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This is a joint post with Mead Over.

The World Bank is reorganizing. Bloomberg reports that president Jim Yong Kim has written staff about a shake-up at the bank’s highest levels in preparation for implementing an as-yet-to-be-announced new institutional strategy. Such can be unsettling for bank employees, some of whom will find their jobs on the line and others who may get new bosses. Is there any reason for the rest of the world to care?

Maybe. If you believe that the world’s flagship multilateral financial institution can contribute to the future prosperity of the world and especially of the world’s poor, then you will want to know whether the impending reorganization will enhance or diminish its contribution. We and others have suggested that the World Bank’s biggest failing has been to judge its performance by how much it lends rather than how much its clients achieve.  We have also argued that the Bank should do much more to finance and catalyze regional and global public goods to address issues such as climate change, agricultural productivity, and disease surveillance. Will the reorganization facilitate such changes?

Several of us at CGD are watching the process with interest and hope, and not just because we spent significant chunks of our careers working within the institution. We care deeply about the bank and believe it can make an even greater contribution to development and global poverty reduction. We know that reorganizations come and go, and that the devil will be in the details of implementation rather than in how the boxes are arranged on an org chart. And as outsiders, there is much that we do not know about what is currently happening and planned. These caveats notwithstanding, we offer these questions based on what we have been hearing about the reorganization plans in hopes that they can help to contribute to a more impactful World Bank.

There are some hopeful signs. We hear that the reorganization aims to strengthen the importance of substantive sector-specific knowledge under new “Global Practices,” to shift the focus of country partnerships from lending instruments to impact, and to strengthen technical career streams so that talented individuals need not become managers to be promoted. As one of us suggested previously in a blog co-authored with Martin Ravallion, aligning individual incentives with development impact rather than with lending would also help to achieve these goals. 

But will the reorganization really strengthen incentives for Bank staff to pursue quality, development impact and public goods? A key aspect of the Bank’s existing structure has been its “matrix organization.” Each Bank employee has typically had two lines of accountability, one to a country director who reports to a regional VP and is judged primarily on the quantity of Bank lending and another to a sectoral director who reports to a sectoral VP and is judged on the quality of Bank operations. This dual accountability is intended to balance the pressure for greater lending from the regional VPs and directors with countervailing pressure to promote the quality of Bank investments from the sectoral VP and directors. 

Not surprisingly, sectoral VPs and directors have a much stronger interest—and track record—in the kinds of institutional reforms we favor, such as promoting the quality of Bank investments, establishing mechanisms for measuring lending against development goals instead of disbursement targets, and coordinating regional and global public goods initiatives. While these units have not always exploited these opportunities, they have tried and sometimes succeeded:

  • New efforts to shift to output-based aid via the “Payments for Results” or P4R pilots
  • Impact evaluation of results-based financing initiatives in health (financed by Norway and the UK);
  • An education sector strategy focusing on learning and tools for countries to achieve it
  • Increased impact evaluation and learning (Spanish trust fund)
  • Technical lead on implementation of an Advance Market Commitment (AMC) pilot for vaccines
  • Efforts to strengthen and standardize tools that use technology to implement social protection programs

Will the new structure encourage such innovative efforts and enable pilots that succeed to be widely adopted? It is not clear – at least to an outsider – how the rumored structure of the reorganization will support the quality objectives.  We hear that sector directors, who previously reported to sector-specific VPs, will now also report to regional VPs. Will this divided reporting mean that the sector directors will be less able to defend global priorities, the quality of bank lending and the career tracks of technical experts? Will the tug-of-war between the impact and volume of Bank operations be tilted towards volume?

When push comes to shove, will a director for education based in the bank’s Latin America regional vice presidency spend more effort increasing disbursements in the region or promoting educational quality across all regions? While a reduction in the number of director’s offices might be desirable, it does raise questions about incentives.  We fear that a sectoral director accountable to a regional VP who has quantitative lending targets and control of administrative budget, on one hand, and a different VP with more abstract and challenging goals regarding impact and global public goods, on the other, is likely to respond more energetically to the concerns of the first.

As outsiders we can only see through a glass darkly.  Perhaps the reorganization does embody a plan to greatly strengthen incentives for staff and management in the direction of higher professional standards, greater development impact, and more diligent and ambitious pursuit of regional and global public goods.  If these are the goals, it is important that the new management structure strengthens them.