What makes people do what they do? What moves us? What incentives really cause us to try things that might fall just outside of our previous experience? How can development cowboys find and use the appropriate incentives to stimulate people to try new things and sustain them after we leave? In this post I offer a look at several different examples from my own experience in which the so-called “change agents” succeeded in the identification and application of appropriate incentives, and some in which they did not. I hope you will read through these examples, consider them in the light of your own work and add your own experience and ideas in the comments section at the end.
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Pull the String
Most of us learned long ago that moving a heavy load over rough ground is much more easily accomplished by pulling it (wagon, sled, wheel barrow) than by attempting to push it. This is most simply illustrated by trying to push a piece of plain string straight across a table and then attempting the same thing by gently pulling on one end. This is a very simple lesson indeed. It seems to often be forgotten, however, as we try to program the actions of our development partners rather than understand their motivations and find effective ways to respond to them.
I was reminded of this lesson early in 2004 when the representative of a major European donor told me, “Of course the flower growers will sell to the marketing company we are establishing – they are obliged by our grant agreement to do so.” The flower growers, in fact, had at least three good reasons NOT to sell to the marketing company:
- First, if they did so, deductions would be taken from their sales to repay debts that were not properly valued or documented.
- Second, they had no trust in the donor who had already failed to deliver on various promises causing them to miss an entire marketing season and had made no credible preparations to market their product.
- Third, and perhaps most important, they did not trust each other and were all making plans to market their flowers individually – to gain what they saw as their individual advantage and protect against the uncertainties of dealing with their cohorts in the industry.
It was a clear case of “pushing on a string” to expect that this little group of flower growers was going to take any action that they saw as being contrary to their short-term individual self-interest just because they were “obliged” to. It might have been possible to work with those same producers to find the elements that would have given them a positive incentive to do what they were being “obliged” to do. In this case the donor had taken none of the necessary steps to do that and appears to have been more interested in selling the equipment and supplies produced in its own country than in establishing viable production and marketing systems in Armenia. This is “tied aid” at its worst, but don’t get me started down that road. It is a long and treacherous one, filled with inefficiency and tended by bureaucrats whose primary interest is in the “branding” label that goes on the equipment and advancing their own careers.
For the economic development process to be effective, it is necessary to realize that people go where they want to go and do what they want to do according to their own best estimation of their (usually short-term) self-interest. They often have little confidence that their so-called supporters are going to really understand their needs or even be around in the longer term to deliver on their “promises”. Especially in this age of increasingly donor-savvy beneficiaries, I seem to see more cases of starry-eyed (or cynical) donors being manipulated by clever beneficiaries than the other way around. We might say, “Good for them if they can make it work,” but too often it does not work at all. Another part of the development budget is wasted and “beneficiaries” have become accomplices in the abuse of the system.
One of my frequent, and occasionally effective, responses to potential clients who drop by my program office, wherever it might be, in the hope of picking up one of the grants the program I am managing is inaccurately rumored to be handing out willy-nilly, after disabusing them of at least the “willy-nilly” part of the rumor, is to explain the concept of common interest. The client is not going to tell me how to run my program (e.g. to whom I should make grants and in what amounts) and my colleagues and I are not going to tell the client how to run his or her business. What we can do together is to explore the client’s needs and look together for the best ways to get those needs satisfied. If that means that some level of partial grant support is required and the nature of the need falls within the parameters of my program, we can explore that possibility, provided that such a facility is included in the “tool kit” the project of the moment has been given. First priority is given, however, to analyzing the situation together and agreeing on the need. After that, we will help look for outside (or inside) resources. Often we find that more careful planning and tighter management will reduce or eliminate the need for outside financing.
Whatever little grant fund we have is the source of last resort. While many aspiring grant recipients are put off by the pretty rigorous process of strategic planning and financial forecasting we go through with them, I am often surprised at how many actually value it and become long-term partners, working with our team on the analysis and resolution of various business problems even when possible grants are not on the table. We can work together to improve planning, management, production and marketing practices without injecting loads of new and ostensibly free money into the company. Grants can be a useful part of the development process but they should not be the objective of the process. Using grants as an incentive to get people to do things they would not otherwise do strikes me as a mistake. Using grants to help people do things that are important enough to them to stimulate the investment of their own resources can often be a useful tool.
One key to success in SME development work, or most other development work as well, I suppose, is to identify the factors that will motivate people to act in ways that are socially or economically desirable as defined, regrettably, by the donor organization. If we are lucky, we can identify common ground where the donor can help in ways that the businessperson or farmer (or government official?) will both understand and make use of because he or she sees how the action will complement what he or she can do independently and add to the bottom line. We can show people how certain actions will benefit them and then help those who are initially willing to undertake those actions to do so effectively and demonstrate their positive effect to others.
Pineapple Growers in Ghana
A good case to illustrate these points took place in Ghana in the mid-1990s. A group of small and medium mid-sized pineapple growers found that they were unable to compete effectively in the European market. They could not attract cost-effective ocean shipping services that would put their product in the European market on a reliable and affordable basis. They had serious competition from pineapple being shipped in by (big) boat by Dole, Del Monte and others from near (Ivory Coast and Cameroon) and far (Central America). They were limited to much higher cost air shipment, which restricted their market to the very high-end consumers willing to pay extra for extreme freshness. This was a profitable trade for those that were able to participate but volumes were quite small and risk was high.
This group of a dozen or so very independent growers was helped by a USAID technical assistance program to see the possibility of joint action to attack the problem. With technical assistance, and very limited financial support, they formed a single-purpose industry association, the Sea-freight Pineapple Exporters of Ghana (SPEG). Through this new association, which they owned and operated together, they were able to contract a vessel to pass through the Port of Tema weekly to pick up their fruit and carry it off to Europe.
In Ghana, like in many other parts of the world, especially those with a period of forced “cooperation” in their recent history, farmers and entrepreneurs are suspicious of each other and reluctant to act collectively. They have too often seen the results of collectivization up close and personal and are now determined to maintain their independence and avoid entanglements that would expose them to the corruption or incompetence (or both) of others.
We certainly cannot force these or any other people to take our advice and organize themselves in ways that appear appropriate to us but bring up all the wrong associations for them. There are several things we can do, however. We can provide training, explanations and demonstrations of our suggested solutions. We can offer incentives for them to try our suggestions, hopefully in the form of reducing their risk rather than directly subsidizing prices. We can make our assistance, especially financial assistance, contingent on their taking these steps. When we agree with them on the goals and the necessary steps to be accomplished in addressing those goals, then we can move ahead together taking the practical steps required. The importance of the conversation that results in our agreement on goals and action steps was the subject of an earlier post.
The SPEG association did serve as a channel for technical assistance to individual producers and shippers as European quality standards tightened with regard to pesticide residues and Good Agricultural Practices (GAP) required by buyers who have adopted the EurepGap (now GlobalG.A.P.) standards. The growers were eager to receive training and other practical assistance in these areas. They had come to understand that it was clearly in their best individual interests to comply with those standards. Having one shipment rejected in France convinced them of that. The association served as a good mechanism for the delivery of that training and brought the members together for a different kind of discussion.
Gradually, as these activities increased, we began to see limited purpose partnerships being formed among the members outside of the SPEG framework as their understanding of the value of cooperation to achieve their aims grew. We were even able to entice the members, by paying part of the cost and therefore earning some right to set the rules, to participate in international trade shows together under a common SPEG banner. Each member still wanted to have his or her own label but cooperation was increasing. As I left the country discussions were underway regarding expanding the association to include exporters of other fruits and vegetables and establishing an association-owned cool store facility on the dock at the port.
It is a slow process but it cannot be any faster until the participants are ready. A European donor agency came to Ghana at one point with a plan to build a cool storage facility at the port for the benefit of the pineapple exporters and others. This was done in a very top-down manner, involving local partners that were not a part of the industry and were therefore not trusted. The association effectively shot down that proposal by refusing to cooperate even though they were not being asked to pay for it. We can argue the irrationality of their position all we want — and I did that to the point of exasperating some of my colleagues – but that is not the point. The point was that the pineapple growers/shippers did not trust that the outside donor, partnered with a local company with no experience in the industry, was not going to somehow monopolize the port facilities and cut them out of the business.
The donor had not made the effort to find the incentive that would have attracted the cooperation of the shippers. The donor was addressing what it correctly saw as a problem by incorrectly throwing money at it (Pushing the string!). The result was that what the donor saw as a valuable investment in promoting horticulture exports from Ghana was viewed by its primary beneficiaries as a threat to their long-term interests. In this case, I believe the solution may have been as simple as involving the growers in the planning of the venture and inviting them to invest some of their own money in its development. I suggested this to the donor representatives but they were quite confident that their way was the best way and then took it – right over the development cliff.
Ownership is a powerful motivator. These folks had seen enough donor-funded white elephants standing around their country unused and unusable. As often as not, this was because they were “owned” by the government or an influential person who was pretty much clueless about the practical operations of the facility or the industry and not terribly interested once the “benefits” of cooperating with the development of the project had been banked. The incentive these folks needed was less a subsidy than the confidence that they were going to maintain control of their activities.
Another illustrative example took place in Armenia a few years later. Armenia is another country where a long history of forced collectivization has resulted in mistrust among business people and an over-developed perception of the need for everyone to “go it alone” to protect their own interests. Of course, these tendencies are reinforced by the difficulties of dealing with official corruption at every turn and a national passion for tax avoidance.
The leather tanning industry, with its rather unfortunate associations with foul odors, hazardous working conditions and a historical tendency to pour the waste products of its processes, including heavy metals, into public fields and waterways, is a natural province of rugged individualists. They fight for quality hides and skins, compete for skilled workers and work hard to out-do each other in turning their literal sows’ ears into quality silk purses for the market place. They have historically seen little benefit in cooperation and often preferred to do their work out of sight of each other or the general public in order to protect their “secrets.” While there are some very logical areas in which working collectively would benefit them individually, convincing them to do was not easy.
In the course of doing some related research, one of our local sub-contractors discovered the existence of several small-scale tanneries spread around the country. All were operating far below their capacity and pretty much in the shadows of the official economy. Several were struggling just to stay in operation at all. Our local sub-contractor discovered that, though these tanneries were not related to each other in any operational way, they were all suffering from the same problem – the lack of reliable access to quality tanning chemicals at reasonable prices.
We invited them all to a meeting to hear the findings of our research concerning the availability of raw hides and skins in the country. After that presentation, we mentioned that they all seemed to be suffering from the same problem and that there might be ways to overcome that problem by acting together. They became interested because they did agree that the problem we had identified did affect them all, and it was a serious one that they were not able to address effectively individually.
As a result of that initial discussion, and several (many!!) more that followed, the Armenia Tanneries Association was formed to gain control over the members’ supply of necessary production inputs. Our team helped with the drafting of articles of association and the preparation of an appropriate business plan for the launching and operation of a single purpose organization. We even helped the members determine that they actually did have funds of their own to invest in various ways along with a small capital grant and commercial bank loans secured by the inventory of supplies. The key to our success in convincing them to join together in this single purpose organization was our offer of a cost share grant to help, a portion of the total cost, capitalize their chemical purchase program – provided that they met certain conditions, which included some investment of their own funds – at least 20% of the total as I recall.
Responsibility for moving the process forward remained with them throughout and the pace was set by them. It often seemed that we were more eager to see this activity completed than the “owners.” This was probably true for quite some time. We were able, however, to resist the urge to “push the string” and take on more of the responsibility ourselves. It would have been much easier for us to essentially deliver a turnkey association to a group of nominal members who were unaware of its genesis and uncommitted to its success. We stuck with our principles, however, and eventually a functional association was launched. It was still a pretty closed group and secretive about its operations, setting stiff conditions for membership and allowing non-members only limited access to its supply program. It did start to function, however, mostly along lines consistent with the principles we had agreed with them.
Single purpose programs (e.g. association development, market access, management training, etc.) or unreasonably short-term development projects designed by donors often result in the other, donor-driven, course being taken and ultimate failure of the activity. While the “operation” may be (or look) successful, the “patient” often dies anyway due to the lack of serious commitment on the part of those who are intended to benefit from the activity and carry it forward
The Armenia Tanners’ Association has now been active for several years. At the time the USAID project ended in late 2007, several reorders had been made to insure ready availability of all chemicals and the total value of the assets (chemicals and cash) had increased. After only about two years of operation all members acknowledged that they were producing more leather products than they were able to before, that the quality of those products was higher as a result of having the right amounts of the right chemicals and that they were making more money as a result of the higher quality products they were producing.
The association has now expanded both in terms of its membership and its activities, (e.g. exploring the establishment of a shared leather finishing facility and undertaking supply contracts to be outsourced to members). We were also able to work with them as a group to reduce the negative environmental impact of their operations and to prepare for the day when they will no longer be allowed to undertake the most environmentally hazardous first stage processing steps that involve chromium and other heavy metals.
Identifying the correct starting point – the right “problem” – was one key to this successful experience. Through our research and extended conversations, we were able to help them realize that they shared a problem that could be addressed together without compromising their individual autonomy. Another key was being able to follow-up with appropriate technical and managerial assistance and a targeted cost share grant to leverage the members’ own capital, which was the primary incentive encouraging them to invest their own money and obtain a commercial loan for the balance they needed. The result was that all of the members benefited by improving the quality of their production and sought out higher value marketing opportunities together.
Guinea Bissau and Nicaragua:
The project in Guinea Bissau discussed in an earlier post is another case of identifying the “right” problem based on extensive conversations with the people involved, identifying actions that would help to mitigate that problem and finding the right incentives to encourage the people involved to try something new to add value to their activity. In this case the problem was the isolation of traditional farmers from profitable markets. The mitigating action was to enable them to store their crop in a way that they would be protected from bad weather, bad animal life (pests) and bad people (thieves) and move it to the market at the best time, thus gaining the profits related to market timing and location. The incentive was a simple credit facility specially designed for the purpose that would provide a basis for gradually increasing the local capital available to fund seasonal trading activities.
It is also interesting to consider the case of the Nicaraguan market traders discussed earlier. What led to the difficulties in that program was that the NGO involved had failed to correctly identify either the real recognized problems of the traders they wanted to help or the incentives that would be most important to them. The NGO assumed that low interest rates and the possibility of receiving various types of training would be attraction enough for potential borrowers. They failed to realize that efficiency and simplicity, as provided by the local money lender, would be more important to these busy ladies.
As development professionals we are often wrong in our assumptions about what motivates people of different cultures and economic situations. An illustration can be found in an experience I had in Northern Ghana in 2000. The potential for benefiting large numbers of very poor rural women engaged in shea butter processing by improving the efficiency of their processing technology had been identified. A development agency, led by a local expert and very experienced in the area had developed a new production process based on hammer mills, mechanical presses and filters that would replace the arduous work of hand pounding (mortar and pestle), cooking and working by hand and, at the same time produce more of a product that could attract higher prices on the export market.
What they had not realized is that shea butter is the primary cooking oil used in that part of the country and that it should have a certain taste and texture to be considered “good.” The product of the “improved” process did not have those characteristics and was thus considered inferior. It would not be considered “right” to foist this inferior product off on unsuspecting foreigners. Moreover, the process of producing the shea butter in the traditional way was a social activity, bringing together groups of women at a time when field work was at its lowest. The new process would bring young men into the process to turn the presses and involve a lot of noise from the grinding mills, effectively ending the social aspects of the activity.
We may be tempted to say that the development team should have done a better job of explaining the values of the new technology to the women but it seems to me that those women had made a conscious decision that some values are more important than someone else’s vision of economic progress, especially since there was no guarantee of the market for this new product, which the women considered useless for their own purposes.
If I have managed to either pique your interest or provoke your ire in this post, please go to the comments box that appears after the footnotes below to share you thinking. I would really like to share the experience the rest of you have had in this important area. And don’t forget to scroll back to the top and sign up to receive future posts in your email box automatically. I promise there won’t be too many and I will try to make them both pertinent and interesting.
 The Conversation is Key