How donor agencies can make the transition to strategic private sector engagement

The Practitioner Hub’s January blog series on ‘Demystifying donor-business collaborations’ hit a spot: There is an urgent need to uncover the issues that can make donor agencies’ private sector engagement efforts succeed or fail.

We all know the buzzwords that describe our common vision of private sector engagement: It’s supposed to be strategic and innovative, across all areas of donor agencies’ work, and deliver lasting commercial and development benefits. Donors and businesses are equal partners – bringing in complementary resources to act on joint agreements – typically involving a change to a company’s investments, where they are made, and how.

What is often underestimated is: transitionWorking this way requires a fundamental shift in how donor agencies are organised and operate. Institutionally, they are still largely set up as bilateral agencies – focused on providing conditional funding or technical assistance to governments in particular. This is also reflected in traditional mechanisms for working with business: While often described as partnerships, these tended to be transactional and top-down, with donor procedures dictating the shape of support.  Now is perhaps the first time that agencies are seriously reviewing how they need to change their way of working as a basis for ‘real’ partnerships with business.

Indeed, moving from traditional formats to the new vision of private sector engagement launches donor agencies on a change process at all levels. This can appear daunting at first. And yet, as a number of pioneering agencies demonstrate, practical steps can make a big difference in the ability to engage the private sector as a strategic partner, rather than as contractors. The Secretariat of the Donor Committee for Enterprise Development (DCED) has done initial research on what these change steps look like in donor and other development organisations, and we found three common types of change:

  • New agency policy, programming and funding frameworks;
  • revised staff roles, team configurations and responsibilities; and
  • efforts to build staff skills, experience and buy-in into new ways of working.

1. New policy, programming and funding frameworks are an important entry point for systematically engaging the private sector in development. A few agencies are now actively consulting business to make their engagement strategies more demand-led. Others have developed more nuanced strategies, with a particular focus on businesses that have a demonstrated interest in sustainable development issues.

Emerging approaches to developing partnerships stand in contrast to traditional mechanisms: they may involve preparatory discussions of several months or even years, to understand business interests of a company and identify development solutions of commercial interest; and they focus on building longer-term relationships, with a wider spectrum of collaborations over time.

Flexible, centrally managed funds, which can be accessed by all technical staff, are one way in which some agencies plan support such strategic partnerships with business. Other new funding frameworks enable donor agencies to respond to business needs in more nimble and intelligent ways. One example are innovation funds, which provide different forms of financial support to the testing or expansion of highly innovative investments.

2. In order to effectively implement new private sector engagement approaches, several organisations are creating or adapting roles of individual staff as well as entire teams.

This often includes recruitment of a new senior member of staff with significant corporate experience, to lead on private sector engagement and internal institutional changes. Some agencies have also created focal points to handle all in-house and external enquiries related to business engagement. More importantly, they are investing increasing amounts of staff time into personal exchanges, networking and relationship-building with business: Some organisations now mandate all technical staff to develop partnerships, and allocate more time for participating in relevant networking events and platforms. Two agencies have developed a system of ‘relationship managers’ who act as regular contact points for strategic corporate partners.

The structure and functions of units and teams have also changed. For example, there is a trend to work through cross-functional teams, as different units become involved in business engagement – for example, marketing and communications, as well as legal teams. 

3. In order to facilitate the execution of new roles, several agencies are building staff skills and experience, have brought in new expertise and are promoting buy-in into new ways of working.

Organisations have developed a variety of mechanisms to build staff skills and experience, including: new staff guidelines; training; day-to-day mentorship and advice from senior staff; and secondments to major partner companies. Several agencies have also changed recruitment strategies to bring in specialist expertise from businesses and different sectors of operation for leadership and technical roles. In addition to technical departments, there is increasing demand for ‘partnership expertise’ in supporting roles – for example, in legal advisory teams.

Several other changes are critical to promote cultural change more broadly. This includes executive level support to change processes within the organisation, and active internal communication of results and lessons learnt. Bigger questions still remain on how to change prevailing incentive structures for staff. Several Private Sector Engagement Directors actively encourage staff to experiment with riskier projects and to share lessons from failure. Some agencies may consider private sector engagement training or successful partnership management as important future criteria for upward mobility of staff in the organisation. Traditional indicators of partnership success will also need to be changed. For example, an emphasis on the number of partnerships completed does not encourage staff to spend time building relationships with strategic partners.

These and other changes are documented in the DCED’s new briefing note ‘How donors can make the transition to strategic private sector engagement. Programming innovations and organisational change”. We’d be curious to get your views, and any additional insights into the institutional changes required to enable effective private sector engagement – via the comment function or email. We may then incorporate these in the final publication.

You can also find more on the theme of private sector engagement on the DCED’s revamped knowledge page here: http://www.enterprise-development.org/implementing-psd/private-sector-engagement/


Melina Heinrich-Fernandes
Melina Heinrich-Fernandes
Melina Heinrich Fernandes is a Senior PSD Specialist at The Donor Committee for Enterprise Development (DCED). The DCED is a forum for learning about the most effective ways to create economic opportunities for the poor, in line with the SDGs...

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