Key Elements in Operating an Aftercare Unit

UNCTAD provides a more detailed account (pp. 27-40) of key steps a region should take in conceptualizing and operationalizing an aftercare program:

 

1) Before beginning the process to set up an aftercare programme, it is important to know and understand the investor community.
  1. The desk research involves accessing commercial databases and Internet resources, and combining these with any information the IPA or any of its partners may have concerning established inward investors. These databases can then be examined to see if there are any statistical characteristics of established firms, such as products, services provided, markets, export orientation, size and country of origin, that throw light on the nature of the established TNCs, and to identify who is managing or controlling the operations in question.
  2. To develop a fuller understanding of established TNCs, further fieldwork will be required to fill in gaps in the desk research. This can be done in several ways: through personal interviews or first through a survey followed by interviews of key groups identified in the sample, including, for example, trade associations. It may be worth undertaking focus group research where specific issues have been identified as being of key importance.
  3. A survey among investors could gather information and test any hypotheses developed during the desk research. Questions to be asked could include: How well embedded are FOEs here? What are the main impediments to their operating or expanding in the region? What has been their experience of working with the public sector? What services would they find most useful from an EDO’s aftercare unit? Under what conditions could they envisage increasing expenditure on R&D and higher value-added activities?
2) Develop objectives and identify partners.
  1. The EDO should consider, on the one hand, the feedback and results of the established investors’ survey, and on the other the economic development aims of their region, to see where overlaps or mismatches are. The actual size of the foreign sector will, on its own, also be an important factor.
  2. A decision to take at this stage is the extent to which other economic development organizations will be included or excluded from setting aims and objectives of the aftercare programme, and it must be kept in mind that the EDO will need to collaborate with at least a few, but probably several, such organizations to deliver an effective aftercare service.
  3. This process can sometimes prove to be quite complex, as some business support organizations may already own some of the business support space the EDO is contemplating entering with its aftercare activity (e.g. that relating to small business development, cluster development, export promotion and the activities of chambers of commerce and industry). Also, agreements must be made as to who owns what space in the national and subnational business support architecture, and how to collaborate, so there is no duplication and resulting confusion among established FOEs.
  4. Development of aims and objectives for the programme should be based on consultation with organizations involved and any resource constraints or other priorities need to be made explicit from the beginning, so as not to create unrealistic expectations for the programme.
  5. Objectives of aftercare programmes can then be agreed, for example, to include (a) increased value-added activities of a targeted set of FOEs; (b) increased employment of certain levels of staff; (c) attraction of suppliers to FOEs, possibly to a specific business park or region; (d) more collaborative projects with universities or other R&D organizations; (e) identification and removal of key barriers to increased reinvestment by FOEs; and (f) increased reinvestment in a specific region.
  6. Once objectives are identified, targets can be set for specific aftercare programmes. Such targets can include (a) the number of contact visits per year for the different segments (see below) in the FOE clientele; (b) the number of successful projects to realize; (c) the number of new jobs to create; and (d) the number of jobs to safeguard. Targets may also include influence on specific legislation or establishment of a science or innovation park.
  7. While developing objectives for aftercare activity, it may become clear that, in order to implement the service successfully, it is necessary to work very closely with other stakeholders in the process. In such cases, it is useful to develop relatively explicit, good working protocols with such organizations, even possibly extending to service-level agreements, depending on the extent to which collaboration is envisaged. Such organizations could include chambers of commerce, overseas diplomatic or consular organizations, outsourced service providers and government departments.
3) Assess resources and develop organizational options.
  1. Once objectives have been identified, the required resources can be defined. If resources are not available, aims and objectives must be modified. Sometimes, EDOs also make use of in kind resources provided by partners.
4) Segment, target and design the aftercare programme.
  1. There are often more established FOEs in the host region than there are EDO resources to give them all equal levels of attention. The EDO must therefore devise a segmentation and targeting strategy that will reach the FOEs it considers most important, given the nature of the established base of inward investors and the objectives developed.
  2. Among agencies that select investors, the industry or sector and the size of the investment are the most popular segmentation criteria. The location of the investment and the source country criteria were only used by a few of the agencies in the survey.
  3. There are other, more sophisticated approaches to segmentation that are increasingly finding favour in IPAs. These include value added at TNCs; actual and potential levels (salary levels, knowledge driven, R&D orientation); type of activity, for example, regional headquarters (HQ), regional R&D centre or specialized manufacturing operation; exports, actual and potential; impact if the TNC decides to relocate to elsewhere; and TNCs where there are already some good working relationships (ability to influence). Some IPAs also use a mix of the above when segmenting their established TNCs.
  4. The South East England Development Agency (SEEDA) in the United Kingdom SEEDA offers established strategic investors in the South-East a comprehensive aftercare programme to help them fulfil their business potential. A strategic investor is defined by SEEDA as one who is active in an important location or industry sector, has a group HQ in the South-East or is otherwise locally prominent. SEEDA has seven investor development managers, each of whom is based in the subregion for which he or she is responsible. Each member of this team helps managers of at least 50 strategic companies to grow the business, as well as flagging up potential difficulties and ensuring that investors’ views are heard by policymakers at regional and national government levels. Investor development managers work with and build upon the achievement of SEEDA’s local partners, providing an extra resource to ensure that the service to investors is uniformly comprehensive across the South-East.
  5. Peters suggests the following as key segmentation variables for TNC aftercare activities: high export intensity; high local content (low import intensity); high pay and productivity; limited displacement effects on key local markets; ability to promote rather than constrain host country competition; capability to support high value-added functions; and ability to develop strong local linkages and high levels of innovation.
  6. Once the segments have been identified, it must be decided which to target, at what level of intensity, and by whom. For example, it may be agreed that: Established TNCs of national importance are the objects of the national agency’s most senior managers; Some companies with specific, unique or highly developed technologies can be looked after by a team coordinated by the national (or subnational) IPA that includes a member from the relevant division in the department of trade and industry, as well as a member from the relevant national scientific research establishment; Other TNCs could be looked after by subnational IPAs or regional cluster organizations, depending on, for example, their size or where their HQs are; Smaller TNCs, where the host region may not have much to offer, may be included in general events such as “the annual gatherings of investors from country X” or mail-outs, and left to themselves, with the condition that if they do need support, they know where to get it.
  7. Once all the TNCs operating in the region have been segmented and targeting agreed, it is up to the delivery organizations to develop creative and innovative aftercare programmes. The programmes should be based on an underlying rationale that links it with economic development policy and should include a series of marketing and promotional events to the targeted established investors. These can be combinations of individual contact sessions and group events, but it is important that their aims and objectives be spelt out clearly so that their effectiveness can be evaluated at a later stage. IPAs must also be very clear about what services they are offering, so that TNCs can respond appropriately.
5) Deliver services, monitor and evaluate the results.
  1. The delivery method will have implications for (a) the type of staff to be recruited; (b) staff training; (c) motivation; and (d) management.
  2. The aftercare programme for Liverpool and Merseyside was set up in 2003 to encourage inward investment in the Liverpool City Region, and is one of the first programmes of its kind run on a local basis. The Aftercare Team consists of six experienced Business Account Managers, who work alongside existing subnational inward investment agencies across Merseyside. The team aims to build relationships with locally based operations and subsidiaries of national and international companies to give them the support they need to grow and reinvest.
  3. It is now generally accepted that the account management system is the appropriate method for delivery of aftercare services. This involves segmenting the community of inward investors and allocating company servicing to specific account managers. Different priorities, targets and service levels are agreed for different firms in terms of their segmentation characteristics.
  4. As to monitoring and evaluating the impact of the aftercare programmes, the key is that the measures against which the programme is to be evaluated are agreed from the outset with the relevant monitoring organizations.
  5. Some quantitative measures have been mentioned. Others include the number of new projects identified, the number of follow-up or repeat visits, the change in stage of value chain of successful projects, and the number of aftercare projects or jobs (new or safeguarded) for which responsibility is claimed. This latter measure can be problematic, and IPAs have developed several approaches to dealing with it.
  6. The value of appropriate monitoring systems lies not only in the measurement of outputs, but also in the process of defining what those outputs are, or could be expected to be, so that the role of the IPA in aftercare becomes increasingly clear and well defined.