Why Give a Damn:
The intention of this series of posts is to share the story of the beginning and ending of a business. We will zoom in on lessons learned in different areas such as the business setup, funding, the market, consumers and technology. This post focuses on your people, finding the right management (local or expat) and how best to hire, groom and train your team.
NICE International was a Dutch based flagship social enterprise operating in Africa that had to wind down its activities in September 2013. In 2011 the Managing Director of NICE participated in the Unreasonable Institute. We, the authors, hope that other social enterprises can learn from our experience. In a first column, the history of NICE was outlined. In this column, we share the lessons learned on finding the right management (local or expat) and how best to hire, groom and train your team.
Management: Local or Expat
At NICE we had a policy of working with local management in order to make the company fit in the local context and address the needs of local consumers. The managing director of NICE Gambia was a Gambian who had gone to university and worked in the UK for 10 years. We expected that someone with this background would be able to operate successfully in the local market whilst meeting our European standards on how to run a business.
Local management was not able to meet our expectations on how to operate the business.
Over time we saw that our local management was not able to meet our expectations on how to operate the business. They were, for instance, not fully capable of running a proper accounting system, developing business plans and realistic budgets, planning activities and reporting against plan. We responded to these shortfalls by increasingly getting involved in the local operations through providing training, sending consultants, developing templates, managing action lists, having more frequent progress meetings, etc. In the long run we saw that this resulted in a lower sense of ownership of the local staff as they had the feeling that the people from Europe were running the show.
Our lesson learned is linked to the point we made in our post about Choosing the Right Business Model:
- If you expect a local company in a developing country to operate in a Western manner, an expatriate should run the business locally.
- If you choose to work with local management, even when trained in a Western country, the management should be allowed to operate the business in their own way, accepting that it will be different from your expectations. In that case operate as an investor, agree with local management on targets to be accomplished and only make additional funding available when targets are met.
Local Staff: Hire the Best or Groom the Rest
One of the main challenges of NICE has been the quality of local personnel. There is a small group of local people in developing countries able to run a company in a Western style. As we learned in Tanzania, these people are in high demand from international companies and NGOs. As they are a scarce resource, they require compensation at (or even above) Western levels. As a small social venture NICE was not able to afford them, especially since our revenues were not at a Western level.
Another issue faced was that most of the highly qualified local managers preferred a secure job at an established organization over the insecurity of building and running a social venture.
Despite our efforts, most of staff did not reach the required performance level within a reasonable amount of time.
Therefore, we chose to hire less experienced and less expensive local talents with the intention to train them to the required level. As a result, we invested significantly in training, supervision and support of our local staffs. This was one of the main activities of our international headquarters. It did result in very loyal staff and we trained a few very talented people. But headquarter staff based in Europe is expensive. In some cases we learned that the total cost of a young talented local staff – including all the cost of training and support – exceeded that of an experienced and more expensive local staff or even an expatriate. And despite all our efforts, most of the local staffs did not reach the required performance level within a reasonable amount of time.
One of the positive outcome of training your own staff often results in very loyal employees. Our employees really experienced working for NICE as being part of an extended family, the NICE family (that is also how we promoted it). That is wonderful and a strong asset, but it is sometimes also difficult to combine such cultural ideas with business performance. For instance, people were often very obedient and expected us to direct the rules and supply for them (like at home where there is a head of the family who directs and supplies), whereas we expected them to be much more pro-active.
In the end we concluded that for certain key roles (such as accountants) it is probably cheaper to send an expat looking for an adventure and willing to accept a reasonable salary than hire an experienced local staff or train a young talent.
Social entrepreneurs have a tendency to focus on impact and their business model. The NICE case shows that even with a working business model (especially when operating in an international context) things can still go wrong. Our advice is to take these lessons learned and get seasoned advisors.
In the next post we will look at funding, whether to use hard or soft money and upscaling: Big bang or step-by-step.
Even with a working business model-especially when operating in an international context-things can still go wrong. Tweet This Quote