Strategic Business Planning Trainer's Manual 0707

MicroSave
Market-led solutions for financial services

Offices in: Kenya, Uganda and India
Associates in: Benin and
Guatemala
www.MicroSave.org
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Trainers Manual for

Strategic Business Planning for Market-led
Financial Institutions
Graham A.N. Wright, Kasia Pawlak, Walter Tounitsky, Lisa Parrott,

David Cracknell and Ramesh S. Arunachalam
Version 0707
MicroSave - Market-led solutions for financial services

Strategic Business Planning for Market-led Financial Institutions, Graham Wright et al. ii
Table of Contents
Introduction to Trainers Manual ................................................................................................1
Session 1: Introduction ..................................................................................................................7
Session 2: What is Strategy and Strategic Business Planning? .................................................8
Session 3: Mission, Values, Vision at the Core of Your Strategy ............................................21
Session 4: Diagnose Current Strategic Position ........................................................................28
Session 5: Formulate Your Strategy ..........................................................................................44
Session 6: Develop Financial Projections ...................................................................................52
Session 7: Execute Your Strategy Through KOGMA Analysis ..............................................54
Session 8: Identifying Key Objectives and Setting Goals .........................................................61
Session 9: Selecting Measures and Setting Targets ..................................................................67
Session 10: Defining Activities ....................................................................................................75
Session 11: Implement and Monitor KOGMA Analysis ..........................................................81
Session 12: Action Plan................................................................................................................90
MicroSave - Market-led solutions for financial services

Strategic Business Planning for Financial Institutions Trainers Manual, Graham Wright et al. 1
Introduction to Trainers Manual

Trainers Guide
Welcome to the MicroSaves Strategic Business Planning Trainers Manual. This manual is meant for
those people who have taken the MicroSave Strategic Business Planning training course and are going to
reproduce the training elsewhere or are going to live it by developing a strategic business plan for their
own institution. The manual provides comprehensive session plans, notes for the trainer with examples for
reference.
It is intended that the trainer delivering this course will be familiar with key concepts in strategic business
planning. The same person is assumed to be a capable trainer. However, for those who may want to brush
up on their training skills, MicroSave has compiled an accompanying manual (available from MicroSave on
CD) specifically discussing training skills and training issues. There are many other training manuals which
the trainer may consult, including the Participatory Learning & Action: A Trainers Guide of the IIED
Participatory Methodology Series.1 MicroSave uses several of the Ice Breakers, Refreshers, etc. from these
manuals.
Theres already a Strategic Business Planning Toolkit on the MicroSave Website. Why is there
a Trainers Manual also?
Some people will read the Strategic Business Planning Toolkit that is on our website and find that to be
enough to go forward with developing the Strategic Business Plan for the institution. However, many people
and organisations have asked for a training course as well. Some people feel that it is faster and easier to train
all the key staff members all at once and also start developing a strategic business plan in the process. This
way they will literally all be reading from the same page.
Who should I be training?

You may choose (or be chosen) to provide training for different types of participants: CEOs or executive
directors, operations managers of financial institutions, senior managers, frontline staff, consultants in the
financial services industry, etc. Each training opportunity will be different and the trainer will need to adapt
the training to the participant profiles and experiences.
Training multiple MFIs

For a training with participants from multiple MFIs, the trainer should insist as much as possible that the
MFIs must send at least eight participants - three senior managers, two front line staff along with the CEO
and one or two active board members - to the training. The exercises in the training are based around
working in institutional groups, so it is essential that participants have detailed knowledge and experience in
the institution backed by the authority to take important long term decisions. A training which has the
participation of board members and senior management ensures that the MFIs are serious about the training
and will allow the teams to breakout into their own organisations, performing the exercises as relevant to
their own MFIs. It may also provide for interesting and rich discussion between MFIs as to why / how their
responses to the various exercises differ.
The training can also be run as Training of Trainers, that is, one or two personnel get trained in the toolkit
and then conduct the same exercise for their institution. However experience has shown that better results are
achieved if the training is run by an external person, as the person helps the team to think out of the box and
in identifying inherent weaknesses and strengths and then facilitate the development of a well integrated
strategic business document.
1
They can be reached at International Institute for Environment and Development/ 3 Endsleigh Street, London, WC1H
ODD, UK
MicroSave Market-led solutions for financial services
It is advisable to have MFI not more than 2-3 MFIs in one training programme. This is because it is
important to maintain privacy of information, especially if the participating MFIs are offering similar
services or are working in same or contiguous operational areas. Experience shows better output through
open and interactive discussions if participant MFIs are from different areas and do not pose competition to
each other.
Training individuals
It is possible to provide this training to individuals consultants or personnel from the MFIs.
If you are working with consultants and/or trainers who will then
work with various institutions to develop strategic business plans
you will want to tailor the training to demonstrate the various
components of the process and how to coach an MFI through the
process.
If you are working with MFI staff who would go back to the
institution and run the training for other members and develop
the strategic business plan as an institution, ensure that the
participants of the training, have detailed knowledge of the
institution to be able to participate in the exercises as designed.
Training institutions
Though not cost effective, many institutions request this training
to be done specifically for their own institution. This is because
of the nature of the information that needs to be discussed details of operation, future projections, financial
details etc. A special necessity for SBP is the correct composition of the planning team. The quality of the
SBP depends significantly on this. So if you are training an institution separately, you must ensure that you
get participation from across all levels in the institution to ensure ownership of the strategic plan from the
board till the front line staff, and from the different operational units training, operations, finance etc. The
emphasis should be on the active participation of senior management through out the exercise.
What About the Venue?

It is much better to run this workshop off-site, away from the MFI(s) office to facilitate creative, strategic
thinking, away from the petty day-to-day intrusions of operational decision-making (and sometimes even
fire-fighting).
What do I need to tell my participants need to bring with them?

The trainer must insist - and ensure - that the participants coming the course are prepared to learn and do.
Participants should come prepared to question assumptions, analyse real situations in their institutions.
Developing strategic business plan is a key element of the course, so participants should have knowledge of
the process their institution has / is using for planning their operations. Participants should gather information
and fill up Handout 4.3. Additional documents as past annual reports, assessment reports, audit reports,
performance reports is also useful.
In addition, the participants should bring with them laptops as this makes using the tools in the course,
much easier, especially if they want to work on the financial projections also.

What do I need from MicroSave for the Training?

Download from the website www.MicroSave.org the Strategic Business Planning Training folder. It will
have the following:
Strategic Business Planning Toolkit
Strategic Business Planning Trainers Manual
Slides
Handouts
Exercises
Handouts:
Handouts are to be given to participants as reference material on the various sessions during the course.
Ideally all handouts should be made available in soft copy so that they can be used by participants when they
return to their institutions. Whenever possible, participants should bring their own laptops so that they can
complete a draft of the strategic business plan on their own machines. Participants should bring Handout 4.3,
an analysis of the competition in the operating area, filled in line with the example that is given.
Exercises:
These are primarily to provide templates for some of the components of the business plan. Computers are
essential for doing the exercises. It is helpful to load them onto participants laptops early in the training.
Slides:
The training is guided by a PowerPoint presentation, divided into sessions. This course can be trained in
several ways, as discussed herein. Ensure that you have the slideshow in the format most useful to you.
Slides can be printed onto overhead slides and utilised with an overhead projector. However, due to the
number of slides, the amount of text, and the animation of slides, it is highly recommended that the trainer
utilises an LCD projector. It helps if participants are given a copy of the slides in handout format of
PowerPoint.
Note that within the slideshow some slides have been hidden and will not be visible during the general show.
These slides often provide additional information, or illustrate another point. They can be unhidden, if
relevant to the course, or used by the trainer to understand a particular issue.
Trainers Manual:
This manual has been designed for you as the trainer to provide you with an outline for presenting the
materials and ideas for using the time, exercises and examples most effectively. Participants are not given
this document, but if they become certified in this toolkit, it is a practical tool to have for training others. The
trainers manual has more information than what is presented in the slides. This can be used by the trainer for
more detailed inputs to institutions if required.
Practical Examples:
Some practical examples have been provided throughout the course based on the experience of MicroSave
with its Action Research Partners and other institutions using the MicroSave tools. The trainer should review
the practical examples and where possible supplement or replace the examples given on the basis of his / her
experience.
Providing examples based on experience adds considerable value to the course, especially where examples
are contextually and culturally appropriate for those being trained.

What else do I need for the Training?

To conduct the training you will need:
A digital projector, although an overhead projector could be used.
Standard Training Room items: Flip chart stands, flip charts, or white board, many blank flash cards, marker
pens of various colours, punching machine, stapler, masking tape, etc.
Some knowledge of PowerPoint: The slideshows may need some customisation inserting the course
schedule for example, customising exercises to meet the
needs of the MFI being trained, adding local terms for I hate animation. How do I turn it off?
savings and credit, the names of the MFI being trained, etc. Highlight all slides at once by clicking
The trainer should be very familiar with the slideshow, on the bottom left icon that shows four
running through it several times before the training starts. squares (slides). This will give you a
This will help him/her note when to click onto the next view of all the slides in the show. Then
slide and to understand the kind of animation that is on press Ctrl and A at the same time; this
each slide. Generally, the animation should NOT be too will highlight all of the slides in the
complex or distracting, but the trainer may choose to show.
eliminate all animation as well (see box). Now that they are all highlighted, look
on the toolbar at the top and click on
Workshop materials for participants: Encourage them to take slideshow, then click on preset
notes in their manuals (so pads of paper may not be needed) animation and select off. There will
so they will remember the discussions better when they get be no more animation on any of the
back to their offices. However folders will be helpful slides.
considering the number of handouts and exercises that there
will be during the course. It may be useful to have pens,
pencils, erasers, etc.
Computers (at least 1 for each institution) to begin developing the business plan.
How do I use this Training Guide?

The training guide is, hopefully, self-explanatory.
Each session provides the Trainer with the Session Objectives, Time, Methods, Materials, Overview and
Process.
The time that each session will take is flexible depending on the trainer, the number of participants, skill
levels of the participants and whether or not the participants are all from the same organisation or from
different ones.
The methods simply alert the trainer as to whether the session is to be conducted as, for example, a
presentation which generally means the slideshow will be utilised, or as a breakout session and that
breakout areas may be required.
A list of all the materials that the trainer will need, above and beyond the list provided above, for the
session is also included. Flipcharts, markers, tape should be assumed, even when not listed.
The overview provides just that an overview of the upcoming session, and
The process section provides the trainer with the steps they should follow to train each session. The
process sections of the trainers manual will often have greater detail on the subject matter than the
participants curriculum, and training tips may be included. It is not intended that the trainer memorises

the text (then we would have added some of our standard jokes!), but rather that the trainer feels confident
discussing the issues at hand. The trainer should bring in relevant examples from her own MFI experiences
and encourage participants to discuss their own experiences. Adults generally learn better from real
life rather than theoretical discussions.
Finally, the trainer will find the following SYMBOLS in the manual to signify different things.
The idea symbol means that you will find comments from our experienced
staff and certified trainers. More comments, questions and ideas can be
Idea: directed to MicroSave, their research partners or their trainers by using the
e-mail addresses on the front of this manual, or accessing the website.
Offers training suggestions trainer could try brainstorming, trainer could

lecture, do a role play, etc.
This symbol helps the trainer find the exercises that are in each session.
Preparing Your Slideshow

MicroSave has hidden slides within each training toolkit.
These will not appear when you are doing the slide Hiding and Un-hiding Slides
presentation, but they provide additional details and more 1. On the Slides tab in normal
information from the toolkit. It is your job as a trainer to go view, select the slide you
through the slide presentation and decide which slides to want to hide.
unhide for greater depth in a particular session. Likewise,
you may choose to hide some slides that are not as relevant to 2. On the Slide Show menu,
your audience. See the box at right for the steps to hide or click Hide Slide.
unhide a slide.
The hidden slide icon appears (or
Also, when printing out the slides you need to be careful to disappears to unhide) with the
uncheck the box that says Print Hidden Slides. slide number inside, next to the
Otherwise all the slides will be printed for your participants slide you have hidden.
and they will have a difficult time following your presentation
(because you will skip over several slides).
Preparation for Training:
You have chosen your participants for the course (or they have chosen you!) and you have:
COSTED and CONTRACTED the training and agreed with the MFI the number of days for training and
follow-up (typically MicroSave has scheduled 5-15 days of follow-up depending on the size and
complexity of the financial institution and the in-house capacity of its staff).
Sent, via e-mail or hard-copy, the pre-course handout files to your participants, if there are going to be
any. It is particularly important to send out the timetable/session plan.
Sent via e-mail and/or hard copy, a letter requesting that the participants bring laptops and all relevant
information such as annual report, performance reports etc.

Chosen an appropriate venue (steady supply of electricity, enough room for breakout groups, etc.) and
seating plan for the number of participants you will have (a U shaped seating arrangement; 6 tables
angled towards the front, small round tables each accommodating 4-5 people etc.)
Ensured that participants are all in the process of completing, or have completed the product
development process and have the appropriate information available to them on the laptops that they will
be bringing with them.
Copied, bound and prepared all the manuals and handouts.
Practiced with the slideshow so that you are confident how to use it.
Alternative Lesson Planning
It is not recommended that the training be compressed into a very short time period nor overly extended. The
Days have been calculated to allow the team plenty of time to learn and practice the tools. Compressing
this time may lead to confusion, and extending it may mean that the group is spending too much time in an
academic setting and not enough time doing it.
A Warning on Course Timing

Effective Strategic Business Planning takes time often more time than is neatly available in three days.
The amount of time required to complete the Strategic Business Planning process effectively will vary
immensely from institution to institution depending on:
How much preparation has been completed on the competition, the external environment (PEST
analysis etc.) in advance of the workshop;
How well the institutions current Mission and Values are established;
How quickly the group can reach consensus on what are often complex (and occasionally divisive)
issues; and
The number of participants (aim for 12-15 maximum and then encourage this group to cascade
the Strategic Plan through the organisation and take the feedback generated in the process).
Warn participants (and yourself) that you may we be working long nights sometimes even with
homework too! And, if desperate, run some group activities in parallel (even if they are scheduled in the
manual to be run in sequence!)

Day 1
Session 1: Introduction
Session Objectives:
To get to know all participants, their organisations and their roles within their MFIs
To present the ground rules and session plan
To review objectives of the Strategic Business Planning for Market-led Financial Institutions training
Time:
30 Minutes
Methods: Introduction exercise

Presentation
Slide Show: PowerPoint presentation entitled Session One customised

by the trainer with the course information. This session consists of 10 slides
Materials:
Handouts:
1.0 Session Plan
1.1 BN 32: MicroSave Training Philosophy
Overview: This session welcomes the participants to the course, introduces MicroSave and its approaches
and gives them an idea of the course content.
1. Introduction
Time: 20 minutes
Slides: 5
Welcome participants and introduce facilitators through the exercise. Talk about the training to explain the
objectives of the training. Provide any logistical information and ensure that each participant has the session
plan for the training.
2. About MicroSave
Time: 10 minutes
Slides: 5
Briefly explain the work of MicroSave and the approach it follows. Update participants with the latest list of
toolkits developed and are available on the website for use. Set rules for your training. We have provided a
suggestive list.

Session 2: What is Strategy and Strategic Business

Planning?
Session Objectives:
To understand what is strategy and why we need strategic planning
Be introduced to the Strategic Business Planning framework
To identify and discuss how we gather information for developing the strategic plan
Assess the significance of strategic positioning
Be introduced to the Strategic Planning Process
Time: 1 Hour 10 Minutes
Methods: Presentation
Exercise in groups
PowerPoint presentation entitled Session Two This session consists of

Materials: 25 slides.
Exercise:
2.1: Steps of Strategic Business Planning Process
Handouts:
2.1 MyMFI Example Strategic Business Plan
2.2 MyMFI Example Measures & Target Matrix
Overview: This session introduces participants to the concept of strategy and what strategic planning is all
about and the role it plays in the strategic positioning of the institutions. It details what is
required to develop a comprehensive strategic plan. The session ends with an introduction to the
strategic business planning process which will be discussed in details in the next two days.
1. What is Strategy?
Time: 20 minutes
Slides: 10
Explain strategy through accepted definitions and detail its attributes. Emphasise that strategy is affected
by both internal and external factors. Strategising leads to adding value to the service provided on a
sustainable basis.
2. Why does an institution need Strategic Business Planning? How is it related to other components?
Time: 10 minutes
Slides: 4
Explain the different components of a Strategic Business Plan and the link between the different components
of the plan. MicroSaves Strategic Planning Framework gives an idea of the different components of
a strategy. Discuss how the analysis of the institution, market, competition and environment
provides information on the components of the strategic plan.

3. What are the sources of information that help develop Strategic Business Plan?
Time: 10 minutes
Slides: 6
Use a call out to list the sources that can be used to collect data to develop a well informed business plan.
This is because it is important to establish a strategic position in the market by differentiating itself from
other players through mission driven sustainable advantage.
4. What are the different steps to developing a Strategic Business Plan?

Time: 10 minutes + 20 minutes for exercise
Slides: 5
The Strategic Business Planning process has 19 steps which has been categorised into four sections:
Developing the Strategy
Developing the Financial Projections
Developing the Business Plan (with KOGMA Analysis)
Implementing the Business Plan
Q. What is strategy?
George Steiner, a professor of management and one of the founders of The California Management Review,
is generally considered a key figure in the origins and development of strategic planning. His book, Strategic
Planning [2], is viewed as seminal on the subject. Yet, Steiner does not bother to define strategy except in
the notes at the end of his book. There, he notes that strategy entered the management literature as a way of
referring to what one did to counter a competitors actual or predicted moves. Steiner also points out in his
notes that there is very little agreement as to the meaning of strategy in the business world. Some of the
definitions in use to which Steiner pointed include the following:
Strategy is that which top management does that is of great importance to the organisation;
Strategy refers to basic directional decisions, that is, to purposes and missions. Strategy consists
of the important actions necessary to realise these directions.
Strategy answers the question: What should the organisation be doing?
Strategy answers the question: What are the ends we seek and how should we achieve them?
Steiner was writing in 1979, at roughly the mid-point of the rise of strategic planning. Perhaps the confusion
surrounding strategy contributed to the demise of strategic planning in the late 1980s. The rise and
subsequent fall of strategic planning brings us to Henry Mintzberg.
Strategy According to Henry Mintzberg

Henry Mintzberg, in his 1994 book, The Rise and Fall of Strategic Planning [3], points out that people use
"strategy" in several different ways, the most common being these four:
Strategy is a plan, a "how," a means of getting from here to there.
Strategy is a pattern in actions over time; for example, a company that regularly markets very
expensive products is using a "high end" strategy.
Strategy is position; that is, it reflects decisions to offer particular products or services in
particular markets.
Strategy is perspective, that is, vision and direction.
Mintzberg argues that strategy emerges over time as intentions collide with and accommodate a changing
reality. Thus, one might start with a perspective and conclude that it calls for a certain position, which is to
be achieved by way of a carefully crafted plan, with the eventual outcome and strategy reflected in a pattern

evident in decisions and actions over time. This pattern in decisions and actions defines what Mintzberg
called "realised" or emergent strategy.
Mintzbergs typology has support in the earlier writings of others concerned with strategy in the business
world, most notably, Kenneth Andrews, a Harvard Business School professor and for many years editor of
the Harvard Business Review.
Strategy According to Kenneth Andrews

Kenneth Andrews presents this lengthy definition of strategy in his book, The Concept of Corporate Strategy
[4]: "Corporate strategy is the pattern [italics added] of decisions in a company that determines and reveals
its objectives, purposes, or goals, produces the principal policies and plans for achieving those goals, and
defines the range of business the company is to pursue, the kind of economic and human organisation it is or
intends to be, and the nature of the economic and non-economic contribution it intends to make to its
shareholders, employees, customers, and communities (pp.18-19)."
Andrews definition obviously anticipates Mintzbergs attention to pattern, plan, and perspective. Andrews
also draws a distinction between "corporate strategy," which determines the businesses in which a company
will compete, and "business strategy," which defines the basis of competition for a given business. Thus, he
also anticipated "position" as a form of strategy. Strategy as the basis for competition brings us to another
Harvard Business School professor, Michael Porter, the undisputed guru of competitive strategy.
Strategy According to Michael Porter

In a 1996 Harvard Business Review article [5] and in an earlier book [6], Porter argues that competitive
strategy is "about being different." He adds, "It means deliberately choosing a different set of activities to
deliver a unique mix of value." In short, Porter argues that strategy is about competitive position, about
differentiating yourself in the eyes of the customer, about adding value through a mix of activities different
from those used by competitors. In his earlier book, Porter defines competitive strategy as "a combination of
the ends (goals) for which the firm is striving and the means (policies) by which it is seeking to get there."
Thus, Porter seems to embrace strategy as both plan and position. (It should be noted that Porter writes about
competitive strategy, not about strategy in general.)
Q. How does strategy relate to other components?

The Strategic Plan outlines the strategic direction for the business and its:
Market and scope
Market growth strategy
Value proposition
Strategy towards the competition
The KOGMA Analysis provides the business plan (key objectives, goals, measures/targets and
activities) to achieve the organisations mission/vision. Together the Strategic Plan and the KOGMA
Analysis provides the Strategic Business Plan.
Financial Planning/Projections helps you assess, project and plan the financial implications (revenues
and costs) of your Strategic Business Plan.
Governance helps to assess the Strategic Business Plan and provide over sight of its implementation
including remedial action if there are significant deviations from or flaws in it.
Strategic Marketing Plan outlines the shorter term actions in a way that they are aligned to your
mission and strategy.

Strategic Business Planning and Financial Planning
Strategic business planning and financial planning, or budgeting, are integral components of good
management. The strategic business plan charts direction, while the budget provides resources to implement
the plan. A strategic business plan neither grounded in fiscal reality nor linked to the budget would be only a
dream. On the other hand, resource allocation without strategic thinking would be shortsighted and
unresponsive to future conditions.
Strategic business planning guides the financial planning process. It establishes and affords management an
opportunity to reevaluate existing allocations of funds. Financial institutions can develop strategies and
action plans that detail what will be accomplished to achieve strategic business planning goals and
objectives each year. These action plans together with performance measures, provide the strongest links
between the operating and capital outlay budgets.
Strategic business planning and financial planning are interactive. Assumptions about available resources
affect what can be achieved in the plan; the plan also sets priorities for resource allocations. Since funding
continues to be limited, strategic business planning can help financial institutions as they strive to do more
with less while remaining focussed on results.
The internal/external assessment component of the strategic business planning process can be valuable in
identifying trends, demand factors and strategic issues to support the development of financial projections.
Well conceived strategic business plans with missions and goals that emphasise accomplishment of
meaningful results in a constrained fiscal environment provide strong justification for resource allocation.
Q. What information is required to develop a strategy?

To develop the Strategy, the five Information Packages that inform almost all aspects of a financial
institutions marketing activities will be helpful for your strategic planning purposes:
1. Market Analysis profiles and understands the target/potential market;
2. Competitor Analysis profiles and understands the financial institutions competitors (both
formal, semi-formal and informal);
3. Customer Analysis tracks performance through customer research, particularly through
customer satisfaction analysis;
4. PEST Analysis examines the Political, Economic, Social (including legal and environmental)
and Technological environment within which the financial institution operates; and
5. Institutional Analysis examines strengths and weaknesses.
Q. How does operational effectiveness and strategy correlate?

At some level extremely high levels of effectiveness become, one might say, hygiene factors (very true for
mature industries; not so much so in many environments where microfinance is relatively new. This trend
becomes more common as microfinance industry develops as evidenced in Latin America, advanced
European MF markets - Bosnia). Operational efficiencies in most microfinance institutions (MFIs) are very
closely comparable - successful ones pursue specific and distinct strategies that differentiate them in the
market. Still more important because of emerging competition from commercial banks (often with
significantly higher levels of effectiveness) who downscale and enter the traditional turf of non-bank MFIs.
On the other hand, the situation in many environments is still characterised by wide variations of
effectiveness. Building a strategy based on better effectiveness and higher profitability would hardly work
long term as ultimately well compete with the best of them as pointed out previously.

Hence, strategy is about being different, about defining your competitive advantage and planning for
sustaining it over a long period of time.
It is therefore importent to watch out for:
1. Inconsistencies in image or reputation (trying to offer a new product/service that does not match
your market position or image).
2. New activities that require different product configurations, different equipment, different employee
behaviour, different skills and/or different management systems
3. Limits on internal coordination and control that will reduce your effectiveness/ability to
implement the Strategy.
Q. What is strategic business planning?

Strategic business planning is a disciplined and pragmatic approach that organisations can use to make
decisions now about the future. It enables them to make more informed choices and decisions, set future
directions, establish priorities, allocate limited resources, improve operations and monitor results.
It is also a process of organisational self-assessment, goal setting, strategy development

and performance monitoring. In the planning process, financial institutions determine
(or review) their core functions and objectives/goals within the context of trends in the
external environment, their internal capacities as organisations and their missions.
Determining their core functions and objectives/goals gives financial institutions a focus
a focus that allows them to plan activities, assign priorities and apply resources to
move them from where they are now in the present to where they want to be in the
future.
In other words, strategic business planning allows financial institutions to consider future scenarios and
outcomes in advance and to decide which ones that they want to make happen. Such thinking and planning
beforehand can help financial institutions make better decisions about their programmes and services and
as a result better meet the needs of its clients. Simply put strategic business planning puts financial
institutions in a better position to accomplish what they set out to do, especially in the future. Thus, strategic
business planning, is a tool for organising the present on the basis of the projections of the desired future it
is a road map to lead an organisation from where it is now to where it would like to be in five or ten years.
To achieve the above, the strategic business plan must be:

Simple, clear and written
Based on the real current situation
Have enough time allowed to give it a time to settle. It should not be rushed. Rushing the plan will
cause problems.
Q. What is new about strategic business planning?

So Whats New? We Do Planning Anyway
Planning is not new - most organisations routinely prepare yearly operational plans. Some of them even
develop long range or comprehensive plans. Strategic business planning, however, distinctly differs from
each of those planning activities. Among its most distinguishing characteristics are:
A bias for action;
Emphasis on strategic thinking rather than producing a planning document;
Focus on a long term;
Anticipation of future events and their likely impact on the fundamental organisational operations;
Focus on identifying what is essential for organisational success and channelling resources toward
those efforts;

Concentration on results; and

Capability to see a desired future-state and construct it.
Q. What are the benefits of strategic business planning?

Simply put, strategic business planning helps a financial institution understand its present situation, examine
how current and future trends may affect it and decide how to best manage anticipated challenges. A precise
set of concepts, procedures and tools help a financial institution interpret emerging trends and issues. During
each planning cycle, insights gained equip the financial institution to effectively respond to rapid, complex
change as it deliberately focuses on its desired destination.
Strategic business planning therefore potentially improves organisational management in many ways.
Foremost, a well-executed planning exercise promotes a common understanding about the financial
institutions overall direction and purpose. Individuals see how their actions support the financial
institutions mission. Clarity of purpose enhances the organisations ability to recognise and concentrate on
those activities or actions that are fundamentally important.
Second, the strategic business planning process trains staff to think and act strategically. These skills permit
the organisation to creatively handle changing circumstances.
Other possible benefits include:
The ability to move from crisis-driven to anticipatory decision making with a clearly established
direction for key issues;
Emphasis on results and benefits rather than levels of service and workloads;
Sharply focused issues for review and debate by top management;
A frame work to link budget allocations to priority issues and improve accountability;
Improved communication between service providers and their various constituencies;
An enhanced ability to respond quickly to changing conditions because of lessons learnt while
analysing its current situation;
Improved capacity to structure and direct resources to achieve excellence and profit from opportunities
and generate desired results;
Better information for decision-making and resource allocation;
A comprehensive understanding of constituent expectations;
A foundation for building team work;
An emphasis on measurable objectives which promote greater accountability for performance;
Improved organisational performance;
An increased possibility of equal or better results using fewer resources; and
Development of a thorough understanding of the various components of the institution.
While strategic business planning offers a financial institution an array of potential benefits, it should not be
construed as a panacea. A well-executed strategic business planning process requires both commitment and
resources from the financial institutions management. For that reason, management should discuss and
articulate its expectations for the planning process before starting it. These expectations guide process design
so that it meets the financial institutions unique needs.
In the 21st Century Successful Organisations are Characterised by:

Carefully crafting and articulating the essence of their business and determining the Main Thing [What Really
Matters]
Defining a few critical strategic goals and imperatives and deploying them throughout their organisations
Tying performance measures to a system and metrics to those goals
Linking these measures to a system of rewards and recognition
Personally reviewing the performance of their people to ensure the goals are met.
- George Labovitz and Victor Rosansky

Benefits of Strategic Business Planning

Strategic Business Planning is an essential tool: Strategic business planning determines the things
that an organisation can do to address customer expectations. Financial institutions are constantly
challenged to manage complex and changing problems with limited resources. Managers must
address new, as well as ongoing responsibilities, while containing and even reducing costs. Further,
financial institutions are being asked to focus on achieving results and stretching those results each
year so that more work is done, work is performed better and/or work is done faster. In other words,
results should focus on the efficiency and effectiveness of operations.
Strategic Business Planning is adaptable: Strategic business planning takes a long-range approach,
but can use regular reviews and updates to check progress and reassess the validity of the plan based
on strategic issues uncovered in the internal/external assessment. The plan can be updated to make the
adjustments necessary to respond to changing circumstances and take advantage of emerging
opportunities. It sets targets for performance, incorporates ways to check progress and provides
guidance for on-going operational and capital plans and budgets.
Strategic Business Planning is planning for change in increasingly complex environments:
Perhaps the one constant in all business today is the notion of change. Increasing demands for
services, shrinking resource bases and greater expectations for sustainable services all combine to
form a dynamic environment. Strategic business planning is proactive; it stimulates change rather than
simply reacting to it.
Strategic Business Planning employs commonsense: Strategic business planning is visionary yet
realistic; it anticipates a future that is both desirable and achievable. It provides a structure for
inspired but practical decision making and follow-through.
Strategic Business Planning is part of total quality management: It helps the manager to manage
the future, rather than be managed by it. It involves a disciplined effort to help shape and guide what
an institution becomes, what it does and why it does it. It requires broad-scale information gathering
and exploration of alternatives and an emphasis on the future implications of present decisions. It
facilitates communication and participation, accommodates divergent interests and values and fosters
orderly decision-making and successful implementation.
Q. What is the right way to conduct strategic planning?

There is no one right way for an institution to develop a strategic business plan. Different institutions will
plan in different ways all with equally successful results. It is not possible, or even desirable, to prescribe a
singular planning process for all institution to follow. Each institution therefore needs to design a planning
process that suits unique needs and abilities. We offer this approach because it has proved a successful way
of developing a strategic business plan in a participatory manner thus optimising buy-in from the
management and staff that must implement it.
If an institution has a long established tradition of planning and the staff, resources in place to do the job,
strategic business planning as a process will be a familiar activity. If however, an institution does not
have any past planning experience, putting a new process in place will require considerably more effort. In
either case, this toolkit should assist the institution needing advice about how to design or tailor a planning
process appropriate to its unique circumstances.
This emphasis on the planning process raises a related point: the process is more important than the plan.
Planning, done well, will enable financial institutions to better position themselves in preparing for future
contingencies. The plan itself is simply an outcome of the process and serves only to document the thinking
and decision-making that has occurred. For this reason, the strategic business plan is only as good as the

process that produces it. Therefore, when deciding how to spend its time, effort, and resources, it is wiser for
an institution to place greater weight on the planning process than on the planning document.
Every planning exercise is unique in its own way; the people involved change, new issues emerge while old
issues modulate, priorities shift, constituent desires and needs shift, resources rise or fall etc. While
circumstances vary, successful strategic business planning processes tend to share the following common
characteristics:
It has the full support and commitment of the Board, management and staff.
It is flexible and user friendly.
It is participatory. It involves executives, managers, supervisors and staff at all levels; it gives
each of them a piece of the action.
It is not left to planners; everyone plans.
It clearly defines responsibilities and timetables. It is carried out by those who have the
responsibility within the organisation for achieving objectives, but is coordinated by someone
who has the big picture.
It galvanises the financial institution; it produces understanding and common purpose (or
alignment) throughout the organisation.
It stays aware of the environment in which it functions. It obtains perspectives from many levels
and sources, both within and outside the institution.
It is realistic about goals, objectives, resources, and outcomes. It takes personnel issues, overall
fiscal conditions and budgetary trends into account.
It is politically and socially sensitive.
It is convincing. It develops and conveys compelling evidence for its recommendations. It uses
innovative communications strategies.
It has a method or strategy for resolving conflicts among stakeholders.
It establishes and ensures accountability for results.
It leads to resource decisions and acknowledges the reality of having to do more with less, often
requiring tradeoffs or the redirection of resources.
It is fresh and continuous not stale and static. Both the plan and planning process are reviewed
and modified regularly (usually annually).
Key Point
Strategic business planning is not a strategic business plan. Strategic business planning is more than
filling out forms or compiling a document. Much of the value of strategic business planning is realised
during the process of planning itself. The steps suggested here helps weave the different components that
make an institution.


Exercise 2.1
In groups of 4 arrange the cut pieces of paper to depict the 19 steps to show the Strategic
Business Planning Process in correct order. 2.1: Steps of Strategic Business Planning
Process
Time: 20 minutes
While discussing the results of the group exercise, help participants understand the over all process of
strategic business planning. An institution needs to identify where it aims to go, analyse where it is now and
develops a strategy to cover the path. What is important while analysing the results is to reiterate the
importance of all the steps and how they all weave into the final SBP.
Business plans for nascent MFIs, transformed MFIs and matured MFIs can be significantly different in
approach and also in terms of the resources required to prepare it time, primary and secondary data, human
resources etc.
On completion show the map/diagram of Strategic Business Planning Steps and hand out the example of a
completed Handout 2.1 Example MyMFI Strategic Business Plan together with the Handout 2.2 Example
MyMFI Measures & Targets Matrix.
Q. What is MicroSaves approach to strategic business planning?

MicroSave uses the approach outlined in the diagram below to conduct Strategic Business Planning.
Mission, values, Strategy

Development
vision at the core of KOGMA Analysis
your strategy Or Business Plan
Development
Implement and monitor

Diagnose current KOGMA analysis
strategic position
Create Measures/targets
Formulate strategy and Activities analysis
Financial Projections Create Key Objectives and

& Budgets Goals analysis

Q. What are the nineteen steps in strategic business planning?

Underlying this framework there are essential 19 steps involved:
Developing the Strategy

Mission, Values, Vision At The Core Of Your Strategy
Step 1: Define/Refine the Mission Of The Organisation
Step 2: Identify The Organisations Values
Step 3: Define the Organisations Vision
Diagnose Current Strategic Position

Step 4: Conduct Market Analysis
Step 5: Conduct Competition Analysis
Step 6: Conduct Institutional Analysis
Step 7: Conduct Sector and Macro-environment Analysis
Formulate Your Strategy

Step 8: Pull It All Together With SWOT
Step 9: Formulate Your Strategy
Developing the Financial Projections

Financial Projections And Budgets
Step 10: Develop Financial Projections
Developing the Business Plan (with KOGMA Analysis)

Create Key Objectives and Goals Analysis
Step 11: Identify Key Objectives
Step 12: Set Goals
Create Measures/Targets and Activities Analysis

Step 13: Select Measures
Step 14: Set Targets
Step 15: Define Activities
Step 16: Re-visit Your Financial Projections
Implementing the Business Plan (with KOGMA Analysis)

Implement and Monitor KOGMA Analysis
Step 17: Communicate the Plan!
Step 18: Reporting, Use & Learning
Step 19: Update Your KOGMA Analysis
Q. How should you organise the planning process?

As operational and management decisions about the strategic business planning process are needed
frequently, a group, committee or task force is designated to serve in this capacity. To make it easier, this
toolkit will call this group a strategic business planning team. The team may be an existing group, the senior
management team, some other type of management group, or a wider group specifically established for the
planning process. While recommendations and suggestions may be made about the groups composition,
senior management has the final say about the participants and group structure.

Generally, the teams size and membership is consistent with the institutions size, structure and scope of
operations. The need to have adequate representation is balanced against the need to keep the groups size
manageable.
The strategic business planning team decides the best way to carry out the planning process. The organisation
must keep in mind that strategic business planning is cyclical and its effectiveness flows from its repetitious
nature. In addition to overseeing the planning process, the team may establish necessary work groups;
develop or review the mission, goals, and objectives; define the critical issues; develop a strategy for
managing those issues; and examine the implementation costs of the plan.
Q. Who should form the strategic business planning team?

The effectiveness of the team is enhanced when members have in depth knowledge about the institution and
its operations, when they understand the various needs of the constituents, are willing to serve and
demonstrate an ability to get things done. The Managing Director/CEO and senior management staff nearly
always serve on the planning team. In addition, the following staff members may add valuable perspectives
to the planning process:
Programme managers, supervisors and field personnel bring knowledge and insight about the
field and their constituents. Generally, these are also the people responsible for making the ideas
contained in the plan operational.
Financial or budget managers provide an understanding of the institutions financing and can
offer analysis of the fiscal impact of alternative approaches. They are the ones, working with
programme staff, who will use the plan to drive financial projections, budget requests and
manage decisions about resource allocations.
Branch or unit managers can assist in determining the impact of the plan on any branches that
the financial institution may have. They also should be using the plan as a guide for capital
outplay and other planning.
Human resource managers add an understanding of how the plan interfaces with the
institutions current workforce and the institutions current human resources policies. Further,
their specific expertise helps identify additional staffing needs required for implementation, new
or continued training needs to equip current employees to perform successfully, and any
necessary changes in organisational structure to support the plan. Ideally, they should be
completely aware of how the plan guides overall operations and filters down to the individual
performance assessment process.
Information system managers must understand the institutions business activities and its
preferred direction for these activities in order to ascertain how information systems can best
support the institutions work. The plan is also useful in setting the future directions of the
institutions information systems.
Planning coordinator is generally responsible for developing and implementing a workable
planning process. This person procures necessary resources to keep the process moving within
its established time table.(This need not be a standing position; however, it is helpful for
someone in the institution to be designated to fill this role)
Public information personnel are responsible for developing strategies for communicating the
plan internally and externally. Creating a shared sense of purpose is critical. The institution must
make the fullest use of this staff to disseminate ongoing information about planning and
performance.
Quality coordinator or the person in charge of any quality efforts that the institution is
undertaking. This person will see that the quality efforts are integrated fully and consistently
with the institutions strategic business planning process.

Final checklist to review the Strategic Business Planning Team:

The strategic business planning team serves as the oversight and coordinating body for the planning process.
The specific duties and responsibilities assigned to the team are dependent upon the unique needs and desires
of the institution.
Is the planning team heterogeneous?
Do the planning team members represent diverse areas and interests?
Do they possess a variety of strengths, knowledge and skills?
Are they knowledgeable about the institution and its operations?
Are they knowledgeable about the primary customers or clients?
Are they influential and persuasive with their constituents?
Do they have access to and an interest in the long-term direction of the institution?
Do they have the time and energy to commit to the strategic business planning process?
Can and will each member make a significant contribution to the strategic business planning
effort?

Session 3: Mission, Values, Vision at the Core of Your

Strategy
Session Objectives:
Implement with Steps 1-3 of the Strategic Planning Process
Discuss and define/redefine Mission, Vision, Values of the organisation
Aligning the Mission, Vision and Values of the organisation
Time: 2 Hours 25 Minutes
Exercise in institutional groups
Materials: PowerPoint presentation entitled Session Three customised by the

trainer with the course information. This session consists of approximately
37 slides.
Exercises:
3.1: Your Organisational Mission (20)
3.2: Your Organisational Values (20)
3.3 Your Organisational Vision (30)
Overview: The process of developing the SBP is initiated. It introduces participants to mission,
vision, values and through exercises helps define them for their own organisation.
1. What is Mission?
Time: 30 + 20 minutes for exercise
Slides: 15
Explain what a mission is through examples and by discussing the importance of mission. Mission defines
the reason for existence of an institution.
2. What are the organisations values? Some examples of values followed by different institutions.
Slides: 13
Values are timeless principles and should reflect at all levels in all spheres. Share examples of values from
different institutions with the participants.
3. What is Vision? Some examples of Vision statements.

Slides: 9
Vision is a Big Audacious Goal, which can be qualitative or quantitative. Trainer works with the participants
to develop a Vision which is concise, consistent, verifiable and feasible.
The Mission, Values and Vision of an institution are interlinked which should be evident in the final
comprehensive document. The strategy should be in line with the above.

A good point to start off the development of a SBP is by deciding the term for which the plan is being made.
Institutions are used to preparing short term operational plans and thus it becomes a challenge to think
strategically for the long term. An SBP should ideally be for 10 15 years for emerging institutions. Start
ups are found to be comfortable with a 5 year plan as the assumptions do not have historical trend to support
it.
Mission, Values and Vision
MISSION - why we exist
VALUES - guiding principles
VISION what we want to be?
STRATEGY our game plan
Q. How do you define your organisational mission?

Most microfinance institutions have a Mission Statement. Indeed the microfinance industry itself is on a
mission to extend and deepen the access to financial services to the poor.
The Mission is the reason for an institutions existence. It clearly and succinctly identifies what the
organisation does, why it does it, and for whom. The Mission reminds everyone the public, government
entities and staff of the unique purposes promoted and served by the organisation. The Mission statement
provides the foundation for the rest of the strategic business plan. The financial institutions goals,
objectives, and strategies must be consonant with its mission statement.
The Mission:
Is about peoples ideological motivation, not products or clients;
Should lead the organisation for decades; and
It is almost impossible to realise and thus stimulates the organisations progress and change.
The Mission is the purpose of the organisation. It is like a star that is inspiring and leading the organisation.
The Mission must be clearly and regularly communicated ... and management should ensure that the Mission
is clearly understood and internalised by all staff.
Mission Statement
We mobilise resources and offer credit to maximise value
and economically empower microfinance clients and other
stakeholders by offering customer-focused, quality financial
services.

Most MFIs have Mission statements. While this step does not necessarily suggest that the institution spend
time rewriting its Mission, it does offer the opportunity to review the statement and determine whether
revisions are necessary. Changes in the external and internal organisational environment do influence its
identity and direction. Consequently, Mission statements will need periodic updating to ensure that they are
still meaningful and easily understood by all constituents. This exercise is often done using 5 Whys .
Dis-assemble the Mission statement into separate descriptive statements (there might as well be just one).
Ask Why is it important? five times applying the question to each consecutive answer thus drilling deep
down into the ideas/philosophy underlying the Mission statement.
Start up MFIs need to define their mission statement. If it is a social development organisation now initiating
microfinance activities, a round of discussion to clarify the split of activities between the existing and new
working units is a good start. This is because the idea is often at a concept level and when it is to be
implemented, staff who have been involved in both social and financial intermediation, find it difficult to
segregate the two, or bring in a balance between the two approaches.
A Mission statement can be framed by asking the following questions, or eventually, be able to answer the
following questions with clarity and surety:
Who are we? What makes us different and why it will endure?
What basic social or political needs or problems do we exist to meet? Our purpose of existing?
How do we recognise, anticipate and respond to these problems or needs? (This will help us to look
outside our institution and to consider wider environment. It will lighten our external orientation).
How should we respond to our key respondents? (Consider various stakeholders and their needs. How
you propose to respond to these needs?)
What is our guiding philosophy or culture? (When you have clarified your Mission Values, Vision and
Strategy will follow)
What makes us distinctive or unique? What distinguishes us in the eyes of different stakeholders?
As a final review, an effective Mission statement should meet the following criteria:
It is clear and concise
It is understood by a wide audience of the institutions stakeholders
It addresses the institutions mandates
It identifies the basic needs and distinct problems that the institution was designed to manage
It is realistic
It defines whom the institution serves
It serves as the foundation for the institutions direction
It acknowledges the expectations of the institutions primary stakeholders
The Mission that is developed serves as an umbrella for all of the institutions sub-programmes and services.
Individual programmes or units may develop their own Mission statements. However, all individual Mission
statements must be compatible and congruent with the institutions overall Mission.

Exercise 3.1
In organisational groups:
Dis-assemble the existing mission statement into separate descriptive
statements.
Use 5 Whys technique to identify your purpose
How your perception of the mission changed?
Do you feel the missions statement could/should be modified?
Agree on the formulation
Time: 20 minutes
For start up MFIs, the mission statement has to be framed. For MFIs which are being started off by existing
organisations, as a mechanism to separate the social and financial interventions, the mission statement of the
new entity should be aligned with the mission statement of the existing organisation.
Q. How do you identify your organisational values?

Values are timeless principles that guide an organisation and make an open proclamation about how the
organisation expects everybody to behave. These Values can be basis of competitive advantage but this is not
the reason for following them.
Values are indifferent to market trends but rather represent the deeply held beliefs within an organisation that
are demonstrated through the day-to-day behaviours of employees that share the Values. Indeed staff are
often attracted to work for the organisation because of it Mission and Values.
As part of recent strategic planning process, Equity Bank collectively defined its core Values. These Values
are the PICTURE that Equity wants to present:
Professionalism,
Integrity,
Creativity and innovation,
Teamwork,
Unity of purpose,
Respect and dedication to customer care, and
Effective corporate governance.
Partner MFI, Bosnia & Herzegovinas Values

Entrepreneur spirit: We support creativity, pro-activity and our people work with enthusiasm.
Action oriented: Without delay and stagnation we start and finish all jobs.
Equal relation toward all people without prejudices: We respect the rights of all individuals and we
are not limited by any prejudices.
Simplicity: We believe that simple solutions are the best solutions.
Reliability: Reliability is the basic characteristic of our work
Transparency: Our work is transparent inside of organisation as well as toward public which is
surrounding us.
Dedication: Partner employees are dedicated to the work and loyal to the company.
Responsibility: We are responsible toward clients, company, employees and environment.
Constant striving for progress: By constant learning we make progress and become stronger.
Team work: We believe that only as a team we can achieve common goals.
Persistence: We give our best and we never give up

As can be seen from the two examples above, there is no generic set of Values that is right for a
microfinance institution, nor a specific way of expressing those Values. The form does not matter
substance and living the Values does!!
Communication, Respect and Integrity .... They sound pretty good? Be careful: these are of Enron! It was
not alone 55% of Fortune 100 companies use integrity as a Value.
The issue is what are your real (not just stated) Values. Research shows that employees will immediately
think about a leader as hypocrite if his actions are not consistent with publicly stated Values. It is important
that staff develops their own meaning of Values so that there is no clash between what leaders meant and
what it meant in reality
Values should be aggressively authentic. Walk into your office or branch. Look around, listen and observe.
How what you see relates to the stated Values of your organisation? Do you feel the Values are reflecting the
reality?
Very few managers use this powerful tool in their management but management by shared Values helps
you to attract staff that shares the same belief, principles and wants to follow you. Shared Values help you to
work on every day basis since not everything is possible to standardise and provide a procedure for.
If you want to identify your Values just to put them on paper on the shelf or wall dont waste your time.
Exercise 3.2
In organisational groups discuss:
1. Who in the institution should define organisational values?
2. Get back to the flipchart and review/draft the values:
What are the ideal values? - Important from the point of view of mission and well performing
organisation that you want to be
Are there really core values? - imagine that the microfinance sector changes in 5 years and it
doesnt support the values at all, would the organsation still stick to these values?
Time: 20 minutes
Q. How do you define your organisational vision?

So far weve discussed the Mission and Values of the organisations that constitute their ideologies. Lets
move on the Vision that brings in a dynamic dimension. Everybody knows Martin Luther King speech
delivered on the steps of the Lincoln Memorial on August 28, 1963. I have a dream A vision that
inspires and galvanises people into action.
The Vision is the inspirational BAG the Big Audacious Goal that helps us express our envisioned future.
BAGs usually are set for around 10 years beyond their current capacities and should be:
Concise - should immediately grab your attention
Appealing to ALL stakeholders
Consistent with Mission and Values
Verifiable - it is written for a certain period of time (in contrast to Mission and Values)
Feasible but not certain (50-70% chances to succeed and demanding high performance from all to do so)
Inspirational - should not only guide but also arouse the collective passion of the employees

The Vision should describe the situation or condition of the organisation in 10 years time after it has
achieved its big audacious goal. Senior management should describe their envisioned future and promote it
widely across the organisation.
A Vision statement is a clear and compelling picture of the financial institutions preferred future. It provides
a description of the ideal future state made concrete. It is where the institution is going and where it wants to
be. This preferred future must be sufficiently desirable and challenging so that it motivates and inspires all
institution staff and influences their decision-making. Yet at the same time, the Vision of the institutions
future must be realistic and credible. When integrated with the institutions Mission statement and Values,
the Vision statement serves as the framework for the institutions planning process.
Vision translates mission into truly meaningful intended results and guides the allocation of time, energy
and resources. In my experience, it is only through a compelling vision that a deep sense of purpose comes
alive Peter Senge.
These three example BAGs show how they can be quantitative or qualitative either so long as they are
verifiable:
Microcredit Summit
Ensure that 100 million of the world's poorest families, especially the women of those families, are
receiving credit for self-employment and other financial and business services by the year 2005.
Southern Africa Microfinance Capacity Building Facility

Our vision is to see in place, effective, profitable and sustainable Microfinance Institutions which
become viable vehicles for the eradication of poverty and the achievement of economic and human
development within the Southern African Region.
Equity Bank
To be the preferred microfinance service provider, contributing to the economic prosperity of Africa.
Think about yourself and people in your organisation. Why do you come to work? If this is a difficult
question to answer (which would be really bad, maybe you should change your job), think about things that
you like to do, that you are enthusiastic about. There is something more in it than just financial rewards.
People need challenge, appreciation, and the feeling that their efforts are important. These are good
instruments, if authentic, to make your people enthusiastic and inspired.
The study of long-term best performing organisations summarise in the excellent book built to last, showed
that being visionary is an important factor in an organisation long term success. Unfortunately, these are
very rarely used. In a typical company you will find most often staff who usually came to the company with
energy and enthusiasm and ended up being one of the following categories (think about your friends or
yourself, have you noticed it):
Contractors = obedient and indifferent. For good pay and working conditions they sell your firm their 8
or 9 hours and capabilities. If they are offered better conditions they will leave you for better job.
Loyalists = bounded to the firm by long term employment, they like what they do, they are proud of their
position, they get good conditions and change would mean to high psychological costs and uncertainty
that they tolerate badly.
Guardians= they are with the firm for good. Usually, they are the ones that established the organisation
or they are emotionally bounded to the leader or they have internalised the Mission and Values of the
institution.
Usually there are very few guardians, a little bit more of loyalists, the majority are contractors.

Aligning The Mission, Values and Vision
The Mission, Values and Vision:

Should inspire and be shared by people
Should become a mantra of every employee
Should convince contractors and loyalists that your Mission and Vision makes sense and can
become also their dream and aspiration
The whole firm and management should consistently move towards realisation of the Vision and be
reliable in their belief and focus on the Mission to make it a powerful tool.
Caution: Being consistent with the Mission, Values and Vision is a must. For example, in 1988 GM
launched its big campaign GM staff as most important asset. Three years later they announced the closure
of 21 factories and firing 18% of staff.
The Mission, Values and Vision cannot be meaningless and must be practiced everyday within the
organisation only if Mission, Values and Vision are shared by the employees can they have a strategic role.
Exercise 3.3
It is 10 years later, you take a well-know economic magazine into your hands and
your firm is on the cover
What is on the cover? (Develop your BAGs)
What is the article about? (Describe your envisioned future)
Remember about characteristics of an effective BAG and description of envisioned future
Time: 30 minutes

Session 4: Diagnose Current Strategic Position

Session Objectives:
Diagnose the current strategic position
To conduct market analysis, competition analysis, institutional analysis and sectoral analysis
Time:
4 Hours 10 Minutes
PowerPoint presentation entitled Session Four This session consists of

50 slides
Materials:
Handouts:
4.1 Nine Brand Differentiators
4.2 Alternative Marketing Strategies
4.3 Competition Analysis Matrix
4.4 PEST Analysis Matrix
Exercises:
4.1 Strategic Segments (20)
4.2 Identify Your Competitor (20) (Optional)
4.3 Competitive Position Analysis (20)
4.4 Competitive Strategies (20)
4.5 Identify Potential Collaborators (20)
4.6 Identify Your Strengths and Weaknesses (30)
4.7 PEST Analysis (20)
Overview: It is important to undertake a market, competition, product and institutional analysis. Explain
briefly the components of each analysis and how it fits into the larger strategic frame using the simple
perceptual map. This is done through detailed exercises on each, in institutional groups.
1. How to conduct a market analysis, to develop products according to needs of clients from
different market segments?
Time: 30 minutes
Slides: 18
Use the simple perceptual map to first identify where the MFI presently positions itself in its existing market.
Meeting client needs is essential for the MFI. Even though clients may have largely similar characteristics,
the financial needs are diverse which is important to be recognised and addressed. This requires the existing
and potential market to be analysed, segmented and then addressed by different financial products and
services.
2. How to conduct competition analysis?

Time: 30 minutes
Slides: 17
MFIs often ignore competitors in the area until client drop out goes up significantly. Discuss the information
collected using the handout given earlier and assesses the competitive players and the areas/issues of

competition. If the information has not been collected earlier, insist on completion or updation of the
competition matrix. Use the simple perceptual map to see if the current position will continue to be the
envisioned position for the future, or the organisation might consider a shift.
3. How to conduct an institutional analysis?

Time: 20 minutes
Slides: 7
Help undertake an internal review of the institution to assess the strengths and weaknesses of the institution.
This can be done through different exercises or an open discussion. This is a key component on which the
future strategy of the institution is based.
4. How to conduct a sectoral analysis through PEST analysis?

Time: 20 minutes
Slides: 8
The external dynamic operating environment is equally important as external changes are often beyond
control and tend to effect operations with a huge impact. The opportunities and threats of the SWOT analysis
covers this aspect.
MicroSave uses the framework outlined in the diagram below to diagnose an organisations current strategic
position and develop its core Strategy:
Who are my strategic clients?

Where to serve? Choice of market and scope
What product to deliver to satisfy my
strategic clients?
Market analysis
Who are my competitors?

How to respond to competition?
Strategy towards competition
Competitor analysis
What are the strengths of my

organisation? Competitive advantage
Which strengths are unique and hard to
copy? development
Institutional analysis
While making strategic choices access the trends in the sector and macro-environment, which
can influence our activity Opportunities and Threats
Sector and Macro-environment Analysis

Q. What is a simple perceptual map?
Review the simple perceptual map and remind participants

to focus on one or two positioning issues: stand for Price
something, clearly and convincingly.
See Handout 4.1 Nine Brand Differentiators z

z
z z
z z
z z z
Quality Convenient, service-

products oriented environment
Reminder: As tempting as it may be to pursue a strategy that aims to provide benefits
in all three areas price, quality and customer service, avoid positioning yourself in the
middle of the value triangle. Experience in other industries has shown that companies
can succeed by concentrating on being the best in one particular area, or at times, by
being very good in two out of the three areas, but they fail when they end up in the
middle, trying to deliver a little bit of everything to everybody and delivering nothing
all that special to anyone.
Q. How do you conduct market analysis?

In this step we examine:
Who are my organisations strategic clients?
Where should my organisation offer products/services to those clients?
What product should my organisation deliver to satisfy my strategic clients?
Analysing the needs of client and potential clients and developing a deep understanding of these needs is the
key and prerequisite for any strategic analysis and actions. Understanding the client is a necessary
background for decisions in both the selection of the markets to serve (who/where) and product (what) areas
and these are our strategic choices.
Feeling the market comes with experience but it still should be confirmed by market research and client
analysis.
What are the Clients really Buying?

When a man (or woman) buys a drill, he/she is not buying the drill because he/she loves the engineering or
mechanics in the drill but rather because he/she needs to make a hole. He/she is buying a hole! Similarly,
your clients do not buy your product nor service for its own sake - your product satisfies clients needs
and these needs evolve over time. Your product should address a need strong enough to drive your strategic
client to buy it it is a great challenge especially in competitive market.
Q. What information do you need to gather?

There is an endless amount of information that you could gather about your market, but what you basically
need to know is the following:
Whose needs are you supposed to be meeting? Which market or kinds of markets do your corporate
vision, mission, and strategy direct you to serve? Whose needs are you actually meeting? What do you
really sell? What combination of needs and aspirations do you address?
Who currently buys your product(s)? In which markets are you operating? Which markets have been
particularly successful for you?
Are there other markets you would like to serve? Are there other customers you would be capable of
serving?
What are the needs, wants, preferences, values and priorities of the markets you are currently serving or
would like to serve?
It is important to note that clients needs satisfied by the same product change over time as their
demographics (family status, size etc.), level of income, life style, values, fashion, etc. change. It is important
to identify these trends because they change your market and provide opportunities to enter new ones.
Patterns of clients needs from different sub-cultures are very often different.
Consider these evolving needs while making strategic decisions regarding the market segments you currently
and potentially want to serve.
Q. What is market segmentation?

Market segmentation is the process of dividing a market into groups of customers (i.e., segments) that have
somewhat different needs or preferences. Your financial institution can divide its market in numerous ways,
for example, according to:
Demographic characteristics (e.g. gender, age, income, household size, education, illiteracy)
Cultural variables (e.g. religion, ethnicity, language spoken)
Geographic variables (e.g. location, population density)
Psychographic variables (e.g. personality, lifestyle, likes and dislikes, values)
Type of business or economic sector of employment (e.g. farmer, small trader, tea, coffee)
User status (e.g. ex-user, potential user, first-time user, regular user)
Usage frequency (e.g. heavy, medium, light or non-users)
Attitude toward a product or institution (e.g. enthusiastic, positive, indifferent, negative, hostile)
Financial service needs (e.g. savings, money transfer, size of loan required, timing of loan required, loan
purpose)
Benefit sought (e.g. low price, high quality, excellent service)
Clearly, any market can be segmented in a variety of different ways, but not all of these options will be
equally relevant or useful to your institution. The challenge is to identify which kind of segmentation makes
most sense for you. Along what dimensions do your customers needs vary?
Q. Why segment your market?

Historically, financial institutions have operated under the implicit
assumption that microfinance clients are essentially homogenous.
As a result, a one product fits all approach dominates the
microfinance industry in many countries. In reality, however, the
financial service needs of poor people are as diverse and complex as
those of richer people and market segmentation can help you to
better understand that diversity and complexity. The segmentation
process can enable you to:
Deepen your understanding of current customers. What kind

of person currently uses your services? What are the different
groups of customers that you serve? How do their preferences differ? Do regular users of a particular
product have certain characteristics in common? What about loyal customers or borrowers with poor
repayment records, do they have certain characteristics in common? Which of your current customers
would you like more of, and how can you reach this type of customer?

Identify opportunities for future business development. Which market segments are you not
currently serving? Why are you not serving them? What does this market segment look for in a financial
service? Is there something you could do to make your existing products more attractive to them? Is
there a new product you could design that would meet their needs profitably?
Increase your product strategy options. If you do not segment your market, you will limit your options
significantly in terms of product development and differentiation, as well as sales and promotion.
Segmentation gives you the option of targeting product development and delivery to more closely meet
the needs of particular customer groups.
Price products more appropriately. You can make more delicate trade-offs between price, quality and
service for certain segments, which will increase the overall product value for customers.
Make more efficient use of your resources. No financial institution can be everything to everyone. By
understanding the various types of customers that you could serve, and carefully selecting the ones you
are in the best position to serve given your strengths and capabilities, you can more sharply focus your
energy and resources on developing products and services that have the greatest impact. By
concentrating on those segments whose needs you can meet best, you can deliver more value to a
particular group of clients than you would be able to deliver to a mass market.
Achieve more effective outreach. Market segmentation can assist you in reaching a specific outreach
objective, for example, serving clients with a particular level of poverty. By identifying and focusing on
the segment (or perhaps, sub-segments) that you most want to serve, you can better understand how to
serve, and concentrate your resources on meeting the needs of, customers in that segment.
Q. How to segment your market?

You can identify a market segment in one of two ways: either survey the marketplace or survey your
customers. Again, it all boils down to market research. You can conduct the survey yourself or hire a
company or consultant to do it for you. You can also set up internal systems to do it automatically, for
example, by collecting information that you believe will be useful for segmentation from loan application
and account opening forms, and by using your management information system to help you organise and
process that information. You will no doubt need to examine a number of segmentation variables in order to
select the ones that best explain customer behaviour in the particular product or market context being
considered.

Box 1: Data Collection Using Account Opening Forms

AMC (a microfinance institution) collects a variety of data on its account opening form using a very simple
tick-the-box survey instrument:
Demographic profile Product usage patterns

Marital status Which products does the customer use in AMC
Age Which products does the customer use in other
Education financial service organisations
Income For what do they use their current financial services
Employment
Where the client lives
What languages they speak Satisfaction with AMC
What is the clients level of education Efficiency
What newspapers or magazines do they read Politeness
Do they have TV or radio Ability to communicate clearly
What they do for entertainment etc. Value for money
MicroSave
As you process the information and experiment with different customer groupings, check to make sure that
the groups under consideration have the potential to be effective market segments. An effective market
segment should be:
Identifiable. Can you describe the customers in the segment with several characteristics in common?
Measurable. Can the size, purchasing power and characteristics of the segment be measured?
Accessible. Can you effectively reach and serve the segment?
Substantial. Is the segment large and profitable enough to serve?
Differentiable. Is there something unique about the segments response to different marketing-mix
elements that distinguishes it from other segments?
Actionable. Can effective programmes be formulated to attract and serve the segment?
Q. What do you do with market segments once you have them?

Once you have identified various market segments as having the potential to
be effective, target those segments that offer your financial institution the
greatest opportunity. Consider your strengths in relation to the needs of
potential customers, your competition, and the overall attractiveness of the
market environment. No matter what your reason for wanting to target a
particular market segment, you should examine your abilities and resources
and choose to focus on the segments whose needs you can meet most
effectively. Check your institutions core competencies against the
requirements of each segment, and select the ones you can best serve.
Once you have selected a target market or markets, research those market segments in detail and begin
planning how you will meet their needs. Be prepared to conduct ongoing research, as the characteristics and
needs of each market segment will change over time. The segment may grow or shrink. Its needs,
expectations, priorities and preferences will change as the market changes, as competition changes, as
technology advances, as the population ages, as the socio-economic and political environment changes, etc.
Use todays market segments to shape your institutions value today, but continue to research your segments
to be able to effectively shape your value in the future. See Handout 4.2 Alternative Marketing Strategies

Exercise 4.1
Define strategic segments served by your organisation:
What are the characteristics of the clients?
What set of needs do you satisfy?
What products do you serve to them?
Are you
Serving few needs of several segments?
Serving broad needs of one-two segments?
Serving broad needs of many clients in narrow market?
What value do you offer to them?
Are there any un-served segments or needs on your market?
Time: 20 minutes
Q. How to conduct competition analysis and identify real competitors?

There are three levels of competition:
1. Direct competition: Offering same products on the same market for example another MFI; a
Credit Union; a bank that has come down market; and of course the informal sector so for example
a money lender or an ASCA2 or chit fund.
2. Substitute competition: offering different products satisfying same or similar needs for example
saving money instead of taking a loan.
3. Potential competition: which can become direct or substitute competition for example
commercial banks targeting micro-enterprises; suppliers starting to extend credit to micro-
businesses or supermarkets starting offering financial services e.g. payment orders
Not every player in the sector is a competitor many will only offer products/services to market segments
that your institution has chosen not to serve. Real competitors satisfy similar sets of needs and address
similar clients these are the institutions that you need to assess, understand and decide how to respond to.
However, your competitors will also:

Think how to win the market;
Seek to fortify their segments;
Expand into new market segments or broaden the client needs they serve; and
Acquire new competencies or enter into partnerships to deliver enhanced products/services
Critical Success Factors are helpful to recognise competitors you can use it as criteria in strategic groups
map (see below). Critical Success Factors are factors which are important for success in your market for
example:
Interest rates
Loan size
2
ASCA = Accumulating Savings and Credit Association
Grace period
Access to capital
Client orientation Access to capital My MFI
Strong brand
High
Take a few pairs of non-correlated
factors/features which differentiate
players in the sector (e.g. interest
rate access to capital, quality of Bank F
service number of served MFIA
segments, number of products
social orientation ).
Place different players on the map MFIB
according to chosen criteria.
Size of a bubble represents each
players market share.
Strategic groups map helps us to Interest
clarify who are our competitors
Low High
these are players who are in similar
position on different strategy maps.
MFIA is in the same strategic group as ours (MyMFI) on interest and access to capital. If this
pattern recurs when we create different pair maps, we will need to examine whether MFIA is
following a similar strategy to ours.
For your institutions main or flagship product(s) conduct a Competition Analysis Matrix to examine where
you have competitive:
Advantages
Disadvantages
Exercise 4.2
Brainstorm the list of critical success factors on your market
Brainstorm the list of all the market players
Create strategic group maps for your organisation
Define criteria
Choose 3-4 non-correlated pairs
Place sector players on the maps who are your competitors?
Identify who are your key current competitors
Time: 20 minutes

Exercise 4.3
Divide into organisational groups
From your knowledge of your MFIs main product and its chief competitors use the
Exercise 4.3: Competitive Position Analysis grid to assess the areas which:
Should be targeted for improvement and
Provide you with specific competences unique to our MFI, difficult to copy or replicate and
seen as a source of sustainable competitive advantage.
Time: 20 minutes
Q. How do you analyse competition?

(See Product Competition Analysis Matrix below Note this should be maintained on a routine basis by the
financial institution. See Handout 4.3 Competition Analysis Matrix)
Remembering that the competition also includes the informal sector (indeed the informal sector is most
MFIs major competition) ask yourself the following questions:
1. What is the competition currently charging for similar products? What terms and characteristics of
the competitors products, that seem to be successful, are appropriate for our market?
2. What are the systems being used by the competitors to deliver the product?
3. What is the products position in the market? What market segment is the product aimed at?
4. How is the product marketed to the public?
5. How is the product perceived by the public? (What do they like/dislike about it?)
6. How will the competition react to your institutions introduction of a new product? (e.g. Will they
react to introduced new products? Will they adjust the price and terms of existing products? Will
they ignore you?)
7. What products do you expect to see your competition introducing in the near future?
This then allows you to conduct competitive position analysis to assess the areas which:
Should be targeted for improvement and
Provide you with specific competences unique to our institution, difficult to copy or replicate and
seen as a source of sustainable competitive advantage.

Competition Analysis Matrix - Group Loan Products - MFIs in Kampala

Uganda Women's Finance
Trust FINCA-Uganda Uganda Micro-finance Union Pride Uganda Faulu
Product (Design)
Purposes (agric, Agriculture, Poultry, Personal Business, Personal Business

personal business, Business, Trade/Commerce Agriculture, Poultry, Business, Trade/Commerce, Transport, Personal Business, Trade/Commerce, Trade/Commerce, School
any) and Services Trade/Commerce Social services, Agric - poultry . Transport, Agric - poultry . fees .
A Solidarity group of 40
broken down into groups of
5's. Compulsory savings of
Ush.2,000 per week. Physical
presence of a member at a
Smaller Group Loans (Small week's meeting. 25% of the
Enterprise Programme): Group Small loans need no formal Group guarantee system 5-9 loan value as compulsory
guarantee scheme of 5 members collateral. i.e. group guarantee members each co-guaranteeing the savings. Growth Business
of which 60% are women. system of (5-10) people. other. A member saves Ush.2,200 Loan. GBL is a small group
Guarantor, assets/ chattel Compulsory savings of 20% of per week as compulsory savings into of (5-7) people, graduation
Mortgage e.g. deep freezers, the loan as security on the the "Loan Insurance Fund" (L.I.F), from the big group and each
Groups: 20% of the loan stock, fridges, TVs, cookers account. For larger loans chattel 25% of loan value as savings on the guaranteeing the other. Faulu
amount as compulsory valued on sight. Savings of 20% of mortgage e.g. deep freezers, account which acts as security. requires compulsory savings
savings/security. Small loan amount as security.For the stock, fridges, other household Physical presence of a member at a of 25% of the loan value on
groups of 5-10 members with village banking programme, the items: TVs, cookers etc.(Small week's meeting. Chattel mortgage e.g the account. Security like land
80% of the group women groups must be between 20 to 30 loans range between deep freezers, stock, fridges, TVs titles,vehicle log books
executives inclusive.The members saving 20% of the loan Ush.100,000 to Ush.400,000; sofa sets etc. (Chattel mortgages are comparable to the loan must
small groups form a bigger amount on the account plus giving any amounts greater than needed for loans below be pledged to the group.
Collateral / group of about 30 members chattel mortgage like stock, Ush.400,000 qualifies to be a Ush.1,100,000 above which one Chattel mortgage like
Guarantees (Village Bank). cows,sofa sets etc. large loan under this category) qualifies for an individual loan). furniture, stock, TVs, etc.
For the Small Enterprise

Progamme loan: 8-32 weeks. 4months for a beginner.
Village Banking Loan: 16-32 weeks (Flexible) from 4,6,9,12
Duration of loan 4-9 months. depending on group credit rating. 6-12 months. 25-50 weeks months.
Repayment
Periodicity Weekly and monthly for group
(weekly, monthly) Weekly. Weekly. loans. Weekly. Weekly and bi-weekly
Minimum is 2 weeks and
Grace Period None. None. None None. maximum 4
Group/ Individual Group. Group Group Group. Group
Group loan qualifies one to Group Loans. Ush.50,000 -
graduate to higher amounts Ush.300,000 for a beginner
of Ush.250,000 then to Small Enterprise loan. Minimum and Maximum Ush.5million
Loan size Amount Ush.500,000. Ush.100,000 Ush.100,000 to Ush.400,000 Minimum Ush.150,000. for Growth Business Loan.
Attendance of a one hour
sensitization meeting per week (on a
day convinient to the group
members). Individuals with small
business within 5-7 Km radius from
the nearest branch. Save Ush 13,200 Attending of sensitization
Village Bank part of a group of Resident within 25Kms from the for 6 weeks, keep 25% of loan value meeting for groups,be in a
Access around thirty saving.Or a Small nearest UMU office. Registration in compulsory savings as security on group of five or more.One
Requirements Groups A group should have Enterprise Programme (SEP) loan fee of Ush.10,000 per person in the account, deposit 10% of loan as a must have been visited by a
(registered business, by-laws ( constitution ) with 5 of five. Attend weekly meetings. the group of five members. Loan Insurance Fund (L.I.F). Faulu loan officer. Any
attendance of members of which 80% are Resident within 20Km from nearest Save at least 20% of loan value Existence of a physical business. Fill Ugandan who is 18 yrs and
sensitisation women and having operated FINCA Offices. Must be in groups in complusory saving account. in a loan application form, be visted above, owned a business for
meetings etc, cash an income generating activity of fives with 60% women. Must Provide 2 passport photographs by one member of the Market at least 6 months. An
flow, business plan, for at least 6 months.The have operated an income and fill a loan application form. Enterprise Group (MEC). Must answer allowance for a new business
tax clearance group must be registered at generating activity for 4months. Attend one monthly meeting at questions relating to the loan during a in each group of five as long
certificate etc) least at the Local council. Groups must have own by-laws. the groups convinient time. MEC meeting. as members guarantee.
Price
2% per month for SEP loan 3% 3% p.m for solidarity and
per month for group village 2.5% p.m for growth business
Interest Rate 2.5% per month. banking loan. 3-4% per month 30%per year or 2.5% per month loan.
Method of changing
(flat, declining
balance) Flat. Flat. Declining balance Flat Flat
Small Enterprise Programme loan:

Ush.5,000 loan application Ush.50,000 administration fee -
form, plus Ush.500 per decreases with bigger groups. N/A 3% of loan value as application Ush.7,000 registration fee and
Application fees month as ledger fee. for Village Bank loan. fee. Ush.3,000 registration fee loan orientation training
Appraisal Fees None. None. None None None

Competition Analysis Matrix - Group Loan Products - MFIs in Kampala (cont.)

Commission fee 2%of amount approved 2% of loan value. 2%of loan value 2% of loan value 1% for all group loans
Expense/cost is met by the SEP loan client pays for costs of Expense born by the Expenses/transport born by the
Monitoring fees borrower. visit. borrower/client borrower. None
for loans exceeding 6 months
and 1.25% for loans of 6
months. In case of an
accidental death of a loanee,
1% insurance on value the American Insurance
approved in case of 1% insurance on approved Group (AIG) pays
accidental death value for a loan of 6 months & Ush.1,000,000 to the spouse
Ush.1,200,000 is paid to the 1% insurance on value approved. 2% for a loan of 12 months. In 1% insurance on approved value for a or family plus settling
bereaved family plus settling In case of accidental death case of accidental death, loan of 6 months and 1.5% for a loan outstanding loan balances to
outstanding loan balance, Ush.1,200,000 is paid to the Ush.1,200,000 is paid to the of 12 months. In case of accidental Faulu. Faulu also discharges
with permanent disability AIG bereaved family plus settling bereaved family plus settling death, Ush.1,200,000 is paid to the the collateral were applicable.
pays off outstanding loan outstanding loan balance, with outstanding loan balance. In bereaved family plus settling In case of a natural death of a
balance to UWFT. In the permanent disability AIG pays off case of permanent disability AIG outstanding loan balance. In case of loanee,AIG pays
event of the accidental death outstanding loan balance to pays outstanding loan balance permanent disability AIG pays Uhs.300,000. In case of an
of a husband AIG pays FINCA. In the event of the to UMU. In the event of the outstanding loan balance to PRIDE. In accident and a loanee loses a
Ush.600,000 and accidental death of a husband AIG accidental death of a husband the event of the accidental death of a spouse AIG pays
Ush.300,000 upon death of pays Ush.600,000 and AIG pays Ush.600,000 and husband AIG pays Ush.600,000 and Ush.500,000. In case of an
Insurance/ Other any of the four registered Ush.300,000 upon death of any of Ush.300,000 upon death of any Ush.300,000 upon death of any of the accidental death of any of the
fees children. the four registered children. of the four registered children. four registered children. two registered children AIG
25% of loan value, 10% of loan as
(L.I.F) and every new member must Ush.2,000 per week (optional)
20% of the loan amount Ush.2,500 per week and 20% of 20%of loan value. Initial save Ush.2,200 per week for a period 25% of loan value for
Compulsory Savings approved loan value. savings of Ush.10,000 of 6 weeks. Business Growth Loan.
Zero tolerance, group
members suffer. Deduction
made on each member's Zero tolerance -Group members A higher interest rate on Group pays up i.e. Pride deducts the
saving until loan is cleared if suffer. Deduction made on each arrears and a red mark default amount from each member in Group pays or immediate
one member fails to pay a member's saving until loan is indicating securing a small a group of 5. If this still fails to clear tapping of group's compulsory
Late Payment loan. A fee of Ush.10,000 per cleared if one member fails to subsequent loan. Ush.5,000 per the loan it then deducts from each savings with the group's
Management. day. pay.. day. member in a group of 50. consent.
A refund of the 10% L.I.F with a
bonus of 2% if the loan is retired.
(This depends on the perfomance of
A 50% increase in subsequent loan the customer i.e only good payers as
amounts depending on credit rating determined by the loan officer - other Interest computed for the
Pre Payment Access to bigger and follow - which determines the loan size wise clients mustleave Pride to get a period funds are held (time is
Incentives on loan faster. based on multiple of savings. None refund of the L.I.F.). a factor of interest).
Promotion
Credit orientation 2 hour Sensitization seminars for prospective Sensitization meetings at the
Brochures provided from the credit seminar held once. Brochures, clients, brochures available at the branch. Information provided
Notices in the banking hall. department. Officer in notices seen in banking reception . Supervision staff gives by the officer. Brochures
Marketing/ Brochures detailed charge.Notices at FINCA hall.Loan officer gives detailed information at will.Notices at Pride available.Notices at Faulu
Information information from manager. established ofices. information. established offices. offices.
Signposts at various FINCA Sign posts at UMU branch In magazines (The
Sign posts at UWFT offices, offices. Wall calendars, T-shirts, offices. Wall and desk Signposts at Pride established Microfinance Banker ) Sign
Fliers, Desk/wall calendars, T- Caps, FM-Radio, Branded calendars, Newspapers, branches and along highways, T- posts at Faulu offices, T-
Advertising shirts, Branded vehicles etc. vehicles. Billboards etc shirts, Caps shirts, Caps etc.
Place/Access
4 branches in Kampala
Several locations out of the city Various locations in Kampala and its suburb (Bakuli, and
Located on Buganda Road Slightly away from the business centre (suburb) Kamokya, suburbs including Owino market, Kamwokya), Owino market,
slightly away from the center on Plot 63 (Buganda road) Kasangati, Nakawa, Kajansi, Kabalagala, Natete, Kawempe, Kawempe and Entebbe Road
business center. and Plot 36 Lumumba Avenue. Kyengela etc. Katwe, Nakawa, Nakulabye. Teller point.
Positioning
Microfinance with a difference
built in order to allow the low
Economically Empowering income people to help Enabling people to succeed
Slogan/vision Women. Small loans big changes. themselves Pride is enterprise. through small business loans.
Perceived to be a women's
Corporate image (to bank offering a wide range of Flexible and customer Efficient and militaristic credit Flexible and customer
be generated after services mainly loans to Perceived to be largely a women's responsive ,innovative and of machine with zero tolerance for non responsive with less access
client interviews) women. institution. high quality. payment requirements.
Good for business because it Customer responsive
Product Image (to be Have various products such as Multiple products with various responds to business cash flow needs products including lending for
generated after client Have various products to individual/business and group names but serving the same unlike other group lending development purposes, like
interview) offer. loans. function organizations . education.
Physical Evidence
Are application
forms clear Clear language aided by
(language) officer. Easy form to complete. Clear Easy forms to complete Very clear. Customer friendly
Do they provide a
clear loan repayment Yes at the time of Yes a repayment schedule Yes at the time of Training /
schedules disbursement. Yes. provided Yes During training Disbursement
Do they provide a
copy of the loan Yes, agreement signed during
agreement. Yes. training Copy kept in file. Yes Yes at disbursement
People .
Straight to the manager who
gives all information Provided with well informed
required. Loan officers officers and willing to give Helpful, well informed but
Customer service always available (excellent information. Ladies provide data extremely busy to get all data Well trained supervisors who help in- Helpful and fairly conversant
/Help desk handling of clients). more willingly. required. depth discussions. refer to loan officer
Process
Application to
Disbursement Time After 1 month's training of 1hour After training receipt of field
(Institutional 1 week even for first loan if per week at group's convenient officer's recommendation i.e. 2 2 weeks for group loan after
perspective) all requirements are met. time. (Speedy loan processing) days. After training and 6 week's saving. application
Discharge process -
time and process it
takes to get
collateral back after Not applicable for the Small
final payment None. Enterprise Programe (SEP) loan. Not applicable,group guarantee N/A, group guarantee N/A, group guarantee

Q. How should you formulate a strategy towards the competition?

The goal is to create competitive advantage of the products through key, sustainable differentiators.
You can attack direct competition to providers of same or similar products typically through a
combination of:
Price
Customer Service
Quality of Product
Beware of competing on price (e.g. interest rate, commission) alone. Such a strategy is costly since
through reducing price means less income (unless you make substantial gains in volume) and you may
need to spend additional money for advertising and promotion to inform the clients. Finally, price-based
strategies very often lead to price war and commoditisation of the service.
Price-based strategies are used for direct competition or as protective reaction to threat of substitute and
potential competition (dropping yields may discourage competition from attack).
Another alternative is to seek to build a market niche and fortify it from competitors entry (barriers)
and substitutes. Focus on an important aspect of quality or customer service to niche clients (product
design, reliability, confidentiality, speed of delivery etc.). Market niches can be through geographical
(e.g. certain region or country) or product specialisation (e.g. certain product on different markets). In
building market niche (special combination of product what we sell, client to whom, market
where and how), quality of products and services is key as well as distribution type and customer
service.
The final alternative is to seek to avoid competition combination of high quality and customer service
with market sharing. There are three alternatives to doing this:
1. Building unique brand
2. Market-product specialisation
3. Market leadership
Formal entry barriers protect firms of EU. Building entry barriers can be done by speeding up
innovation processes to make it difficult for others to enter the market through technology and product
replication. Another way is to create strategic alliances with potential competitors.
Cooperation between competitors sometimes is very helpful since helps to reduce costs (e.g. licensing,
information exchange, innovation, IT infrastructure and marketing). Strategic alliances can be arranged
for special purposes to bring additional benefits (barriers for new competitors, lobbying, entering new
markets etc.). Your Mission and Values can be the basis for identifying partners and entering
cooperation you do not have to do everything on your own!!
Exercise 4.4
In Organisational Groups:
What kind of competition does your MFI face?
Direct
Substitute
Potential
What has been your strategy towards competition in the past?
Direct competitors
Substitute competitors
Potential competitors
What have been the strategies used by your competitors?
Time: 20 minutes

Q. How do you get information on your customers and

competitors?
The financial services market is one of the hardest to research If you find out more, and
since peoples responses to questions concerning money and more thoroughly, what a
their financial affairs are often pre-programmed by society. customer wants (and why)
Furthermore, there are often discrepancies between what people than a competitor, then
say about financial services and how they actually use them everything else you do can be
hence the importance of careful and often non-traditional better directed and is more
research. likely to succeed. Conversely,
if the finding out process is
In general, financial institutions should gather information from skimped or inaccurately
both internal sources (such as feedback from front-line staff, conducted compared with a
simple questions on loan application or account opening forms, competitor, everything else
and the active mining of data from management information you do is going to be more
systems) and external sources (most importantly from difficult and stands less
customers and potential customers, but also from competitors, chance of success. Take care
government and donor agencies, networks and trade to identify customers needs.
associations, and the public media). For details and guidance
with respect to the market research process, see MicroSaves ~ Forsyth (1998)
Market Research for MicroFinance Toolkit.
Exercise 4.5
Do you know any examples of collaboration in microfinance industry? In your
market?
What are they? How successful they are/ have been? Why have they fallen?
What were the benefits/costs for parties that have entered the collaboration?
Can you think about any potential joint projects that would be beneficial for your institution?
What they could be?
Are there any players that could become a potential partner for your MFI? What benefits would
you expect? What benefits would the potential partner look for?
Time: 20 minutes
Q. How to conduct institutional analysis?

First and foremost, identify your organisational strengths. This set of organisation strengths is the basis
for strategic decisions about competitive advantage development. Strategy should largely be built on
developing strengths (do not focus too much on eliminating weaknesses).
Most of strengths, especially in services sector, are intangible assets staff, brand, systems. Ranking
critical success factors against your competitors helps identify comparative and sustainable advantages
and disadvantages.
Why Intangible Assets?

1. Typical tangible assets buildings, machines can be used only in a defined place by a few staff.
While intangible assets e.g. client database, brand can be used in many places and for different staff
for different purposes in the same time.
2. Tangible assets depreciate thus we have amortisation costs. Information can become obsolete but
this does not de-capitalise the institution. The same applies to brand, staff loyalty and commitment
which should increase in value over time if appropriately managed.

3. An institution with a good brand has more loyal staff and can demand more from them. An
institution with an excellent market intelligence system can build such information basis that will
help them better understand the market trends than their competitors
4. Tangible assets can be bought, leased, hired or sold. Intangible assets take lots of time to build. To
acquire the intangible assets usually you have to buy the whole organisation.
The research in the UK industry among managers showed that there are key intangible assets
particularly important to strategic success:
- Reputation (8-10 years to build)
- Product brands (6 years)
- Acquiring know-how by employees (4-6 years)
Examples of financial institutions strengths and weaknesses:
Strengths Weaknesses
Speed of loan tracking system
Qualified, innovative staff
High headquarter staff turn-over
Staff dedicated to the mission and vision
Security of staff handling and insuring money
Wide range of products
Poor incentive system
Simple procedures
Delinquency in some products and branches
Strong Brand
Personnel structure within branches
Flexibility of products
Lack of strategy to access new markets
Visionary Strong Board of directors
Lack of marketing strategy
Market research
Leadership role in the sector
Exercise 4.6
List the 5-8 key strengths and weaknesses of your organisation
Rank them in order of importance
How much will these factors influence success in 3-5 years? (Review the list taking
into account future drivers of success)
If in a severely competitive environment: Later Use your strengths list to rank your MFI
against its competitors using the scale 1-5 use relative preference ranking techniques
Time: 30 minutes
Q. How to conduct sector and macro-environment analysis?

While making strategic choices assess the trends in the sector and macro-environment, which can
influence our activity the Opportunities and Threats.
Q. What is sector analysis?

Sector analysis gives information on trends in your close environment and the stakeholders who have
power in and around your business:
Competitors
Collaborators
Investors
Clients
Staff
Networks

Legislators/Regulators
Technical service providers
IT systems developers
Local elite/politicians etc.
Assess what is crucial for your organisation:

Strengthening competition new players on the market?
Banks targeting low-salary individual segment?
Law liberalisation for national expansion?
New e-banking systems?
Support from an international network?
Reducing donor interest in providing capital funds? Etc.
Q. What is PEST analysis?

PEST analysis examines the external factors that are likely to influence your organisation (to its benefit
or detriment). The Political, Environmental, Social (including legal and environmental) and
Technological trends are assessed using a PEST framework.
PEST analysis gives this information about macro trends which influence your business (usually in long
term):
Economic growth,
Interest rate,
Demography,
Analysed trends can represent opportunities or threats. Identifying key trends that will give you
leverage in building your competitive advantage is key.
Use an approach that focuses on the dynamics in the PEST factors notice the trends which are going
to influence the sector in the future (months, years) and assess how the trend will influence our
organisation positively or negatively? Remember that every trend can become a threat or opportunity
it depends on how you use it.
Key is to notice what is unnoticed to others and to transform what appears to be a threat into
opportunity - P Drucker.
Examples of financial institutions opportunities and threats:
Opportunities Threats
High demand Clients increasingly burdened with
Strengthening entrepreneurs debt
Unemployment Decreasing trust among people
Stable currency in next 3 years Increasing unemployment
Low inflation rate High rates of interest
High rates of interest Increasing competition in financial
Rural areas neglected services
Economic growth Reform of the banking system
Efficient legal system creating uncertainty
Changes in the law Changes in the law
New legal form options offer possibility of Bureaucracy of government
new services Lack of quality human resources
Professional association offers lobbying force on labor market
You can use the following table to assess the PEST events and what they mean for the Strategy.

Factor Event / Threat / Probability / Impact on Strategic

Issue Opportunity Importance Plan
Political 1.
2.
3.
4.
Economic 1.
2.
3.
4.
Social 1.
2.
3.
4.
Technical 1.
2.
3.
4.
This is provided as Handout 4.4 PEST Analysis Matrix
Exercise 4.7
In institutional groups:
What are the key
Political
Economic
Social/legal/environmental and
Technological
factors that are likely to impact the institution?
Which stakeholders have great influence on your institution?
What trends can be noticed/expected in your sector in next 5-10 years? What influence will
they have on your institution?
Time: 20 minutes

Day 2
Session 5: Formulate Your Strategy
Session Objectives:
To collate the analysis from SWOT
Design strategies to improve on SWOT
Analyse market and product mix present and future to decide on strategy for growth
Define value proposition that gives a competitive advantage
Summarise by formulating strategy to establish a brand in the market
Time: 120 Minutes
Slides:
PowerPoint presentation entitled Session Five This session consists of
Materials: 24 slides
Exercise:
5.1 Create a SWOT (20)
5.2 Strategic Market Decisions (30)
5.3 Formulate Your Strategy (30)
Overview: This session attempts to analyse the current strategic position in terms of the position and
positioning3 of the institution and its products in the market. The institution may continue in existing
markets with existing products, but it may also choose to enter new markets or introduce new products.
Such decisions need to be backed by a thorough analysis of the institutions positioning in the market
both present and future.
1. How to develop market positioning using SWOT analysis?

Slides: 6
Once the SWOT analysis has been done, what is important is to strategise on how the institution could
convert the weaknesses into strengths and threats into opportunities. Pick up specific examples
identified from the previous days assignment and explain what could be a possible strategy for
converting a weakness to a strength and/or threat to opportunity.
2. Developing the future strategy statement based on analysing market and product mix
Time: 30 + 20 minutes and 30 minutes for 2 exercises
Slides: 18
Assuming the implementation of the strategies that evolve out of the SWOT analysis, the institution
now needs to understand its spread in the market through its different products and services. This is
done through Ansoffs product market mix in a institutional group exercise. The exercise brings in
clarity on the expansion plans and the expansion/growth strategy is a key component of the Strategic
Business Plan.
3
Position refers to the status that is given to an institution by the market/users of the services, while positioning
refers to the status which the institution aims to be in the market. While position is more for external customers,
positioning is for internal customers.
Q. How to develop a strategy based on SWOT analysis?

The last component of your
Opportunities Threats
preparation/analysis for the Market
Strategy is an institutional self- Competition
analysis. This analysis is
essentially a candid introspection Sector
of your institutions:
Strengths PEST
Weaknesses Strengths Weaknesses
Opportunities
Threats Organizational
competitive
The strengths and weaknesses advantage
describe factors internal to your potential
institution while the opportunities
and threats describe external
forces faced by your institution, as shown in the SWOT Analysis Framework below. In completing this
analysis, you are likely to draw on the macro- and micro-environmental analysis described above, so it
is useful if you complete those first.
Be careful not to fall into the trap of assuming that youve finished your institutional self-analysis once
your list of strengths, weaknesses, opportunities and threats is complete. To make this list useful in the
definition of marketing objectives and strategies you need to go four steps further.
(1) Prioritise the SWOT analysis to identify which issues (be they strengths, weaknesses,
opportunities or threats) are the most important for your institutions Strategy. This can be done
by ranking the issues in their order of importance4 the discussion generated is likely to yield
important insights. Alternatively, each member of the group can be given 10 points to allocate.
A member can give no more than four points to any one issue. This effectively forces the
participants to make a hard choice about what is most important to them. Once members of the
group finish allocating their points, the numbers are totalled. The issues are then ordered based
on the number of points. The highest point total is the most important issue and so on.
(2) Examine the extent to which it is possible to match your internal strengths with the
opportunities presented by the market environment. Strengths which do not match any
available opportunity will be of limited use, while opportunities which do not have any
matching strengths cannot be exploited unless you make fundamental institutional changes.
(3) Look for weaknesses that you might be able to convert into strengths in order to take advantage
of an identified opportunity.
(4) Consider whether you can convert any threats into opportunities, which can then be matched by
existing strengths.5
4
See MicroSaves Market Research for MicroFinance toolkit for a detailed description of running Focus Group
Discussions with PRA tools and how to conduct simple ranking exercises.
5
Ennew, et al., Marketing Financial Services, (Oxford: Butterworth-Heinemann, 2000) 68-70
SWOT Analysis Framework
Strengths Weaknesses
Internal to the
company
Matching
Conversion
Exist
independently Opportunities Threats
of the
company
Conversion
Source: Ennew, et al. (2000)

SWOT analysis helps to make strategic decisions according to a simple (in theory!) rule:
Avoid threats
Use opportunities
Base on strengths
Improve weaknesses
Exercise 5.1
Create SWOT for your organisation
Use the results from previous exercises
Look at SWOT while making strategic decisions/choices (in next stages)
Time: 20 minutes
Q. How to formulate a strategy statement?

On the basis of the diagnosis of your institutions current position, it is now time to look formulating
your Strategy. This is best done by addressing three key issues:
1. Choice of market and scope of operations
2. Strategy towards the competition
3. Competitive advantage development/maintenance
Q. How do you plan your future market and scope?

As you examine the market and scope for your institution in the future, it is worth re-examining the past
and current situation and responding to the following questions:
1. What strategy has your financial institution been following (within the framework of the Nine
Growth Strategies Matrix see diagram below)?
2. What has been the reason for such choice?
3. Has the strategy been successful?
4. Why/why not?
5. What are the pros and cons of continuing the current strategy?
And thus begin to answer the strategic questions pertaining to the future:
6. What are the opportunities/needs to shift to enter new/modified markets or widen the needs
served by our institution?
7. Which strategy could be a good choice for your institution in longer term?

To answer these questions it is necessary to look at:

1. What is your core market now?
2. Who and with what my organisation is going to serve?
Serving few needs of several segments
Serving broad needs of one-two segments
Serving broad needs of many clients in narrow market
3. What are possibilities to penetrate existing market?
4. What are possible other markets (segments, countries ) which you could enter using your
strengths and value proposition?
Where you can deliver better value than competitors?
Where you can deliver the same value at the lower cost?
To answer/assess these questions re-examine the SWOT analysis that you have just completed!
Products (Scope)
Markets Existing Modified New
Sell more of our existing Modify our current Design new products
products to our existing products and sell that will appeal to
Existing types of customers more of them to our our existing
(Market penetration) existing customers customers (New
(Product product
modification) development)
Enter and sell our Offer and sell Design new products
Modified products in other modified products to for prospects in new
geographic areas new geographical geographic areas.
(Geographic expansion) markets.
Sell our existing Offer and sell Design new products

products to new types of modified products to to sell to new
New customers (Segment new types of customers
invasion) customers (Diversification)
Exercise 5.2
What strategy has your institution been following (Nine Growth Strategies Matrix)?
What has been the reason for such choice?
Has the strategy been successful?
Why/why not?
What are the pros and cons of continuing the current strategy?
What are the opportunities to shift or enter new/modified markets or widen the needs served by
your institution?
Which strategy could be a good choice for your MFI in longer term?
Time: 20 minutes

Exercise 5.2 Continued

What is your core market now?
Who and with what is your organisation going to serve?
Serving few needs of several segments
Serving broad needs of one-two segments
Serving broad needs of many clients in narrow market
What are the possibilities of penetration in the existing market?
What are other possible markets (segments, countries,) which you could enter using your
strengths and value proposition?
Where can you deliver better value than competitors?
Where can you deliver the same value at the lower cost?
Look at SWOT!
Time: 30 minutes
Q. How to develop your value proposition?

In addition, you will need to formulate the value proposition you are offering the clients. This can be
done by answering two questions:
What is my competitive advantage? and
How I can use it for creating sustainable value proposition to my strategic segments?
The diagram below outlines the key components of most value propositions for financial services. The
weight applied to the different components defines the value proposition.
Product attributes Brand Customer Relationship
Functionality Brand Comfort/convenience

equity Trust
Quality Price Time
Responsiveness
Uniqueness to needs
Value proposition
Thus an organisation focusing on Operational Excellence will stress the product offerings on-time
delivery of high quality services at a reasonable price, and will have a brand focused on efficient and
client responsive services.
Thus an organisation focusing on Product Leadership will stress the product offering on high quality
services that offer advanced functionality and respond to clients needs, and will have a brand focused
on product leadership and being the best in the market.
Thus an organisation focusing on Customer Relationship will stress the offerings

convenience/comfort, the trust underlying it relationships with customer and how the organisation
responds to the needs of its clients, and will have a strong and carefully nurtured brand focused on the
oganisations closeness to its customers.
Q. How to develop your competitive advantage/strategy?

As you complete your thinking on this aspect of your Strategy consider:
What is/are your strategic market/s?

What is your competitive advantage (based on my unique strengths)? What will be your value
proposition for this market/s?
Will you be able to create a sustainable competitive advantage in your chosen market:
Think about your competitors response to your strategic move
Thank about your competitors move in the future
How difficult is it to replicate your competitive advantage?
On the basis of the above you should be able to pull together a succinct summary of your institutions
Strategy.
Example Strategies:
1. Strategy of a Group Based MFI:
Target market Poor women with income of < Rs 2,000 pcm throughout the State of
Market and Scope Kerarnchul
Group-based and later individual-based credit products and
crop/animal/health insurance (through agency agreements)
Market growth Geographic expansion into 10 new districts
strategy New product development (individual lending & health insurance)
Value proposition Access to a range of credit services tailored to the evolving needs of the
customer (group to individual)
Access to a range of insurance services with reputable formal sector
insurance companies
Competitive Product leadership
advantage
Strategy towards Out compete the informal sector on price and product range (security
competition provided by access to insurance services)
2. Strategy of a Retail Bank:

Target market Individuals: financially educated, looking for wide range of services
Market and Scope Broad needs of 2 segments: Standard and Prestige high income
individuals
Market growth strategy Market penetration
Value proposition Wide offer of banking services (deposits, credits, cards, mortgage loans,
transfers, stock exchange account)
Modern innovative financial provider of wide range of products
Competitive advantage Product leadership
Strategy towards Penetrating market niche being fortified by wide range of constantly
competition improved offering
Our Retail Banks Strategy:

We will provide a wide range of banking services for individual, targeted clients in order to
grow revenue through cross-selling.
We will constantly adjust our offer to clients needs in response to their needs, which we will
constantly assess through an on-going programme of market research.
We will set the lowest price on the market for a few highly demanded products in order to
acquire individual clients and then to offer them bundled products.
Our Retail Banks Growth strategy:

Continue in existing markets, but focus on strategic segments.
Product modification and market penetration to serve strategic segments.

3. Market Entry Strategy of a New Internet Bank:

Target market Few needs of broad segment
Individuals - trend setters, pioneers, looking-for-innovation clients, young
professionals (more mass market in long term)
Market growth strategy Developing new internet banking products via internet in long term
Value proposition Basic banking services for mass market via internet
Functionality, fast access, zero defects in internet transactions
Price
Internet leader
Competitive advantage Operational effectiveness
Technological innovation
Strategy towards Attack - high interest in deposits, free money payments to build first a niche
competition of trend setters to further expand to other markets and diversify products
My Internet Bank Strategy to gain considerable market share by:

Targeting individuals who are pioneers and trend setters.
Using internet channel - in very effective, functional way.
Zero defects in activity - building reliability for internet bank.
Offering lowest prices for basic banking services.
My Internet Banks growth strategy:

New markets - target strategic segment (pioneers).
Market expansion to other segments and product development introduction of other banking
services using internet technology.
Exercise 5.3
What are your strategic choices?
Describe your strategy in a (very) few succinct paragraphs
Time: 30 minutes
Q. Why do institutions need to differentiate from competitors?

Yes! Within strategy you must decide in what areas to be the best - to be different. Use the simple
perceptual map to decide what would be the best area for specialisation. You can not be the best in
every business process so it is necessary to make trade-offs and decide what not to do. Strategy is
focused on set of activities in what your organisation decided to excel other activities should meet the
sector standards, but they are not mentioned in strategy formulation and implementation. Strategy is a
guide for change within your organisation.
Typically, when MFIs plot themselves on this simple

Price
differentiator map, the majority place themselves near
the service point of the triangle. This indicates that
customer service is generally quite important to overall
business strategy in the microfinance industry. In a z
market where all MFIs are seeking to differentiate on the z
basis of Convenient, customer-oriented service, your z z
z z
institution might want to focus on an offer that combines z z z
Quality and Price as differentiators. Whichever you
chose, it must be aligned with your institutions Mission, Quality Convenient, service-
Values and Vision and will drive your brand. products oriented environment

Remember: No Recipes!
There are no ready schemes for creating a strategy
Competitive advantages and value propositions are very often mixtures of theoretical concepts
Do not ever underestimate your intuition and feeling just remember to test them with data
collection and analysis
Use the 80/20 rule and live with imperfect information
Strategy is much closer to art than to science

Session 6: Develop Financial Projections

Session Objectives:
List resource required for developing financial projections
Identify the projection model the institution wants to use
Share model for financial projections if relevant and requested by participants
Time: 20 Minutes
Demonstration exercise
Materials: Slides:
PowerPoint presentation entitled Session Six This session consists of 10
slides
Handout:
6.1 Financial Projection Spreadsheet for Small MFIs
Overview:
1. What are the resources needed for developing financial projections?

Time: 10 minutes
Slides: 5
The KOGMA is the action plan to realise the strategy defined in the previous exercise. The financial
projections need to be reviewed after KOGMA, but we need to do a draft to get a reality check. This
helps identify the risk factors in finances.
2. How to decide which projection model to use?

Time: 10 minutes
Slides: 5
There is a need to check the viability of the strategy. New products, new staff and other new items need
to be included in the financial projections. It is important to identify the risks, cost drivers, issues that
would need focus while doing the KOGMA. What follows is a strategy for preparation for growth, with
different risk scenarios and sensitivity analysis.
Q. How to develop financial projections?

Now you have a Strategy, it is time develop the Financial Projections. These projections will
necessarily be first draft and will be amended as we develop the Business Plan (KOGMA Analysis) and
thus plan the implementation of the Strategy. But now is the time to take your strategic choices and
model them to develop the Financial Projections.
The types of questions that you should be answering in this step are:
What resources (financial, technological, human, physical etc.) are required to implement the
Strategy?
Are these resources assured?
Will you need to recruit, place and train management and front-line staff?
Does the implementation of the Strategy require the reallocation of resources within your
organisation?
In view of the available resources does the Strategy make sense or will it need modifying?

At this stage you will have to decide how to model the financial projections. Many MFIs use the
MiroFin model (this can be downloaded from the CGAP website and is the most sophisticated MFI-
specific modelling software). Some have found Microfin a little too inflexible and/or complex and have
preferred to set up their own Excel spreadsheets.
Use which ever model you find the most appropriate for your needs/capabilities the most important
thing is to model your projections and examine the viability of your strategy! You should also use the
spreadsheet to conduct sensitivity and what if analyses in order to understand:
The most important revenue/cost drivers.
The risks/vulnerabilities of the strategy.
The opportunities/areas which will require particularly careful focus during implementation
(this will drive your Key Objectives in the KOGMA Analysis).
Remember these Financial Projections will change as you prepare your KOGMA Analysis and (of
course) as you get more information as the implementation process moves forward. The KOGMA
Analysis will reveal areas that require:
Particular attention/budgetary allocations and potentially
Additional opportunities to increase revenue/reduce costs.
Hanout 6.1 Financial Projection Spreadsheet for Small MFIs

Session 7: Execute Your Strategy Through KOGMA

Analysis
Session Objectives:
To understand why Strategies Fail?
To get an overview of KOGMA analysis
Review the elements of KOGMA analysis
Understand the benefits and uses of KOGMA analysis
Agree/accept the rationale for using KOGMA analysis
Time: 1 hour 15 minutes
Slides:
Materials: PowerPoint presentation entitled Session Seven This session consists of
28 slides
Handout:
7.1: KOGMA Team Roles
Exercise:
7.1 What Can KOGMA Do For You? (Optional) (10)
Overview:
1. What are the barriers to implementation of strategies?

Time: 10 minutes
Slides: 8
Most institutions design strategy documents but they are often not implemented. Discuss the common
reasons for the same by encouraging sharing of experiences.
2. Introduce KOGMA Analysis

Time: 25 minutes
Slides: 13
So what is important is analysis and documenting the strategy statement to the core. KOGMA is the
framework which helps us detail out the strategy into a feasible action plan.
3. What is the importance of KOGMA and who should be involved?

Slides: 7
KOGMA is the detailed action plan and thus representation from all staff and departments is important
for a realistic plan. This is also important to ensure ownership of the strategy document.
Q. Why do strategies (so often) fail?

A 1999 Fortune Magazine story suggested that 70% of CEOs failures came not as a result of poor
strategy but of poor execution. It is difficult for firms to differentiate an ongoing complex effort to
realise strategy from every day trouble shooting. Very often the consequence is that strategy is
developed by board and management or consultants and it ends up in the shelf in form of document that
is dead on delivery. Operational management has its own problems and quick fixes quickly become the

organisational routine. These eliminate the implementation of any strategy with its difficult choices of
preferred clients and products, cost, quality and service policies. Thus the most important is to
institutionalise strategy implementation in everyday operations through clear key objectives, goals,
performance measures and activities.
Only 10% of organizations execute

their strategies
Barriers to Strategy Execution
VISION PEOPLE MANAGEMENT RESOURCE

BARRIER BARRIER BARRIER BARRIER
Only 5% of Only 25% of 85% of executive 60% of

staff managers have teams spend less organizations
understands incentives linked than 1 h/month dont link budgets
the strategy to strategy discussing strategy to strategy
Guidelines for Deploying Your Strategy
Organize voluntary meetings at which you explain the strategy. Ask the three key questions:
1. What is the strategy as you heard it?
2. Why is it personally important to you?
3. How do we need to work differently together?
Be a facilitator of dialogue. Get people to talk with each other about the strategy, not to you as the boss.
But listen to what theyre saying! Document key points made by participants and share them with
others. Use the best suggestions as bases for process improvements.
Q. What is KOGMA analysis?

KOGMA stands for Key Objectives, Goals, Measures/targets and Activities together these provide a
clear, simple framework for he implementation of your Strategy.
To implement your strategy you will need to focus on these critical issues and which drive the Key
Objectives. It is all too easy to get lost in a wide variety of activities many of which are often
relatively unimportant! Identifying the Key Objectives necessary to implement your strategy will help
you to:
Prioritise and focus on the critical issues - What Really Matters
Help all staff see how their work contributes to the vision and the strategy to achieve it
KOGMA Analysis is based on the Structure Tree approach developed by George Labovitz and Victor
Rosansky see The Power Alignment, John Wiley and Sons. It provides an intuitive approach to:
Identifying the Key Objectives for achieving the mission/vision of the organisation and then
Setting the Goals that must be achieved to meet these Key Objectives as well as
The Measures/Targets and
The Activities necessary to achieve the goals.

This analysis then allows you to develop your strategic business plan in a participatory manner thus:
Getting inputs/insights from all levels
Building buy-in/understanding at all levels
Optimising implementation
It also allows you to describe and communicate your strategic plan in a succinct manner so that
everyone can see their role in delivering on the plan.
Example of Use of Structure Tree6 from Equity Bank:
Critical Success Factors Stretch Goals Measures Initiatives

(Key Objectives) (Goals) /Targets (Activities)
Develop organisation

culture
Mission/Vision that values people

and supports the
business
Vision:
To be the
Mobilize adequate
preferred
resources
microfinance
service provider
contributing to
the economic Build a high quality

prosperity of asset portfolio
Africa
Mission:
We mobilize Provide high quality
resources and financial services
offer credit to
maximize value Implement robust
and economically systems
empower the and processes
microfinance
clients and other

stakeholders by
offering customer - Maximize value for
focused quality stakeholders .
financial
services. Remain market led
.
and
customer focused .
Plan and manage .

expansion
.
6
Copyright Stepwise Management www.stepwisemanagement.de Raingasse 18, 67157 Wachenheim, Germany
Example of a KOGMA Analysis from OurMFI in India:

Mission/Vision Key Objectives
Mission: Note how the Mission/
To provide high quality, client-responsive Vision and Strategy drive
financial services to the poor. Develop professional organization
culture committed to serve the poor
the Key Objectives.
Vision:
To be the largest and most valued Upgrade skills of key staff The Key Objectives are, in
MFI in the state Labovitz and Rosanskys
Understand and respond to the terms, the Critical Success
Strategy Statement needs of the poor for financial
services
Factors, that must be in
In the next 10 years we will
transform OurMFI to become the
place for OurMFI to
market leader in microfinance in Implement strong systems and implement its Strategy and
Okedhra State. We will do this processes meet its Mission/Vision.
through redesigning products &
systems and retraining staff. The Maintain a high quality asset
portfolio OurMFI has then analysed
strength of the organisation will then
allow us to raise capital to the Goals that must be
significantly expand the geographic Mobilize adequate resources achieved in order to meet
reach of OurMFIs business.
Expand into new districts the Key Objectives.
Measures and Targets are then identified for each of these Goals so that OurMFI can evaluate its
progress towards achieving these. In turn Activities are planned in order to meet these Targets and thus
the Goals.
Returning to the example of Equity Bank, if we examine the Key Objective of Develop A High
Quality Asset Portfolio, we can see that four Goals were considered essential to meet this Key
Objective.
Achieving these Goals has

Key Objective Goals been identified as key to
meeting the Key Objective
of building a high quality
asset portfolio.
1. Maximum return on assets
In the case of Equity Bank,
Build a high 2. Optimal staff capacity & they saw the need to 1.
quality asset supportive credit structure maximise the return on all
portfolio their assets: from yield on
3. Efficient credit methodology portfolio to yield on
treasury investments (the
latter being particularly
4. Efficient credit system important given the highly
liquid state of the bank). Similarly, Equity understood that it needed to 2. re-train its staff and support
them with 3. new approaches/methods to assessing loan applications, issuing and recovering loans (in
all of the wide variety of credit products offered by the bank). Finally Equity recognised that 4. its
credit management systems required tightening and improvement if it was to achieve the Key Objective
of building a high quality asset portfolio.

Targets
Each of these Goals
Goal Measures Activities
was then assigned a
series of Measures
International 1. Quarterly Compliance Reviews
100% by
of credit polices and procedures
and Targets and the
benchmarks June 2006
with monthly snap checks Activities necessary
(OPERATIONS) to meet those Targets
2. Organize half-yearly exchange were then planned
programme (CREDIT and HR)
and responsibilities
PAR < 5%
by 1. Carry out a credit training on were assigned.
3. Efficient PAR delinquency management
December
credit (CREDIT and HR)
methodology
2005 It is important to note
that many (and often
< 1% in all 1. Monthly close monitoring of
Write off ratio the three PAR (CREDIT)
most) of the Measures
years are outcome rather
1. Monthly review of write off than process focused.
collection targets (CREDIT and
< 3.5% by FINANCE) For example while
Provisioning December 2. Monthly review of performance Equity Bank decided
2006 targets for branches and to use International
individuals (CREDIT and
BRANCH MANAGERS)
Benchmarks to assess
compliance and to
ensure the organisation sent managers to examine opportunities to learn from credit methodologies
elsewhere in the world, the remaining three Measures focused on Portfolio at Risk, Write Offs and
Provisioning.
The Targets must be specific, measurable, achievable, results oriented and time bound in short
SMART! The Activities are planned to meet those Targets are planned and the departments/individuals
responsible for their implementation are clearly defined so that their performance can be assessed.
Equity Banks Strategic Planning and Change Management Process

The development of a common vision and strategic plan for achieving it was implemented within a
lengthy, participatory process facilitated by Stepwise Management (a consulting firm based in
Germany). Months of staff time was spent developing mission, values and vision, assessing Equitys
strengths, weaknesses, opportunities and threats, preparing a structure tree outlining critical success
factors, stretch goals, targets/activities and measures. This process allowed Equity to bring its
strategic plans and goals into framework that was easy to communicate and thus operationalise the
clarity of focus.
By the end of 2004, all senior and middle management had played a role in developing and internalising
the strategic plan. By the middle of 2005 everyone within Equity knew, and had bought into, the
institutions plan and understood the roles they played in achieving it. Amid the turmoil of explosive
growth, Equity had achieved a common vision and was harnessing the power and commitment of all
845 staff working in the same direction to realise it. In the words of one Assistant Branch Manager,
before we just went to work to work. Now we are going to work to achieve goals. Please make sure
we have goals all the time." With this commonality of vision and understanding of the strategic plan
and the activities necessary to achieve it, Equity was able to further delegate responsibility and
empower managers.
As a result of this high alignment employees and managers had a frame of reference for their high
level of empowerment. Being an employee at Equity Bank very fast became a kind of status symbol.
Equity Bank attracts the most talented people in the country7 to join the bank as an employee and to
work at Equity Banks mission and vision Frank Kretzschmar, Stepwise Management.
7
By 2004 Equity had been able to recruit senior professionals from all the major banks in Kenya, the Central
Bank of Kenya, Safaricom, East African Breweries, Selectron, USA and Reuters South Africa.
Q. Why is KOGMA analysis valuable?

It is a framework not a panacea that helps you to identify the Key Objectives and Goals necessary to
implement the strategy. The institution chooses the activities to be measured and these are informed and
guided by the analysis of your environment. KOGMA makes you display what you want to achieve,
and forces people to do something about that that you decide is important about What Really
Matters.
Like the Balanced Score Card, KOGMA takes the emphasis away from purely financial indicators and
balances these with the non-financial indicators that often drive the overall performance of the
institution. We need to move beyond looking at and planning with financials alone:
In todays business reality, value is not captured in tangible, fixed assets of the firm, but in people
and relationships with and within the institution those intangible assets. Tangible assets no
longer serve as primary driver of enterprise value. Link to intangibles discussed before:
customer/stakeholder relationships, culture of innovation and change. People buy a promise of
value. Traditional financial measures compare previous periods, are results of historical
performance. These do not provide you with early signals/indication of client, quality, staff
problems or opportunities.
In reality, financial results simply provide rear-view perspective of past performance: they are not
indicators of future performance. You may be performing well now but you can close down in the
future. For all financial institutions, financial stability is important so you need to be forward
thinking how will you secure your long-term financial stability
Furthermore, financial statements are prepared by functional area and reinforce functional silos of
information whereas KOGMA Analysis allows all departments to understand the larger plan and
the role they play in it. Furthermore, staff at all levels need performance data they can act on. This
data needs to be relevant to their every day activities. Financial metrics will not be god for every
job.
Looking at financials for cost-cutting strategies may not result in long-term gains.
Many MFIs have social impact goals: they need non-financial and financial measures to motivate
and evaluate their performance.
KOGMA Analysis can:

Clarify current strategy/introduce new strategy
Align strategic plans/improvement initiatives
Align employee goals to institutional goals
Communicate to and educate staff
Help you weather business crisis
Set new targets for the institution
Integrate new leadership
KOGMA Analysis provides a participatory method for strategic planning, thus creating better buy-in.
It should improve tracking and management of gaps in implementation and provides a measurable and
manageable basis for performance evaluation. It allows improved communication and awareness of
strategy and what really matters as well as enhancing management capabilities by informing decisions
in the context of the big picture.
Implementing a successful KOGMA Analysis exercise requires:

Involving staff at all levels, all the time in a participatory effort spear-headed by the
KOGMA Analysis team of up to 10-15 people. The team should be interdisciplinary
representing all your departments and include managers and knowledgeable KOGMA
ambassadors from different levels:
o Senior staff: insight into strategic directions
o Middle management: will be tasked with translating strategies and policies into action

o Front-line: likely to be first affected by change, knowledgeable about day-to-day

operations
The team should include complementary skills, different perspectives and a mix of thinkers and
doers (will make sure that goals are realistic and are accomplished):
During the development, constant, fearless critique and refinement of the KOGMA analysis
through an iterative, participatory process
Change management!!! How is all of this good thinking to be implemented as quickly and
efficiently as possible?
Using the measures/targets to assess performance and achievement as well as to focus on
areas where the gaps between the Targets and Measures are not decreasing as the Activities are
implemented.
And above all Action! Is it encouraged? How is it measured? How is it rewarded?
See Handout 7.1: KOGMA Team Roles
Exercise 7.1
In buzz groups:
Develop a list of the benefits that a KOGMA Analysis should bring for
organisations committed to providing financial services to the poor
These will then be discussed in plenary
Time: 10 minutes

Session 8: Identifying Key Objectives and Setting

Goals
Session Objectives:
Understand the principles underlying the process of identification of key objectives
Clarify key objectives
Set goals
Define goals to meet key objectives
Time: 3 hrs 30 minutes
Slides:
Materials: PowerPoint presentation entitled Session Eight This session consists of
16 slides
Handouts:
8.1 Verbs for Key Objectives
8.2 Clarify Key Objectives
Exercise:
8.1 Identify Key Objectives (45)
8.2 Compile and Finalise Key Objectives (30)
8.3 Clarifying Key Objectives (30)
8.4 Setting Goals (30)
Overview:
1. What are the principles of identifying key objectives? How to identify them?
Time: 15 + 3 exercises of 45, 30 and 30 minutes respectively
Slides: 13
Help the institutions to analyse their vision and mission statements to identify the core components of
them which will become the focus areas for the MFI. Typically an institution would have 6 to 8 key
objectives.
2. How to set goals for the identified objectives?

Time: 10 + 2 exercises of 30 and 20 minutes respectively
Slides: 3
Assist institutions to derive the interim goals to be met in order to reach the objectives. Each objective
can be typically broken down into 3-4 goals.
Q. How to identify key objectives from the vision and mission

statement?
By now, the planning team should have a shared understanding of the institutions current situation,
internally and externally. Its focus shifts from a here and now perspective to a more future-oriented
one. It uses the conclusion of the SWOT analysis to identify issues critical to the institutions future,
ones that must be addressed so the institution can carry out its Mission.

A critical or strategic issue is generally framed as a challenge over which the institution has influence.
It can be described as a fundamental policy question or important challenge that affects the institutions:
Mandates, mission and culture;
Product or service level mix;
Clients or users; or
Costs, financing, organisational structure, or management.
An institution can experience negative consequences, if it fails to effectively manage its critical issues.
Generally, a critical issue involves some type of conflict. The conflict most frequently centres around
elements such as:
What will be done?
Why will it be done?
How will it be done?
When it will be done?
Where it will be done?
Who will do it? and
Who will be favoured or disadvantaged by it?
Because a critical or strategic issue can significantly affect the institutions capabilities and direction, it
demands extensive analysis. The institution should develop a precise statement of the issue that
captures the essence of the situation by:
Describing what it is;
Why it is important;
How the institution knows it is an issue; and
The likely consequences of ignoring it.
This statement is vital for developing strategies to manage it.
While identifying issues can be contentious, the level of tension it produces may very well fuel change.
The balance rests with generating enough pressure to get action while not so strong as to induce
paralysis. An effective planning exercise should focus decision makers attention on the most strategic
issues.
Example: Critical issues facing a Non Bank Finance Corporation

1. Given the need for low-cost capital to expand the outreach of the institution and thus achieve
economies of scale, should we mobilise voluntary savings from clients? Alternatives, such as
borrowing from commercial banks and international patient capital funds remain relatively
expensive and do not offer clients the valuable service that a range of savings products could.
2. Given the capital adequacy requirements of 12.5% and the likelihood that a significant
mobilisation of voluntary savings will take us below this, should we seek additional equity
investments from a) existing shareholders and/or b) international patient capital equity funds?
If we are unable to attract such investors we are likely to be subject to sanction by the central
bank.
3. Given the donor environment that is mandating sustainability and outreach, and the
governments refusal to further subsidise agricultural lending, should we increase interest rates
to greater than 18% on reducing balance? If we do not the profitability, and eventually
sustainability of the institution may be compromised.
Use action verbs to start all Key Objectives and drive change: Handout 8.1 Verbs for Key
Objectives.

Exercise 8.1
In three groups
To achieve your Vision:
What are the Key Objectives that you must achieve?
What must be in place to achieve the vision?
What is essential for success?
Take cards and write one key objective on each
Then rank the cards in order of importance remembering that a focus organisation will have
only 6-10 key objectives within your KOGMA analysis
Time: 45 minutes
Q. How do you move from critical issues to key objectives?

The strategic business planning team must thoughtfully consider alternative solutions to the critical
issues from these it will derive its Key Objectives. Frequently, organisations move quickly from
issues to the adoption of solutions, latching onto the first solution that comes to mind. If the institution
expects the strategic business planning process to develop better solutions by looking at an array of
potential responses, it should not rush from issue to a solution. This denies the institution the chance to
build its strategic thinking skills. While initially difficult, through repeated use, the institution will
build strong strategic thinking skills that bring long term dividends.
Finding viable solutions or responses to critical issues takes a through understanding of the issue, the
challenges it presents to the financial institution, and the advantages and disadvantages of the
alternatives. While the team looks at each alternative, it should look for any potential barriers to
achieving its the Key Objectives. A healthy debate about the effort required to surmount a barrier can
possibly uncover likely implementation problems. This gives the institution the chance to decide if it
wants to overcome the barrier or to abandon that alternative. Awareness of the realities before
committing to action can save the institution a great deal of time, resources and frustration. After
exploring its options, the team chooses which Key Objectives to include.
The critical issues and the potential solutions to them will allow you to identify the Key Objectives
necessary to translate your Strategy into action! There are, of course, many things your institution could
do but remember to prioritise and focus on What Really Matters! Typically an organisation will
have only 6-10 Key Objectives and thus retain FOCUS.
It is important to ensure that your strategy is clear in the minds of all who are working on brainstorming
the Key Objectives. It helps to begin Key Objectives with action verbs: increase, reduce, initiate,
develop, reinforce, minimise, improve
The Key Objectives set strategic direction at the institutional level. They channel the institutions
actions in a clearly defined way. They are detailed enough to guide, but not so specific that they
hamper innovation and creativity. They should not be a restatement of the institutions mission, nor
reflect business as usual. It is normal to use around 10 years as the planning horizon.
Key Objectives are bridge between high-level strategy and specific performance Measures you will use
to determine progress to overall Goals and thus good objectives represent a faithful translation of your
strategy. Ask yourself: will achievement of this Key Objective lead to the successful strategy
execution?
When you develop the Key Objectives remember that:

Key Objective statements should be challenging, yet realistic in terms of what the institution
reasonably expects to accomplish.
Key Objectives address priorities and the results of the SWOT by addressing the management of
critical issues.

Key Objectives collectively should provide enough detail to guide operating decisions, yet be
flexible enough to generate creativity and innovation.
Key Objectives should not conflict with one another.
Key Objectives should be written in clear, simple language, which can be easily understood by all
MFI staff as well as the general public.
Key Objective statements should be brief and to the point. One or two sentences are generally
adequate. In some cases, the institution may need longer Key Objective statements, but short direct
ones are usually best.
The strategic business planning team may use any or all of the following questions to facilitate the Key
Objective development process:
Do the Key Objectives address critical issues confronting the institution?
Do the Key Objectives chart a clear course for the institution?
Are the Key Objectives consistent with the institutions mission and mandates, and any further
guidance from top management?
Do the Key Objectives reflect the core business activities and strategic direction for the institution?
Are the Key Objectives realistic, achievable, and challenging?
MyMFI As An Example Of Linking Key Objectives To Mission/Vision
MyMFIs Mission: To provide customer-responsive financial services to the people of MyCountry.
My MFIs Vision: To serve 250,000 low-income customers with a range of credit and insurance
products and thus to become recognised as the most customer-responsive MFI in MyCountry by 2015.
MyMFIs Key Objectives:

1. Implement new IT system
2. Increase computer literacy amongst all staff
3. Improve cost-efficiency of credit processes
4. Achieve financial sustainability
5. Secure long-term debt on commercial terms
6. Reduce transaction costs for customer
7. Secure an agency agreement with one of the major insurance companies
8. Empower staff to act as financial advisors
Exercise 8.2
In plenary
Bring together all the groups Key Objectives
Review and compile them into the final set of Key Objectives
Put the Key Objectives on Flash Cards and onto the wall
Time 30 minutes
Q. How to ensure that your key objectives are clear enough?

After you have identified the Key Objectives, it is often a very useful exercise to take your 6-10 Key
Objectives and clarify them using objective statements in order to check that they:
They provide precise clarification of the meaning suggested by the objective
They outline why this objective is important to clients, employees and other stakeholders
Briefly discuss how the objective will be accomplished

Example of Clarifying A Key Objective With An Objective Statement

Objective: Attract, develop, retain talent
Objective statement: Knowledgeable and experienced employees are the key to our success. Our
objective is to reduce staff turnover and recruitment challenges by creating an appealing work
environment built upon role clarity, personal motivation, satisfaction and accountability. We will
provide all employees with an opportunity to directly impact office-wide performance and achieve
goals that meet clients needs.
Exercise 8.3
In three groups
Review Handout 8.2 Clarify Key Objectives
Take 2-4 of the Key Objectives in each group and then clarify them using the format
in Handout 8.2.
Do they:
They provide precise clarification of the meaning suggested by the objective
They outline why this objective is important to clients, employees and other
stakeholders
Briefly discuss how the objective will be accomplished
Time 30 minutes

Q. How to set goals for the identified objectives?

The next step is to set the Goals that must be achieved in order to achieve the Key Objectives. Again
focus on the issues that really drive the achievement of the Key Objectives. Typically you will have 1-4
Goals for each Key Objective. Remember the more Goals you have the more complex implementation
and creating effective change will be so focus on What Really Matters!!
Mission/Vision Key Objectives

Mission:
To provide high quality, client-responsive
Returning to the example of financial services to the poor. Develop professional organization
culture committed to serve the poor
OurMFI, we will examine which Vision:
Goals were set by OurMFIs team to To be the largest and most valued Upgrade skills of key staff
achieve their Key Objectives. MFI in the state
Understand and respond to the
Strategy Statement needs of the poor for financial
In the next 10 years we will services
transform OurMFI to become the
market leader in microfinance in Implement strong systems and
Okedhra State. We will do this processes
through redesigning products &
systems and retraining staff. The Maintain a high quality asset
strength of the organisation will then portfolio
allow us to raise capital to
significantly expand the geographic Mobilize adequate resources
reach of OurMFIs business.
Expand into new districts
In order to achieve the Key

Key Objective Goals Objective of maintaining a high
quality asset portfolio, OurMFI
believes that it must:
Improve its group formation
1. Improved group formation and recognition system.
and recognition system Revise its repayment
incentive for group
Maintain a 2. Revised repayment members and for staff.
high quality incentives for group members Revise and improve its
asset portfolio and staff credit monitoring and
reporting system.
3. Revised credit monitoring/
reporting system
Exercise 8.4
Divide the Key Objectives into groups of 2-3
Divide into 2-4 groups one for each group of Key Objectives
Each group prepare cards defining the Goals that must be achieved to meet 2-3 Key
Objectives
Time: 30 minutes
Each group then present to the others for discussion
Time: 20 minutes

Day 3
Session 9: Selecting Measures and Setting Targets
Session Objectives:
To select parameters for measuring achievement of goals
Set SMART targets to us the measuring parameters
Time: 180 minutes
Slides:
Materials: PowerPoint presentation entitled Session Nine This session consists of
15 slides
Handout:
9.1 Common Performance Measures
9.2 Worksheet to Select Measures
9.3 Performance Measure Summary Form
Exercise:
9.1 Select Measures (45)
9.2 Set Targets (30)
Overview:
1. How to define measures for each of the goals that you have selected?
Slides: 11
Initiatives taken by an institution, if not measured, becomes less effective as the impact of initiatives
may not always be visible/tangible. Thus it is important to identify measuring units which will help the
institution to monitor the changes against the goals set.
2. How to define the targets for each of the measures that has been identified?
Slides: 4
The parameters for measuring have now to be converted into measurable targets. The variation in
performance between the set targets and achieved target then helps analysis of the performance of the
programme. Selection of targets often requires development of systems and formats which will enable
the institution to use the measures.

Optional Exercise to Review Days 1 & 2 (in the unlikely event that you
have time for it!)
Trainer cut up the slips from Days 1&2 Review Exercise
Participants divide in to three or four teams and take three question slips each.
They can then retain one question slip and offer two question slips to the next team
(in a way that they cannot see the questions).
The next team selects one of the two question slips and then repeats the exercise until all the
teams have three questions each.
Time 15 minutes
Q. How to select measures for the identified targets?

The Measures will guide and drive the organisations efforts to achieving the Goals, and are therefore
central to the effective implementation of your strategy. Measures must be selected with the greatest of
care!
Q. Why measure performance?

Performance should be measured because:
Measuring performance is good management. Establishing performance measures provides
accountability for results from the strategic business plan.
Measuring performance can enhance the quality of services. Performance measures inform
MFI staff of customer needs and levels of satisfaction and make it possible to identify action to
improve quality and reduce costs.
What gets measured gets done. Most people want to do a good job. Performance measurement
helps managers and employees focus on what is important. By comparing actual with expected
results, it enables managers, staffs and other state holders to evaluate progress towards goals
and objectives.
Measuring performance aids in budget development and review. Performance measures are
valuable in the budget development process. They allow a more accurate assessment of
resources needed to support activities. They also help identify what kind and level of product or
service will be provided for the amount of resources available.
Measuring performance helps institutions answer the question Why are resources being spent
on these activities? Performance measures also bring greater clarity to the development
process and provide civil society with a more meaningful sense of the results that will be
attained with their /others resources.
Q. What are the categories of performance measures?

Performance measures: used to measure results and ensure accountability. The strategic business
planning model incorporates five common performance measures:
1. Input
2. Output
3. Outcome
4. Efficiency and
5. Quality.
Each category is designed to answer a different question and must often be used in combination to
analyse an institutions results.
See Handout 9.1 Common Performance Measures

Inputs measure the amount of resources needed to provide particular products or services. Inputs
include labour (staff), finance, materials, equipment and supplies and can also represent demand
factors, such as target populations. Input measures are useful in showing the total cost of providing a
service, the mix of resources used to provide the service, the demand for services, and the amount of
resources used for one service in relation to other services.
E
X INPUT MEASURES
A
M Number of clients eligible for the microfinance programme.
P Number of customers requesting service (e.g. loans).
L Number of loan applications received.
E
S
Outputs measure the amount of products or services provided. Outputs focus on the level of activity in
a particular programme or sub programme. Workload measures, which are designed to show how staff
time will be allocated to respond to service demand, are most commonly reported. Outputs are useful in
defining what a programme produces. However, they are limited because they do not indicate whether
the programme goals have been accomplished, and they do not reveal anything about the quality or
efficiency of the service provided.
E
X OUTPUT MEASURES
A
M Number of loan applications approved
P Number of clients trained
L Number of loans inspected or verified.
E
S
Outcomes measure whether services are meeting proposed targets. Outcomes reflect the actual results
achieved as well as the impact or benefit of programmes. Both intermediate and long-term outcomes
can be evaluated. Most senior managers are generally most interested in outcome measures. Yet,
information about the ultimate result is not always available or practical to measure. In these instances,
it may be necessary to use proxy or surrogate measures. For example, completion of the 12th grade is
not the same as literacy, but it may be the measurement that comes closest, and the one that can
currently be measured. Likewise, prompt repayment by clients could be indicative of clients benefiting
from enterprise they (had) started with a microfinance loan.
E
X OUTCOME MEASURES
A
M Percentage reduction in loan delinquency
P Reduction in incidence of defaults.
L Percent increase in repeat loans for clients
E Percent increase in new businesses started by clients.
S
Output measures are often mistaken for outcome measures. Outcomes assess how effective or
successful the microfinance programme has been. Outputs alone cannot tell management how
successful the programme has been. How much work a programme does is different from how well
programme is working.

The following illustrates the difference between outputs and outcomes.
Outputs Outcomes
Number of clients given loans Is not the same as Clients starting a business after
taking a loan
Number of clients trained in delinquency Is not the same as Reduction in incidence of
management. delinquency
Efficiency measures are also known as productivity measures. Efficiency can be measured in terms of
the cost per unit of output, the ratio of outputs per unit of input and the ratio of outputs per unit of time.
Ratios help express the relationships between different performance measures to convey more
information about the productivity and cost effectiveness of a microfinance programme.
E
X EFFICIENCY MEASURES
A
M Output/input: Number of clients with loans to number of clients
P enrolled.
L Time/Output: Turnaround time per application processed.
E Cost/Input: Cost per client.
S Cost/Outcome: Cost per client with a successful micro enterprise.
Quality measures reflect the effectiveness in meeting the expectation of customers and stakeholders.
Measures of quality include reliability, accuracy, courtesy, competence, responsiveness and
completeness associated with the product or service provided. Lack of quality can also be measured: the
resources that will be devoted to performing rework, correcting errors or resolving customer
complaints. Both the positive and negative sides of measuring quality can be important to track.
E
X QUALITY MEASURES
A
M Number of non-delinquent loans compared to number of all loans
P Number of borrowers with highest credit rating related to total
L number of borrowers
E Percentage accuracy of information entered in the database.
S
Examples of (performance) Measures often used by financial institutions include:
Sustainability # of clients served

Revenue growth/mix % of drop-outs/dormant accounts
Accuracy of reporting Quality of processes
Cost reduction Response time
Productivity Market share
Client satisfaction/ retention New product introductions
Cost of processes Employee satisfaction/retention
Client acquisition/ profitability Employee productivity
Return on investment/ assets IT system availability
Q. Which measures should you choose?

How many measures? As a rule of thumb 1-3 per objective. The fewer the measures the better (although
they need to reflect well what we are measuring). There is a lot of noise in modern organisations and a
good KOGMA analysis should provide a view of real drivers of success in your organisation. Focus on

strategic measures real drivers of success. If something seems wrong than you will get into more in-
depth investigation. Dont get trapped into operational measures!
Ensure that the Measures you select are:

Meaningful - significant and directly related to the Mission, Vision, Key Objectives and Goal.
Valid represents what is being measured
Responsibility linked - matched to an organisational unit responsible for achieving the
measure.
Customer focused reflect the point of view of the customers and stakeholders.
Comprehensive - when taken together, the set includes all key aspects of institutions
programme performance.
Balanced the set includes several types of measures - i.e., outcome, efficiency and quality
measures.
Credible - based on accurate and reliable data.
Cost effective - based upon acceptable data collection and processing costs.
Compatible integrated with existing financial and operational systems.
Comparable useful for making comparisons with other data over time.
Simple easy to calculate and interpret.
Useful accurately captures progress over time.
Easy to understand so that it can use as communication and alignment tool for your staff
Updated frequently you launch planning exercise to improve results thus you need timely
information i.e. updated monthly or quarterly. You need to allow room for corrections
Average-cautious look for the right metrics so that they do not aggregate and hide important
issues
Quantitative reflect objectivity as much as possible. Quantitative are better for this. With a
little bit of creativity you will be able to translate anything into a number. E.g. distribution of
trauma reports in a timely fashion can be translated into % of trauma reports distributed on time
Not dysfunctional - Dysfunctional measures are driving wrong behaviour in the organisation.
E.g. consider the example of a restaurant chain. Concerned with a large amount of food being
thrown away at the end of the day, managers instructed their staff not to cook any food within
one hour of closing until ordered by a client. Great for waste but bad for client service. Clients
had to wait for ages and as consequence the business dried up. Measuring waste in this case
drove the wrong behaviour. Consider the behaviour your measures will drive before including
them.
Key Issues in Choosing Measures

Inputs are generally easiest to collect. Outcomes tend to be the most difficult. Recognise that it is
difficult to get staff and management to focus on more than activities. Try to balance the collection
process to include outcomes, efficiency and quality measures.
Keep in mind that efficiency measures can be expressed as ratios of outputs and outcomes to inputs.
Strive to define a balance of different types of measures for each goal. Because they are interrelated,
measures cannot be considered in isolation. For example, increasing quality of microfinance services
cannot be accomplished without regard to cost.
Once Measures are decided on, institutions need to:

Determine data requirements,
Identify current baselines,
Set realistic performance targets based on benchmarking, and
Compare actual performance with expected results.
To assist MFIs, MicroSave offers a logical system to dissect and record all pertinent information about
performance Measures. The Handout 9.3 Performance Measure Summary Form can be completed for
each performance measure at institutional, unit and subunit levels. The Performance Measure Summary
Form ensures a detailed history of each Measure can be accessed easily by all staff.

Exercise 9.1
In the same groups continue working on the Goals you have set and select the
Measures that will best assess progress towards achievement of those goals
Use Handout 9.2 Worksheet to Select Measures to assess the measures you have
selected
Time: 45 minutes
Time: 45 minutes
Q. How do you set about benchmarking?

Once performance measures have been chosen, use benchmarking to establish performance targets.
Benchmarking involves seeking out best performers inside or outside of your institution, studying them
to determine why they are the best at what they do, and applying what is learned.
Potential benchmarking partners can be identified through:

Previous studies
Literature from national/international sources (for example the MIX)
Awards given to organisations
Business /government press literature, and
The internet.
Benchmarking data may represent:

Professional, national, or accreditation standards
Quality practices
The highest or lowest rating (whichever is more desirable) in a given issue or field
Performance
Workload
Levels set in statutes, regulations, or official guidelines.
In a world class financial institutions, benchmarking is not viewed as a one shot study, but rather as an
on going process through which performance standards are set and revised.
Q. How do you set performance targets?

Performance targets are quantifiable estimates of results expected for a given period of time. Setting
performance targets is an art. The following criteria may help:
Should be developed by those who will be held accountable;
Should include input from customers and stakeholders;
Should include final and annual incremental targets;
Should be derived from benchmarking and best practices, where available;
Should represent realistic expectations toward meeting goals and objectives;
Should be adjusted based on experience and expectations; and
Should enhance productivity.
The real art of setting performance targets is to create challenging but achievable targets. The best
targets are those that stretch the capacities of people and programmes, but are, nonetheless, possible -
those that result in genuine improvement, while building staff pride and confidence. Conversely,
impossible performance targets kill motivation and stifle innovation.
Developing good performance measures is thus an evolving process that improves with time. The
following questions can be used to review and update performance measures (as they evolve) as well as
Key Objectives, Goals and any other components of the strategic business planning model.
What adjustments, if any, should be made to the measures currently used?
What developments in the past year will influence current performance measures?
Have there been any problems in measuring performance in the past years?
What changes should be made in the way data are collected and analysed?
Is the measured information useful to programme management and staff, executive
management, the institutions finance unit, customers and stake holders?
How could performance measures be enhanced?
Are additional measures necessary?
To summarise, it takes time to develop good performance measures. This is a process that will improve
with experience. Financial institutions will need time to experiment with different measures, to
accumulate actual performance data and to set realistic targets for future performance. Thus, the process
of developing, updating and reporting performance measures is dynamic and requires on going
attention.
Keep Your Targets SMART:

Specific directly related and linked to the measure/goals
Measurable from easily accessible data sources
Achievable but not too easy stretch and challenge your staff and systems!
Results Orientated focused on the outcomes rather than the methods to achieve them
Time-bound with specific and documented time frames
You will need information to set Targets. Sources of target information will include:
Trends and baselines first you should look at current results on the metric. Examining past
data and trends will allow you to choose a target representing a meaningful challenge, while
staying within the ballpark of reality.
National, state, local, industry averages micro banking bulletin, the MIX.
Employees those closest to the action are frequently in the best position to provide insight on
what represents a meaningful target. Involving employees not only will provide relevant
knowledge input but will get their buy-in. "He that complies against his will, is of his opinion
still - Samuel Butler.
Other organisations/networks.
Feedback from clients and stakeholders ask your clients what they expect from your financial
institution. After all your goal is to improve results for your clients.
Exercise 9.2
In the same groups continue working on the Goals/Measures you have set and
develop the Targets for each Measure.
Time: 30 minutes
Time: 30 minutes

Equity Bank set the following Targets for its Goal of developing an effective credit system:
Goal Measures Targets Activities
1. Train on waste reduction by June

Process 2005 (SECURITY and
efficiency
> 95% by OPERATIONS)
rating March 2006 2. Implement Activity Based Costing
by December 2005
(OPERATIONS and FINANCE)
3. Automate Manual Processes by
September 2005 (IT)
4. 100% by
Compliance
Effective 1. Issue certificate of compliance to
credit
with processes December policies and procedures by
and procedures
system 2005 March 2005 and Quarterly
(OPERATIONS)
2. Performance standards to include
compliance by March 2005 and
Quarterly (HR and CREDIT)
On demand 60% by 1.Define Reports in the new system
accurate for credit management by April
reports Dec 2005 2005 (CREDIT)

Session 10: Defining Activities

Session Objectives:
Translate targets to reality by defining activities
Identify new activities based on the defined strategy and align existing activities to the strategy
Link strategy to budget by finalizing the financial projections
Time: 2 hours 20 mins
Slides:
Materials: PowerPoint presentation entitled Session Ten This session consists of 15
slides
Handout:
10.1 Mapping Activities to Goals/Key Objectives
10.2 Prioritising KOGMA Activities
10.3 Budgeting
10.4 Terms of Reference Template
Exercise:
10.1 Alignment of Existing Activities to Strategy (20)
10.2 Define New Activities (20)
Overview: The last step in the business plan is to list the activities that need to be undertaken to be able
to achieve the targets. All activities have a cost implication. So it has to be checked whether all
activities has been accounted for the draft financial projection. Adjustments are made in the financial
projections to incorporate all activities.
1. How to plan to achieve the targets?

Time: 20 + 3 exercises of 20, 45 and 45 minutes respectively
Slides: 10
In this section the participants list the activities that they want the institution to undertake to achieve the
targets that they have set. This is done in two phases, one by listing existing activities and then by
adding on new ones which are felt needed. This completes the operational part of the business plan.
2. How to link strategy to budget and update the financial projections?

Time: 10 minutes
Slides: 5
Each activity undertaken has a cost implication. Thus the complete activity list has to be aligned with
the financial projections. Refer to the draft financial projections developed earlier and the new line
items are added along with the costs.
Q. How do you define activities?

Activities should link to the Key Objectives, through Goals and Measures/Targets and not vice
versa. Organisations are usually activities driven: they think first about certain activities meeting their
on or clients needs and then identify objectives, measures and targets for those activities. This is wrong
from a Strategic Business Planning perspective Mission, Values, Vision and Strategy should always
come first. Key Objectives then outline the broad priorities necessary for success. Next, Goals and
Measures tell us what we must excel at to achieve the Key Objectives and execute the Strategy and how

we will gauge our progress. Targets supply a star to shoot for. And finally, Activities are put in place
that will help us achieve our Targets.
Examples of Activities include anything from building a client service portal on your web to launching
a career development programme or redesigning your financial management system.
To start with map current organisational Activities to your KOGMA Goals. Any initiative or Activity
that cannot demonstrate a clear linkage to a Goal, and hence to your Key Objectives and Strategy,
should be considered as strong candidate for removal. If you are looking for a quick economic pay-off
to justify your investment into the planning process, this step could be it. An ineffective initiative
represents the potential drain of your scare resource that could be used elsewhere. At the same time
your staff and management efforts and energy are directed to initiatives that have no or little payoff in
value.
Q. How do you assess and prioritise activities?

Using the KOGMA you can put your current initiatives under microscope and clearly divide which
generate and which do not generate the value and drive to your success.
To assess on-going or current Activities within your institution:

1. List existing Activities
2. Review their alignment with strategy
Do they link to Key Objectives and Goals?
Can their effectiveness be assessed using developed Measures?
What would be their contribution to achieving set Targets
3. Indicate resources allocated
4. Prepare suggestions to management with next steps regarding these Activities:
Continue
Discontinue
Then develop new Activities through creative thinking and check them out against KOGMA Goals to
ensure that they will contribute to what really matters for achieving your Key Objectives.
To identify/design new Activities for your institution:

i. Identify new Activities, particularly in areas where they are needed the most
ii. Use lateral thinking approach and brainstorming
iii. Once you have generated enough check identified initiatives for alignment
iv. Prioritise your Activities/projects
Exercise 10.1
In your organizational groups:
List current or planned Activities/initiatives in your organisation
Review their alignment to the strategy using the Handout 10.1 Mapping Activities to
Goals/Key Objectives:
Do they link to Goals/Key Objectives?
Can their effectiveness be assessed using developed Measures?
What would be their contribution to achieving set Targets?
Time: 20 minutes

You will need to assess your own criteria to assess priorities and the weights to assign to each of the
criteria, but you should design and implement a system for formally prioritising Activities so that those
likely to yield the most results in terms of achieving Goals and the Key Objectives are implemented
first. See Handout 10.2 Prioritising KOGMA Activities.
Initiative #1 Initiative #2
Criteria Weight Description
Points Score Points Score
Ability to positively impact Key

Linkage to Strategy 45% 7 3.2 1 4.5
Objectives
Present value of benefits discounted 5

Net present value 15% 5 .75 10 1.5
years
Total cost 10% Total cost including labour and capital 5 .50 10 1
Resource requirements (key Key personnel needed including time

10% 8 .80 10 1
personnel) requirements
Total anticipated time to complete the
Time to complete 10% 8 .80 10 1
initiative
Impact of other initiatives on the

Dependencies 10% successful outcomes anticipated with this 3 .30 10 1
initiative
6.4 6
Q. How do you budget for all these activities?

60% of organisations do not link their strategy to budget. The link to budgeting is clear when you
calculate the monetary investments necessary to launch the Activities. Every initiative or Activity will
necessarily entail allocation of resources.
All Activities should document the Key Objectives and Goals they support, resources required to
accomplish (human and financial), dependencies with other initiatives and key milestones.
The operational budget to be used to allocate resources is necessary for typical, recurring operations.
The strategic budget is reserved for spending designed to close any significant gaps that exist between
current and desired performance on critical performance indicators.
Alternatively you can use Activity Based Costing to develop the budget however, this is very
complicated.
Attach budgets to organisational levels and Activities

Provide those that will prepare budgets with templates they can use to easily capture resources
requirements. Each Activity needs to come with documentation costs, timing, dependencies, key
milestones, payback periods, etc.

A Simplified Budget Submission Form
Business unit: IT and records Goal(s):

Increase customer satisfaction (KO3: Improve client focus) and
Enhance speed of basic business processing (KO5: Improve efficiency)
Measure Target Activity Resource requirements
(USD)
operating Capital
Customer satisfaction 80% Internet customer service 100.000 50.000
measured by quarterly portal
surveys Remodel of citizen service 25.000 250.000
centre
Records management 50.000 150.000
programme
TOTAL 175.000 450.000
Then summarise all the requests (documents) in relation to Key Objectives and Goals.
Budget Request Compilation by Key Objective and Goal
Key Objective: Improve client-focus
Goal Current KOGMA Budget request Budget request

status** operating (USD) Capital (USD)
Increase customer Red*
satisfaction
Promote economic Green*
opportunity
Provide new services Yellow*
% total spending 35 27
*Green meeting or achieving the target, red requires improvement, yellow requires caution and
attention
** Current KOGMA status snapshot of performance on the objective in the most recent year.
Finalise the budget: There will be gaps between requirements and money available. To close the gap,
each initiative leader should deliver a formal presentation to senior managers outlining their budget
submissions:
What they encompass
Why they are strategically important,
How they will positively impact the Goals/Key Objectives.
Managers will need to decide which initiatives to fund. Most organisations use a ranking system:
Activities that can be eliminated since they have low impact
Activities that can be cut but will influence the groups chances to meet the Targets
Activities that are crucial for achieving Goals/Key Objectives
See Handout 10.3 Budgeting

Then Develop Terms of Reference for the Activity and allocate the resources necessary to implement
it. Below is the format used by some organisations for this exercise:
Activity Terms of Reference Template
Activity Name Project Manager Unit/Team
Key Objective
Goal
Measures Targets
Activities
Milestones
Deliverables
Dependencies
Risks
Resources
Budget
Operating
Capital
Interaction
Required
Completed By Date (last updated) Version
See Handout 10.4 Terms of Reference Template
Exercise 10.2
In your organisational sub-groups continue working on your Key Objectives:
Define the new Activities the organisation must undertake to meet its Goals
Use lateral thinking approach and brainstorming
Once you have generated enough check identified initiatives for alignment
Time: 45 minutes
Time: 45 minutes
Time: 20 minutes

Q. Why do you need to re-visit the financial projections?

Now you have a clear understanding of the Activities and budgets necessary to implement your
Strategy, it is time to get back to the financials! Re-examine the financial projections in the light of the
budgets for the Activities:
Do the projections still add-up?
What are the key revenue and cost drivers and are these adequately stressed in the KOGMA
Analysis?
This step may force you to revisit some of your Key Objectives or Goals.

Session 11: Implement and Monitor KOGMA

Analysis
Session Objectives:
To understand the need to communicate the business plan
To learn how to cascading KOGMA analysis for alignment
Report, use and learn from KOGMA
To debate why update KOGMA analysis
To list the key implementation principles
Time: 1 hour 20 Minutes
Slides:
Materials: PowerPoint presentation entitled Session Eleven This session consists of
20 slides
Exercise:
11.1 Reporting on KOGMA Results (20)
11.2 Principles and Challenges (20)
Overview: The KOGMA affects all levels in an institution. Thus it is important that the results of
KOGMA be shared with all in the institution. It is key to the success of its implementation.
Implementation of KOGMA can be ensured and made effective by attaching incentive scheme with its
implementation and achievement.
1. Why and how can results of KOGMA analysis be shared with all personnel?
Time: 20 +20 minutes for exercise
Slides: 9
For effective implementation of KOGMA, it is important that the results of the KOGMA analysis are
shared with all relevant personnel in the institution. It has to be a two way communication to ensure that
the results are amended and effective suggestions are incorporated.
2. How to report on the results of KOGMA?

Time: 20 minutes (plus 20 minutes of exercise time)
Slides: 11
The impact of KOGMA can be documented as the activities, measures, targets have been defined. A
reporting format needs to be developed which will capture the impact that is being achieved through
KOGMA.
Q. How do you communicate and market the plan?

The Key Objectives Goals and key performance Measures can be published in the financial institutions
annual report. However, successful implementation of the strategic business plan depends on effective
communication. Internally, the KOGMA Analysis should be communicated to all organisational levels.
Managers and staff need to have a clear understanding of the plan and their roles in it. A plan has little
value if it is not widely understood and accepted. It must form the basis for daily action throughout the
institution.

Part of your communication will have been conducted through the participatory process you used to
develop, review, critique and refine the KOGMA Analysis. It is however important to ensure that
everyone in the organisation has a clear understanding of the key building block of the Strategy and
KOGMA Analysis. As a minimum Chairman to Cleaner should know our organisations:
Mission
Values
Vision
Key Objectives
Goals in which they are involved
Communicate and cascade KOGMA Analysis to all the organisational levels (staff meeting) and make
the KOGMA Analysis available through as many channels as possible:
Intranet
Presentations from team members
Brochures
Newsletters
Town hall meetings etc.
Talk about the plan at staff meetings
Distribute copies of the full plan to programme managers
Prepare a condensed brochure version of the plan to share with all employees
Display the mission statement in a prominent location in the building
Recognise progress on the plans Key Objectives and Goals at staff meetings, in newsletters, and at
other organisational events.
Q. What is cascading?
Involvement Is Key To Ownership: Remember that communication is a two-way process and that many
excellent ideas for both Strategy and KOGMA will come from all over the organisations. Assign team
members to different organisational
levels and teams to lead the Mission, Values, Vision, Strategy
cascading efforts. Start with
Organisational
business units and continue down KOGMA
Goals
the organisational structure. Measures /
Targets Kn
o wl
Actively solicit critique, discussion ed
Goals ge
and inputs from all levels this will: Unit a nd
Improve the KOGMA Analysis KOGMA
Measures /
Targets
in
fo
rm
Improve understand/buy-in and Kn
a ti
on
o wl
thus alignment ed Goals
ge Measures /
a nd Team
in KOGMA Targets
Use the communication process to fo
rm
open communication channels ati
on Goals
throughout your organisation. Individual Measures /
In large and complex organisation, KOGMA Targets
the cascading process is used to
further develop and deepen the detailed planning.
KOGMA analysis can be used to prepare a business plan for each level of your organisation.
As a minimum the cascading process should ensure that everyone knows the Mission, Vision, Values,
Key Objectives and the Goals in which they are involved so that their daily work is directly aligned to
the purpose and plan of the institution.

Sending A Man To The Moon

There is a great story about former president Lyndon B.Johnson touring Cape Canaveral during the
space race to the moon. During his visit, the president came across a man mopping the floor, and asked
him, What is your position here? The gentleman looked up from his pail and proudly replied, I am
sending a man to the moon. Such is the power of alignment, when every person, regardless of role and
rank, possesses a clear line of sight between his or her job and the organisations loftiest goals.
KOGMA Analysis can be used to drive organisational alignment from top to bottom, through the
process of cascading:
Cascading is a process to bridge the considerable learning gap that exists in most organisations
Cascading provides real-time data for decision making, resource allocation and STRATEGIC
LEARNING!
Cascading the KOGMA Analysis allows the staff to find meaning in their chosen professions
In socially driven organisation cascading is even more important since achieving long term outcomes
requires much effort and very good collaboration.
A non-profit must be information-based. It must be structured around information that flows up from
the individuals doing the work to the people at the top the ones that are in the end accountable and
around information flowing down. This flow of information is essential because a non-profit
organisation has to be a learning organisation Peter Drucker in Managing the Non-profit
Organisation.
Cascading the KOGMA Analysis allows the staff to find meaning in their chosen professions (we need
something more than money, so knowing how we contribute to wider society is empowering).
A recent study by Watson Wyatt in the US revealed that only about half of employees understand the
steps their companies undertake to reach new business goals. According to researchers in the UK, in
poorly performing organisations 2/3 of staff did not have a good understanding of overall organisational
goals.
Cascading facilitates learning by fostering a two-way flow of information up and down the
organisational levels. Staff is given a chance to demonstrate how they contribute to results. Results
analysed at different levels benefit the leaders that can see how Activities fit within the whole
organisation.
Soichiro Honda of Honda Motors notes that a very successful corporation is one that grasps the
importance of alignment. He thinks that the sacred obligation of leadership is to:
1. Craft a vision: what we will be
2. Create goals: what 4-5 things we must do to get there
3. Alignment: translate work of each person into alignment with the goals.
Each unit should examine the institutional KOGMA Analysis to identify areas where they can have the
greatest influence examining which of the Goals it can influence. Start with unit level and go down.
After each level is completed, the team audits the Measures for the institutional KOGMA Analysis and
between different teams. Once all KOGMA Analysis review exercises have been completed by all
units, hold an open house meeting where staff can challenge each others analyses.

Institutional KOGMA Analysis
Key Objective: To be Goal: Improve customer Measure: Customer loyalty rating: Target:75%
the MFI of choice in loyalty: move beyond composite index of customer loyalty
our market satisfied to loyal customer
Customer Service and Marketing (CS&M) KOGMA Analysis
Key Objective: To be Goal: Improve customer Measure: Redesigned customer Target:5

the MFI of choice in loyalty: move beyond processes; number of redesigned
our market satisfied to loyal customer customer processes and services
CS&M Information Technology KOGMA Analysis
Key Objective: Goal: Provide Measure: Service requests; Target:500

Improve customer effective desktop number of service requests
loyalty: move support to CS&M completed
beyond satisfied to staff
loyal
Q. How to use tracking systems?

Tracking systems to monitor progress, compile management information and keep the plan on track are
also essential for successful implementation of the KOGMA Analysis. Tracking the implementation of
Goals (and Key Objectives) will normally be the responsibility of the individual or team responsible for
completion of the Activities. Ideally, monitoring should follow a regular schedule-quarterly or monthly
or in some cases, even weekly.
It will therefore be desirable to develop a tracking document. Elements for a workable tracking
document should include:
Key Objectives
Goals
Measures
Activities, including the identification of the position, unit, section and/or branch/division
responsible for implementation
Room for comments and an explanation of the actions taken to date
Information on current status.
Remember that by adding space for comments and the current status of each action step, your Activities
plan may work as your tracking document.
The tracking document is only as useful as the information it contains and provides to management.
Remember that this report will be a tool that management will use not only to evaluate the Key
Objectives and Goals, but also to react quickly and effectively to the unexpected.
Progress and non-progress should be reported. Report progress to date on steps in the Activities plan
that are completed ahead of schedule and that are on schedule. If things are not progressing according
to plan, report the reasons, as well as what is being done to get implementation back on track.
Q. How do you monitor the measures?

In addition to tracking progress on Key Objectives, Goals and Activities, Measures should also be
monitored. Data should be collected for each Measure and reported at a regular interval. Progress
reports on Measures could be in the form of data tables or presented in charts or graphs.
When using Measures as indicators of progress, it is important to note that most outcome measures only
provide a score indicating how well the characteristic being measured is doing. External factors will
affect the value of most, if not all outcome measures.
For each Measure, compare actual performance with the proposed performance level, and report the
results. Ask the following questions about variances:
How does the reported performance compare to previous periods?

Is the variance relevant to successful achievement of the goal?

Do external factors affect performance to the extent that targets may not be met?
Is the variance due to faulty implementation?
Are there unanticipated effects resulting from the variance?
How frequently and in what form will the performance information be prepared?
What kinds of explanatory data do you think will be needed to explain trends and results?
How will the data/information be verified and checked for accuracy? What kinds of
controls, tests and/or audits are appropriate?
What kinds of unintended results can you expect from implementing the strategies? How
can you avoid these results?
How will you use the data to evaluate, improve, and change your strategy?
How will you know if your strategy is inefficient or ineffective? What will you do to fix it?
Measuring Progress of the Strategic Business Plan Key Issues
Comparison of actual performance as reported in the monitoring document, to the planned

performance (i.e., target) provides the basis for periodic evaluation of the strategic business plan and the
planning process. Management should use the results of the daily, weekly, monthly or quarterly reports
to identify reasons for not meeting expected results and use this information to review and revise
policies, procedures, goals and objectives, as necessary.
Tracking performance and reporting results is an important way to measure progress towards meeting
the goals in the strategic business plan. Assist staff by articulating some boundaries:
Designate specific cut-off times for reporting.
Pay special attention to continuity of data collection and calculation during personnel changes.
Train the new staff on how to calculate the measures in accordance with previous methods.
Be sure there are effective internal controls to be sure the information is properly collected and
accurately reported. It is difficult and embarrassing to take back information once it leaves an
office.
Q. How should you report the results?

Each institution will establish its own guidelines concerning how often performance information is to
be collected and reported. At a minimum, data for each Measure will have to be collected annually, but
some Measures may be calculated more frequently.
For example, you may want to have internal management reports on key volume, caseload and
delinquency indicators every month and then to aggregate and report this information to upper
management on a quarterly basis. For other indicators (especially if the month-to-month changes are
nominal), you may want your data-reporting period to be semi-annual.
External reporting. External stakeholders want to know how well the financial institution and its
operations are performing. If Measures show a continuous improvement process with a positive impact
on results, some of the stakeholders concerns may be allayed.
Reports for external stakeholders should be clear and concise. Reports are often easier to read if the data
are presented graphically. Reporting performance measures can also be aggregated and incorporated in
annual reports.
Use explanatory information when reporting results. Your can rarely measure all the variables or
identify true cause-and effect relationships. To do so would require a rigorous experimental design,
which would be impossible or prohibitively expensive.
Also, multiple factors can influence outcomes and many are beyond the control of the institutions
management. Recognise that your Measures have some limitations, and try to explain any unexpected
results.
The following may help in the communication of results.

Include targets as well as actual results
Include explanations where performance varies significantly from previous levels or targets
Develop reports that are user-friendly and that various stakeholders will be able to understand
Provide information that will enable readers to easily assess the level of performance
Do not provide too much information
Ensure that feedback on the reported information can be gathered
Internal reporting. Internal reports can take various forms. These reports for programme managers
can be more detailed and are usually more frequent than those for other stakeholders or top
management. They may also include more process information. Sometimes, the data may be separated
in order to clearly convey patterns. For example, results may be more meaningful if reported by
geographic area or branch etc.
Create a mock-up report with dummy results beforehand and consult with the executive group. Then
use results to drive agenda of management review meetings:
Invite based on knowledge (not only managers)
Review performance on all KOGMA measures
What if data shows poor performance? Let the Measures speak for themselves. Show people how
they are doing. Ask for and offer explanations. Organisations do not always have control over ultimate
results. For example, the economy or events in peoples lives can influence a microfinance
programmes outcome. Determine what can be done differently.
It is alright to constructively confront substandard performance. If not, poor performance is sanctioned

and opportunities to improve are limited. Keep in mind that measuring performance also recognises
accomplishments.
Exercise 11.1
In groups:
Develop a report template for reporting KOGMA Analysis results
Present
Time: 15 minutes
Q. What should you do in the review meetings?

Review performance on all Measures:
What can you learn from those Measures where you excel?
Are there initiatives or resources that can be applied with equal effectiveness to other Measures?
Ask more questions about the Measures/Targets:

Is the Target appropriate?
What supporting Activities are devoted to this Measure?
How are we progressing on those Activities?
Do these results imply a flaw in our strategy?
How have other Measures in the chain of cause and effect reacted to this performance?
Develop a tracking device to ensure commitments made in the meeting are kept and that progress is
taking place. Use analysis of the gaps between Targets and actual achievement on each Measure to
drive the agenda.

Q. On what do you base the rewards on overall results?

The easiest way to tie KOGMA Analysis performance to rewards at higher levels in the organisation is
through bonuses/staff incentive schemes. Some may even consider bonuses to lower organisational
levels based on the specific Goals for which they are responsible.
Under such schemes a certain percentage of incentive compensation is available to employees if the
organisation achieves some or all of its goals. Each measure is assigned a weight with total weights
across perspectives summing to 100%. Financial targets often receive higher weight to reflect
importance of fiscal success (or other depending on goals).
For Example:
Key Objective Measure Target Actual Weight Payout
Improve Sustainability FSS 100% 110% 30% 3.0%

Revenue Growth 25% 20% 10% 0
Excel at Customer Customer Satisfaction 75% 77% 15% 0.4%

Service
%Customer Retention 90% 85% 5% 0
Re-engineer Internal On-time delivery 90% 85% 10% 0

Processes
Operational Efficiency 85% 85% 10% 1.0%
Improved staff capacity %employees gaining three new competencies 70% 75% 12% 0.86%
and satisfaction (competencies attainment)
Employee Turnover (Neg) 5% 4% 8% 1.6%
Total Payout 6.86%
Successful KOGMA Analysis

Has a mix of financial and non-financial measures
Creates an environment conducive to motivating staff
Enables communication of Key Objectives, Goals and Targets
Describes the organisations vision
Gives an overall picture of the strategy
Shows staff where to contribute
Focuses staff on critical issues
Allows monitoring of progress towards Goals and thus Key Objectives
KOGMA Analysis is about change! Reflect it and update your KOGMA Analyses regularly.
Exercise 11.2
In groups:
Develop a list of key principles in implementing the KOGMA organisation-wide
Discuss potential challenges you may encounter and ways to avoid/deal with them
Time: 20 minutes
Q. Why do you need to do an annual review and assessment?

All strategic business plans KOGMA Analysis or others - should undergo an annual assessment. This
helps the institution:
Evaluate progress towards the Key Objectives and Goals.
Determine what went well and what lessons were learnt.

Modify the plan to make it more realistic or challenging depending upon the circumstances and
Prepare useful information for the next planning cycle.
The institution should conduct an annual assessment of its strategic business plan. This allows the
strategic business planning team and the institution to see where it is with implementation, make any
necessary adjustments and prepare for the upcoming operations plan. The questions beside each
category are illustrative of the types of issues the institution should examine.
On Strategy What has been accomplished to date on each of the strategies

Implementation outlined in the strategic business plan?
In particular, which of the operational goals and actions planned for
completion during the year were actually achieved/completed?
Which operational goals and actions were not achieved/completed?
Why
On Expected versus What are the quantitative and qualitative results of the efforts to
Actual Outcomes date?
Do the results match what we expected to see?
How could we have achieved more?
What appear to have been the other intended and unintended
consequences of the action in pursuit of the strategies?
On Resource Utilisation Are resources, including staff, money, information, technology,
facilities, etc., being used as planned?
Are more or different resources being used than were anticipated?
On Corrective Actions What reasons may explain outcomes different from those expected?
What, if any corrective action should be considered and/or
implemented to get the institution on track?
On Trends Have there been any trends/developments with major implications
for the strategies?
How might the strategic business plan be modified to accommodate
new and/or changing trends?
Q. What are the lessons learnt from other industries on

implementation of KOGMA?
Examples of principles:
Encourage common language where appropriate as terminology should be consistent across
the organisation we all use the same Key Objectives, Goals, Measures, Targets and
Activities. There is a need for further education on the terms to ensure we are all on the
same page.
Keep Measures to minimum, but there is no cap on Measures in cascaded KOGMA
Analyses at organisational level we purposely limit the number of Measures. However at
each level there is a need to choose measures reflecting the team contribution. General
principle to keep to minimum works here as well.
Make sure that the tool does not serve only as reporting or measure depository but is used
by management for management purposes.
Cascaded KOGMA Analyses should be content specific representing the unique
characteristics of each group. People will only support what they create thus encouraging
unique but aligned KOGMA Analyses is critical to success.
Personal performance objectives should be linked to the scorecard all leaders and
managers should have the development of a KOGMA Analysis for their area as part of their
personal goals (i.e. advancing KOGMA among their groups). Understanding/use of
KOGMA Analysis should be included as key leader competence.

Communication of KOGMA Analysis and the development process will be critical as it is

cascaded throughout the organisation.
Team leaders are vital to the KOGMA acceptance (prepare support tools, educational
materials, road shows, boot camp for managers)
Share learning as a team and communicate regularly to capture early success of KOGMA
to circulate them and share (through website, meetings, etc). Team should meet regularly to
discuss, monitor and support successful implementation.
What You Can Do

Adapted From George Labovitz and Victor Rosansky
Start with the main thing [the Key Objectives/Goals] for the business or your business unit. Do you
know it is? Do your people know? Dont simply post the main thing. Engage the people who work for
you in a dialogue to be sure that they understand it and its implications for their work.
Create goals for everyone. Everyone from top to bottom needs individual goals that align with the
over-arching Key Objectives of the department, the division, and the company.
Create your own set of indicators [measures]. No matter where you are in the organisation, you have
customers (either internal or external), employees, financial requirements, and processes under your
direct control. Create a meaningful measure for each. Make each as close to real-time as possible.
Make sure that everyone understands your measures and how they tie into the main thing [the Key
Objectives/Goals]. Give every person working for you a one-page graphic that shows how his or her
work contributes to the main thing. If more than a single page is required, youre not being clear.
Link measures and activities with rewards and recognition. There should be a pecking order of
measures and rewards. Match these to customer care-abouts. What customers care about some should
earn the highest reward.
Give people the training they needs to do the job right. Start by identifying the people who do the job
best and the measures that point to best. What makes them best? Train others to be like them.
Review performance on a regular basis. Let customers rate employees through appropriate measures -
this makes rating more objective and takes the burden off you.

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Session Objectives:
To ensure participants have a written follow up plan of finalizing the strategic business plan
and sharing it with all in the institution
Time: 40 minutes
Slides:
Materials: PowerPoint presentation entitled Session Twelve This session consists
of 4 slides
Handout:
12.1 Course Evaluation
Exercise:
12.1 Action Planning (40)
Overview: The strategy document may remain a document unless measures are taken to ensure that it is
taken forward. So a defined action plan is designed by listing person responsible for completion of the
document and sharing with all others in the institution.
Time: 10+ 40 minutes for exercise

Slides: 4
Exercise 12.1
In organisational groups:
Review exercises, ideas that you have developed in the last 3 days
What key challenges in developing and implementing strategy can you identify?
What kind of assistance your organisation will requiring in developing/reviewing
your organisational strategy
Time: 25 minutes
Report back to the plenary
Time: 15 minutes
Please complete the course evaluation help us improve!! Handout 12.1 Course Evaluation

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MicroSave

Market-led solutions for financial services

Trainers Manual for

Graham A.N. Wright, Kasia Pawlak, Walter Tounitsky, Lisa Parrott,

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Introduction to Trainers Manual ................................................................................................1

Session 1: Introduction ..................................................................................................................7

Session 2: What is Strategy and Strategic Business Planning? .................................................8

Session 3: Mission, Values, Vision at the Core of Your Strategy ............................................21

Session 4: Diagnose Current Strategic Position ........................................................................28

Session 5: Formulate Your Strategy ..........................................................................................44

Session 6: Develop Financial Projections ...................................................................................52

Session 7: Execute Your Strategy Through KOGMA Analysis ..............................................54

Session 8: Identifying Key Objectives and Setting Goals .........................................................61

Session 9: Selecting Measures and Setting Targets ..................................................................67

Session 10: Defining Activities ....................................................................................................75

Session 11: Implement and Monitor KOGMA Analysis ..........................................................81

Session 12: Action Plan................................................................................................................90

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Introduction to Trainers Manual

Who should I be training?

Training multiple MFIs

What About the Venue?

What do I need to tell my participants need to bring with them?

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What do I need from MicroSave for the Training?

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What else do I need for the Training?

A digital projector, although an overhead projector could be used.

How do I use this Training Guide?

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Offers training suggestions trainer could try brainstorming, trainer could

Preparing Your Slideshow

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A Warning on Course Timing

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Methods: Introduction exercise

Slide Show: PowerPoint presentation entitled Session One customised

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Session 2: What is Strategy and Strategic Business

Time: 1 Hour 10 Minutes

PowerPoint presentation entitled Session Two This session consists of

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4. What are the different steps to developing a Strategic Business Plan?

Strategy According to Henry Mintzberg

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Strategy According to Kenneth Andrews

Strategy According to Michael Porter

Q. How does strategy relate to other components?

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Strategic Business Planning and Financial Planning

Q. What information is required to develop a strategy?

Q. How does operational effectiveness and strategy correlate?

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Q. What is strategic business planning?

It is also a process of organisational self-assessment, goal setting, strategy development

To achieve the above, the strategic business plan must be:

Q. What is new about strategic business planning?

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Concentration on results; and

Q. What are the benefits of strategic business planning?

In the 21st Century Successful Organisations are Characterised by:

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Benefits of Strategic Business Planning

Strategic Business Planning Trainer's Manual 0707

Strategic Business Planning Trainer's Manual 0707