Tuesday, June 1, 2021

104. Lean at Origin for Producer Groups in East Africa

Can formal education improve the management practices of firms?  Literature on the impact of business training offers mixed evidence of its effectiveness, depending on the educational settings and targeted population (McKenzie and Woodruff 2012). At Artisan, we believe there is growing evidence of effective executive education courses on the African continent. Our Lean At Origin courses are a good example of the power of executive training for the coffee sector. 

According to VoxDev, a development economics platform:

"Low-cost interventions such as executive education courses can improve firms’ financial practices and decision making, and trigger economic development."

In a recent paper (Custodio et al. 2020), a randomized controlled trial (RCT) was used to estimate the impact of a financial education program for top executives at medium-sized and large firms in Mozambique. The authors find that this intervention leads to significant changes in short-term financial policies and investment. They show that upon receiving financial education, managers reduce accounts receivable and inventories, which generates an increase in free cash flows used to finance long-term investments. These changes improve the performance of the treated firms. 

Artisan Coffee Imports has been bringing executive education style courses in Lean management principles to producer organizations since 2016. The "Lean at Origin" curriculum was piloted with cooperatives in Rwanda and Burundi in 2016-2017 as part of an Export Promotion grant from Trademark East Africa. From there, founder Ruth Ann Church continued to roll out the program to private producing companies in Rwanda and Burundi. In 2019, to two cooperatives on the island of Idjwi in D.R. Congo received the training thanks to a grant from the Polus Foundation.

Adoption of the principles was high, as most participants readily saw the application of tools for the elimination of waste to their work in coffee and also to their every day lives. During the leadership training at Kopakama, Terese UWIMANA, president of the Ejo Heza women's group stated, "the way of making things clean and organized is going to help us at home and in the community, too!"

Lean at Origin curriculum typically starts with a two-day training for the organizations' leadership. In groups not larger than 18 at a time, participants engage primarily in learning through in hands-on activities and group discussion. Lectures with powerpoint slides (given through simultaneous English-Kinyarwanda translation) are kept brief and limited. Principles of delegation, the importance of metrics and customer focus are emphasized with leadership.

Supervisors are included in the second two days of instruction, where the emphasis is on quality improvement projects called "Kaizen" projects. The goal is to give the participants a basic understanding of how to visualize and improve a process utilizing teamwork and brainstorming.

A key finale event is the "Lean Celebration Day" where community leaders and family members are invited to the cooperative to hear brief presentations by each of the Kaizen groups about the improvements they have made. After the presentations, food, music including drums, drinks and traditional dancing are part of the "Lean Party"!

Impact - the story of Gervias KAYITARE:

With each training a "Lean Champion" is identified. The criteria to be selected is the individual's grasp of and ability to communicate the lean principles. In 2016, by the end of four days of training at Kopakama, it was clear that Gervais KAYITARE comprehended the opportunities Lean was offering his cooperative - especially KAIZEN. In 2017 Gervais embraced advanced sessions on Value Stream Mapping and allowed deeper sessions for the team at the dry mill on Lean tools for production scheduling. In 2018, Gervais helped the farmer cooperative implement the largest change in quality control in its history with the introduction of a floating requirement at all 35 collection sites. In 2019, Gervais had moved into the Executive Director role at the coop. In that role he encouraged new processes to improve soil rejuvenation and the floatation process at collection sites.

In 2020, Gervais was again at the cutting edge, implementing a third cherry price in addition to the government-mandated two prices. This was in keeping with the Lean principle to eliminate waste and defects at the point of purchasing raw material. They would pay a "special" price for "special" coffee that met strict and well-communicated quality criteria: delivery before 12 noon to the collection site and no-compromises hand-sorting. With the "special" criteria to get only the reddest coffee cherry, Kopakama was on its way to lower costs and improve quality at the same time -- the hallmark of Lean. 

This step into new territory of paying a quality premium at the time of the farmgate transaction brought unwanted attention and stress for Gervais and his cooperative. Neighboring cooperatives called the "special price" unfair and unlawful. Gervais courageously held his ground, convincing the cooperative president and the board, that their position was indisputably beneficial to the farmers and the cooperative, and could benefit the entire country if allowed to continue.

In 2021, Rwanda began to see coffee processing organizations across the country paying "special" prices. Thousands of farmers have benefited from the new appreciation for the value they bring now that "elimination of waste" is beginning to take hold in Rwanda's coffee value stream.

Research on the value of executive education:

Differences in productivity and profitability across firms can be large and persistent (Syverson 2004, Syverson 2011, Foster et al. 2008). Management practices as well as development levels across countries contribute to explaining these differences (e.g. Bloom and Van Reenen 2007, Bloom and Van Reenen 2011, Bloom et al. 2013). Analyses of the role of management practices in explaining firm-level productivity and profitability focus on a variety of topics including operational management practices and financial management practices. Corporate policies in these areas might be particularly important in contexts where financial and operational frictions are severe, such as in developing economies. 

Watch a video 'Introduction to Lean' on Youtube with Ruth Ann Church presenting basic Lean principles to groups of coffee producers across several continents. Click here.

Read about a 2015 Lean training for a Kenyan peanutbutter firm sponsored by the United Nations International Trade Centre (ITC): Click here.

Read about a team of European students who taught Lean courses in the East African Community, 2019-2020, via an ITC program called MARKUP.

Read more about executive education in Lean offered throughout the African continent: https://www.lean.org.za/

Read more about research on interventions focused on financial management practices:  https://voxdev.org/topic/firms-trade/how-financial-education-managers-can-help-improve-firm-practices-evidence-mozambique