BDS market development guide.pdf - PACA

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SMEs—Getting “Real” over Assessing Performance
Donors and facilitators spend inordinate amounts of time trying to assess change within
SMEs that may (or may not) result from interventions. In the complex world of businesses,
many factors affect performance and to isolate the influence of one of these—a BDS
supported by donor funds—is difficult and of questionable value. Moreover, one of donors’
favorite indicators—employment—is inherently (and severely) problematic (Box 17).
Markets presume that a BDS offers benefits and real value to the SME. A more realistic and
practical approach to assessing impact at the level of the firm is based on SMEs’ own
perceptions and experiences of services. Although some may complain that this is not
objective, what matters ultimately—in a market context—is what consumers think.
Box 15: The Problem with Employment as an Indicator in BDS
Although employment change is perhaps the most common indicator used by development agencies
to assess performance, in practice it is a flawed indicator. Aside from the pervasive difficulties of
attribution, there are three main problems associated with it:
1. What is a job? The value of employment—jobs created—as a useful indicator for comparative
analysis rests on an assumption that the unit of comparison (a job) is broadly similar from one place
to another. In fact, there are a number of factors that mean what is termed “a job,” and these may
vary greatly.
• Income—how much is earned? In many family-owned businesses, family members working receive
nothing. Informal sector trainees may have to pay to be trained and pay for the opportunity to work.
In most developing economies, minimum wage legislation is widely ignored.
• Job “size”: is there a minimum length of time per week that employment needs to reach before it can
be regarded as a job? The ILO has used a threshold of 1 hour per week—but clearly this is very
different from someone working a 40 or 50 hours week.
• Job duration: for how long will a job last? In informal sector enterprises, in particular, there is great
volatility in employment patterns that makes it difficult to ascertain job duration.
• Other issues include working conditions with regard to safety and health, working hours, employee
rights, satisfaction, and opportunities for further training.
2. Employment is not an indicator shared by SMEs: despite the insistence of many development
agencies, most businesses do not exist to employ people. Using employment as an indicator of
business development can be misleading. Businesses may expand and become more competitive
and in the process lose labor.
3. The pressures of political manipulation: no other indicator has been abused so much by agencies
and their sponsors. Employment is an emotive subject; unemployment is seen to be a major
symptom and cause of poverty. Organizations are under pressure to produce politically pleasing
numbers and few questions are asked about their accuracy. The supposedly hard numbers of
employment have an alluring certainty and precision surrounding them, encouraging the belief that
they have a rigorous, scientific basis—a belief that is usually false.
Microenterprise Best Practices
Development Alternatives, Inc.