firm capabilities in Tanzania: A survey November 2017

Firm capabilities survey – Tanzania 2017 Objective: gain insights into management practices of Tanzanian manufacturing firms currently in operation. Qualitative and quantitative data that can subsequently be used to develop policies and support measures that will help to tackle the challenges in Tanzania of low productivity and export capacity in the private sector, particularly among medium-to-large sized firms, and their fragmented and underdeveloped entrepreneurial ecosystems. Location: Arusha, Mwanza, Dar es Salaam, Pwani Conducted by Economic Development Initiatives (EDI) in April – August 2017 THIS IS AN INITIAL ANALYSIS BASED ON THE SURVEY DATA, AND IS SUBJECT TO FINALIZING PENDING FURTHER STATISTICAL ANALYSIS.

Sample description Screening questions 156 firms surveyed Number of full-time employees at the firm must be at least 50 and at most 5000 or satisfy the following equation: Full-time employees + 0.5*part-time employees > 49 The firm must be a manufacturing firm; The respondent must be the person in charge of the day to day operations of that plant; and, The respondent must have been in their job for more than 1 year; 156 firms surveyed Firm age: median 15 years Listed on stock mkt: 29.5% firms in sample Education of manager 74% graduate/professional degree 16% post-graduate degree Employees: median 80 Only 7% managers are women

Outsourcing and exports 56% of firms do not outsource at all Of those that outsource, median is 20% of production 38% of those that outsource, do so for 1-10% of production 45% of outsourcing firms, do so for 11-30% of production 17% of outsourcing firms, do so for 31-50% of production 59% of firms do not export at all Of exporters, 20% firms export 50% or more of production Of exporters, 56% firms export 1-20% of production 23% exporters, export 21-49% of production

Quality of management How well do you think the firm is managed overall? Scale of 1 to 10 Median score = 8 How well do you perceive operations and production processes are managed? Scale of 1 to 10 How well do you perceive the talent (people, promotions, incentives, etc) are managed? Scale of 1 to 10 Median score = 7 Survey scores 18* dimensions of management Introducing lean management techniques (scale 1-5) Median score = 3 i.e. Some aspects of modern (lean) manufacturing techniques have been introduced, through informal/isolated change programmes 12% firms: Other than JIT delivery from suppliers few modern manufacturing techniques have been introduced (or have been introduced in an ad-hoc manner) Only 3% firms have introduced all major aspects of modern (lean) manufacturing have been introduced (JIT, autonomation, flexible manpower, support systems, attitudes and behaviours) in a formal way Overarching questions on management quality. Scoring management: Introducing Lean (Modern) Techniques Rationale for Introducing Lean (Modern) Techniques Process Documentation and Continuous Improvement Performance Tracking Performance Review Performance Dialogue Consequence Management Types and Balance of Targets Interconnection of Targets Time Horizon of Targets Target Stretch Clarity and Comparability of Goals Instilling a Talent Mindset/ Managing Talent Building a High-Performance Culture Removing Poor Performers/ Making Room for Talent Developing Talent and Promoting High Performers Distinctive Employee Value Proposition Retaining Talent

dimensions of management – process and consequence Process improvement (scale 1-5) Consequence management (scale 1-5) Tests processes for and attitudes to continuous improvement and whether learnings are captured/documented Median score = 3 i.e. Improvements are made in one-week workshops involving all staff (to improve performance in their area of the plant) 27% have low levels of process improvement* Less than 2% have high levels of process improvement mechanisms** e.g. Exposing problems in a structured way is integral to individuals’ responsibilities and resolution occurs as a part of normal business processes rather than by extraordinary effort/ teams Identification of problems, dealing with failure, implementation of plans Median score = 3 i.e. Failure to achieve agreed results is tolerated for a period before action is taken 28% firms score 1 or 2  low levels of consequence management* Less than 3% firms state that failure to achieve agreed targets drives retraining in identified areas of weaknesses or moving individuals to where their skills are appropriate *score = 1 or 2 **score = 4 or 5

Dimensions of management – performance Performance tracking (scale 1-5) Performance review (scale 1-5) Tests whether performance is tracked using meaningful metrics and with appropriate regularity Median score = 3 i.e. Most Key Performance Indicators are tracked formally. Tracking is overseen by senior management 33% score low (score = 1 or 2) 2.6% score high (=5) e.g. Performance is continuously tracked and communicated, both formally and informally, to both staff using a range of visual management tools. Tests whether performance is reviewed with appropriate frequency and communicated to staff Median score = 3 i.e. Performance is reviewed periodically with both successes and failures identified; results are communicated to senior management. No clear follow-up plan is adopted 31.4% score low (score = 1 or 2) 1.3% score high (=5) e.g. Performance is continually reviewed, based on indicators tracked; all aspects are followed-up to ensure continuous improvements. Results are communicated to all staff.

Dimensions of management – talent management Managing talent (scale 1-5) Making Room for Talent (scale 1-5) Tests what emphasis is put on overall talent management within the organization Median score = 3 i.e. Senior management believe and communicate that having top talent throughout the organisation is a key way to win 38% firms score low (score = 1 or 2) Under 2% firms score highest (score = 5) Tests how well the organisation is able to deal with underperformers Median score = 3 i.e. Suspected poor performers stay in a position for a few months before action is taken 20.5% firms score low (score 1 or 2)

target setting Time horizon Target stretch Tests whether firm has a 3-horizons approach to planning and targets Median score = 3 i.e. There are short and long-term goals for all levels of the organisation. As they are set independently, they are not necessarily linked to each other 33% firms score low (score = 1 or 2) Under 3% firms score = 5 Tests whether targets are based on a solid rationale and are appropriately difficult to achieve Median score = 3 i.e. In most areas, top management pushes for aggressive goals based on solid economic rationale. There are a few ‘sacred cows’ that are not held to the same rigorous standard 39% firms score low (score = 1 or 2) Under 2% firms score = 5

Decision making – new products Who makes decisions on new product introductions – you, the CEO, or both of you? (Scale 1-5) In 22% firms, CEO decides In 9% firms, CEO decides but Plant Manager can recommend In 33% firms, joint decision by CEO and Plant Manager In 10% firms, plant Manager decides but must inform CEO In under 4% firms, plant Manager decides

Infrastructure Power outages & Use of generators During power cuts, of normal energy usage, what percentage do the generators generate? For 38% of firms, 100% of energy is generated by generators In the last three months, how many public grid power outages that paused production did this plant experience? Median no. of outages = 15 How many hours, on average, did these power outages last on average? Median hours = 3.5 In the last three months, did this plant own or share a generator? No – 35% Yes – 65%

Decision making – tasks Allocation of tasks (scale 1 - 5)* Pace of work (scale 1 - 6)** How much do managers decide how tasks are allocated across workers in their teams? Managers make most or all decisions for almost entire sample (46% – managers make all decisions; 47% – managers make most decisions) Who decides the pace of work on the shop floor? Managers make most (35%) or all decisions (51.3%) about pace of work on the shop floor * (1)Managers make all the decisions,(2)Managers make most of the decisions,(3)Decision making is about equal,(4)Workers make most of the decisions,(5)Workers make all of the decisions ** (1)Managers make all the decisions,(2)Managers make most of the decisions,(3)Decision making is about equal,(4)Workers make most of the decisions,(5)Workers make all of the decisions,(6)Customer demand determines the pace

Next steps More robust statistical analysis e.g. on: Are exporters better managed? ??? Draw policy lessons from analysis How to catalyze improvement in management (and what aspects of management) Facilitate knowledge transfer between local firms