Download Optimizing Use of MDB Resources through Effective Partnering with

Optimizing Use of MDB Resources
through Effective Partnering with
the Private Sector
Diana Smallridge
President
International Financial Consulting Ltd.
March 2005
tel: 1.613.742.7829
100 Queen Street, Suite 1350. Ottawa. Ontario. K1P 1J9. Canada
fax: 1.613.742.7099 www.i-financialconsulting.com [email protected]
MDBs have a responsibility to ensure their
activities “crowd in” the private sector
MDBs must ensure that their products and
programs fill a precisely defined market
gap
The need to maximize private sector
financial players must be a critical part of
their strategic focus
However, too often MDBs lose sight of this
and their activities are not as catalytic as
they could be.
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There has been insufficient focus on this at
the senior management level
Market gap thinking has not traditionally
been part of MDBs’ strategic planning
focus
While the mandate is well defined (poverty
alleviation etc.), the strategies to execute
the mandate are not.
There is often confusion and lack of clarity
in the implementation of the mandate
3
Behaviour will change with new incentive
structures & clarity of strategy
New management incentive programs and
processes must be devised
Need for change in the behaviour of some
institutions/officials
New strategic direction must be defined in
detail
Time is right given change in leadership at
several of the MDBs
4
Strategic Planning must be a high priority
and be lead by professionals
Is not a top-down approach; should include
input from all levels of the organization
Must be lead by individuals with “ears” to
hear the views and perspectives of the full
spectrum stakeholders
Senior management must have a stake in it
Must balance the needs of many; cannot be
“hijacked” by one stakeholder group
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Strategies must cascade down into
individual’s performance objectives
Clear institutional strategies must feed into
each employee’s annual performance
objectives
Employees must be able to relate to the
institutional objectives and strategies
Strategies must be detailed and specific
6
A Strategy Toolkit links Strategic
Objectives with Performance Measures
Strategies must reflect the universality of
stakeholders
The inherent conflicts in meeting divergent
stakeholder interests must not be avoided
but addressed head-on using balanced
strategies
The Balanced Scorecard should be
employed to measure progress against the
strategic objectives
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8
Measure What Matters
 It is important to define what success
means and measure it
 What matters is incremental progress
towards closing the gap between the
current state and a well-defined future
state
 Measure how much progress is being made
towards closing the gap
 Measures are results-based and usually
quantifiable
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Manage What is Measured
This is a fact of life. Behaviour changes
when measurement happens.
Measurement is the first step that leads to
control and eventually to improvement.
If you can’t measure something, you can’t
understand it.
If you can’t understand it, you can’t control it.
If you can’t control it, you can’t improve it!
H. James Harrington
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There are different types of measures
INPUT
Cost of
Funds
OUTPUT
Number of
Loans
issues
OUTCOME
Level of per
capita GDP
MDBs must define the universality of
their stakeholders
Private Banks/
Insurers
Local Gov’ts/
Communities
Shareholders
MDB
Employees
Other MDBs
Bilaterals
NGOs
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MDBs must be sensitive to their impact
on stakeholders’ interests
12
Stakeholder
Impact
NGO
Concern about local community engagement
Need for regular consultations to be “heard”
Employees
Line employees can provide bottom-up feedback into the system
Need for them to relate to the overall specific objectives of the institution
Private Sector
 MDBs need to partner effective and maximize the private sector’s
resources and capability
 The role of MDBs must be define by the market gap
Local Gov’ts
 MDBs must focus on enabling environment
 The axiom works: “give a man a fish, feed him for a day; ;teach a man
to fish; feed him for a lifetime”
Bilaterals
 Who is best placed to take a risk, catalyze the private sector
 Who is best placed to facilitate coordination with host governments
(based on historical, geopolitical or other concepts)
Shareholder
Listen before deciding what is best
Do not be presumptuous or use MDBs for your own national interests
Other MDBs
No competition
..and be willing to take a long, hard look
at themselves and their impact
Weaknesses
Opportunities
Threats
Internal
Strengths
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External
By identifying areas of strength and
weakness where strategies must focus
Strengths
Weaknesses
Opportunities
1.
3.
2.
4.
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Threats
15
A Performance Measurement System links
institutional level strategies
Strategic Objective #1
Priority
IFC in a Leadership Role
Establish a reputation for leadership in key
spheres
Results
Action Plan
1. Review Environmental, Health and Safety
Policy
2. Actively support Equator Principles
3. Review replicability of Tadjikistan Power
Project
1. New EHS Policy
2. More EQ bank members
3. Internal working group to define
key elements
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A Performance Measurement System links
institutional level strategies
Strategic Objective #2
Priority
Increased partnership with Private Providers
Use IFC’s resource more effectively to catalyze
private sector sources of capital
Results
Goals
1. Increase number of B-loan participants
2. Decrease the ratio of IFC capital to private
capital in private equity
3. Decrease the cases of competition with
other MDBs
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Individual Objectives and Measures roll up
into the Strategic Objectives and Measures
Strategic Objective #2
Priorities
Partnership with the Private Sector Providers
1.
2.
3.
Action Plan
1.
2.
3.
4.
5.
6.
7.
Performance Measure
Regular formal consultations with international banks, local
banks and private insurers on risk sharing concepts
Product development which reflects market gaps and IFC’s core
strengths
Performance measures and incentive systems which promote cooperation
Define key market needs in financing private sector
Identify which organization is best placed to meet
identified needs (international, local; private, public)
Survey key players
Define gaps which IFC could fill
Develop or refine product
Apply product to pilot transactions
Review
1.
2.
Level of co-financing with commercial banks
Level of co-investing in private equity funds
Measurement should start at the strategic
level and cascade down
STRATEGIC
MEASURES
STRATEGIC
OBJECTIVES
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President
Vice President
To be truly
effective, strategic
BUSINESS UNIT
MEASURES
Division Heads
performance measures
need to be linked directly
to the day-to-day activities
of people in the organization.
INDIVIDUAL
MEASURES
Managers
An important way for this to
happen is to link strategic measures
to the competencies and the performance
objectives of individual employees.
“Bullseye! Hitting Your Strategic Targets Through High Impact Measurement”
Schiemann and Lingle
Staff
An integrated Performance Management
System links Strategic Planning with
individual’s performance objectives
Staff
Manager
Division
Manager
Heads
Division Manager
VicePresident
Heads
Presidents
Manager
Staff
Staff
Staff
Staff
Division
Heads Manager
Staff
Manager
Staff
Staff
Staff
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For example, the President’s objectives
can be those of the Bank
Staff
Strategic
Objectives
1.
Financial
Sustainability
2.
Risk Taking
3.
Catalyst
4.
Partner
Manager
Division Manager
Heads
Manager
ViceDivision
President Presidents
Heads
Manager
Staff
Staff
Staff
Staff
Division
Heads Manager
Staff
Manager
Staff
Staff
Staff
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… and his performance measures are
the Bank’s measures
Staff
Strategic
Objectives
1.
Financial
Sustainability
2.
Risk Taking
3.
Catalyst
4.
Partner
-
PerformanceManager
Measures
Division Manager
Profit
Headsmargin
Net interest
Staff
Staff
ROE
Deputy Division Manager
President
General Heads
RAROC
Managers
Loans/Assets Manager
Staff
Division
Heads Manager
Staff
Manager
Staff
Staff
Staff
Staff
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A VP can have objectives which are a
subset of the Bank’s
Staff
Manager
Business
Objectives
General
Manager
Division Manager
Heads
VP
Division
Heads
Manager
Manager
Staff
Staff
Staff
Staff
Division
Heads Manager
Staff
Manager
Staff
Staff
Staff
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…. and her performance measures are a
subset of the Bank’s measures
Staff
Business
Objectives
General
Manager
VP
Staff
Manager
Performance
Measures Staff
Division Manager
Division
Heads
Heads
Staff
Manager
Deputy Division
Division
General Heads Staff
Heads
Manager
Managers
Division
DivisionStaff
Heads Manager
Heads
Staff
Manager
Staff
Staff
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A Division Head in the Staff area has
objectives in support of the business
Staff
Business
Objectives
1.
Introduce a
Treasury Deputy
Risk
General
Management
General
Manager
system
Manager
Division Manager
Heads
Manager
Division
Heads
Managers
Manager
Staff
Staff
Staff
Staff
Division
Heads Manager
Staff
Manager
Staff
Staff
Staff
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… and can be measured by achieving
certain milestones
Staff
Staff
Manager
Performance
Business
Objectives
Staff
Division Manager Measures
Division
Heads
Heads
Staff
Deputy Division Manager
Deputy Division
General
General Heads
General Staff
Manager
Heads
Managers
Manager
Managers
Staff
Division
Division
Heads Manager
Heads
Staff
Manager
Staff
Staff
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This forms the basis for the performance
appraisal system
Strategic Planning
What Performance?
Business Planning
Goal Setting
How?
Action Planning
Mid-stream Corrections
Quarterly Monitoring
How Did We Do? Why?
Year End Measurement
Individual Performance
Appraisal
• Performance Improvement
Actions and Skill Gaps
• Training Needs
• Performance-Based Rewards
• Promotion
• Career Path Planning
Unit Performance
Appraisal
• Staffing Plans
• Skills Development
• Process Improvement
• MIS Improvement
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A Balanced Scorecard measures progress
against the strategic objectives
Financial
Stakeholders
Borrowers
Private Sector
Internal
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