Examining LAPO's Organisational Strategy

Lift Above Poverty Organisation (LAPO) is a prominent microfinance organisation in Nigeria.

LAPO was in the news in March 2010 for disbursing Naira 14 Billion (approx a little less than a 100 Million US Dollars) in the year 2009. The amount is pretty large and according to LAPO the idea is to reach larger number of beneficiaries. Managing funds of this size requires robust management tools and techniques.

In this post, we (www.nigeriamicrofinance.org), attempt to critically examine the robustness of the strategy that was announced by Mr Godwin Ehigiamusoe, Executive Director of LAPO in a press release in March 2010. The idea is to offer insights to the microfinance sector at large.

The Strategy in Brief

In the words of Mr Ehigiamusoe, LAPO has a well-stated multi-dimensional approach embedded in a two-phased strategy:

Phase 1. Institutional Strengthening Phase

Institutional strengthening phase is designed to enhance the organisation's financial management and control measures, staff productivity and service delivery capacity with special attention to branch automation nationwide, through the application of management information system software.

Phase 2. Expansion Phase

Complimenting the phase 1 of the strategy, Expansion Phase intends to scale up the outreach. The company operates in 226 branch network spread across 21 states of the federation, including Abuja, as at December. The branch network being large in size, they have been sub-divided into 54 areas and 11 regions for administrative and operational convenience. This helps LAPO to focus on achieving a target of reaching one million clients by 2011. The organisation currently has a client base of 243,055.

Besides these two phases, the organisation also has subsidiaries which are autonomous bodies such as LAPO Micro Investment Support Services (MISS), LAPO Agricultural and Rural Development Initiative (LARDI), LAPO Academy for Microfinance Company Limited, Sierra Leone, LAPO Capital Limited and Lift Microfinance Bank Limited. These institutions compliment the activities of LAPO through impacting social and economic factors affecting the members of LAPO.

Critical Analysis of the Strategy:

The organisation is well-placed in terms of its reputation in the industry as an organisation with best practices. The idea to have two-phased integrated strategy by LAPO is highly commendable. In management jargon, LAPO has been trying to integrate People, Processes and Products. The success rate of the strategy is high but the importance of critical elements in the implementation should not be overruled.

Besides this, we also interpret that the strategy, although well-stated, does not cover certain important elements - which we call as missing elements. These elements - critical elements and missing elements - forms the basis of our analysis. We have used McKinsey's 7-S strategy to explain these elements.

Let us first briefly understand the McKinsey's 7-S strategy and then get back to LAPO's case study. The picture below summarizes 7-S strategy.

The McKinsey 7S model involves seven interdependent factors which are categorized as either "hard" or "soft" elements:

"Hard" elements are easier to define or identify and management can directly influence them: These are strategy statements; organization charts and reporting lines; and formal processes and IT systems. Strategy, Structure and Systems are the "Hard" elements.

"Soft" elements, on the other hand, can be more difficult to describe, and are less tangible and more influenced by culture. However, these soft elements are as important as the hard elements if the organization is going to be successful. Shared Values, Skills, Style and Staff are the "soft" elements.

LAPO seems to be working rigorously on the "Hard" elements which we also believe are truly critical elements for successful implementation. For instance the strategy has been well thought and well articulated, the structure and systems have also been thought through.

However, there seems to be some elements which are missing in the strategy, which are the "soft" elements. These may severely hinder the implementation. These missing elements are discussed below. Here it is important to note the disclaimer that this analysis has been made using the press-releases and therefore should not be used to fully judge the organisational performance of LAPO.

Shared Values:

• What are the core values?
• What is the corporate/team culture?
• How strong are the values?
• What are the fundamental values that the company/team was built on?

These are the questions which LAPO probably needs to focus on. The vision of the organisation should trickle down from the top management to every member of the institution and should be owned by everyone - not just the by the staff but also by the borrowers or clients of LAPO. This aspect seems to be missing in the strategy spelled out (It may perhaps be inherent and may have not been articulated).

Style:

• How participative is the management/leadership style?
• How effective is that leadership?
• Do employees/team members tend to be competitive or cooperative?
• Are there real teams functioning within the organization or are they just nominal groups?

Effectiveness in working with community is achieved through participative leadership and management. Community should participate in planning and implementation. The best one can do is to train the community in leadership and managerial functions for them to become effective participants. One-sided approaches are always prone to failures.

Consider the case of high-interest rates: without community participation in the decision making of setting the interest rates, there would be issues related to integrity and transparency. This is happening around the world with examples from Banco-Compartmous to SKS India. Nigerian microfinance institutions are also being blamed for high interest rates. Participative and informed decision making will help remove the barriers to growth.

Staff:

• What positions or specializations are represented within the team?
• What positions need to be filled?
• Are there gaps in required competencies?

Human Resource has largely been a neglected area in the microfinance institutions world-wide, Nigeria being no exception to this. The proper placement of right people in right jobs is the need of the hour. LAPO needs to include this in its strategy for growth.

Skills:

• What are the strongest skills represented within the company/team?
• Are there any skills gaps?
• What is the company/team known for doing well?
• Do the current employees/team members have the ability to do the job?
• How are skills monitored and assessed?

Building the capacities of organisation, staff and clients are essential ingredients which cannot be overlooked. Without proper skills, neither of them can use the billions of Naira optimally. Skill importation or skill transfers should be considered as important elements in the strategy.

Conclusion

With an ambitious plan to be a leading microfinance institution, LAPO has to set itself as a model microfinance institution in the country - the foundation of which has already been laid out. What is required is to tighten the nuts and bolts and sail the ship through the storm.

For other institutions trying to imitate LAPO's growth strategy - here is a word of caution. The strategy is good for a given set of innumerable elements in the ecosystem that LAPO operates. Blindly adopting them for your own organisation can severely affect your own strengths. Better diagnose your organisation well and have a strategy of your own by learning lessons from others. There is this age-old African proverb which is no more relevant in these dynamic and ever-changing world. The proverb says - if it looks like a wildebeest and everyone else is chasing it, it must be lunch!

Let us know what you think about this article and share some snippets of your own organisation through the comments below.

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Disclaimer: The article is not intended to affect the credibility of the organisation - either positively or negatively. The views expressed in this article are purely from an individual perspective and is not influenced by any institution.

Sources:
1. Daily Champion, 11 March 2010
2. The McKinsey 7-S Framework that is used in this article was first featured in the book "In Search of Excellence", by former McKinsey consultants Thomas J. Peters and Robert H. Waterman.

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