{"id":2663,"date":"2015-12-07T22:08:06","date_gmt":"2015-12-08T03:08:06","guid":{"rendered":"https:\/\/digital.hbs.edu\/platform-rctom\/submission\/world-bank-group-reform-without-change\/"},"modified":"2015-12-07T22:28:56","modified_gmt":"2015-12-08T03:28:56","slug":"world-bank-group-reform-without-change","status":"publish","type":"hck-submission","link":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/world-bank-group-reform-without-change\/","title":{"rendered":"World Bank Group: Reform Without Change"},"content":{"rendered":"
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World Bank Group Commitments, FY15<\/figcaption><\/figure>\n

Founded in 1944 with the task of leading international post-war reconstruction and development, expectations have\u00a0always been high of the World Bank Group (WBG). As the global economy has evolved, so has the Bank’s\u00a0mission – it now places itself on the frontier of\u00a0ending extreme poverty by 2030 and\u00a0boosting shared prosperity (income level of bottom 40% in any given country).<\/p>\n

To this end, the WBG currently provides\u00a0$45 billion a year in funding\u00a0for developing world projects. It boasts a 16,000 strong staff located\u00a0across 127 countries and five institutions (IBRD, IDA, IFC, MIGA, ICSID). But do WBG operations truly deliver value to\u00a0its 188 member states? In reality, poor\u00a0accountability and crippling bureaucracy has resulted\u00a0in an operational model that is at odds with its business model.<\/p>\n

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Business Model<\/strong><\/p>\n

By providing loans, grants and policy advice, the WBG acts as a bank, a foundation and a think tank to developing countries. However, it receives income from just one of these functions; programs are funded through interest payments on loans as well as through contributions from\u00a0wealthy member states. While the current President, Jim Yong Kim, has called for the organization\u00a0to become a “solutions” bank that leverages its vast institutional expertise, the\u00a0reliance on loan volume\u00a0to sustain business\u00a0has influenced the way the Bank incentivizes and evaluates success.<\/p>\n

As a result, lending has moved increasingly towards middle-income countries such as Brazil, India and China that can repay large\u00a0loans, unlike the poorest countries where, by definition, extreme poverty is most pronounced. This mismatch between\u00a0mission and reality\u00a0is particularly glaring in light of China’s recent announcement that it would\u00a0deliver\u00a0a $60 billion development package to African economies.<\/p>\n

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Operating Model<\/strong><\/p>\n

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Global Practice Groups<\/figcaption><\/figure>\n

Organizational Structure<\/em><\/p>\n

In 2014 the World Bank Group underwent a significant restructuring. Previously, the institution was organized into geographical units, each headed by a Vice President. Many staff had a second reporting line to sector units based on industry expertise (such as health, infrastructure or macroeconomics), forming a matrix structure rather than vertical business units. The restructuring flipped this matrix, creating 14 Global Practice Groups (GPGs) formed along sector lines. The intention was to enrich the knowledge base by increasing collaboration and sharing lessons from a variety of country and regional contexts, rather than operating in geographical silos.<\/p>\n

Instead, the\u00a0result to date has been the creation of 14 new silos, with expertise and decision-making being centralized away from those closest to clients. A second round of restructuring in mid-2015 created an extra layer of bureaucracy by forming three overarching groups, each managing a subset of the GPGs.<\/p>\n

The organizational mess at the Bank has left staff dazed and confused; a 2015 survey found just 38% of employees felt senior management \u201cclearly communicates\u201d the institution’s \u201cstrategic priorities\u201d, and only 33% have \u201ca clear understanding of the direction in which [senior management] is leading [the World Bank Group]\u201d.<\/p>\n

Governance Structure, People and Processes<\/em><\/p>\n

All recent efforts to reform the organizational structure at the Bank have missed the point: a governance structure that is barely accountable to its member states combined with too many levels of hierarchy have created a disconnect between decision makers and beneficiaries. The governance structure is such that each member country\u2019s number of votes is proportional to its financial contribution to the WBG. The US, as the largest shareholder, holds roughly 17% of votes and has an individual seat on the Board of Executive Directors (EDs). In contrast one ED represents 23 African nations. This structure severely stifles the voice of beneficiaries.<\/p>\n

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President of the World Bank Group, Jim Yong Kim<\/figcaption><\/figure>\n

EDs are chosen on an individual basis to promote national and regional priorities, rather than collectively to maximize expertise across all key areas of WBG operations. This stands in contrast to the new internal structure of the WBG, and its sector-based GPGs. The Board meets twice a week, weighing in on every single project, but offers little transparency in to its deliberation and voting process. The President of the World Bank Group, another key influencer of change, is nominated by the US government through an informal \u201cgentleman\u2019s agreement\u201d with the EU, who in turn nominate the head of the IMF. Such processes limit the pool of expertise and diversity of viewpoints that are absolutely essential in designing the operating model of one of the most important institutions in the world.<\/p>\n

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The World Bank Group is a prime example of how world-class assets (human capital, global office infrastructure, deep relationships with recipient governments) can be mismanaged through an operating model that is misaligned with the organization\u2019s value proposition. This is exacerbated when that proposition, the business model, is in itself poorly articulated.<\/p>\n

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Sources:<\/strong><\/p>\n