ORGANIZATIONAL DIAGNOSTIC FOR MARKET FACILITATION
ORGANIZATIONAL DIAGNOSTICFOR MARKET FACILITATIONASSESSING YOUR ORGANIZATION’S UNDERSTANDING OF WHATTO DO AND HOW TO DO ITmicroREPORT #176October 2011This publication was prepared by Engineers Without Borders Canada for ACDI/VOCA with funding from USAIDunder the Accelerated Microenterprise Advancement Project (AMAP) Knowledge and Practice II task order.ORGANIZATIONAL DIAGNOSTIC FOR MARKET FACILITATIONi
ORGANIZATIONAL DIAGNOSTICFOR MARKET FACILITATIONASSESSING YOUR ORGANIZATION’S UNDERSTANDING OF WHATTO DO AND HOW TO DO ITmicroREPORT #176DISCLAIMERThe author’s views expressed in this publication do not necessarily reflect the views of the United States Agency forInternational Development or the United States Government.
CONTENTSOVERVIEW . 1I. KNOW WHAT. 4II. KNOW HOW . 8III. ASSESSING YOUR RESULTS . 12TABLES AND FIGURESTable 1: Understanding the “What” in Market Facilitation. 5Table 2: Understanding the "How" in Market Facilitation. 9Table 3: Understanding Your Organizational Diagnostic . 14Figure 1: Representative Assessment of Various Organizations’ Capacities for Market Facilitation . 2Figure 2: Know What Assessment Matrix . 4Figure 3: Know How Assessment Matrix . 8Figure 4: Improving Organizational Effectiveness for Market Facilitation . 13
OVERVIEWMarkets are complex, dynamic and difficult to predict with certainty. Creating sustainable changes in markets requiresthat businesses and market actors feel a sense of commitment and ownership over their new activities and behaviors.It requires that donor-led interventions respond to existing and future market demands, while stimulating this sense ofownership. The market facilitation approach attempts to respond to these two needs. To effectively undertake amarket facilitation approach, organizations must understand the fundamentals of business and markets, the underlyingissues that are limiting market growth, and the sequence of changes that may be required. They must be learningorganizations, aware of and adaptive to the changing market trends and opportunities that will emerge over time.Within this operating culture and environment, facilitators can then design interventions that strategically target keyindustry constraints. This sounds simple in theory; however, implementing this type of approach in practice is quitedifficult.Many development organizations adopt effective service delivery approaches that follow a linear set of repeatable andpredictable interventions, generally focused on primary producers and on activities conducted by project staff (i.e.farmer training, input provision, market actor forums and workshops). These interventions are important, but will beinsufficient for effective market facilitation, which requires staff to understand and respond to changing marketdynamics in ways that minimize market distortion and stimulate sustainable increases in economic growth.Furthermore, facilitation requires that interventions are designed and staff are incentivized to respond to the dynamicand unpredictable nature of markets, and change through ongoing learning and iteration.For an organization to be effective at market facilitation, it may therefore need to develop new knowledge, capacitiesand skills that are currently lacking. This tool aims to help practitioners and managers assess current capacity,understand what might be required, and begin a process of personal and organizational capacity improvement.A. PURPOSEThis tool has two primary purposes:1. To serve as a starting point for organizations to evaluate their current project implementation approach withrespect to different components needed for effective market facilitation.2. To offer a platform for conversation about what changes might be required within an organization to take ona market facilitation approach.B. WHAT THE TOOL ISThe tool attempts to break down market facilitation into day-to-day practices to help clarify what effectiveorganizational practice looks like. It is intended to assist managers interested in improving their organization’s internalcapacity to identify strengths and weaknesses and understand where to begin focusing their capacity building efforts.The tool does this by aggregating behaviors and practices observed from working with over 50 developmentorganizations in Africa and over 15 organizations specifically focused on improving smallholder linkages withmarkets. These range from cutting-edge, innovative organizations and projects designed specifically for marketfacilitation to established international aid organizations and projects that have a long history of service delivery-basedagriculture interventions. While the tool aggregates experiences and trends across these organizations, it is necessarilya simplification of the issues involved since each capacity is a separate, complex topic. This tool draws from andtargets agricultural interventions, however it reflects best practices of learning organizations that are relevant for allORGANIZATIONAL DIAGNOSTIC FOR MARKET FACILITATION 1
market-driven projects to consider. A series of recommendations based on these best practices are provided at theend of this resource.C. WHAT THE TOOL IS NOTThis tool is not a perfect picture or description of each organizational capacity; rather it highlights important issuesthat have been observed that affect organizations undertaking a market facilitation approach in order to stimulatereflection and discussion.This tool is also not prescribing market facilitation as the “right” approach for every situation or intervention.However, if a project or organization is interested in taking a market facilitation approach, this tool describesknowledge and capacities required to successfully implement such an approach given ideal circumstances.This tool alone will not be sufficient for upgrading organizational capacity for market facilitation. Managers interestedin improving their organization’s capacity should use this tool as an initial assessment to start a conversation aboutareas for growth. Real improvements will require leadership, management commitment and ongoing investment in theorganization and staff to realize improved performance, learning and capacity as market facilitators.D. USING THE ORGANIZATIONAL DIAGNOSTICThere are three parts to this tool: Part 1: Know WHAT: Assessingunderstanding of the purpose andcontext of market facilitation. Part 2: Know HOW: Assessingorganizational capacity to putmarket facilitation into practice. Part 3: Assessing OrganizationalCapacity: Analyzing how anorganization is doing and where itcan improve. Visual and electronictools are provided to capture andrepresent organizational capacity,strengths and opportunities forimprovement.Figure 1: Representative Assessment of Various Organizations’ Capacitiesfor Market FacilitationUsing this Guide:1. Review the Know What capacitiesand behaviors. There are five questions that target essential components of knowledge and understanding.Based on your organization’s actions and attitude, rank the organization from 1-4 for each question.Challenge yourself to think of examples as you go through this matrix. Remember, the value of this exercisecomes from rating actual rather than desired action.2. Repeat this process and thought exercise for the Know How skills and characteristics. This section unpacksthe components of organizational practices that have proven to be critical for market facilitation.3. Add up the score out of 20 for Know What and the score out of 20 for Know How.ORGANIZATIONAL DIAGNOSTIC FOR MARKET FACILITATION 2
4. Plot it on the matrix provided, putting a score of 5-20 on the vertical and horizontal axes. How did yourorganization fare? Where are your organization’s strengths? Where does it need to improve? Think aboutwhat is needed to get there.5. At the end of this guide, there are a series of recommendations tailored to the state of your organizationbased on your own assessment of understanding and ability to implement a market facilitation approach.These recommendations are necessarily general, but will provide you with guidance on where to target yourcapacity building efforts.As you go through this guide, remember to be honest about your assessment—no organization is perfect. Everyonecan stand to improve their knowledge, skills and capabilities in different areas. An honest assessment of yourorganization’s understanding of market facilitation will serve you better as you will be more aware of yourorganization’s strengths and areas for improvement, and will be able to ask for support accordingly.ORGANIZATIONAL DIAGNOSTIC FOR MARKET FACILITATION 3
I. KNOW WHATThis section aims to help you assess your organization’s knowledge and understanding of market development andfacilitation. Below are five broad categories with guiding questions to assist your reflection and assessment. Thecategorization attempts to capture both breadth and depth of understanding. The questions are:1. What is the problem you are trying to solve?2. What are the desired outcomes being targeted?3. What are the constraints inhibiting these outcomes?4. What is the project intervention strategy?5. What is the role of the facilitating organization?Figure 2: Know What Assessment MatrixThe following matrix outlinessome common behaviors amongimplementing organizations.Read through each section belowand rate your organization’scurrent behaviors from 1-4.Remember, be honest and basethis assessment on what yourorganization does and how it acts,not on what you want it to do orhow you want it to act.ORGANIZATIONAL DIAGNOSTIC FOR MARKET FACILITATION 4
Table 1: Understanding the “What” in Market FacilitationKNOWWHATConventionalagriculture projectBasicunderstanding ofvalue chains andmarket facilitationapproachGood understanding of valuechains and market facilitationapproachSophisticated understanding of value chains andmarket facilitation approachRating:1234What is theproblem you aretrying to solve? People do not haveenough food and/orare living inpoverty. Theproblem isprimarily one ofproduction—quantity, quality andconsistency. Producers havelimited access toinputs and outputmarkets. This islimiting their abilityto benefit from theirwork and accessdifferentopportunities.What are thedesiredoutcomes beingtargeted? Producers are foodsecure and haveincreased incomes. Production hasincreased inquantity andimproved in quality. Improvedproduction has ledto improved accessto stronger outputmarketopportunities andagricultural inputs. Producers areachieving increasedprofits from theseopportunities. The actors in the overall market system, includingproducers, businesses, supporting service providers,and governing institutions are not cooperatingeffectively. There are limited commercial relationships betweenfarmers and firms, different firms and the serviceproviders that support them. The current behaviors of producers and firms tend tobe adversarial and opportunistic; they are not orientedtowards mutually beneficial commercial relationships. Producers and firms are benefiting from improved accessto knowledge, products and services available throughmultiple delivery channels and innovations that allowthem to manage their businesses. Behavior change at farmer and firm level—moving fromone-off transactions to strong commercial relationshipsthat allow innovation in a competitive market. Ongoing improvements driven by firms and producerswho are innovating and learning to remain competitive. High-quality commercial relationships between producersand firms, between firms themselves and with serviceproviders and government institutions.What are theconstraintsinhibiting theseoutcomes? The challenge isprimarily with theproducer. Thepoorest of thepoor are unable toparticipate in theinformal or formalmarket sector. Producers are notwell linked intomarkets andproducerorganization isinadequate. Main constraints arecash and quality ofproduce. There are no marketopportunities and/or The problem is not just withproducers, but also thebusinesses and market actorswho are working or could workwith producers. Businesses are not interested ordo not know how to work withproducers, and producers arenot able to engage with themeffectively. Well-functioning markets thatinvolve smallholder farmers. Firms are able to have strongrelationships with smallholderfarmers and are willing to investin the relationships. Producers and firms are able tomanage their relationships formutual gain. Producers have access to theknowledge, products andservices they want through avariety of commercial channels. Limited market linkages betweenproducers and firms andbetween firms themselves. High transaction costs arelimiting firms’ interest or abilityto work with smallholders. Producers have low capacity andknowledge about how to engagewith firms and markets. Incentives are not aligned toensure mutually beneficialSee constraints throughout market through a systemslens: Some are market related: Support services areinsufficient; enabling environment is not supportive of acompetitive, dynamic and transparent market system;incentives for doing business are not aligned; businessmodels not effective to overcome transaction costs. Some are based on social norms and behaviors: People areskeptical about doing business outside of existingrelationships or communication channels; comfort withfamiliar market-oriented arrangements; perception thatORGANIZATIONAL DIAGNOSTIC FOR MARKET FACILITATION 5
firms are notinterested inworking withproducers due tohigh transactioncosts.What is theprojectinterventionstrategy? Standardizedinterventionsfocused primarily atproducer-levelconstraints. Producer andfarmer training toincreaseproduction. Provision of full orpartial subsidies. Focused onactivities with scaleup throughreplication of theseactivities withsimilar producersor businesses. Project designlimits flexibility ofinterventions. Limited focus onlearning systems orinnovation tounderstand broaderindustryconstraints. Standardizedinterventions with abroader scope,incorporating needsof immediate marketrelationships. Establish obviousand immediatemarket relationships(farmer toaggregator, buyer orprocessor/inputtrader). Provision of full orpartial financialsubsidies. Scale-up isreplication ofactivities. Learning is limited toimmediate activitiesand impact theproject has onproducers.collaboration between marketactors. Behaviors currently not orientedtowards the market. Interventions adjusted based onunderstanding of the dynamicnature of implementationstrategies. Attempts to address constraintsthroughout all levels of the valuechain. Uses a ‘facilitator’ or ‘enabler’approach to interventions. Uses financial subsidiesstrategically and withconsideration for firm’s capacityto absorb and manage this capitalinvestment. Recognizes sequenced nature ofinterventions. Starting to probe for reasonsbehind constraints and behaviorchanges but struggling to adjustinterventions based on thisinformation and learning. Scale-up is based on behaviorchanges triggered and driven bymarket dynamics. producers are poor and are not viable customers orsuppliers.Some are capacity issues: Significant firm-level behaviorchange and capacity development is required; farmerknowledge of how to engage with market opportunitiesis still low; ability to seek and use innovation is low dueto social norms and capacity constraints (e.g., literacy).Project design provides flexible intervention strategybased on learning from all staff and from recognizingemerging trends in the market.Always probes for reasons behind surface constraintsand behavior changes; able to adjust interventionsbased on information and learning.Uses a range of intervention tools (e.g., training,graduated cost sharing, self-selecting mechanisms,competition to drive innovation) strategically to tailorsupport for industry growth.Tackles constraints at multiple levels within value chain/industry.Sequenced interventions using a ‘light touch’ approachof adjusting intensity based on emerging needs and1situations.Focused on outcomes and hypothesis driven.Scale-up is based on learning through innovation andbehavior changes triggered through interventions.Scale-up is driven by market dynamics.A light touch approach recognizes and responds to market-driven opportunities without getting directly involved in the industry. As staff learn about what is and is notworking, the project can adjust the intensity and direction of resources to target specific opportunities and leverage points to catalyze change.1ORGANIZATIONAL DIAGNOSTIC FOR MARKET FACILITATION 6
What is the roleof the facilitatingorganization?2 Service delivery—training, support togovernmentcounterparts/extension,provision ofinputs/start-upcosts, etc. Primaryrelationship is withproducers, somerelationships withother firms andservice providers. Scale-up of ideas oractivities. Linking farmer withfirms that areimmediatelyaccessible andobviously related(e.g., farmers andaggregators). Reactivelyaddressing marketconstraints withsome firms. Scale-up of ideas oractivities taking intoaccount a businessperspective. Market facilitators arerelationship builders. Identifying constraints preventingfirms at all levels from enteringthe industry or growingsustainably. Targeting theremoval of those constraintswith reasonable levels of riskmanagement. Intentionally stimulating businessminded behavior throughactivities, discussions,connections, jointdemonstrations/pilots, etc. Limited follow-up on theseconversations to support thebusiness with implementation orto learn from successes andfailures of the idea. Market facilitators are required to take on manydifferent roles, including: coach, relationship builder,business person, communicator and innovator. 2 Assisting firms to understand and manage risk andbenefits. Absorbing and buying-down risk as required throughtargeted demonstration of an idea or opportunity. Role is always shifting based on constraints in thesystem and needs of producers or firms. Staff and organization positioning itself as a neutralplayer—a change agent rather than a market actor orcompetitor.Refer to Being a Market Facilitator: A Guide to Staff Roles and Capacities, USAID microREPORT #172 for further information on this.ORGANIZATIONAL DIAGNOSTIC FOR MARKET FACILITATION 7
II. KNOW HOWUnderstanding what market facilitation involves, the purpose of an intervention and the problem that is beingaddressed, is only half of the equation. Understanding how to apply these concepts at different levels of theorganization is also required.Figure 3: Know How Assessment MatrixThe following matrixoutlines five importantelements of organizationalcapacity that answer thefollowing questions:1. H ow do field staffview and carry out theirrole? Field staff
ORGANIZATIONAL DIAGNOSTIC FOR MARKET FACILITATION 2 Figure 1: Representative Assessment of Various Organizations’ Capacities for Market Facilitation . market-driven projects to consider. A series of recommendations based on these best practices are prov
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