the psm approach

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The World Bank‘s Approach to Public Sector Management Reform 2011-2020 Better Results from Public Sector Institutions 29 November 2011

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Page 1: The PSM Approach

The World Bank‘s Approach to Public Sector Management Reform2011-2020

Better Results from Public Sector Institutions

29 November 2011

Page 2: The PSM Approach

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?

Page 3: The PSM Approach

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?

Page 4: 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?

Page 5: 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?

Page 6: The PSM Approach

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5%

10%

15%

20%

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30%

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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?

Page 7: The PSM Approach

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?

Page 8: The PSM Approach

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?

Page 9: The PSM Approach

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

Page 10: The PSM Approach

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

Page 11: The PSM Approach

• 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

Page 12: The PSM Approach

• 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:

Page 13: The PSM Approach

Lending engagement can be episodic

Source: World Bank Business Warehouse data

Exam

ple:

Len

ding

Eng

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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

Page 14: The PSM Approach

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

Page 15: The PSM Approach

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

Page 16: The PSM Approach

…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…

Page 17: The PSM Approach

…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.

Page 18: The PSM Approach

• 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

Page 19: The PSM Approach

…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

Page 20: The PSM Approach

…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

Page 21: The PSM Approach

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

Page 22: The PSM Approach

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

Page 23: The PSM Approach

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

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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

Page 24: The PSM Approach

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

Page 25: The PSM Approach

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

Page 26: The PSM Approach

(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

Page 27: The PSM Approach

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

Page 28: The PSM Approach

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

Page 29: The PSM Approach

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

Page 30: The PSM Approach

(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.

Page 31: The PSM Approach

(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

Page 32: The PSM Approach

(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

Page 33: The PSM Approach

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

Page 34: The PSM Approach

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

Page 35: The PSM Approach

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

Page 36: The PSM Approach

Thank you!