noveMber 2008 47174 About the Author changing Programs to Fit new Strategies: DAviD LAwrence joined iFc in 1996 to work on Some Lessons from ukraine the business Development Project in ukraine, where he set up two provincial business When IFC's advisory services strategy evolves, it can lead to major centers and later managed the project. he established iFc's program changes. This requires good risk management, because field offices in Yerevan and tbilisi supporting investment clients, donors, government, partner organizations, and staff are services, helped establish the Private enterprise Partnership affected. A good strategy, coupled with solid management and in eastern europe and central well-executed programs, can do a lot to increase IFC's effectiveness. Asia (PeP-ecA) as its Deputy head, worked on Knowledge But it's easy to slip up. Management for the Small and Medium enterprise (SMe) Department, and managed iFc's office in banda Aceh. an irritated in partnership with local governments, and currently he is Advisory government had forged them into a network1. the Services coordinator in official calls program extended IFC's reach to small ulaanbaatar, Mongolia. the country businesses beyond Kyiv, which appealed to APProving MAnAger manager with donors. the Swiss had already agreed to Mario Fischel, head, Private a complaint. a fund a continuation of the project, which enterprise Partnership ­ donor delivers provided employment to about 50 people. china. a frosty messageabout the reason for the strategy change was future funding straightforward: Corporate governance was p r o s p e c t s . more in line with IFC's core business than Your project's small business consulting. Furthermore, the best people leave in droves. anyone who has 1998 financial crisis in russia had made workedonIFCadvisoryProjectslongenough corporate governance a hot issue. Having has experienced these scenarios first-hand. made the decision, how did IFC execute it without getting itself in hot water? How did Problems like these are more likely whenever it manage the risks that come with strategic strategic changes are put into place. this is change? Can these lessons be applied as IFC unavoidable: it is simply not possible to make redefines its core products? everybody happy when changes are made. If handled poorly, you can jeopardize key Lessons Learned relationships, put funding at risk, demoralize your staff, or damage IFC's reputation. But 1) Create a Strategy That Goes Some- with a little planning it is possible to manage where theserisks.Luckily,IFChasplentyofexamples to learn from. What we did. IFC's new strate- IFC Strategy Change in Ukraine, gy took us to a circa 2000 different, but clear, direction. one example of a major strategy shift took even before the place in Ukraine in 2000, when IFC decided 1998 financial to discontinue its Business Development crisis, it was obvious that the business center Project and use its resources for a new model had limited impact. But the crisis cre- Corporate Development Program, which ated an urgent need for fresh ideas and a focused on corporate governance. this was new approach. By proposing a strategy with notalightdecision.IFChadsetup11business consulting centers throughout the country 1 The project (1995-2001) was funded by the British Know-How Fund and USAID at a cost of about $3 million. By the end of 2000, the centers had helped clients mobilize $13.8 million. IFC SmartLeSSonS -- noVemBer 2008 1 a clear, logical direction, IFC was able to convince key important to lay out the arguments and convince them stakeholders that it made sense to drop the Business De- that their taxpayer money would have greater impact velopment Project. through corporate governance than through business centers. the Swiss were convinced, and the new strategy The result. IFC executed a major strategy change and was settled before any action was taken. built up its Ukraine Corporate Governance program, a model which has since been replicated globally. IFC The result. IFC treated Switzerland with respect and as a looked brilliant and forward-thinking. IFC showed that true partner by discussing the change in strategy before it could react to changing economic conditions and executing it. the close relationship with Switzerland create a focused, relevant program to address a serious continues to this day. Corporate governance remains a private sector issue. the Swiss felt we were using their top priority for Switzerland's development program. resources wisely and were grateful for IFC's advice. The lesson. as key partners, donors should always have The lesson. make sure you're going somewhere when input on decisions that affect programs which they fund. making a strategic change. It isn't enough to just stop Include them in discussions early on so that they share doing something ­ you have to redirect your energy, ownership. We are using their money, and if they are your brains, and your resources in a new and better excluded from important decisions, they could take their direction. this message is important ­ without it, you will funding elsewhere. In the long run, this will lead to encounter resistance from donors, partners, and even better, long-term relationships and more funding your own staff. opportunities. If the Funding mechanism for technical assistance and advisory Services (FmtaaS) is weakened 2) Let the Program Run Its Course because of the current financial crisis, this lesson will become even more important. What we did. IFC considered dropping the project early, but 4) Get Input from Your People finally decided to let it run its course. all obligations were met What we did. there was ­ to local government, donors, significant, passionate and partners. the most valuable internal debate before the component of the project, on new strategy was adopted. business policy, was preserved although discussions and evolved into a separate possibly dragged on too Business enabling environment (Bee) program. long, IFC management consulted with program managers, project managers, The result. IFC closed the business center project while and key staff as part of the decision-making process. developingasuccessfulspin-offBeeprogram.Bydeciding the decision makers were in Kyiv and moscow, not not to close the project early, we avoided unnecessary Washington. conflicts with the donor, local officials and partners, and avoided reputational risk. We also gave our staff time to The result. Strong opposition to closing the project led find other positions both within and outside of IFC, and management to decide to let it run its course. there were able to keep our best talent. many of them are still was some bitterness after the decision was made. But with IFC today. years later, it is clear that it was the right choice. Corporate governance remains important to private The lesson. Impatience to get the new strategy moving sector development and has become an important is understandable ­ but wrong. When IFC implements a product, strengthening both IFC advisory and program, it has obligations to donors, government, investment services. the business center model has partners, and project staff. IFC can both fulfill these faded away as a developmental tool almost obligations and move in a new direction at the same everywhere. time. Canceling a project because of a strategy change carries big risks. It is difficult for donors to find new uses The lesson. the people on the ground have valuable for returned funds, and difficult to explain to their own knowledge that should be considered before making a governments. It also sends the wrong message to your strategic change. they are well placed to inform staff, increasing the risk of losing your best people and management of risks and can effectively deliver new demoralizing the rest. messages to partners. this may sound obvious, but IFC does not always consult its people on the ground 3) Talk to Your Donors before making major strategic changes. What we did. IFC discussed its 5) Look after Your Staff new ideas with the Swiss before setting its new strategy What we did. IFC did not do anything in particular to in stone. Switzerland had help staff affected by the decision, although by letting already bought into the the program run its course, there was more time for business center idea, so it was them to make alternate career plans. 2 IFC SmartLeSSonS -- noVemBer 2008 The result. there was lingering resentment Why This Matters Now as a result of the decision. Corporate Governance staff was perceived as as IFC refocuses its benefiting at the expense of Business advisory services Development Project staff. Since Swiss work, closing or funding had been expected, this was a d i s c o n t i n u i n g heavy blow. programs is inevitable. By The lesson. It learning from our would have been pastexperiencesinexecutingstrategychanges, better to more ac- we can reduce risks, make changes less painful, tively assist affect- and put our energy into executing better, ed staff. Help with more focused programs in the future. résumés, cover let- ters, interview We can also use strategy changes as an coaching, and placement with other IFC opportunity to show donors that we are projects could have been offered proactive- cutting-edge thinkers who are the partners of ly to take the sting out of the decision. choice in private sector development. DiScLAiMer iFc SmartLessons is an awards program to share lessons learned in development-oriented advisory services and investment operations. the findings, interpretations, and conclusions expressed in this paper are those of the author(s) and do not necessarily reflect the views of iFc or its partner organizations, the executive Directors of the world bank or the governments they represent. iFc does not assume any responsibility for the completeness or accuracy of the information contained in this document. Please see the terms and conditions at www.ifc.org/ smartlessons or contact the program at smartlessons@ifc.org. IFC SmartLeSSonS -- noVemBer 2008 3