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The World Bank‘s Approach to Public Sector Management Reform2011-2020
Better Results from Public Sector Institutions
29 November 2011
1. How did we develop the PSM Approach?
Overview
1. How did we develop the PSM Approach?
2. What is PSM reform and why does it matter?
3. What are the Bank’s current strengths and weaknesses in supporting PSM reform?
5. Which strategic directions should the Bank’s PSM Approach for 2011-2020 follow?
6. How should we ensure progress?
4. What are emerging challenges and opportunities for PSM reform?
2. What is PSM reform and why does it matter?
3. What are the Bank’s current strengths and weaknesses in supporting PSM reform?
4. What are emerging challenges and opportunities for PSM reform?
5. Which strategic directions should the Bank’s PSM Approach for 2011-2020 follow?
6. How should we ensure progress?
A very intensive consultation process…
• An (external and internal) Advisory Group, including Academics and
Government Officials
• Academics and Practitioners via Public Blog discussion
• The Public Sector Governance Board / Human Development Sector Boards
• Regional Public Sector Units
• The PSM Thematic Groups / Communities of Practices
• Key partners – including DfID, CIDA, UNDP and OECD Govnetno major consultation with client governments (budget constraints).
BLOG: http://blogs.worldbank.org/governance/public-sector-management
What is PSM and why does it matter?
Strengths and Weaknesses
Challenges and Opportunities
Strategic Directions
Ensuring Progress
With:
How did we develop the PSM Approach?
…and significant background work• Issues Papers
o Defining the public sectoro What can PSM reform achieve?o How we learn about what works in PSM reformo Knowledge, products and staffing for PSM reformo Explaining successes and failureso What is the Bank’s mission in PSM reform?o Challenges and opportunitieso What should the Bank do?
• Econometric Review of the World Bank’s PSM Portfolio
• Discussion Paperso “Towards a ‘Theory of Change’ for PSM reform”o The “Diagnostic Protocol” and Country Pilots
• Staff Surveys on the PSM Approach
• Input Papers o Matt Andrews – “Change Space” and PSM projectso Graham Scott – PSM strategy review
What is PSM and why does it matter?
Strengths and Weaknesses
Challenges and Opportunities
Strategic Directions
Ensuring Progress
How did we develop the PSM Approach?
The public sector delivers key results…
Center of Government/
Upstream
Sector Agencies/ SOEs and corporate bodies/
Downstream
Objectiveand Subjective Development
Outcomes
Sector Outputs:• Services• Regulations• Infrastructure
investments • Sector policies
Fiscal and Institutional Sustainability:• Realistic and achievable revenue targets• Cooperation between levels of government• Support for oversight bodies• Effective management of fiscal policy and
aggregates
The Public Sector… …and its functions
How did we develop the PSM Approach?
Strengths and Weaknesses
Challenges and Opportunities
Strategic Directions
Ensuring Progress
What is PSM and why does it matter?
High inco
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Upper middle i..
.0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
Revenues Outlays
General Government Revenue and Outlay as a Percentage of GDP
Source: IMF Government Finance Statistics and International Financial Statistics
…and represents a large part of the economy
How did we develop the PSM Approach?
Strengths and Weaknesses
Challenges and Opportunities
Strategic Directions
Ensuring Progress
What is PSM and why does it matter?
The Public Sector Results Chain
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There are many conceptual challenges…
How did we develop the PSM Approach?
Strengths and Weaknesses
Challenges and Opportunities
Strategic Directions
Ensuring Progress
What is PSM and why does it matter?
The PSM Approach defines PSM reforms…
By their purpose: They seek to achieve sustainable improvements to the public sector results chain.
Not by assumptions about the right place to start.
…which the Approach resolves by defining PSM as a problem-solving task
How did we develop the PSM Approach?
Strengths and Weaknesses
Challenges and Opportunities
Strategic Directions
Ensuring Progress
What is PSM and why does it matter?
Total Committed Amounts to Public Finance Management Projects by Donor (2005-2008, worldwide)
Source: OECD Development Database on Aid Activities (Creditor Reporting System)
How did we develop the PSM Approach?
What is PSM and why does it matter?
Challenges and Opportunities
Strategic Directions
Ensuring Progress
The Bank has a large PSM lending portfolio…
As a development actor As a knowledge generator As an integrator
Strengths and Weaknesses
Denmark
Norway
IDB Sp.Fund
AsDF
Sweden
Netherlands
AfDB
Australia
United States
EU Institutions
United Kingdom
AsDB
IDB
IDA
IBRD
0 500 1000 1500 2000 2500 3000 3500
Source: PSM portfolio review, 2011
…but with a mixed track recordAverage Investment Lending Project success rates by Sector Board
How did we develop the PSM Approach?
What is PSM and why does it matter?
Challenges and Opportunities
Strategic Directions
Ensuring Progress
As a development actor As a knowledge generator As an integrator
Strengths and Weaknesses
GIC TR SP SDV WAT ED EP UD Total ARD FSP EMT ENV PS FPD HE0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0.9
1
0.920.88
0.81 0.79 0.79 0.78 0.75 0.75 0.74 0.73 0.73 0.71 0.70.690000000000001 0.63 0.63
• Little explicit evidence about what matters most in improving PS performance
• Significant uncertainty about the institutional forms that are suited
• Changing the actual behavior of public agents deep inside the public sector is hard
• Even if implemented, PSM reforms may not make the intended difference for development outcomes
• Political economy factors may not be fully evident until the reform process plays out
Despite significant advances in understanding,everyone faces problems with PSM reforms…
How did we develop the PSM Approach?
What is PSM and why does it matter?
Challenges and Opportunities
Strategic Directions
Ensuring Progress
As a development actor As a knowledge generator As an integrator
Strengths and Weaknesses
• Lending engagement can be episodic• Even when continuous, there are diverse areas of focus for lending• Where lending dialogue is discontinuous, analytical work and TA often fill
the gaps – but not always• The challenge is to ensure that the client experiences Bank engagement on
PSM as a unified program
…but the Bank faces some distinctive problems
How did we develop the PSM Approach?
What is PSM and why does it matter?
Challenges and Opportunities
Strategic Directions
Ensuring Progress
As a development actor As a knowledge generator As an integrator
Strengths and Weaknesses
We tend to downplay, not manage, risk
The Bank yet has to put “best fit” fully into practice – persistent pressures towards “best practice”
Dialogue with client governments on PSM reform is sometimes discontinuous, undermining trust-building and familiarity with client country context:
Lending engagement can be episodic
Source: World Bank Business Warehouse data
Exam
ple:
Len
ding
Eng
agem
ent o
n PF
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, s
elec
ted
coun
trie
sHow did we develop the PSM Approach?
What is PSM and why does it matter?
Challenges and Opportunities
Strategic Directions
Ensuring Progress
As a development actor As a knowledge generator As an integrator
Strengths and Weaknesses
UkraineTurkey
TajikistanSlovak Republic
Russian FederationRomania
PolandMoldovaLithuania
LatviaKazakhstan
HungaryGeorgiaBulgariaBelarus
AzerbaijanArmeniaAlbania
1994 1996 1998 2000 2002 2004 2006 2008 2010
Engagement No Engagement
Even when continuous, there are diverse areas of focus for lending
PFM education
Information technology
Public investment management
External Audit
Internal audit
Treasury management
Budget preparation
1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Example: PFM Lending to Georgia by Institutional Area
No Engagement
EngagementSource: World Bank Business Warehouse data
How did we develop the PSM Approach?
What is PSM and why does it matter?
Challenges and Opportunities
Strategic Directions
Ensuring Progress
As a development actor As a knowledge generator As an integrator
Strengths and Weaknesses
Where lending is discontinuous,analytical work and TA may fill the gaps
19931994199519961997199819992000200120022003200420052006200720082009201020110123456789
10
Example: World Bank PFM Activity in Azerbaijan
Lending - Adjustment Lending - Investment AAA - ESWAAA - NLTA IDF
Fiscal Year
# of
Acti
ve P
roje
cts
Source: World Bank Business Warehouse data
How did we develop the PSM Approach?
What is PSM and why does it matter?
Challenges and Opportunities
Strategic Directions
Ensuring Progress
As a development actor As a knowledge generator As an integrator
Strengths and Weaknesses
…but explicit research is lagging… Extensive tacit “practitioner”knowledge on PSM reform…
The field has a weak knowledge base
Some promising work is emerging:
How did we develop the PSM Approach?
What is PSM and why does it matter?
Challenges and Opportunities
Strategic Directions
Ensuring Progress
As a development actor As a knowledge generator As an integrator
Strengths and Weaknesses
• Detailed and high quality case studies…
• Impact Evaluations on “downstream” PSM reform (e.g. school-based management)…
• Emerging work on the Political Economy of Public Sector Reforms…
• Some promising studies using comparative data on institutional strength…
…but indicators of the strength of country systems are still lacking for key PSM areas:We have PEFA…
• Civil Service • Tax Policy and Administration• Decentralization /
Governance across levels of government
Need to make more progress in country systems
How did we develop the PSM Approach?
What is PSM and why does it matter?
Challenges and Opportunities
Strategic Directions
Ensuring Progress
As a development actor As a knowledge generator As an integrator
Strengths and Weaknesses
Number of PEFA assessments conducted 2005-2010
Source: Stocktaking of PEFA Assessments by the World Bank.
• Project ratings are an uncertain measure of reform success (success might reflect lack of ambition)
• Project indicators are very idiosyncratic – hard to aggregate
• Research rarely built into project design
We do not reap the potential for learning from the Bank’s portfolio:
=> Much project knowledge remains implicit / in the minds of project leaders
Need to learn more from our portfolio
How did we develop the PSM Approach?
What is PSM and why does it matter?
Challenges and Opportunities
Strategic Directions
Ensuring Progress
As a development actor As a knowledge generator As an integrator
Strengths and Weaknesses
…but that poses challenges for integration.
PSM reforms are led by diverse specialists…
How did we develop the PSM Approach?
What is PSM and why does it matter?
Challenges and Opportunities
Strategic Directions
Ensuring Progress
As a development actor As a knowledge generator As an integrator
Strengths and Weaknesses
Source: World Bank.
1995-2010 World Bank Projects showing the % led by different disciplines within the Bank
…but it is facing problems in attracting and retaining senior professionals
with higher level integrative skills with specialized skills (e.g. ICT)
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Source: http://jayshriram.com/wp-content/themes/twentyeleven/images/obj.png
The Bank has a highly qualified body of staff working on PSM reform…
How did we develop the PSM Approach?
What is PSM and why does it matter?
Challenges and Opportunities
Strategic Directions
Ensuring Progress
As a development actor As a knowledge generator As an integrator
Strengths and Weaknesses
Major changes in the Bank’s external environment
• Demand from countries for:• more flexible problem-solving• help in solving different problems
• Competitive pressures from other suppliers of TA and finance
• Technological change – social media and back office functions
How did we develop the PSM Approach?
What is PSM and why does it matter?
Strengths and Weaknesses
Strategic Directions
Ensuring Progress
In the Bank’s external environment Within the Bank In how we understand institutional reform
Challenges and Opportunities
Major changes within the Bank
• A flat budget environment
• Increasing pressures to demonstrate results
• A general push towards open data
• Growing corporate emphasis on explicit risk management
• New Program for Results Lending Instrument
How did we develop the PSM Approach?
What is PSM and why does it matter?
Strengths and Weaknesses
Strategic Directions
Ensuring Progress
In the Bank’s external environment Within the Bank In how we understand institutional reform
Challenges and Opportunities
And major changes within the PSM field
• The best practice to good fit journey has begun (but not ended)
• A shift in emphasis from contents (technical recommendations) to context (country circumstances) to process (how are actors engaged in problem and solution identification)
• The process concerns are about how we identify problems and solutions jointly with counterparts, and how we ensure active feedback during implementationA
shift
in e
mph
asis
contents
context
process
How did we develop the PSM Approach?
What is PSM and why does it matter?
Strengths and Weaknesses
Strategic Directions
Ensuring Progress
In the Bank’s external environment Within the Bank In how we understand institutional reform
Challenges and Opportunities
Which strategic directions should the Bank’s PSM Approach for 2011-2020 follow?
1. How should we pursue agility in our operational work?
2. How should we balance tacit understanding of PSM with more “scientific” knowledge?
3. How can we encourage a “whole Bank” Approach?
How did we develop the PSM Approach?
What is PSM and why does it matter?
Strengths and Weaknesses
Challenges and Opportunities
Ensuring Progress
1. How should we pursue agility in our operational work?
2. How should we balance tacit understanding of PSM with more “scientific” knowledge?
3. How can we encourage a “whole Bank” Approach?
Strategic Directions
Pursue Agility in Operational Work Balance tacit with “scientific” knowledge Encourage a “whole Bank” approach
(1) Ensure continuous engagement on PSM
1. Regular reviews of country PSM developments led by PSM specialists and country PSM counterparts help ensure that disparate Bank actions are understood as part of a continuing dialogue
2. Work more closely with development partnersconcerning pooled funding
Image source: http://www.globalhumanitarianassistance.org/wp-content/uploads/2010/07/Article-finmechs-thumb.jpg
Image source: http://www.thomasgroup.com/getfile/3d4a2910-486d-4ebc-bde0-d3adc1c3af56/strategic-alignment.aspx
How did we develop the PSM Approach?
What is PSM and why does it matter?
Strengths and Weaknesses
Challenges and Opportunities
Ensuring Progress
Strategic Directions
(2) Emphasize a “diagnostic” approach in project design and selection
A. Promote 4 diagnostic principles:
1. Focus on the functional problem, rather than the solution
2. Engage stakeholders in identifying functional problems and binding constraints
3. Use political economy analysis prospectively
4. Use available evidence and accepted theory on whether a reform will fix the problem
• Why is the current dysfunction in equilibrium?• What does this imply for the feasibility of reform approaches?
B. Promote HD-PREM “Public Sector Management Clinics
Pursue Agility in Operational Work Balance tacit with “scientific” knowledge Encourage a “whole Bank” approach
How did we develop the PSM Approach?
What is PSM and why does it matter?
Strengths and Weaknesses
Challenges and Opportunities
Ensuring Progress
Strategic Directions
We need to:
• Genuinely work in multi-sector teams
• Develop robust indicators that can be linked to disbursements
• Take change management processes into account
Source: World Bank Business Warehouse Data
(3) Take advantage of theProgram for Results Instrument
Pursue Agility in Operational Work Balance tacit with “scientific” knowledge Encourage a “whole Bank” approach
How did we develop the PSM Approach?
What is PSM and why does it matter?
Strengths and Weaknesses
Challenges and Opportunities
Ensuring Progress
Strategic Directions
Does the increase in DPL lending indicate a movement towards more flexible lending instruments?
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
0
5
10
15
20
25
30
35
40
45
Investment Lending DPLOther Development Policy Lending Structural Adjustment Loans
Examples:
(4) Incorporate stakeholder feedback more systematically into PSM projects
• India: Mobile Phone hotline for reporting corruption in land administration
• Mozambique: Regular surveys of public officials to monitor actual usage of IFMIS systems
• Philippines “tax watch”: Company monitoring of corruption in tax administration
Pursue Agility in Operational Work Balance tacit with “scientific” knowledge Encourage a “whole Bank” approach
How did we develop the PSM Approach?
What is PSM and why does it matter?
Strengths and Weaknesses
Challenges and Opportunities
Ensuring Progress
Strategic Directions
1. Define portfolio risk tolerances (what percentage of ineffective projects is reasonable?)
(5) Be more honest about the risks at the project and portfolio level
Image source: http://www.debtfreeadventure.com/wp-content/uploads/2009/07/highwire.jpg
2. Better approximate economic and social returnsof PSM reform
Image source: www.flickr.com
Pursue Agility in Operational Work Balance tacit with “scientific” knowledge Encourage a “whole Bank” approach
How did we develop the PSM Approach?
What is PSM and why does it matter?
Strengths and Weaknesses
Challenges and Opportunities
Ensuring Progress
Strategic Directions
(1) Push ahead with metrics of the strength of country systems
We need to:
• Push ahead, even without the urgency that drove the development of PEFA
• Build demand for better information through open source data
The PEFA success story is not easy to replicate…
Pursue Agility in Operational Work Balance tacit with “scientific” knowledge Encourage a “whole Bank” approach
How did we develop the PSM Approach?
What is PSM and why does it matter?
Strengths and Weaknesses
Challenges and Opportunities
Ensuring Progress
Strategic Directions
Number of PEFA assessments conducted 2005-2010
Source: Stocktaking of PEFA Assessments by the World Bank.
(2) Enable better learning from projectsA potentially rich source of learning, that could better be exploited through:
1. More standardized groupings of project progress indicators
2. More in-depth quality evaluations that capture de facto change processes
Pursue Agility in Operational Work Balance tacit with “scientific” knowledge Encourage a “whole Bank” approach
How did we develop the PSM Approach?
What is PSM and why does it matter?
Strengths and Weaknesses
Challenges and Opportunities
Ensuring Progress
Strategic Directions
(3) Stimulate and lead a multi-agency research agenda on PSM reform
• PSM reforms in highly aid-dependent countries• Political economy of PSM reform• Measuring public sector productivity
Pursue Agility in Operational Work Balance tacit with “scientific” knowledge Encourage a “whole Bank” approach
How did we develop the PSM Approach?
What is PSM and why does it matter?
Strengths and Weaknesses
Challenges and Opportunities
Ensuring Progress
Strategic Directions
1. Research on frontier issues
2. More rigorous evaluations of PSM reforms
3. High quality case studies and theory development on the political dynamics of PSM reform
Three recommendations:
• Strengthen professional communities• Develop common training and analytic frameworks• Reward “influence” on other projects
• Develop a consistent, cross-sectoral PSM Competency Framework
• Training and skill building
1. Strengthen a shared understanding of the public sector
2. Strengthens shared competencies
3. Strengthen a shared determination to remain at the cutting edge of research
Pursue Agility in Operational Work Balance tacit with “scientific” knowledge Encourage a “whole Bank” approach
How did we develop the PSM Approach?
What is PSM and why does it matter?
Strengths and Weaknesses
Challenges and Opportunities
Ensuring Progress
Strategic Directions
Which strategic directions should the Bank’s PSM Approach for 2011-2020 follow?
In sum
• Doing better: continuity, diagnostics & experimentation, focus on results and risks
• Knowing better: metrics of the strength of country systems, learning from projects, leading a research agenda
• Integrating better: shared understanding, competencies and determination to remain at the cutting edge
How did we develop the PSM Approach?
What is PSM and why does it matter?
Strengths and Weaknesses
Challenges and Opportunities
Ensuring Progress
Strategic Directions
How should we ensure progress?
Monitoring implementation (inputs) is necessary
…but not enough! Monitoring outcomes (in the long run) is crucial…
• A rolling annual action plan;• With SMART targets;• Monitored by the Public Sector Governance Board;
• They are clearly attributable, but…• They do not capture relevance• If the Bank takes risks, they should not
go up!
Project-level indicators are not enough either…
• Disagreement about what is “good”• Lack of measures of what is “good”
(indicators of the strength of country systems)• Attribution to the Bank will be difficult
(what is the counterfactual?)
…but monitoring country-level change is hard
How did we develop the PSM Approach?
What is PSM and why does it matter?
Strengths and Weaknesses
Challenges and Opportunities
Strategic Directions Ensuring Progress
Thank you!