Publications

	Table of Contents
p. 3 of 26 BACK | NEXT I. Introduction II. Changes in Development Environment and Agenda III. Themes for Organizational Effectiveness IV. Objective and Principles of Organizational Change V. Analysis of Options VI. Main Features of Organizational Change VII. Complementary Changes VIII. Challenges and Responses IX. Budget Implications and Implementation Plan X. Conclusions XI. Recommendations

Reorganization of the Asian Development Bank

---

III. Themes for Organizational Effectiveness

12. The diagnostic phase (phase I) undertook a detailed review of the impact of the changes outlined in chapter II, and of the strategic agenda of the LTSF on ADB’s current organization, and identified a number of key themes that affect ADB’s capacity to deliver its agenda. These are discussed here. Many of these themes require a multidimensional response. Some cannot be fully addressed by organizational change and need to be addressed by ADB’s shareholders and other stakeholders. Organizational change can be divided, for the purposes of this paper, into structural and nonstructural matters. Accordingly, chapters IV to VI deal with structural matters, while recognizing that structural change needs to be complemented and supported by nonstructural changes. These complementary changes, including human resources, business processes, and incentives, are discussed in chapter VII.

A. Managing Multiple Goals

13. A unitary vision and strategy is important to the effective delivery of development services. ADB’s vision is of an Asia and Pacific region free of poverty. Its overarching goal is poverty reduction. To this end, it has adopted a number of supportive and complementary goals, including sustainable economic growth, good governance, environment protection, inclusive social development, gender, and private sector development. ADB’s organizational structure must now be realigned to achieve this vision. Over the past several years, the adoption of different goals and objectives has resulted in a multiplicity of policies, guidelines, organizational units, and reporting relationships. Any organizational change should integrate and simplify these as much as possible.

14. Other multilateral development banks (MDBs) are also coping with goal congestion. The African Development Bank (AfDB), Inter-American Development Bank (IDB), and World Bank (WB) are making concerted efforts to become strategically more focused, concentrating essentially on the overarching objective of poverty, and being more selective as to how they address other thematic objectives in the context of poverty.

B. Balancing Country and Sector Considerations

15. Broad-based issues such as poverty reduction, good governance, and strengthening of public sector capacity require a countrywide approach and strong country leadership and ownership of the development agenda. Clearly, poverty in a DMC can only be effectively analyzed and addressed on a cross-sectoral and countrywide basis. The causes of poverty are complex and deeply embedded in the political, governance, and social frameworks of a country; its capacities for effective economic and public management; and the capacity of civil society to make government more accountable. ADB needs a structure that enables it to better understand and handle these complex dimensions of poverty in an integrated, cross-sectoral manner. At the same time it is essential that ADB maintain high levels of technical expertise and excellence in each sector.

16. Different MDBs have dealt with the organizational aspect of this issue in different ways. The World Bank has introduced a “matrix-type” of reporting by sector and country staff, as well a number of specialist vice presidencies and directorates. IDB has adopted a different approach: a regionally oriented operational structure with specialist units for policy development and advice.

C. Managing Quality and Policy Compliance

17. Quality assurance and policy compliance are continuing concerns and must be addressed effectively. The principal areas of concern are as follows:

1. Clearer accountability: the responsibility for specific activities of ADB should be clarified further. For instance, programs and projects departments are both responsible for achieving the objectives of a country strategy, and for delivering the overall program of loans and technical assistance (TA). Some RMs share responsibility for programming, portfolio management, and economic and sector work (ESW) with headquarters. Technical support for poverty-focused lending is provided by the Poverty Reduction Unit in SPD, and Social Development Division in OESD.

2. Development impact is substantially dependent on effective portfolio management and implementation of ADB’s interventions. These should therefore have equal priority with programming and project preparation. However, in practice, implementation gets lower priority than these activities. The majority of operational staff are assigned to project design and processing, rather than to project implementation. It is essential for project implementation to receive equal recognition with project preparation.

3. Balancing substantive and procedural matters: as projects become more complex, the need for in-depth analysis and intensive in-country consultations is increasing. Substantive discussion of development options in the field with key stakeholders, and with colleagues within ADB should be enhanced. However, currently, considerable time is dedicated to getting the documentation right. This greatly increases internal transaction costs, consuming time that could be devoted to substantive matters. It is important to achieve a healthy balance between substance and process.

4. Compliance with ADB policies, especially “safeguard policies,” is a critical area. A number of units in ADB are considered responsible for such compliance, such as Social Development Division, Environment Division, Poverty Reduction Unit, Operations Evaluation Department and Office of the General Counsel. In reality, however, they have multiple roles and functions. It is necessary to clarify whether these units should be “enforcers” of policy compliance, technical advisers and catalysts, or they should themselves undertake operations. These roles are not necessarily compatible and can sometimes lead to unnecessary confusion.

D. ADB as a Resource and Knowledge Center

18. As mandated by the LTSF, ADB must become a “knowledge catalyst” for the region. There is considerable potential to use ADB’s regional mandate and resources as a knowledge catalyst for Asia and the Pacific. The outcome of the organization review should enable ADB to build on and use its economic and sector talent for the benefit of DMCs through knowledge dissemination. For example, ADB has a large group of macroeconomists who can be used to build a high quality source of economic research and advice for the region. Existing programs and activities need to be improved: ADB invests substantial resources in ESW and capacity building, and these need to be better programmed and implemented. Knowledge dissemination and capacity building work should be a key part of staff work plans and assessments.

19. The training function needs greater attention. Training is essential to internal and external capacity building and this is well recognized in other MDBs. ADB should work toward developing a greater capacity in this area. Training for external agencies is currently done by different units in ADB. It should be professionalized and better coordinated.

E. Promoting a Strategic Regional Focus

20. ADB’s Charter mandates it to promote regional cooperation. This has been reaffirmed as a crosscutting strategic theme in the LTSF. ADB is currently revising its regional strategy to respond more effectively to this mandate. As a regional institution, ADB has a clear comparative advantage in promoting regional cooperation. There is a need for a stronger institutional structure to coordinate this activity. However, no office or group has an incentive to promote region-wide initiatives, or to engage other regional groupings such as the Association of Southeast Asian Nations (ASEAN) or Asia-Pacific Economic Cooperation (APEC), except on a sector by sector basis. With the growth of such regional groupings, and the increasing focus on global and regional public goods, a focal point for regional cooperation in ADB is necessary.

21. Among the regional MDBs, IDB has a dedicated department for regional and subregional affairs. Through this department, IDB has established strong links with regional and global organizations.

F. Public Profile and Information

22. ADB should have a more active approach to its external relations activities. The information and communications technology revolution, increasing civil society attention to MDBs, and adoption of an agenda that deals with complex and sensitive issues such as governance will result in greater public scrutiny of ADB. The LTSF has recognized that ADB must have a proactive external relations and media strategy, a commitment to a more active public profile, and a structure that can deliver a unified external image of ADB. There is a strong case for better coordination of the different units that currently generate and channel knowledge and information in ADB.

G. Partnerships

23. Enhancing strategic alliances and partnerships is a strategic operating principle of the LTSF. Some funding agencies and nongovernment organizations (NGOs) have indicated that ADB should build broader partnerships, rather than focusing on specific joint activities such as cofinancing projects. ADB should work with the development agencies as equal partners in achieving shared goals for DMCs. ADB should consider NGOs and other civil society groupings as valuable partners in development activities, and should develop better mechanisms and products for such active engagement.

H. Risk Management

24. Each institution faces risks, defined as threats to the integrity, stability, reputation, and survival of the institution. Risks are mitigated by policies and procedures that seek to minimize the possibility of their occurrence, and to contain them if they materialize. Risk management in ADB has largely been seen in terms of treasury-related risks or credit risks in private sector transactions and not in terms of ADB’s public sector loans. ADB has made some attempts to evaluate country risk, but these have not materialized explicitly in any policies or procedures. At the project level, risks are generally handled in terms of financial viability, and environment and social impact. ADB’s policies for these areas are sufficient for risk management, but depend for their effectiveness on rigorous and objective enforcement. ADB needs to address risk management more thoroughly.

I. Summary

25. Some of the themes outlined in paras. 13-24 need to be addressed at the strategic and policy level. Some can be addressed through organizational change, which is discussed in Chapters IV-VI.

Back II. Changes in Development Environment and Agenda	Next IV. Objective and Principles of Organizational Change