The following is a conversation between Will Warshauer, the President and CEO of TechnoServe, and Denver Frederick, Host of The Business of Giving on AM 970 The Answer WNYM in New York City.
Denver: TechnoServe is a leader in harnessing the power of the private sector to help people lift themselves out of poverty. Impact Matters, an organization that rates nonprofits based upon their impact, has rated TechnoServe the No.1 nonprofit in cost effectiveness when it comes to reducing poverty. And here to tell us about how they do it, it’s a pleasure to have the President and CEO of TechnoServe, Will Warshauer.
Good evening, Will, and welcome to The Business of Giving.
Will Warshauer
Will: Happy to be here, Denver.
We’re working in 29 countries, reaching millions of people every year, working with small farmers because most of the world’s poor earn their living through agriculture, and also working with the entrepreneurs and helping people get jobs in the various ways that people earn more and become prosperous.
Denver: Many listeners may not be familiar with TechnoServe. How and when did the organization get started, and what’s your mission?
Will: You’re right. We’re one of the best-kept secrets in international development. We were founded 51 years ago to provide business solutions to poverty. Our founder, Ed Bullard, had that insight, and that was a radical notion 50 years ago. People didn’t talk about profits and development in the same sentence. It’s become the middle of the mainstream now, but we were one of the first to work in that area.
We have grown. We’re working in 29 countries, reaching millions of people every year, working with small farmers because most of the world’s poor earn their living through agriculture, and also working with the entrepreneurs and helping people get jobs in the various ways that people earn more and become prosperous.
Denver: There’s a tendency, Will, to look at governments and foreign aid as the key drivers to lifting people out of poverty. But, increasingly, business is becoming more important. In fact, would it be fair to say that it has become the key driver?
Will: Absolutely. If you look at the statistics, you will see, a long time ago, in most emerging markets, foreign aid became eclipsed by direct foreign investment, and about two years ago, that even became true for the continent of Africa where there’s more investment dollars flowing in than aid dollars.
So, the smart people that are thinking about aid and development are thinking about how they can leverage that private sector investment, dynamism, and energy to drive development.
…although we work with some of the poorest people in the world, we don’t give anything away for free.
Denver: That’s really interesting.
Well, let’s talk about that work. There are three major elements of how you go about doing it. The first is empowering the small-scale farmers and entrepreneurs with the skills and knowledge they’re going to need. Now, how do you provide that?
Will: Whether it’s a small farmer or a small business person, we are really trying to help them in three ways. I should preface that by saying that although we work with some of the poorest people in the world, we don’t give anything away for free. We’re even against subsidies. That sounds a little strange, perhaps, but the reason for that is if we can help people get into commercial relationships that really work on straight commercial terms, that’s what will last over time, and that’s what we’ll scale up. So, that is our approach.
A lot of the skills building involves business skills, whether it’s a small farmer or a small business person, gaining those basic skills so that he or she can understand and run their business effectively. And then various technical skills, ranging from everything to growing coffee to making soap or other products that they may be manufacturing.
Denver: Do you also help them get access to capital?
Will: We do. We don’t provide any of it directly, but we do help them access it from a range of institutions – microfinance institutions, credit unions, and banks – around the world. We often will advocate at those institutions and help them perhaps develop specialized products. An agricultural loan, for example, can only be paid back after harvest. Things like that.
We are a classic, sort of teach-them-to-fish organization, so that’s why we don’t want to provide the financing. We want to find commercial organizations to do that.
Denver: You are really a catalyst in so many different ways.
Will: That’s what we aim to be. Exactly. And again, it goes with our mission of a focus on long-term impact. We are a classic, sort of teach-them-to-fish organization, so that’s why we don’t want to provide the financing. We want to find commercial organizations to do that.
Denver: That makes sense.
A second important aspect of this work is to strengthen market connections. Now, what’s often missing, and what are you able to provide?
Will: This is an area where I think the world is changing fast in a way that really advantages the small farmer and the small business person. We think about this in terms of a concept called shared value. This was put forward by a couple of Harvard Business School professors in a seminal article about a decade ago – Michael Porter and Mark Kramer.
…we work with some of the great corporations in the world – Coca-Cola, Unilever, Nespresso and so on – but we don’t ask them to be philanthropic. We take them a hard business case and say, “This is great for your bottom line. And by the way, in executing this, you’re going to take thousands or tens of thousands of families out of poverty in a way that they can stay out.”
Denver: Mark has been on the show.
Will: Great.
They had the insight that there are a growing set of opportunities where the business opportunity actually lines up with the social opportunity. So, we work with some of the great corporations in the world – Coca-Cola, Unilever, Nespresso and so on – but we don’t ask them to be philanthropic. We take them a hard business case and say, “This is great for your bottom line. And by the way, in executing this, you’re going to take thousands or tens of thousands of families out of poverty in a way that they can stay out.” And so that is our approach to them.
Take an example of a company which is sourcing agricultural commodities. It used to be that those companies saw that as a zero-sum game – If I can buy what I’m buying 10% cheaper, I win. The smarter companies have understood for some time now that if the family that is growing what you need to buy – you may be buying coffee, you may be buying mangoes, whatever it is you’re buying – if that family that grows it for you is living in poverty , that is actually a core business risk for you because it may not be there when you need to come back and buy it again next year. So, you as a business person have a business interest in helping that family become prosperous.
Denver: Yes. And you just said a moment ago, tens of thousands…so my mind jumps to the fact that you have to assist with farmer aggregation to try to get all these farmers working together so there is a supply that’s readily accessible to these major corporations.
Will: Absolutely key. We look at a lot of market failures and try to help solve for those. You just mentioned a really important one. When you think about a lot of crops that consumers around the world enjoy, many of them are majority grown by smallholder farmers – about 75% of the world’s cacao for chocolate, 70% of the world’s specialty coffee, all grown by these small farmers.
So, they need to come together – what used to be called a “cooperative,” or we now refer to it more often as a “farmer business organization” where they can come together. They can then get better terms of trade; they can access inputs that they need to buy, and they can trade with some of these big multinationals because they get to the scale that they need to get to.
It doesn’t make sense to help a farmer learn how to grow more of a certain crop if there is no good way to get it to market, or no good way to connect them with the next border.
Denver: And the third and final leg of the stool is to improve the business environment for small-scale producers. Tell us about that.
Will: Well, it’s really looking at the whole market system. It doesn’t make sense to help a farmer learn how to grow more of a certain crop if there is no good way to get it to market, or no good way to connect them with the next border. So, it’s really looking at the whole business environment.
I can tell you a short story that illustrates the power of this. Many people don’t know that Coca-Cola is the largest juice company in the world. Coke has been selling more and more juice to a growing middle class in the continent of Africa, but they were sourcing all of the fruit for that juice. They were importing it all. It was a classic sort of market failure. So imagine this container of fruit coming into the port from India. They would literally be driven by these African farmers sitting on the side of the road with fruit on wooden tables selling it. It was a terrible failure.
So we entered into a partnership with the Gates Foundation and Coke to address that. We worked with about 65,000 small farmers across East Africa, working on them improving their fruit production. We then worked with a number of fruit processing companies. So again, the enabling business environment… Because why was Coke importing it in the first place? It wasn’t that they didn’t care about African farmers, but they needed a certain volume and they needed a certain quality, and they needed that reliability to do their production.
So by having these farmers trained, by aggregating them into farmer business organizations, by enabling local processing companies to process to the standard that Coke needed, Coke is now able to source all of the fruit for all of the Minute Maid juice that it sells in Africa from African farmers. And those farmers who are selling to Coke saw their income from fruit more than double in the course of this.
Will Warshauer and Denver Frederick inside the studio
Denver: That’s a fantastic story. And you really have to look at those different parts of the supply chain. Sometimes people tend to focus on the commodity, but there’s a whole system that has to be in place if you’re going to go from A to Z.
Will: And if a piece of it is not working, then you don’t get the benefits you’re seeking. Absolutely right.
I think if I had to call out one thing, I think it is the business background of the staff and their ability then to sit at a table with a Coca-Cola or with a Nespresso and have a really credible business case developed.
Denver: Hey, Will, in what ways is TechnoServe different from other international development nonprofit organizations in terms of your composition of staff and the way you go about your business?
Will: It’s interesting, Denver. I have spent my career working in international development. I was a Peace Corps volunteer right out of college, so I’ve had the privilege of serving in a number of really high-performing international development organizations.
What is really different about TechnoServe is the staff, the background and quality of the staff. Most of our staff come to us from the private sector. Many of them come from top tier management consulting firms like McKinsey and Bain, and so they bring a world-class ability for analysis. What struck me when I joined TechnoServe over five years ago now was the depth of analysis upfront – these 60-page deep analyses of the mango sector in Northern Mozambique, or the global coffee opportunity. That drives much, much better project selection and project design because it’s based on a really deep understanding of these markets and market dynamics, and local culture.
I think if I had to call out one thing, I think it is the business background of the staff and their ability then to sit at a table with a Coca-Cola or with a Nespresso and have a really credible business case developed.
I think people come to work for us; they want meaning in their work, and they believe, I think, very deeply in our approach. We’ve got demonstrated a detailed impact… They just were working for a consulting firm making a business case for somebody selling widgets, but now they’re making a business case that can really take tens of thousands of small farmers out of poverty permanently.
Denver: Will, what’s the secret of recruiting them? We always talk about compensation, and I know they do pretty well at McKinsey and Bain compared to the nonprofit. How do you navigate that?
Will: Well, Denver, I have a belief that people, at the end of the day, have a deep need for their work to mean something. And so, some people tell themselves stories. You hear a lot of people in Silicon Valley saying, “We’re making the world a better place because you can order a pizza with one click instead of two clicks.” So, I think that’s a human need, and I think we can offer that.
I think people come to work for us; they want meaning in their work, and they believe, I think, very deeply in our approach. We’ve got demonstrated detailed impact. I think they appreciate that. They appreciate how well their business skills can be used when they’re working for us. They just were working for a consulting firm making a business case for somebody selling widgets, but now they’re making a business case that can really take tens of thousands of small farmers out of poverty permanently.
…we’re always looking for an opportunity for value addition. The idea of shared value is win-win. The company wins, and so does the farmer in this case.
Denver: I do not drink orange juice, but I do drink coffee. So I want you to tell us about Nespresso and how you partner with them to build a more sustainable coffee industry in East Africa.
Will: This is one of our most fruitful partnerships. Again, it’s based on this concept of shared value and based also on very deep research that TechnoServe did into the coffee sector more than a decade ago. That research showed us a couple of key things that are opportunities.
One was that the global demand for what’s called specialty coffee – that fancy coffee that you may get at Peet’s and Starbucks and Blue Bottle and all – that global demand for that is growing seemingly without end, and consumers are willing to pay for that. So there’s an opportunity there. Also, a farmer on a very small piece of land is capable, with the right training, of growing some of the world’s best and, therefore, most valuable coffee.
So, we’re always looking for an opportunity for value addition. The idea of shared value is win-win. The company wins, and so does the farmer in this case. When we work with small farmers on coffee, we can help them increase their yields of every tree by 50% to 100%. And when we help them improve the quality of it, generally through locally processing it after they pick it off the tree, we can help them get a price premium, which sometimes is as high as 40% or 50% over what they were getting before.
So you can imagine, if you’re a small farmer and you’ve got this small coffee farm, and suddenly each tree is producing twice as many beans, and each bean is worth 50% more than it was before, the economics of your family changes quite substantially. Now, we’ve done this over 10 years and many countries with Nespresso. They have something they call a “AAA” program thinking about taking care of farmers, but they’re a company that has understood this and bought into it at the highest level. I’ve spent time with their senior management team, and they get it. And they invest in it in a way that’s good for their business and great for these small farmers.
Denver: Well, that leads me into, and what I mentioned in the opening, TechnoServe focuses not just on impact, but cost-effective impact. On average, what is your ROI for every dollar spent?
Will: On average, our ROI is over three. I want to be clear about this because this is looking at the cost of a project. This includes every dime of cost, every administrative dime and everything else, so all the costs of running a project, and then looking at the benefits, which are the extra income earned by our clients.
So if we’re looking at a farmer, what we do is we look at a farmer the next village over who we did not work with, and that allows us to control for things like weather or like global crop price changes. So we’re doing a really thorough job to try to isolate the impact that our project had and get rid of any exogenous factors.
There’s a big range in there. We just recently visited a project that had an ROI of 20-to-1. We’re thrilled about that, obviously.
Denver: Those are the ones that you scale up usually.
Will: Absolutely.
Denver: You have the proof of concept, and then you move it around.
Will: And we’ve got some that are below one. Some of those are pilots that you wouldn’t expect, but some of them are just bad projects, and we learn from those as well.
Denver: And as you mentioned earlier about impact, since there are no handouts and there are no subsidies, you do have an impact after you leave because you’ve built a sustainable model.
Will: Well, this is the most important thing, and a bit of a hobby horse of mine, if you’ll allow me. Everyone who cares about international development, everybody who works in the field wants sustainable development. We want to teach people to fish. We want to have impact that lasts. You and your listeners may be shocked to know that that is almost never measured.
And so, we are, with the help of some forward-looking donors, we are increasingly measuring that. We are hiring external research agencies who are going back to find clients that we stopped working with five years previously. We have great data and evidence of where they were five years ago, the benefits that they got, and the question really is: What’s happened in the intervening five years? Did those persist or not?
You mentioned coffee farmers in East Africa. That was a recent research. I was sort of holding my breath. I pledge to make all that data public. We do make all our impact data public, our research data.
Denver: But you still hold your breath.
Will: But I still… you still hold your breath.
Overwhelmingly, those farmers are still doing the practices that we taught them, still are realizing the yield gains and the price gains that they had five years ago. We’ve got research in the field, going into the field soon to look at entrepreneurship programs in Latin America through the same lens.
But there is not enough of this done. It’s nuts. It’s a huge gap. If you as a private individual want to give a dollar to a charity, if you’re like me, you want to give it somewhere where it’s going to provide impact, not just while that project’s running, but for years afterwards. And we don’t have the data in this field yet. And so, I am a real advocate for more and more of this kind of research. So that whether you’re the Gates Foundation, or whether you’re the private individual sending in a $20 check, you ought to be targeting that money for interventions which are proven to have long-term, lasting impact.
Denver: Unfortunately, that’s just the way we are. We don’t do a lot for prevention. We do it when somebody gets sick. We spend a lot of money, and then we live in that moment. And then when that moment’s gone, we stop tracking it, and we don’t see what the aftermath of it is. It’s just sort of the way we are, and it’s not good.
Will: Well, look. There are some administrative reasons. Development is often funded through projects. And so often, there’s plenty of funding in that project cycle to do research. The donors all care about this and care about research. And so administratively, some of them struggle to say, “Well, I want to go back and look at something that happened five years ago, but that project is over. How do I do that?”
Denver: That’s right.
Will: But that’s a solvable problem, obviously.
Denver: Well, it sounds like you’ve solved it.
You’ve received support from the Bill and Melinda Gates Foundation, among others, to harness emerging technologies for the benefit of the rural poor. Which ones are showing the most promise?
Will: Look, it won’t be news to your listeners that technology is changing things so fast.
You talked about farmer aggregation. Everybody’s got a mobile phone, and the ability to do a more virtual aggregation and tie farmers together through technology is dramatically changing things, particularly when that’s linked with mobile money. Farmers can now be paid for their crops. They used to have to get on a bus, ride for two days, get paid in cash, and have a very dangerous journey home with a backpack full of cash. They now can be paid in real time over their mobile phones. So that’s been dramatic.
We’re actively exploring a lot of technologies around distance learning. A lot of the training that we do of entrepreneurs and small farmers is done in person. If we can move some of that onto the mobile phone, we can be more cost-efficient, reach more people.
Denver: Yes. You’ve opened up TechnoServe labs in Silicon Valley, right?
Will: We do. We have a small lab in Silicon Valley now run by a lifelong technologist. We’re having fantastic conversations with a range of technology companies. There’s a lot of interesting work going on around remote sensing, which is another area we’re quite engaged in, which should allow us to focus our field forces even better than they are today.
The small farmer is on the frontlines of climate change. Often, they’re most affected by it, often with the fewest tools in his or her toolbox to address it.
Denver: You work with small entrepreneurs, but we’ve been talking a lot about the work you do with small farmers. What is climate change doing and the impact that it’s having on them? I know some of them probably contribute to it in part, but what’s that impact been, and what can you do to mitigate it?
Will: That’s a huge issue. The small farmer is on the frontlines of climate change. Often, they’re the most affected by it, often with the fewest tools in his or her toolbox to address it. I visit a lot of farms, small farms around the world, and I can’t recall the last time I visited one where, in one way or another, the farmer was not talking about climate change.
There’s a number of exciting things that we can do, and I think both for adaptation and mitigation. So there’s a whole area called “climate-smart agriculture.” It is an area that we’re pursuing. There are improved seeds, which are drought-resistant, which we can help farmers access. Coffee is a wonderful crop for this because the best practice for coffee is planting a lot of shade trees. So our farmers have planted over a million trees, which is just a good practice for growing coffee and also helpful for this problem.
But there’s a lot of work to do. And the farmers, the small farmers, a poor small farmer in Africa likely does not have access to a couple of 19th-century technologies like tractors and irrigation, which are often too expensive for that farmer to access. So, we’ve got a long way to go, but it is a big priority for us.
Denver: Every year, about 10 million young people enter the workforce in Africa; yet over maybe 60% don’t find jobs. There’s this youth bulge, and I think it provides, and you think it provides, I’m sure, a tremendous opportunity as well as a tremendous challenge depending on what’s going to happen. Give us your assessment and what TechnoServe is doing to serve this population.
Will: It’s one of the groups we focus on, and you’re absolutely right. You see it not only in Africa but in other parts of the world. You have about 12 million young people entering the workforce in India every year as well.
We have been very active in this space. We ran a large project in Africa with support from the MasterCard Foundation, which focused on rural youth, helping them come together and gain both life skills and then business skills. Some went on to be employed. Many of them went on to band together and start small businesses.
I’m recently back from a trip I took to India, and our team in India is running a very creative project focused on young people from low-income families and helping them get jobs. There are different tiers of universities in India. The lower tiers are where poor people send their kids. The schools are not great. And so, this is a poor family that’s scrimping and saving… probably the first person from their family to go to school, and the problem is that you’re seeing rates of only about 5% of graduates from these schools getting formal employment. So, it’s a bargain that’s really not being kept.
Our team in India looked at the various things that were being done, and through a lot of creativity and iteration, have launched a program called “Campus-to-Corporates,” which is helping these young people get entry-level, white-collar jobs. So, they’re working at banks. They’re working at insurance agencies. They’re doing payroll processing. They’re doing compliance, things like that. We work with them for a year during their final year of university. We are seeing 75% of them get placed into these jobs. It’s dramatic. And a year later, 74% of them are still in that job or a similar job.
And just to give you a flavor of this, I met a young woman who I will not soon forget named [Teslim]. [Teslim] comes from a poor Muslim family. They live on the outskirts of Mumbai, seven of them in a one-room house. She was at this university. It’s a conservative family, so she had to really fight with her parents to get to go to university at all. She then had to fight to take part in this campus-to-corporate program that she took part in. She got a job working at a local bank, helping trace lost credit cards and doing some sales.
She was three months into her job when I met her. She stood and proudly described all this to me. Her family income has doubled as a result of that entry-level job. She told me that she’s eligible for a bonus. And that on her third month on the job, her numbers were so good that she earned a 50% bonus on top of her salary. She started to tear up when she told me about it. And frankly, I started to tear up listening to it. The pride that she had, how she must be regarded in her family, the difference she’s able to make to her siblings, and the fact that once you’re in an organization like that and into a job like that, you’ve got a pathway up.
And we are really in the business of providing opportunities. We recognize the agency, the industriousness, the smarts of these people; what they don’t have is opportunity. We’re cracking the door open for them…
Denver: Yes. Sure.
Will: So, [Teslim]…I see great things for [Teslim] and I’m going to try to find her every time I’m in Mumbai and see how she’s doing. But it’s those sorts of opportunities that we try to create, and that’s really how I think about TechnoServe.
I think it’s Nick Kristoff that said, “Intelligence is universal, but opportunity is not.” And we are really in the business of providing opportunities. We recognize the agency, the industriousness, the smarts of these people; what they don’t have is opportunity. We’re cracking the door open for them and people like Teslim or these fruit farmers who are now selling to Coca-Cola, or the coffee farmers that now are able to sell at better prices to Nespresso. They are walking through that door and continuing to walk and doing it all.
Denver: Great story.
Tell us about the corporate culture at TechnoServe, what makes it a special place to work. But what steps do you take to create and sustain a culture when your employees are just spread out all across the globe?
Will: We’re over 1,200 workforce. Our headquarters is here in the United States, but 95% of our workforce is abroad, spread across the 29 countries where we’re operating.
We are data-nerds. We are really committed to understanding the impact of what we do. That may sound odd, but it’s much harder in a nonprofit space to track impact and to measure it precisely than it is in for-profit business where you’ve really got some better-established metrics there. And so I think that’s one thing that binds us together.
We’ve got targets. Our main success metric is the extra money that our clients earned in total. That was almost $190 million last year. So, for some of these families, a few hundred extra dollars a year is the difference between having their kids be able to go to school or not; having a metal roof on their house or not; being able to afford medicine when their baby gets sick or not.
And so, I think tying people together with driving numbers together. And, of course, the world is shrinking, so we’re on video calls with each other all the time. We bring our senior leaders together at our headquarters every other year and share lessons learned and leadership.
But it’s really, I think, the deep commitment to our mission. These management consultants, who mostly take quite large pay cuts to come and work for us, are deeply committed to our mission. Like me, they see poverty as one of the great injustices in the world today. The issue: It shouldn’t be the way it is, and they’re outraged by it, as I am. And I think this belief in the power of business, in the power of a business approach to bringing many, many people out of poverty in a way that lets them stay out.
Denver: Let me close with this, Will. The world has made dramatic progress in recent decades lifting people out of poverty, which is now below 10%, as defined by the United Nations. What do we need to do to be vigilant to assure that it doesn’t start moving back up again? What needs to be done now that will reduce it even further?
Will: You’re right, Denver, and a lot of people are not aware of the dramatic progress that’s happened over the last couple of decades where we’ve seen more people come out of poverty than at any other time in the history of humankind. So, on the one hand, it’s enormously encouraging. On the other hand, you have more than 750 million people still living in what’s defined as “abject poverty”; 3 billion below the traditional poverty lines. So there is so much left to do.
I think we are making great strides with women. You’re never going to develop if half of your population is not treated properly and not given the same opportunities as men. So that is a lever that we need to push on to drive progress. You mentioned climate change earlier, and that’s obviously a massive threat to all of this. There’s a healthy debate out there. Some people really want to see government as being in the lead on this. Unfortunately, the track record of a lot of developing country governments is not very good.
We hope that they can create an enabling environment largely, and we believe strongly in the power of business to do this, particularly where you find those areas for shared value where good business can result in good development as well. But it’s going to take a continued focus, a continued investment, continued creativity. I think technology will continue to unlock new opportunities we haven’t thought of. We’re beginning to use big data in international development problems in a way that we’ve never had the opportunity to do before. So lots of challenges and opportunities in front of us.
Denver: Stay tuned.
Well, Will Warshauer, the President and CEO of TechnoServe, I want to thank you so much for being here this evening. Where can people find additional information about the organization, the work that you do, and maybe provide some financial support to help move it forward?
Will: You can visit our website, which is www.technoserve.org. We’re on Facebook; we’re on Twitter. We’re on all the social media. But yes, come and look us up.
Denver: Well, thanks, Will. It was a real pleasure to have you on the show, and thanks for a great conversation.
Will: Thank you, Denver.
Denver: I’ll be back with more of The Business of Giving right after this.
Will Warshauer and Denver Frederick
The Business of Giving can be heard every Sunday evening between 6:00 p.m. and 7:00 p.m. Eastern on AM 970 The Answer in New York and on iHeartRadio. You can follow us @bizofgive on Twitter, @bizofgive on Instagram and at www.facebook.com/businessofgiving.