Following the Leader

Something special happened today that I’m not quite able to define.  I was about fifteen minutes into a forty minute run this morning when a Rwandan man in his late 50s (15 to 20 years my senior) started to pass me by.   For some reason unbeknownst to me I started to try to keep up with him.  You have to know this is completely counter to my general workout style.  I like to train in complete solitude.  I’ve gotten to the point where I just run and literally don’t look at people because I want to somehow feel like I’m alone, which is hard in a society where people are always out walking.  It’s especially tough to do this when people stare at you and feel free to fall in next to you and try to keep up or pass you.  This happens both when running and when biking.  The middle-aged man on the single-speed bike carrying a 10 gallon jug of milk might pass me by when I’m climbing a hill; even the young kids walking to school will sometimes sprint ahead of me over short distances.   It is not only solitude I hope for while training; it’s also freedom from the stress of even just friendly and unspoken competition with a workout buddy – another reason I train alone.

So it was very out of character for me to start following this man while running today.  I think a few different things were going through my mind.  I was aware that I wasn’t trying to race with him.  I also knew I wanted to show deference to his age so I consciously stayed a couple steps behind him and to the right.  But the hardest for me to define was this feeling that I wanted to “follow” him.  We made eye contact; he knew I was trying to keep up as we started to ascend a hill; he would glance at me and stay at a pace that I could manage but with a struggle.  He wasn’t trying to “best” me.  He was trying to train me, to encourage me, to challenge me.  And it was playful…as we crested the hill, he quickly pulled away, but then waited and as we came to an intersection, he indicated that he was going one direction while I was going the other.  We smiled and gave each other a high five and went on our way.

The significance of this experience may be a function of the role we play here at Karisimbi Partners, as advisors who get paid to provide valuable insight, lead organizations, define strategies, and implement plans.  It may just be a function of working in a developing country under the premise of being “here to help.”  It may be a function of my own flawed character and lack of respect for “the other.”  Regardless of the reason, those five minutes I got to spend this morning following the lead of a Rwandan man clearly my senior, my teacher and my better was incredibly life giving and something I will cherish and look for more opportunities to experience. 

-Dano

The Tragedy of the Uncommon Expert*

We have made the point before: the biggest hurdle standing between the present reality on the ground in Rwanda and the bold ambitions of its leadership is a lack of qualified people.  Bold ambitions infuse this place with hope.  Better yet, Rwanda’s leadership seems motivated to achieve what is in the best interests of all her people… and that is not often the case in Africa.  We continue to remark that this is an exciting time to be here; it is a thrill to work to see even some small part of this nation’s vision being realized.  Good vision, good intention…  lacking are sufficient people to put it into action.

The most recent illustration of this shortcoming is in what may be called “the tragedy of the uncommon expert”.  Earnest is one such expert.  His training and skill as a plumber is well above the norm (in a place where it is not uncommon to ‘fix’ the same appliance four or five times until satisfactory).  Importantly, Earnest has his own tools, speaks English and is trustworthy (meaning he shows up on time and does not seem to have ‘sticky fingers’ that would require accompanying him at all times on the job).  When my friends have the inevitable plumbing emergency, I’m glad to be able to offer them Earnest’s number.  Therein begins the tragedy.  Earnest does not know how to refuse, balance or delegate work.  Soon, his responsiveness and reliability suffers under the weight of too many customers.  Finally, his work begins to suffer, he stops returning calls and I stop referring him to others.  We have seen the same process play out for mechanics, electricians, realtors and the most capable of Rwanda’s business leaders as well.  This is easier to comprehend when you consider statistics such as these: 75% of the workforce has no more than a primary school education (23% have none) and just 6% of those working in the largest companies have university credentials (according to just released Establishment Census).  Too few people… doing too much work… leads to ‘burn-out’, bad work and often the need to find a new expert.

One of our clients illustrates the same point.  Emmanuel is the founder of a relatively large company (by Rwandan standards).  He employs more than a hundred people, yet complains there is only one man (Celestine) whom he trusts to make good decisions and ‘get things done’.   Emmanuel regularly laments that progress stalls if he or Celestine are not pushing daily.  When Emmanuel travels, or Celestine is sick, business grinds to a halt.  Virtually every client reveals a similar pattern in some measure: competence and trustworthiness are in short supply.  Part of what is lacking is also a certain mindset for being productive in a work environment.  Those Rwandans with advanced education or experience living in a more developed country contribute a unique and valuable mindset, but instilling this perspective in those who have not had such privileges is difficult indeed.

In Rwanda, too few qualified people have too much responsibility.  Thankfully, I don’t think I’ll need a plumber again for at least a couple weeks…

Onward and upward,

-Carter

*  subtle but intentional reference to "The Tragedy of the Commons" dilemma (popular in socio-economic theory and debate) whereby multiple self-interested individuals deplete a limited community resource. 

Our Different Way of Doing Business

It has been more than two years living and working in Rwanda, yet it is still evident that we will never entirely “blend in” or “go native” here.  The fact is, we were all born and learned about management in the United States.  We’ve all lived and worked in other countries (e.g. including Scotland, France, South Korea, etc.) but our country of origin has left an indelible mark on who we are today.  In Rwanda, the challenge can be to add the best of what American business has to offer while leaving the rest.

There are elements of the American business environment that we would never wish on Rwanda.  America’s litigious environment has created bureaucracy, de-humanized policies, and increased costs in ways we are glad to avoid here.  As relates to personnel benefits, the relatively high cost of health care and limited vacation time in America are not something we’d encourage Africans to emulate.  Unhealthy degrees of independence and competitiveness sometimes found in the US would certainly cause problems in this developing country context.   

We have also come to realize there are elements of American business culture that suit Rwanda well, although they do make us somewhat conspicuous.  It is difficult for people in a relatively structured, hierarchical culture to see how we could be content in a company with three equal partners sharing the top post.  To verify that we were a legitimate business, a government official had to come visit our office(s) and since we predominantly work from home offices, client locations, and conduct many meetings in local cafés and hotels, the inspector left scratching his head.  In the end, although our company is a significant taxpaying organization it was not counted in Rwanda’s recent business census since we don’t have a separate and dedicated office space.  Given our desire to avoid unnecessary overhead costs, and the fact that our best work is often done on site with clients, we haven’t seen fit to have an office as of yet (and we can charge our clients less as a result).  Additionally, we are frequently given funny looks when we come to meetings on motorcycles.  We are assured that no Rwandan consultant would be taken seriously if they didn’t have an office and an SUV of their own, but we tend to be less concerned about image and have found we are taken seriously, nonetheless.  Besides, at roughly $6.50 USD/gallon, this is another way we can save money, do our part for the environment, enjoy Rwanda’s temperate climate… and it is a lot more fun!

We may never blend in entirely, but we are confident some of the ways we are odd also contribute helpful differences to Rwandan business culture.  Our way of doing business brings a dose of informality, suggests our work speaks louder than our look, and suggests it can be good to say ‘no’ to unnecessary overhead costs in order to focus resources where they matter most.

Onward and upward,

-Carter

Investment Considerations for Nations & Businesses

From rural electrification to food security, the Government of Rwanda regularly considers various investment opportunities. Allow me to suggest the Government of Rwanda may be wise to approach such deliberations from the perspective of a private business.

For a business to be successful over the long-run, it must continuously invest. By definition, an investment seeks a rate of return that is competitive vis-à-vis other investments that entail a similar level of risk. Sources of capital for investment are categorized as either equity or debt. The amount of debt verses the amount of equity required for a business to be successful depends on a number of factors. Ultimately, the business has to generate enough capital to repay its debt holders and it has to generate enough profits to satisfy the return requirements of its equity holders. When a company begins to generate negative profits (i.e. lose money) and continues on that path to the point where it has insufficient funds to pay the interest on its debts, the business goes into default, which is tantamount to bankruptcy.

Reversing this course means a return to profitability which inevitably requires some form of new investment. That may take the form of equipment retrofitting to produce a different line of more profitable products. It may require factory relocation or hiring a more qualified team that will successfully manage expenses. Even reducing employee ranks requires an initial investment in some form of severance benefits to those former employees. The two criteria required to justify any investment are: 1) it generates the required return, and 2) it affords sufficient capital to fulfill ongoing commitments.

These same investment criteria apply to public sector investments. Friedrich August Hayek, renowned 20th Century economist and philosopher, advocated for nations to grow by using internally generated profits to make investments that create appropriate returns. In contrast, John Maynard Keynes, Hayek’s contemporary, argued for nations to grow by using borrowed funds to make investments that generate appropriate returns. There is a great debate continuing today in the developing world about which approach is best. The reality for any nation (or business) is that these are not mutually exclusive; both debt and equity strategies need to be pursued simultaneously to maximize growth.

Nations seeking growth implicitly or explicitly evaluate two criteria: 1) what capital structure will be simultaneously the lowest cost and still afford sufficient capital to fulfill ongoing obligations to creditors; 2) what investments will generate the highest short, medium and long-term returns.

As businesses readily attest, a nation’s best investment is in its people. This includes appropriate levels of health care, education and entitlements; more importantly it involves investing in the creation of an environment where people have the opportunity to exercise their gifts and talents to the maximum extent for the benefit of themselves, their families and their communities. Rwanda is leading the way in the East African Region by striving to maintain a competitive capital structure, while making investments that will generate good socio-economic returns for its citizens. 

Other developing countries could learn from the example set by the Government of Rwanda, while simultaneously taking a page from the logic used by business investors: prioritize investments in people, find the right balance of debt and equity, and commit to continuous investment for growth.

-Dano

Building Management As/Where the Market Demands

A 14 February 2011 article in The East African (a regional business newspaper) titled Low Capacity the Reason Africa is Still Poor highlights the need for business management capacity building.  As readers of this blog know, Karisimbi Business Partners is a Kigali-based management consulting firm offering long-term commitment and world-class advice.  As a socially-motivated venture, we aim to offer high-impact guidance to high-impact ventures.  Every day Karisimbi Partners interacts in very practical ways with a wide range of business operators in Rwanda.  Below are some examples of what this looks like.

Consumer Products Sales & Marketing: Daily mentoring of the client’s sales manager for a large (500K USD annual turnover) consumer products company.  This includes creating the template for establishing a baseline of existing customers, volumes, and prices – business has been operating for four years and this information isn’t available.  It involves one-on-one mentoring including some basic guidance like the following:

Sales Manager: “I’ve spent the day out talking to customers promising them better quality and better service.”

Karisimbi Partner: “Please don’t promise anything unless you know how you are going to deliver on that promise.  The first job has to be to listen to the customers’ concerns and let them know that the company is working hard to address those concerns.  Secondly, start the conversation by simply asking them what would be required in order for them to be willing to distribute a small additional volume of your product.  Let’s meet again in two days to review the list of customers and their responses to your questions.”

Project Management: Working with the client’s Director of Project Management to understand the current status of Project Management Reporting in a large (more than 5M USD annual turnover) construction company.  Ultimately concluding that none of the daily, weekly or monthly reports focus on analyzing changes in critical path task schedules.  Reporting only focuses on financial indicators.  As a result, most of the company’s projects are delivered on budget, but significantly behind schedule.  Currently developing and conducting one-on-one training for project managers on an Excel-based reporting process that focuses more heavily on adjustments to critical path task schedules.

Investing: Analyzing the variety of businesses within a holding group and advising the owner of the company where to invest the next 1M USD that he wants to put into his businesses.  Realizing that most of the financial reporting is on a cash-basis (as opposed to accrual) and there are significant difficult-to-track transfers between different businesses and therefore limited insight into the true profit and loss individually attributed to any one business unit.

These interactions were not conducted through group “training” sessions.  These were not theoretical or generalized approaches to particular aspects of business management.  These were relationship-based practical interventions addressing particular challenges for particular people in particular companies.  The impacts are clear and measurable and as advisors, Karisimbi Partners is actually held accountable in many ways by the client for the outcomes.  In every one of these interactions, Rwandan business managers experienced significant growth in their business management capacity.  And that growth will be passed on directly to sales people, project managers and investment analysts in those companies and other companies in those industries.

While our work often begins with asking many questions and delivering some analysis in the form of a report, interactions such as those described above suggest the report merely represents the beginning of the partnership we form with clients in order to ensure implementation.  These implementations, while difficult and time-consuming, are where the greatest impact is possible…. and they are perhaps the most rewarding part of what we do.

This approach is not necessarily the only means of building business management capacity in Rwanda but it seems to be a method that is in demand by the marketplace and we believe that ultimately the market is what should drive approaches to business management capacity building.

-Dano

Claiming Karisimbi

In naming our organization we had a two part objective:   first, as a local socially-motivated business, intent on demonstrating our commitment to the needs of Rwandan businesses and entrepreneurs, we wanted a name that was clearly Rwandan – unmistakable in its connection to the country; second, we wanted to communicate our mission and the value we hoped to bring to all organizations, leaders and enterprises with whom we had the privilege to engage. 

Our tag line is “Guiding ventures to reach new heights”, and as Mount Karisimbi represents the highest point in Rwanda (14,800 ft), is familiar to all Rwandese, and provides a clear metaphor for growth and challenge, we felt secure in appropriating it for our organization.  However….it never felt quite right that in our strategy discussions with clients, our metaphorical descriptions and comparisons of business challenges and successes to Mount Karisimbi, we had no personal experience with the great mountain itself. This changed last month with our team’s two day expedition of our namesake.

Located in northern Rwanda and bordering the Democratic Republic of the Congo, Mt. Karisimbi is an inactive volcano in the Virunga mountain range.   Despite Rwanda’s stable equatorial climate, a peak of this height means conditions far different from the rest of the country, with temperatures around 30 degrees Fahrenheit at base camp and deep mud for 90% of the trek.  As one would expect, we prepared for the adventure with appropriate clothes, packs, footwear, tents, food, water, etc and secured a national park guide to lead us up.  From that point on, our expectations and metaphors differed from those we had discussed “in theory” with clients over the past year and half, revealing some new and unexpected similarities to the challenge of building business and growing management capacity.  Allow me to list some highlights and “business” observations from our adventure:

Focus on your strengths (e.g. don’t be afraid to outsource / hire expertise):

Dano and I were both very pleased to learn that porters would be available for hire ($8.50 per day).  Neither of us had any ego associated with carrying our own 40+ lb. pack plus water up a muddy trail.  Getting ourselves up and down the mountain sounded within our “skill set.”  To prove the point, those heavily laden porters handily beat us both up and down the mountain.  Carter and a friend decided to take the challenge of carrying their fully loaded packs on day one…arriving at base camp well after us, white faced and wobbly and ready to concede the packs for day two. 

Plan for the Unexpected (e.g. allow for contingencies and protect yourself):

To our surprise, not only did we have a guide, we were assigned ten well armed soldiers to provide protection for our expedition.  We hesitate to speculate why or if they were necessary, but writing this safely back at home means I have no complaints.  Now that’s what I call insurance.

Keep your sense of humor (e.g. laugh at adversity):

There is a reason people refer to business as “serious”, but, despite its inherent challenges (or perhaps because of them), it is important to maintain your sense of humor and perspective.  Climbing a mountain for “fun”, resigning yourself to the necessary “trudging” required to keep forward momentum through muddy trails lined by stinging nettles, camping at 12,000 ft in the cold with minimal sleep… all these things can change your attitude for the worse, but only if you let it. 

Building relationships (e.g. stronger together than apart)

An obvious expectation of people taking on a challenge together is (hopefully) a strengthening of relationships and teamwork.  We certainly found this to be the case on our climb, which included deepening our own partnership, getting to know our new intern, Jon Porter, and crossing cultural lines - huddled around a campfire with soldiers at night trading hymns in our respective languages - relationship building at its simplest.

Dano, Greg & Carter- true Karisimbi Partners at last

View from the top (e.g. may not be all you expect):

Sometimes achieving the goal is quite different from the expectation.  We had often talked with clients about the proverbial “incredible views once you’ve achieved the summit of your potential”, but the reality for us was that our last 1000 feet of the climb was completely clouded over, resulting in near zero visibility from the top; the dominant recollection from the summit consists of cold, wind, ice and other debris.  Ironically, one of the most rewarding views was at the bottom of the mountain, where the fields of pyrethrum (daisy) stretched across the landscape.  This had very special significance for us given our work assisting the client whose factory these well tended fields would supply – bringing employment and security to the local farmers.

Dano, Carter & Greg after the summit

Carter thinks this should be an annual trip with clients invited, but Dano and I aren’t quite there yet.  Either way, we are proud to now legitimately lay claim to our name, Karisimbi Partners.

-Greg

Private Sector Development in Developing Countries: What Works?

Umwaka Mushya Muhire!  (Happy New Year!) 

After recent travel and varied conversations, I am convinced that there are many good (and controversial) ideas about the best form of private sector development.  I would like to take this opportunity to put the question to YOU: 

“What seems to work (and what does not) among economic development initiatives in developing countries?”

I will compile your responses (including pitfalls to avoid and best practices to consider) and add some of Karisimbi Partners' own insights in an effort to see if anything resembling a consensus can be found for application in places like Rwanda.  Please lend us your ideas and opinions on this important topic!

Onward and Upward,

-Carter