Who Coaches the Coaches? Thinking Systemically about Non-Financial Support to Businesses in Fragile Settings

This is the final blog in a series inspired by the four take-away messages from USAID’s primer on private-sector engagement in fragile and conflict-affected situations, and it focuses on going beyond financial support to provide the coaching, networking, and advocacy needed for local businesses and new investors to succeed in particularly complex, fragile and conflict-affected environments. See the earlier entries in the series for more on social inclusion, environmental stewardship, and conflict sensitivity as a third dimension to shared value; managing private-sector actors who are invested in a conflict-dominated, humanitarian system; and novel approaches for prospecting potential partners.

Bitter honey

Things did not go smoothly for the budding social entrepreneur from the first post in this series. The work of collecting, cleaning, and bottling the honey from the indigenous people in the Democratic Republic of Congo’s Ituri rainforest should have been the hard part. But flush with more honey than they had ever sold in a season and optimistic about even higher quantities in the future, their manager aspired to expand beyond their established market of small retailers in Mambasa City and Bunia, and he looked to North Kivu, Ituri’s wealthier and more developed southern neighbor. He traveled with over a thousand litres of honey to a medium-sized city just over the provincial border, where he knew a large pharmacy that would buy high-quality wild honey in bulk.

The pharmacy was impressed by the quality of the honey, appreciated the socially responsible story of its provenance, and offered a fair price. It uses honey as a base ingredient in a line of natural cosmetic products, and being able to market it as pure—from the unspoilt forests of the Okapi Reserve, no less—was an important selling point for its customers in cities like Beni, Butembo, Goma, and Bukavu. The social entrepreneur backed out of the deal, though: he had heard that in the provincial capital Goma, the unit price for wild honey like his was up to 50% more than he was being offered by the pharmacy.

So he traveled to Goma for a better price. Here, though, wholesale buyers were used to dealing with several metric tonnes per transaction, so a thousand litres did not afford him as much leverage in Goma as it did in the north of the province. The higher prices he heard about were usually paid by NGOs with funding to develop non-forest timber products in specific parts of North Kivu, and they did not price honey like commercial buyers did. Moreover, the commercial buyers knew how far he had come, and at what risk—first through territory controlled by the ADF militia, then through that of the even more feared M23—and they knew he could not afford to walk away from the sale. Crestfallen, he took the deal, accepted a lower unit price, absorbed the extra transportation costs, and slunk back home, lesson learned.

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The Strengthening Livelihoods and Resilience (SLR) activity learned its lesson, too. SLR made the mistake of assuming that once the groups of Mbuti were consulted, supplier clubs were arranged, improved beekeeping equipment was delivered, and the honey had been collected and delivered to the packaging facility in Mambasa City, its “private-sector” partner could handle the selling part. Quite the reverse: for a socially oriented NGO in its first serious commercial foray, building trust with a marginalized community, training them, and conducting a fair economic transaction came naturally; negotiating with wholesalers in the big city—less so. Next season, the SLR team will coach this new player through process of selling in bulk to serious buyers.

It is tempting to laugh at anecdotes like this one, or at the businessman from the previous post in this series who neglected to verify that the purchase order for a district’s entire maize harvest was finalized and signed. But that would be missing the point about working with a nascent private sector in a place like Ituri. The private-sector or quasi-commercial partners SLR works with usually made it through both grueling inquisition by partner communities and a lengthy negotiation process designed to clarify ideas and filter out ‘bad actors’. Of all the organizations and businesses in the area, they were often among the most creative, energetic, and aligned with values of long-term, inclusive economic growth and resilience. It is a mistake to dismiss them as unmotivated or incompetent.

In Ituri, following one business practice, like going to extreme lengths to get a better offer—or eschewing another, like written contracts—is not risible, it is adaptive. In a market system with limited information and little trust, businesses with low turnover seek to balance their books with the occasional exploitative sales margin, so the smart move may be to walk out of a negotiation at the first suspicion you are being cheated, especially if there is a glimmer of something better. When written records of business transactions can be turned into a liability with unaccountable tax authorities, signing sales contracts can be a blunder. These market actors were responding intelligently to natural incentives in their socioeconomic system; SLR was the one suddenly changing the rules and expecting its partners to ‘revert’ to foreign business norms without any help from a coach.

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Twelve businessmen… and a $45,000 airplane?

More such anecdotes abound, and with them, the lesson SLR is taking from them: not to gape or guffaw, but to perceive the resources and expertise that are there, and to find the opportunities to nudge its partners towards something better. When SLR began its co-creation efforts in Ndrélé in northeastern Ituri, it came into contact with a group of a dozen businessmen with considerable capital reserves seeking ideas to put their money to use. It transpired that the leading investment proposal was to launch an air-taxi service between Mahagi City and Ituri’s capital Bunia to the south. By all reports, they had mobilized $220,000 between them, lined up a used plane for $45,000, and were exploring the other equipment, pilots, and permits they would need to get under way. They asked SLR if the project could guide them through the process of purchasing and outfitting the plane, hiring staff, pricing fares, and competing with the donor-subsidized missionary and UN planes making the Bunia–Aru–Mahagi circuit.

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Now, the bicycle-inclined author of this blog entry has never shopped for an airplane himself, but he is confident that if someone offers to sell you one for forty-five grand, your first question should be, “Does it… fly?” None of the dozen Ndrélé businessmen had a background in logistics, let alone aviation experience. And although USAID did design and manage SLR with a flexible mandate to promote resilience and livelihoods, and even though logistics innovations are an underappreciated way to catalyze systemic improvements in remote rural markets, directing USG funds into a shoestring airline in a war zone seemed… out of scope. However, the SLR team did not see a group of unrealistic dreamers, nor victims of an attempted scam (right?), but rather a community of creative businessmen with open minds, a desire to do something useful for their small city, and money to invest.

SLR rarely comes across community groups or small businesses with the ability to mobilize more than five or ten thousand dollars, and that is usually in kind—equipment, products, labor, and the like. Two hundred thousand dollars was unheard of. SLR does not insist on a specific matching amount from its partners, preferring to calibrate the relative co-investments to the level of risk the partner is accepting, the strategic relevance of the partnership to SLR, and most of all, the partner’s own capacity to mobilize capital. Sometimes SLR supports 90% of a partnership budget, sometimes 30% or 40%. Or zero per cent: sometimes it only facilitates connections and provides advocacy and guidance, without any in-kind or technical support. However, it adjusts the order of magnitude of its investment to the scale of activity the partner is ready for, technically and financially. A group of investors in one of northern Ituri’s most economically important cities with that much cash in hand was interesting because it could be used to unlock significant resources from SLR or from other co-investors.

SLR helped the businessmen calculate and compare the risks and rewards of airplane operations with agro-processing, guided them through the process of formalizing an association, and coached them as they developed a business plan for a small mill that could source its raw material locally and sell flour at a more competitive price than the prevailing Ugandan imports. It also helped them calculate their working capital… at $30,000—a figure that plunged from their original estimate when SLR’s business-advisor consultant helped them distinguish liquid from illiquid assets (a private airplane no longer being part of the plan probably also had something to do with the capital drying up). Nevertheless, it was a better financial starting point than most of SLR’s partnerships, and the new association is currently working to set up a small factory outside of Ndrélé.

Mainstreaming a ‘beyond financial support’ approach

The fourth and final lesson to take away from the USAID primer that inspired this blog series is that in fragile and conflict-affected settings like Ituri, USAID and its implementing partners need to shift away from contributing primarily financial support and show a greater preference for helping partners to access  human capital, data, infrastructure, relationships, and recognition. The primer also speaks to the importance of USAID projects as a guide to private-sector partners on learning and adaptation. It gives the example of the Sri Lanka Biz+ program, which found that the small and medium enterprises in the most conflict-affected part of the country made the best use of their financial assistance when they had a long-term coach, rather than a brief consultancy, to guide them. It introduced a management development training program and business coaching as a standard part of its model, and this approach was a major contributor to the program creating 8,000 jobs and generating $25M in business investments. The primer also observes that as the project was closing down, three district chambers of commerce began working to expand the training to continue growing Sri Lanka small and medium enterprises. This last development is especially noteworthy when it comes to looking at non-financial support through a systems lens.

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As SLR’s community co-creation work required more and more involvement from the private sector to jump-start economic activity and it faced increasing vetting and planning challenges, the team reached a similar conclusion to the Sri Lanka program about the need for coaching. SLR has become efficient at building the ‘beyond financial support’ dictum into a standard partnership workplan, often assigning promising private-sector partners a business-planning coach even as co-creation discussions begin. While SLR, the business, and the community are refining the ideas and negotiating roles, the business coach can help them quantify their assets, calculate their annual turnover, analyze profit margins, and start developing a realistic business plan. For example, another promising business in Mahagi territory owned several trucks and worked primarily in construction, but it also had several agricultural investments and was interested in expanding. However, it needed linkages to farmers and guidance on how to establish a profitable milling operation. SLR’s coaching helped them start the process of installing a mill in a conflict-prone town on the border with Djugu, and it is on track to be up and running by 2025.

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SLR is providing valuable support to private-sector partners not just in business planning, but also in networking, strategy, business-to-business and business-to-consumer communication, and even advocacy. However, for a project aspiring to approach resilience from a systemic lens, this raises a challenging second-order question: if coaching is so critical for a nascent private sector in fragile contexts, who coaches the coaches?

Looking at knowledge, relationships, and recognition ‘services’ through a systems lens

SLR uses a simple framework (found on the last page of these workplan excerpts) for analyzing how well-aligned its partnership budgets are with good facilitation principles. For example, when SLR supports a partner to build knowledge, networks, or brand visibility, it is often providing a ‘service’ that would come from a permanent market actor in a healthier market system. When it steps in as a temporary substitute, SLR formulates a hypothesis for how another market actor could be introduced to playing that role, then it finds a way to bring that actor into the partnership in a modest way. It always attempts to create new market linkages and support a transition of the support function to a permanent actor in the system… when it can. In the Sri Lanka example, it was chambers of commerce that showed promise of taking over one training function. With business coaching, SLR hypothesized there was a business case like this one to be made for Ituri’s universities to assume that role: business-school faculty need real-life subjects to research and teach; and students need exposure to the job market. Perhaps universities could learn how to engage businesses in need of coaching as case studies, and businesses could learn how to design internships to draw in support from universities when they needed guidance.

SLR began providing business-coaching support on that hypothesis, subsidizing only the transportation needs of the faculty who became involved. However, it found that quality business coaching was time-consuming, and that university faculty had many demands on their time (and, reasonably, were disinclined to work for free), had few incentives from their deans to leave campus to work with Ituri’s small businesses, and most of all, the university system in Ituri was beset by many of the same challenges—weak infrastructure, precarious financing, insecurity, brain drain—as the rest of the market system. SLR had neither the in-house expertise nor the bandwidth to approach the university system with the heavy support that would be necessary to truly test the validity of its hypothesis. So SLR still uses a few excellent university faculty members as part of their roster of business coaches—but as paid consultants, and without the expectation that it will turn into a sustainable pattern after the end of the activity.

The USAID primer on private-sector engagement in fragile contexts calls coaching, data, networks, advocacy, and the like “non-financial support”, but they do have a cost, even if a PSE project does not provide them through direct financing to a private-sector partner. When it comes to the first-order problem of sustainable financing for agricultural inputs or durable land-tenure dispute-resolution mechanisms, SLR has a murky but hopeful vision for how some of the changes it is putting in place can continue beyond the end of the activity (though it will not be easy). On the other hand, SLR has found it harder to develop plausible sustainability hypotheses around ongoing “non-financial support” to the private sector so that it can continuously grow and adapt.

To return to the “who coaches the coaches?” conceit, if SLR’s university business coaches were themselves in need of more coaching than the project could offer before they could take on that role in the system permanently, and if a separate donor project is needed to strengthen the resilience of the university system (so, “a coach coach will coach the coaches”?), a systems lens would look to the permanent system actor that would support the university system itself to continuously innovate its business-coaching services as local business needs change or outside forces shock the economy. In other words… “Who coaches the coach coaches?”

Serendipity

The tongue twister sounds absurd, and it is—especially in a conflict-stricken place like Ituri where people struggle to feed themselves and businesses can lose everything overnight. But the question is not purely academic: transforming a system so it is able to learn and adapt on its own is arguably the single best thing a donor project can do for systemic resilience. In fragile and conflict-affected settings where the learning function is so critical, though, market actors that can provide non-financial support like coaching are rare. Sometimes, a program like SLR needs to assertively fill some of these functions itself, even without a solid sustainability hypothesis. This may mean finding other ways to measure whether it is doing good facilitation. It also points to limitations in a project team’s own prescience in the face of a complex system—in other words, sometimes you just do the right thing and hope that someone you couldn’t have predicted will step in and take over your role some day.

For the SLR team, that has boiled down to a lot of honest discussions, case-by-case decision-making, and, sometimes, trust in the serendipity inherent to unpredictable places—not strict policies or formulas. Like the observation that private-sector engagement best practices are more important than ever somewhere like Ituri, the same can be said about the importance of hiring the right people and nurturing smart, adaptive, resilient project teams that can work effectively in the grey areas and manage those tough judgement calls.

Dan Langfitt is a Principal Specialist in DAI’s Resilience & Stability practice. He was the Director of Partnerships and Operations for the DRC SLR Activity until April 2023. SLR’s Clarisse Mageza and Siméon Androva made major contributions to this piece.