without the project’s support. Wait-and-see tactics include strategic decisions to stay away from or limit any support to a partner as a means to assess how they respond. The process can be passive--by letting support die without active communication from the project, or active--by refusing to work with a partner until they shift behavior.
An important component of using self-selection tools and applying a rolling exit strategy is shifting expectations in relation to risk and project timeline. If a partner has shown on multiple occasions a half-hearted attempt to select into the program, standards for access to project support need to be raised each time the partner indicates an interest in this support. Similarly, as the project nears the end of its timeframe, a new partner will have to overcome a substantial hurdle to access project support.
In all cases, a project should use these tools and tactics to develop more transparent and commercially grounded relationships that foster benefit flows that are rational and drive constant upgrading (i.e., innovation). To foster these new relationships and changes in behavior, a project must ensure that the relationships it fosters are not dependent upon its involvement. Also, a project should maintain an industry-level focus: while it may work at many levels in a value chain, the goal remains industry-level competitiveness that MSEs contribute to and benefit from.
Understanding the underlying decision-making process of actors in a value chain is not always straightforward and projects have to develop systems and an operational culture to be effective observers and analysts. Typical projects foster a command and control management approach with activities directed down to staff and operational reporting required to flow upwards. This traditional management approach is not appropriate for a value chain facilitation project as it encourages a misdirected focus on transactions and operational statistics such as the number of people trained. Depending on cultural dynamics in a country a traditional management approach can also foster misreporting of data to appease management.
The objective of a facilitation approach is to change the way that transactions occur by fostering more supportive relationships, innovation-based competition, and benefit flows that encourage effective relationships and innovation. Management systems have to support an operational environment that:
- provides quantitative and qualitative data to track performance--i.e, the capacity to observe actors in relation to expected behavior changes
- empowers staff to manage in dynamic environments--i.e., trains staff, encourages staff interaction and provides guidelines for staff to effectively observe and report on progress
- fosters more appropriate decision-making--i.e., provides a clear direction concerning the types of behaviors required for improving competitiveness
- reinforces a learning-based operating culture