4.4 Why do inter-organisational relations matter?
Development management necessarily and inevitably involves the management of relationships between organisations. As one development manager puts it:
Effectiveness means not just looking internally at whether you've got your personnel policies right, it means whether the managers of that organisation can take on the negotiation, networking, brokering, contracting work which is necessary … to relate across boundaries, with the public sector, with the donor community etc.
The fact that there are many actors with different resources, norms, values and practices means that relating to other organisations involves recognising those differences and the (likely) power relations involved. It also means that no single organisation is likely to have the monopoly of action on institutional development.
In the remainder of Section 3 we are going to look at the management of relationships in two ways. Here we will look at the different kinds of relationships that can be established, identifying them in terms of three types: competition, coordination and cooperation. In the next sub-section, we will look at one of the key skills required in managing inter-organisational relationships, the skill of negotiation.
Read ‘Why inter-organisational relationships matter’, linked below. This introduces ‘competition’, ‘coordination’ and cooperation’ as the three ‘ideal types’ of inter-organisational relationships. As you read, make notes on:
how the ideal types have been significant at different times in the history of development;
the warnings the authors give as regards the use of the term ‘partnership’;
the significance the authors attach to inter-organisational relationships for institutional development.
Click below to view the article (0.01 MB).
The significance of the ‘3Cs’ (i.e., competition, co-ordination and co-operation) is that they all represent ideas and practices which shape the institutional frameworks within which individual institutional development efforts take place. In reality, the distinctions between the three forms are not clear-cut.
However, the common associations made with each have been important to the way that institutional development initiatives are structured. As the article indicates, in the past a focus on the state has led to institutional development meaning action to support the development of government structures and of government's capacity to co-ordinate relationships with other groups (NGOs, for example). With the emergence of neo-liberalism, competition has been particularly favoured, implying changes in institutional frameworks, organisational types and inter-organisational relationships. And in recent history, the co-operation that (in an ‘ideal’ sense) has always characterised civil society has assumed a greater significance, resulting in the emergence of networks as important ways of organising for development.
The term ‘partnership’ is often used as though it is equivalent to co-operation and is characterised by trust, shared values and consensus about what is to be done.
The article hints at several points that this may not be the case. It asks us to make ‘sense of the politics which underlie the rather cuddly notion’ of partnership, the ‘real conflicts of interest and agenda which persist in all areas’ (p. 2) , and the processes through which these conflicts are managed. ‘“Partnership” often masks a complex reality’ (p. 13), one aspect of which may be the exercise of power by stronger partners to bring weaker partners ‘on board’ – or ‘into line’. The broader point that the article is making, though, is about the significance of inter-organisational relationships for institutional development. It argues that they ‘particularly matter when it comes to working towards broader, collective outcomes’ (p. 14), and that nurturing such relationships will ‘produce new and more desirable (read “effective”) institutions’ (p. 15). This reading presents the 3Cs as a framework for understanding these relationships, arguing that it ‘will help us to make sense of more complex realities’ (p. 4).
The following activity provides a brief example of this. It relates to a case involving the development of a micro-finance institution in Russia in the 1990s. With funding from the G7 countries and Switzerland, the European Bank for Reconstruction and Development (EBRD) established a package for promoting the development and growth of a small business sector in Russia. This package is called the Russia Small Business Fund (RSBF), and its wider goal was to contribute to the development of competition in the Russian economy. The activity will give you a sense of the network of inter-organisational relationships involved.
Watch the video ‘Micro-credit in Russia’, linked below. A list of interviewees is provided in the transcript. After viewing the video clips, read the short document ‘Russia Small Business Fund – Informal Note, July 1997’ (RSBF, 1997), also linked below. The document provides some detail of the way in which the Fund is structured and its operational mode. Make notes on the following questions:
What were the objectives of the RSBF?
How would you characterise the inter-organisational relationships between the main players in the programme?
How does the programme promote competition? How is competition viewed by the people involved in the programme?
Are co-ordination and co-operation also promoted or employed at different times by any of the agents involved? Can you give examples?
Click to view the video clip (9 minutes).
Transcript: Video 5
Click to view the video clip (10 minutes).
Transcript: Video 6
Click below to view article (0.02 MB).
According to Elizabeth Wallace (Senior Banker at EBRD) and the Informal Note, the programme has two principal objectives. The first is to help small business develop with the help of loans. The second objective is to build capability in the banking sector so that small firms have access to finance on a permanent basis. Loan officers are trained by the programme so that they have the skills to judge requests for loans on the basis of business plans and a more general analysis of businesses, and on the basis of the people asking for loans, rather than collateral or connections. As Martin Holtmann from International Project Consultancy (IPC) notes, consultants are also willing to assist the banks in more general ways to ensure their own survival in the new environment.
The EBRD has a great deal of power and is co-ordinating this programme through IPC. The Russian banks have to work with EBRD in order to get the funds, and as Elizabeth Wallace comments, they ‘need to change their banking practices’ if they want to succeed in the new economic climate. The entrepreneurs themselves, while having little formal power, seem pleased to have a new source of income and are keen to work with the banks. The programme is clearly designed to help small businesses compete successfully in the new capitalist environment. Entrepreneurs who have received loans all testify to the contribution that the loans have made to their ability to be competitive and to enable their businesses to grow.
Competition is promoted in other ways. Competition requires a complex regulatory framework, and appropriate institutions have to be developed so that competition can not only thrive, but deliver on improved quality, choice and, most importantly in this case, the growth of employment opportunities. You may be able to see elements of the framework in the structures which EBRD and others are trying to put into place. As you will have noted from the video and the Informal Note, a number of different banks are involved in the programme at this stage. The EBRD considers this to be very important in constructing a positive competitive environment in which banks will become more efficient. The development of trust, by establishing and maintaining shared norms and practices, and the growth of social capital, improving the skills and expertise of both bank officials and entrepreneurs as well as their ability to work together, are both important to the successful development of competitive services and businesses. Thus, from the beginning, while the RSBF is a programme based on improving enterprise through competition – competition between banks and between businesses – the main implementer, EBRD, uses co-ordination to get the banks moving in the same direction, to initiate appropriate regulatory frameworks, and to establish shared norms around the development of new banking services. However, there is no doubt that co-operation is also important – employees and entrepreneurs have to believe in the new practices and make changes because it is in their own self-interest to do so.