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Management of international institutions and NGOs : frameworks, practices and challenges
 9780415706643, 0415706645, 9780415706650, 0415706653

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MANAGEMENT OF INTERNATIONAL INSTITUTIONS AND NGOS

International Institutions (IIs), International NGOs (INGOs) and Transnational Hybrid Organizations (THOs) play a hugely important role in the modern world economy. Despite having been studied by scholars from a range of disciplines, these organizations have never before been approached from a management perspective. This ambitious book analyzes the management challenges associated with international cooperation and sheds light on how these organizations have evolved as the political, economic and business environments have changed around them. Covering an admirably broad canvas, the authors pursue two main objectives. Firstly, they explore the main management frameworks developed in the context of the corporate and national public/non-profit organizations and adapt them to the specificity of IIs and INGOs. This leads to the identification of a “tailored” approach to IO management based on their institutional and operational settings, stakeholder groups, core business, staff profile, and financial arrangements. Secondly, they “bring theory into practice” by linking frameworks to several case studies and best practices of organizations currently experimenting with management systems and tools, with case studies including the World Bank and the Gates Foundation. This comprehensive textbook is a must-own resource for students and academics involved with studying and working with international organizations. Eduardo Missoni, Adjunct Professor at Bocconi University and Milano-Bicocca University, Milan, Italy. Daniele Alesani, Adjunct Professor at Bocconi University and Catholic University, Milan, Italy.

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MANAGEMENT OF INTERNATIONAL INSTITUTIONS AND NGOS Frameworks, practices and challenges

Eduardo Missoni and Daniele Alesani

Routledge l·

Taylor &. Francis Croup

LO N D O N A N D NEW YORK

First published 2014 by Routledge 2 Park Square, Milton Park, Abingdon, Oxon OX14 4RN and by Routledge 711 Third Avenue, New York, NY 10017 Routledge is an imprint of the Taylor & Francis Group, an informa business © 2014 E. Missoni and D. Alesani The right of Eduardo Missoni and Daniele Alesani to be identified as authors of this work has been asserted by them in accordance with sections 77 and 78 of the Copyright, Designs and Patents Act 1988. All rights reserved. No part of this book may be reprinted or reproduced or utilised in any form or by any electronic, mechanical, or other means, now known or hereafter invented, including photocopying and recording, or in any information storage or retrieval system, without permission in writing from the publishers. Trademark notice: Product or corporate names may be trademarks or registered trademarks, and are used only for identification and explanation without intent to infringe. British Library Cataloguing in Publication Data A catalogue record for this book is available from the British Library Library of Congress Cataloging in Publication Data Missoni, Eduardo (Professor) Management of international institutions and NGOs : frameworks, practices and challenges / Eduardo Missoni, Daniele Alesani. pages cm Includes bibliographical references and index. 1. International agencies--Management. 2. International organizations-Management. 3. Non-governmental organizations--Management. 4. International cooperation. I. Alesani, Daniele. II. Title. JZ4850.M57 2013 352.11--dc23 2013023164 ISBN: 978-0-415-70664-3 (hbk) ISBN: 978-0-415-70665-0 (pbk) ISBN: 978-1-315-88736-4 (ebk) Typeset in Bembo by Taylor & Francis Books

CONTENTS

List of illustrations Foreword Acknowledgments List of Abbreviations Introduction Daniele Alesani and Eduardo Missoni

xi xv xviii xix 1

SECTION 1

The context 1

International Institutions: classification and main characteristics Daniele Alesani 1.1 1.2 1.3 1.4 1.5 1.6 1.7 1.8

Introduction 13 Towards a definition of International Institutions 14 Possible classifications of International Institutions 16 The United Nations system 18 Global and regional International Financial Institutions 28 Other families of IIs 38 List of United Nations funds, programs and specialized agencies 42 List of regional development banks 47

11

13

vi Contents

2

International Non-Governmental Organizations: definitions, classification, and relation with the UN system Eduardo Missoni 2.1 2.2 2.3 2.4 2.5 2.6 2.7 2.8

3

Defining NGOs 49 Non-profits 51 Civil society 52 Third sector and social economy 54 In search of operational definitions 57 Other transnationally operating non-profits 58 NGOs and the UN system 64 Case study: the Bill and Melinda Gates Foundation 71

Transnational Hybrid Organizations, Global Public-Private Partnerships and Networks Eduardo Missoni 3.1 3.2 3.3 3.4 3.5 3.6

49

77

Introduction 77 Defining and classifying Transnational Hybrid Organizations and Global Public-Private Partnerships 78 Organizational arrangements of THOs and other public-private interactions 83 Lessons learned and challenges 88 From the idea of “partnership” to Global Public-Private Partnerships. A historical overview 90 Case study: the UN opening to the corporate sector—the Global Compact 94

SECTION 2

Management of international cooperation 4

The evolution of international development cooperation Eduardo Missoni 4.1 4.2 4.3 4.4 4.5 4.6 4.7

The birth of development discourse and international aid 105 Critics from the south 108 Applying the “Shock Doctrine”: the neoliberal response to crisis 109 Fight against poverty, partnership and development goals 112 Financing development 113 In search of aid effectiveness 115 The future of international cooperation, aid and development 118

103 105

Contents vii

5. Coordination and coherence among the main actors of the development sector: trends, initiatives and ways forward Daniele Alesani 5.1

5.2 5.3 5.4 5.5 5.6 5.7

6

6.2 6.3 6.4 7

New paradigms for international development cooperation and coordination among development actors 122 Consolidated coordination mechanisms within the UN system 123 The search for UN system-wide coherence and focus on field operations 125 The UN system: towards a comprehensive country needs assessment and planning 126 Consistency, operational efficiency and effectiveness at the country level: the “Delivery As One” initiative 129 An inconvenient dilemma for the current coordination initiatives in the development sector 137 Case study: UNAIDS at the crossroad between UN system coordination, modernization of governance settings and management reform 138

Changing paradigms for program implementation Daniele Alesani 6.1

7.4

146

A new role for IIs in technical cooperation programs’ implementation: status and challenges 146 The changing aid environment and a new role for development actors 147 IIs: from “administration” to “strategic management” of implementing partners 152 Progress to date and future challenges 161

The evolution of funding policies and their impacts on International Institutions Daniele Alesani 7.1 7.2 7.3

122

Introduction 165 Funding sources and mechanisms 165 The escalation of voluntary resources and its impacts on financial and operational management 170 Current initiatives to reform IIs’ funding patterns 176

165

viii Contents

8

General coordination of responses to crisis situations Anna Fiscale and Eduardo Missoni 8.1 8.2 8.3 8.4 8.5 8.6 8.7 8.8

Introduction 181 The increasing need for a coordinated response 181 The evolution of the relationship between the humanitarian actors and their coordination mechanisms 183 Humanitarian coordination roles and organs 185 The humanitarian financing system 187 The 2005 UN Humanitarian Reform and the cluster system 191 NGO coordination in the field 193 Case study: humanitarian intervention in the aftermath of the Haiti earthquake 194

9 Accessing development assistance data and statistics Eduardo Missoni and Luca Citino 9.1 9.2 9.3 9.4

181

203

Introduction 203 OECD aid information and reporting system 203 Aid flows from NGOs 209 The UN system aid statistics 210

SECTION 3

Management systems and reforms in International Organizations 10 Governance models and reforms Ivano Bongiovanni, Eduardo Missoni and Daniele Alesani 10.1 Governance in IIs and INGOs: definition and key concepts 215 10.2 Institutional governance: organizational arrangements and the “rules of the game” 216 10.3 Decision-making mechanisms in IIs and INGOs 220 10.4 Good governance in IIs and INGOs 225 10.5 International regimes and global governance 231 10.6 Conclusions 232 10.7 Case study: tripartite governance structures at the ILO and the ITU 233 10.8 Case study: UN Security Council—veto power and reform proposals 236

213 215

Contents ix

11 Strategic thinking and planning Daniele Alesani and Ivano Bongiovanni

239

11.1 Introduction 239 11.2 The notion of strategy and the need for a tailored approach to public sector organizations and NGOs 240 11.3 The growing importance of strategy and strategic management in public and intergovernmental organizations 241 11.4 Towards a working definition of strategy for IIs and INGOs 243 11.5 Strategy formulation in IIs and INGOs: “thinking” and “planning” 249 11.6 Managing strategy in IIs and INGOs 256 11.7 Case study: new strategic decisions made by IFAD 262 12 Results Based Management Daniele Alesani

266

12.1 12.2 12.3 12.4

Introduction 266 Results Based Management: concepts and definitions 266 The evolution of RBM in international cooperation 271 Specificities of RBM in International Organizations and the attribution issue 274 12.5 Success factors, best practices and challenges facing RBM implementation in International Organizations 278 12.6 Does performance matter? A donor’s perspective 286 12.7 Case study: towards a harmonized and efficient IIs’ performance oversight by donors—the “common approach” and MOPAN 292 13 The evolution of budgetary, accounting and financial reporting systems Daniele Alesani 13.1 Basics of accounting in public and non-profit organizations 295 13.2 Evolution of public sector accounting under the NPM agenda and progressive adoption of accrual accounting 299 13.3 Budgeting processes and budget structure in IIs 301 13.4 Financial accounting and reporting in IIs 307

295

x Contents

14 Human Resources Management Daniele Alesani and Michael Hathorn 14.1 14.2 14.3 14.4 14.5 14.6 14.7

Introduction 325 HRM and reforms in International Organizations 325 Strategic HRM 328 Reforming the HRM function 335 Reform of the HR systems and tools 338 The future of HRM reforms in International Organizations Case study: preventing and managing work-related disputes—the UN internal justice system 354

325

351

SECTION 4

Building and managing the organization’s profile

361

15 Building and managing the organization’s profile Eduardo Missoni

363

15.1 15.2 15.3 15.4 15.5

Introduction 363 Communication and branding 364 Stakeholder management 373 Resources mobilization 377 Case study: the management of strategic partnerships with civil society organizations at UNICEF 384 15.6 Case study: social media strategy for IIs 386 16 Ethics and International Organizations Eduardo Missoni and Gabriela Lupu 16.1 16.2 16.3 16.4 16.5 16.6 16.7

391

Introduction 391 Defining ethics 392 Ethics of International Organizations 394 Ethics in International Organizations 396 The ethical versus unethical organizations 399 Conclusions 401 Appendix: main fields of study in ethics 401

17 Conclusions Eduardo Missoni and Daniele Alesani

406

Bibliography Index

411 436

LIST OF ILLUSTRATIONS

Tables 1.1 1.2 1.3 2.1 2.2 2.3 4.1 4.2 6.1 7.1 8.1 8.2 8.3 8.4 10.1 11.1 11.2 12.1 12.2 12.3

Set of criteria to define a “formal” II UN Classification of areas of intervention UN system personnel profile Comparison of criteria defining INGOs NGOs participation rights in ECOSOC and subsidiary bodies Basic facts about the Bill and Melinda Gates Foundation The Millennium Development Goals The five principles of the Paris Declaration on Aid Effectiveness Funds allocated to IPs as a percentage of 2011-2012 UN funds and programs expenses Voluntary and mandatory contributions in UN system organizations Classification of disasters Clusters and cluster lead agencies involved in humanitarian intervention CERF funding and appeal needs met by cluster in 2010 and total CERF resources in 2011 and 2012 ERRF donors and amounts committed Pros and cons of the main decision-making mechanisms in IIs Strategic thinking and planning Evaluation of results of IFAD strategic re-alignment The attribution issue and the “scale” of intervention WFP’s outcome definition and indicators WB Global Corporate Score Card

15 17 27 59 68 71 114 116 161 167 182 192 198 199 226 250 265 277 278 280

xii List of Illustrations

12.4 12.5 13.1 14.1 14.2

International Institutions’ performance assessment Main features of the assessment initiatives by the donor community Main areas of potential accounting diversity Drivers of staff motivation A tailored approach to HRM reforms in IIs

286 288 319 334 352

Figures 0.1 Generation of Public Value through the interaction between the Representation and the Managerial Systems in international organizations 1.1 The World Bank group 1.2 Political, technical and economic rationalities for IFIs 2.1 The BMGF annual spending since its creation (million US$) 2.2 Breakdown of BMGF spending per area in 2010 3.1 Classification of THOs, GPPPS and other global networks 5.1 Linkages between CCA, UNDAF and organizations’ country programs 5.2 Links between CCA, UNDAF and Country Programs: A results-based management perspective 5.3 A graphic representation of the UN Deliver as One model 5.4 The four principles of the DaO 5.5 The expected benefits of the DaO initiative DaO independent evaluation 5.6 UNAIDS’ governance settings 6.1 Alignment, empowerment and decentralization in technical cooperation for development 6.2 Changing program delivery paradigms within the UN system 6.3 Implementing partners’ management cycle 6.4 The planning and programming phase 6.5 The Harmonized Approach to Cash Transfer 6.6 Monitoring and Evaluation 6.7 IIs’ management cycle: new tools and frameworks 7.1 Multilateral aid organizations by size of contributions received by bilateral donors 7.2 Trend of core and non-core contributions to the UN system 7.3 Core and non-core contributions by main state donors, 2008 7.4 Program Cost Recovery as percentage of Voluntary Contributions, WHO 7.5 Balancing cost structure and funding arrangements 7.6 Evolution of number and USD amount of MDTFs, 2004–2009 8.1 CERF income as a share of total humanitarian assistance (data is in current prices) 8.2 Total resources to pooled funds 2006–2010

5 32 37 72 73 79 127 128 130 131 133 140 149 150 153 154 157 159 162 169 171 171 173 176 178 188 189

List of Illustrations xiii

8.3 8.4 9.1 10.1 10.2 10.3 11.1 11.2 11.3 11.4 11.5 11.6 11.7 11.8 11.9 12.1 12.2 12.3 12.4 12.5 12.6 12.7 12.8 13.1 13.2 13.3 13.4 13.5 13.6 13.7 14.1 14.2 14.3 14.4 14.5 14.6 14.7 14.8 14.9 14.10 14.11 14.12

The humanitarian planning process The Humanitarian Response flow Resource flows covered in the Aid Activity database ITU membership Number of vetoes by country; period 1946–2012 Historical trend of vetoes by country; period 1946–2012 The notion of strategy in non-profit organizations Strategic positioning by IIs and INGOs Strategy as fit: strategic re-alignment options Strategy formulation Strategic thinking Strategic plan: a sample structure Strategic versus operational decisions The strategic triangle The five competitive forces model for IOs The result chain: an example Organizational, operational and policy effectiveness A system-wide perspective of result orientation WB strategic planning documents IFAD Management for Developing Results Integration of IFAD’s MfDR levels The UK MAR approach The MOPAN Common Approach framework Main characteristics of alternative bases of accounting Sample structure of the UNESCO budget UNESCO’s budget: programs and sub-programs Example of budget execution report Example of budget execution report - delivery principle Financial disclosure impacts of IPSAS adoption in WFP Model donor reporting format Strategic HR management - a conceptual framework The strategic HR management model Principal elements of the structure of the HR function The HR management cycle WTO HR Management Division structure, 2006 Regional and central out-posting options Job families and salary scale overlapping at OECD The broad-banding system at OECD: an example EBRD performance-based compensation scheme A balanced model for career development The UN Secretariat’s vision for reforming HR management The UN internal justice and conflict management system

190 193 208 235 237 238 242 245 248 249 251 254 256 259 260 268 270 274 279 281 282 291 293 298 304 305 306 307 315 317 329 330 331 332 336 337 341 342 345 349 353 356

xiv List of Illustrations

Boxes 3.1 9.1 9.2 9.3 9.4 10.1 10.2

The ten Global Compact principles Statistical tables of DAC database Types of aid Channels of aid Qualitative descriptions Restructuring of the voting mechanism at IFAD The INGO Accountability Charter

95 205 206 207 207 221 229

FOREWORD

Globalization is a complex phenomenon with multidimensional consequences on the economy and society, subsequently challenging the existing international governance frameworks. The economic power of transnational companies has progressively grown, while the influence of governments and International Institutions (IIs) has been decreasing or, at least, questioned. In this context, evidence shows that despite an increase in financial resources, an extension of functions, and an overall augmentation in formal recognition of IIs, these organizations have substantially lost influence. In today’s globalized world, IIs are only one component of a complex and highly fragmented system of economic and social agents influencing global governance, a system which increasingly involves the corporate sector and civil society and is made even more complex by a number of high-level initiatives, regimes, and public-private partnerships (e.g. G8, G20, Kyoto Protocol, The Global Fund to Fight AIDS, tuberculosis and malaria). Rather than analyzing the global governance system, this book focuses on how effective management of IIs and International Non-Governmental Organizations (INGOs) can contribute to it. The legitimacy of IIs primarily rests on the level of participation and commitment of national and intergovernmental players. An efficient and effective use of resources by IIs is a not sufficient, but surely a necessary condition to secure this fundamental support. However, the lack of a sound managerial approach has greatly contributed to a progressive loss of trust in IIs on the part of these essential constituencies and donors. Often the argument has been put forward by opinion leaders that taxpayer money may be wasted in inefficient institutions which lack transparency or real impact on population wellbeing. The current global financial meltdown further exacerbated this tendency particularly because IIs’ interventions often came with significant sacrifices and constraints attached.

xvi Foreword

In today’s scenario, characterized by fast evolution of the relationships among very diverse global actors, global governance strongly influences internal governance of IIs and INGOs (collectively referred to as “international organizations”, in this book) and shapes their funding policies and operations. Thus, in this rapidly changing context, management acquires an increasingly critical role. With the end of the Cold War and the progressive establishment of a multipolar system and a global free market environment, geopolitical relations are increasingly affected by financial issues. This process contributed to the expansion of both the scope and the aims of IIs in international development cooperations, trade and economic integration, and support to macroeconomic and financial stability. To face this challenge IIs need to regain credibility and show that they are capable of evolving from a “bureaucratic” to a “managerial” model that is based on efficient use of resources, orientation toward results, accountability for performance, financial transparency, decentralization, and effectiveness of operations. This implies recruiting, educating, and nurturing international managers with the right competencies and skills to, on one hand, effectively and efficiently implement policies decided by the governing bodies (top-down flow), while on the other, identify, analyze, and understand global issues in order to properly orient the political decision-making processes (bottom-up flow). To this end, at least three managerial models generally co-exist: “Diplomatic/ Political”, “Functional”, and “Professional”. “Diplomatic/Political” managers directly support IIs’ and INGOs’ governing bodies in building political consensus and participation around global issues, economic rules, and socio-economic objectives. These profiles play a relevant role in drafting documents aimed at promoting or maintaining peace in a conflict setting and defining global standards, intergovernmental agreements, or financial rules. They also contribute to the promotion of global advocacy campaigns and global moral suasion behavior, for example against terrorism, corruption, and criminality of any kind. “Functional” managers run the day-to-day operations in IIs and INGOs. This requires them to set up, manage, and continuously develop operating mechanisms such as planning, programming and budgeting, performance measurement and career development systems, management control and financial accounting systems, and internal and external communications. In IIs, these tasks are made even more challenging by the international nature of organizations; in these organizations there exists an inherent need to harmonize different cultural and professional backgrounds and build a separate international public management culture which is necessarily different from the national public administration models (e.g. UK or US civil servants vs. French bureaucracy). “Professional” managers implement projects, programs, and field operations. They must have specific competencies and skills required by their respective professions and sectors of intervention (agriculture, infrastructure, healthcare, security, humanitarian aid, etc.) as well as a mindset oriented toward results. According to the specific environment where they operate, priority may be given to command-control chain, leadership, flexibility, and/or negotiation skills.

Foreword xvii

Based on the discussion above, the consolidation of management models tailored to II and INGO specificities requires defining the best mix of diplomatic, functional, and professional management profiles for the individual organization as well as the identification of career paths which will allow managers to grow across these three models. This process also needs to be supported by specific educational contents and programs, and guided by high ethical standards, in order to produce a new generation of international organization managers. Missoni and Alesani’s book offers a first important contribution to this need. In literature, IIs and INGOs have been investigated by a number of disciplines ranging from international relations to the political sciences. A managerial approach to these organizations only recently started to surface through a growing number of articles in international journals, and a wealth of professional concept papers and progress reports issued by single organizations. Nonetheless, there is to date no systematization of management reforms and practices in IIs and INGOs into a comprehensive framework, tailored to the institutional and operational specificities of these organizations. Missoni and Alesani’s book aims to fill this gap in international literature by exploring and identifying the main features of a managerial approach to international organizations. The reader will note the broad, cross-functional scope of this work (from strategy to accounting, from HR management to program delivery) and the ambitious challenge undertaken by considering IIs and INGOs jointly. These organizations have significant similarities and can be usefully compared as they are part of the same global governance system. In this work, the authors adopt a strong, multidisciplinary approach and merge a rigorous theoretical component with a hands-on approach that will intrigue professionals, academics, and graduate students alike. I trust that through this book readers will gain an in-depth knowledge of the functioning of international organizations and a comprehensive understanding of the best practices and the main challenges of international organizations that are currently experimenting with management reforms. Elio Borgonovi Full Professor of Public Management Bocconi University, Milan, Italy

ACKNOWLEDGMENTS

We would like to express our gratitude to the many people who encouraged us to pursue this endeavor and saw us through this book; to all those who provided support, discussed, read, wrote, offered comments, allowed us to utilize their remarks and assisted us in the editing and proofreading. We would like to thank the many International Organizations’ professionals and managers who shared their priceless experience and knowledge with us during the years, in particular: Anthony Beattie, Dominique Benard, Miguel I. Figuerola, Gregory Hess, Remo Lalli, Achim Von Heynitz. You are real visionaries and change agents. Sincere thanks to Giulia Ferrari for coordinating the editing with patience, precision and infinite energy, and to Biorn Maybury-Lewis for the insightful comments and the excellent proofreading. We would like to express our gratitude to all colleagues who supported us with frank discussions and inputs, particularly Prof. Carolyn Ban. We also owe a great debt of gratitude to Prof. Elio Borgonovi for his unending support and belief in our project. A special thanks to our students and young people who are the real inspiration for our work. Special appreciation goes to our publisher, Terry Clague and Routledge for believing so strongly in this book. Finally, we thank our family and friends, who supported and encouraged us selflessly.

LIST OF ABBREVIATIONS

AAA ACC ADB AECID AfDB AHRMIO AIMS AL ASEAN AU AWP BMGF BoDs BoGs CAP CCA CCO CDC CEB CEO CERF CHAP CHFs CIDA CMRs

Accra Agenda for Action Administrative Committee on Coordination Asian Development Bank Agency for International Cooperation and Development – Spain African Development Bank Association of Human Resource Management in International Organizations Aid Information Management Systems Arab League Association of South-East Asian Nations African Union Annual Work Plan Bill and Melinda Gates Fundation Board of Directors Board of Governors Consolidated Appeal Process Common Country Assessment Committee of Cosponsoring Organizations – UNAIDS US Centers for Disease and Control Chief Executive Board for Coordination Chief Executive Officer Central Emergency Response Fund Common Humanitarian Action Plan Common Humanitarian Funds Canadian International Development Agency Corporate Management Results

xx List of Abbreviations

CoE CONGO CPA CPAP CPC CPD CPPMS CRC CRIN CSO CSOs CSR CRS DAC DAG DANIDA DaO DESA DFID DHA DPI DPKO DSRSG EBRD ECHO ECOSOC EIB ERC ERFs ERRF ERP ESA EU EU-MIC FA FACE FAO FCTC FDI FS FSS GAN GATT

Council of Europe Conference of Non-Governmental Organizations in Consultative Relationship with the United Nations Country Programmable Aid Country Programme Action Plan Committee for Programme Coordination Country Programme Document Corporate Planning and Performance Management System Convention on the Rights of the Child Child Rights International Network NGO Coordination Support Office Civil Society Organizations Corporate Social Responsibility Creditor Reporting System – OECD Development Assistance Committee – OECD Development Assistance Group Danish International Development Agency Delivery as One Department of Economic and Social Affairs Department for International Development – UK Department of Humanitarian Affairs Department of Public Information Department of Peacekeeping Operations Deputy Special Representative of the Secretary-General European Bank for Reconstruction and Development Humanitarian Aid Department of the European Commission Economic and Social Council European Investment Bank Emergency Relief Coordinator Emergency Response Funds Emergency Relief and Recovery Fund Enterprise Resource Planning European Space Agency European Union European Civil Protection Mechanism Flash Appeal Funding Authorization and Certificate of Expenditures Food and Agricultural Organization Framework Convention on Tobacco Control Foreign Direct Investment Financial Statements Forward Spending Survey – OECD Global Action Network General Agreement on Tariffs and Trade

List of Abbreviations xxi

GAVI GDP GFATM GIST GNI GNRC GPEC GPPPs GPs GRI HACT HC HCT HIPCs HLCM HLCP HLPC HRM IADB IAEA IASC IATI IBRD ICAO ICC ICC ICRC ICSID ICSC ICSU ICVA ICYE IDA IDB IDCF IDPs IFAD IFC IFFIM IFIs IFPMA

Global Alliance for Vaccination and Immunization Gross Domestic Product Global Fund to Fight AIDS, Tuberculosis and Malaria Global Implementation Support Team – UNAIDS Gross National Income Global Network of Religions for Children Global Partnership for Effective Cooperation Global Public–Private Partnerships Global Partnerships Global Reporting Initiative Harmonized Approach to Cash Transfers Humanitarian Coordinator Humanitarian Country Team Heavily Indebted Poor Countries High Level Committee on Management – CEB High Level Committee on Programs – CEB High Level Panel on System Wide Coherence Human Resources Management Inter-American Development Bank International Atomic Energy Agency Inter-Agency Standing Committee International Aid Transparency Initiative International Bank for Reconstruction and Development International Civil Aviation Organization International Chamber of Commerce International Criminal Court International Committee of the Red Cross International Centre for the Settlement of Investment Disputes International Civil Service Commission International Council for Science International Council of Voluntary Agencies International Cultural Youth Exchange International Development Agency Islamic Development Bank International Development Cooperation Forum Internally Displaced Persons International Fund for Agricultural Development International Finance Corporation International Financial Facility for Immunization International Financial Institutions International Association of Pharmaceutical Manufacturers and Associations

xxii List of Abbreviations

IFRC IIs ILO ILLR IMF IMO INGOs IOM IPs IPSAS ISO ITC ITTs ITU IUCN JIU KPIs LDCs LFA LoU LTAs MAR MDGs MDTF MERCOSUR MfDR MIGA MIs MINUSTAH MSF MOPAN MoU MYFFs NAFTA NEX NGDO NIEO NPFM NPM NPOs OAS OAU OCHA

International Federation of the Red Cross and the Red Crescent Societies International Institutions International Labor Organization International Lender of Last Resort International Monetary Fund International Maritime Organization International Non-Governmental Organizations International Organization for Migration Implementing Partners International Public Sector Accounting Standards International Organization for Standardization International Trade Center Interagency Task Teams International Telecommunication Union International Union for Conservation of Nature Joint Inspection Unit Key Performance Indicators Least Developed Countries Logical Framework Approach Letter of Understanding Long Term Agreements Multilateral Assessment Review – UK Millennium Development Goals Multi-Donor Trust Fund Mercado Comun del Sur Management for Developing Results Multilateral Investment Guarantee Agency Micro-Indicators United Nations Stabilization Mission in Haiti Médecins Sans Frontières Multilateral Organizations Performance Assessment Network Memorandum of Understanding Multi-Year Funding Frameworks North American Free Trade Agreement National Execution Non-Governmental Development Organization New International Economic Order New Public Financial Management New Public Management Non-Profit Organizations Organization of American States Organization of African Unity United Nations Office for Coordination of Humanitarian Affairs

List of Abbreviations

ODA OECD OECD/DAC OESC OIOS OSCE OSOCC PAHO PCB PDNA PIU PoW PPPs PRSP PSC PSC RBB RBM RC RDRAs RM RMF SAP SCHR SG Sida SMSR SOI SPs SWAP TCPR THOs TNCs TSF UIA UNAIDS UNASUR UNCDF UNCTAD UNCTC UNCTs UNDAC UNDAF UNDESA

xxiii

Official Development Aid Organization for Economic Cooperation and Development OECD Development Assistance Committee Office for ECOSOC Support and Coordination Office of Internal Oversight Services Organization for Security and Cooperation in Europe On Site Operations and Coordination Centre Pan American Health Organization Programme Coordinating Board – UNAIDS Post-Disaster Needs Assessment Project Implementation Units Program of Work Public–Private Partnerships Poverty Reduction Strategy Paper Peace and Security Council Program support costs Result Based Budget Results Based Management Resident Coordinator Regional Disaster Response Advisors – OCHA Resource Mobilization Result Measurement Framework Structural Adjustment Programmes Steering Committee for Humanitarian Response Secretary-General Swedish International Development Cooperation Agency Synergic Model of Self-Reliance Special Olympics International Strategic Plans Sector Wide Approaches Triennial Comprehensive Policy Review Transnational Hybrid Organizations Transnational Companies Technical Support Facility – UNAIDS Union of International Associations Joint United Nations Programme on HIV/AIDS Union of South American Nations United Nations Capital Development Fund United Nations Conference on Trade and Development United Nations Center for Transnational Corporations United Nations Country Teams United Nations Disaster Assessment and Coordination United Nations Development Assistance Framework United Nations Department of Economic and Social Affairs

xxiv List of Abbreviations

UNDEF UNDG UNDP UNDRO UNESCO UNEP UNFPA UNGA UNGC UN-HABITAT UNICEF UNIDO UNHCR UN-NGLS UNODC UNOPS UPU UNRWA USAID USAR UNSAS UNV UNWTO VfM WB WEF WFP WHO WIPO WMO WSB WTO WWF

United Nations Democracy Fund United Nations Development Group United Nations Development Programme United Nations Disaster Relief Organization United Nations Education, Science and Culture Organization United Nations Environment Programme United Nations Population Fund United Nations General Assembly United Nations Global Compact United Nations Human Settlement Programme United Nations Children’s Fund United Nations Industrial Organization United Nations Office of the High Commissioner for Refugees United Nations Non-Governmental Liaison Service United Nations Office for Drug and Crime United Nations Office for Project Services Universal Postal Union United Nations Relief and Works Agency for Palestine Refugees in the Near East United States Agency for International Development International Urban Search and Rescue United Nations System Accounting Standards United Nations Volunteers United Nations World Tourism Organization Value for Money World Bank World Economic Forum World Food Programme World Health Organization World Intellectual Property Organization World Meteorological Organization World Scout Bureau World Trade Organization World Wildlife Fund

INTRODUCTION Daniele Alesani and Eduardo Missoni

Objectives and scope of this work International Institutions (IIs) and International Non-Governmental Organizations (INGOs) have been investigated in the international literature by several disciplines, from international relations to the political sciences. At the same time, it appears evident that these organizations—hereafter collectively referred to as International Organizations (IOs)—underwent, and still are undergoing, a paradigmatic transition from an “administration” to a “management” model, similar to domestic public and non-profit organizations. A managerial approach to IOs only recently started surfacing and, at present, there is a lack of systematization of emergent practices and experiences under a consistent and tailored framework that explains “what is management” for IIs and INGOs. Our intent is to contribute to filling this gap in the literature and to address the growing knowledge needs on this subject in both the academic and professional communities. This book also aims to satisfy the need for a comprehensive text dedicated to postgraduate students who have been exposed to the fundamentals of public management and administration and wish to further explore these themes with a specific reference to IOs. We pursue two main objectives. First, we explore the main management frameworks developed in the context of the corporate and national public/non-profit organizations and adapt them to the specificities of IIs and INGOs. This leads us to identify a “tailored” approach to IO management based on their institutional and operational settings, stakeholder groups, core business, staff profile, and financial arrangements. The combination of technical, political, and managerial rationalities in these organizations is the basis of our approach since IOs are “inherently political” organizations and it is often a political agenda that drives the time and window of opportunity for management reforms. We then “bring theory into practice” by linking frameworks to case studies and best practices of organizations

2 Management of IIs and INGOs

currently experimenting with management systems and tools. In doing so, we aim to merge a theoretical component with a hands-on approach. Beginning in the 1990s, the international literature extensively investigated the transition from a traditional, bureaucratic model of “public administration” to a more modern “public management” approach. An OECD report (1998) effectively described public management in the following terms: In most member countries public management reform has involved a major cultural shift in response to a new paradigm of management, which attempts to combine modern management practices with the logic of economics, while still retaining the core public service values. This new management paradigm emphasizes results in terms of “Value for Money” (VfM), to be achieved through management by objectives, the use of markets and markettype mechanisms, competition and choice, and devolution to staff through a better matching of authority, responsibility and accountability. (OECD 1998) Public management has been described by the international literature as the new paradigm for managing organizations which substitutes the previous public administration model (Hughes 2012). The new paradigm is based on decentralization and flexibility, calls for strong client focus, and allows for choice, competition and the use of market instruments to maximize delivery of programs and services. Public management stands on the principles of management accountability for results in exchange for adequate resources and freedom of execution. This paradigm alters the agency relationship between managers and political leaders, creating a more complex and interactive relationship no longer based on command and execution. In this work, we will take the “public management” paradigm in its broad sense explained above and we will analyze how its principles and tools can be applied to IOs to support public value creation. To this end, it is worth highlighting the distinction between the broad public management paradigm and the notion of “New Public Management” (NPM; Hartley and Skelcher 2008). This distinction is even more necessary given that, in certain literature and over time, NPM became shorthand for public management. NPM relates to a specific political and management agenda applied by governments of a number of countries around the world and spread in the early 1990s starting from the Commonwealth countries (for a literature review see Hood 1991). The main points of the NPM agenda include a shift towards a quantitative downsize of the government and reduction of its role, the introduction of competition in the public sector, corporatization and outsourcing, focus on privatesector style of management practices, hands-on professional management, systematic use of standards and measure of performance, and great emphasis on efficiency and output production (Hughes 2012). While NPM is undoubtedly the most wellknown application of the public management paradigm, its implementation and

Introduction 3

actual results have been the object of extensive criticism in the literature, principally because of: a excessive focus on efficiency-gains and sheer reduction of the role of government as opposed to an evolution of this role in a more strategic, regulatory and outcome-oriented perspective (Moore 1995); b aseptic application of management tools and styles developed in the corporate world without enough consideration to the specificities of the public and non-profit sector organizations; c gap between rhetoric and reality in regards to the extent of change in consolidated practices and behavior associated with the public administration paradigm. We will not deny that NPM has been the initiator, and in a certain sense, the inspiration of management reforms in IOs. At the same time, we will take into account the criticisms of NPM in order to identify a realistic, strategic, substantive, and feasible approach to IOs’ management. From a historical perspective, the progressive affirmation of a managerial approach to IOs is the consequence of management reforms (and also of the NPM agenda) in domestic public and non-profit organizations. In most countries where management reforms happened, they were not the results of an internal drive for change and improvement, but were rather initially imposed by politicians and governments highly unimpressed with the quality and management of their public services (Hughes 2012). The same kind of pressure and drivers that generated the wave of public management reforms in national governments eventually impacted IOs. Influential donors, from the US to the UK to the north European countries, started asking the UN system organizations and other IOs to “do more with less”, to re-engineer their processes and systems, to improve efficiency and effectiveness, to pursue their competitive advantages, and to drop or contract out all remaining non-core activities that NGOs or the private sector could supposedly perform more efficiently and effectively. The search for the best “Value for Money” (VfM) is now a priority for any donor. At the same time, mismanagement and ethical scandals, such as Oil for Food and misconduct in several UN peacekeeping missions, tainted IOs’ reputation and generated a push for greater transparency and better internal governance and management. Top officials reacted to these pressures by introducing reforms aimed at achieving better orientation towards results, accountability, more efficient use of resources, and a stronger partnership attitude. Perhaps the most renowned series of reforms in IOs was drafted, and at least partially implemented, during the tenure of Kofi Annan as United Nations Secretary General between 1997 and 2006. In 1997, a comprehensive reform agenda entitled Renewing the United Nations: A Program for Reform (A/51/950) was enacted. The process culminated in the 2006 agenda for reform Investing in the United Nations for a Stronger Organization Worldwide. One of the main difficulties in analyzing IO management reforms is the lack of a common agenda for change and the uneven penetration of management systems

4 Management of IIs and INGOs

and tools. We will try to overcome this difficulty by analyzing separately different aspects of reforms and by identifying best practices and their applicability on a larger scale. This book is published at a critical moment for IO management reforms. After the initial enthusiasm for the incorporation of managerial tools and systems, there has been a partial disaffection from them within organizations and among key stakeholders. Some of the main causes for this estrangement are the elevated expectations and simplistic approach adopted by some organizations, the lack of sufficient customization of management techniques to the specificity of IOs, and the lack of preparedness, change management, and support by the leadership of the organizations. Yet, we are convinced that IOs do still need a specific, “tailored” managerial approach to tackle and successfully overcome the challenges posed by their current environment in order to ultimately increase their effectiveness and improve their relevance in the international agenda. In this perspective, we aim to contribute to the identification of managerial tools and systems that work in the IO context and to the understanding of the pre-conditions and success factors for reforms. The scope of this work encompasses all IOs as defined by the Yearbook of International Organizations and therefore includes both IIs and INGOs. With regards to IIs, we will mainly focus on the organizations of the United Nations system and International Financial Institutions. With regards to INGOs, we attempt to set out a satisfactory definition and categorization and, due to the increasing relevance and diversity of entities acting transnationally, we extend the scope of observation to other relevant, non-state actors as well as to emerging, transnational public-private hybrids. Organizations active in the development and humanitarian sectors are more heavily investigated, consistent with the greater attention given by previous literature and the significance of their current management reform efforts. In light of the variety of organizations included in our scope, we have focused on trying to identify and explain the commonalities and differences among various types of organizations, compare experiences, and highlight lessons learned from the current practices.

The adopted theoretical framework Since management is a relatively new angle from which to study IOs, it would be tempting to focus on “validating” this approach by testing it against competing theories and paradigms grounded in political science and international relations. Yet, we believe that the validation of the managerial approach for IOs can only arise from the analysis of the actual practices of the organizations that have experimented with it and by carefully assessing their challenges and the achieved results. Therefore, this work will adopt an extremely broad theoretical framework used by the mainstream public management literature and will adopt a strongly deductive method to identify the elements of what we call a “tailored” approach to management for International Organizations. The “conceptual lenses” of this work are grounded in the notion of “public value” (Moore 1995). As Moore and several authors point out in reference to

Introduction 5

domestic public sector organizations (Borgonovi 2005; Meneguzzo and Rebora 1990; Mussari 1994; Rebora 1999), the creation of public value in IOs arises from the reconciliation of strictly interdependent and potentially conflictual dynamics between:  The political representation system, through which interests, values, and aspirations of a community (or group of constituencies) are channelled and form the political resources, or consent, to support the approval and implementation of public programs; and  The managerial system, aimed at maximizing the utilization of physical, financial and human resources in order to generate the expected outputs and ultimately achieve the expected outcomes and impacts. It is evident that these two systems are strictly interdependent. The management system can only work in the presence of good quality policies, aimed at realistic and clear objectives and with the provision of adequate resources, including political support. In turn, the representation system can only achieve its mission to satisfy the values and aspirations of the community it represents if core operations and internal processes are efficient and effective, resources are oriented towards results, and partnership attitude is strong. This framework is fundamental in defining the “scope” for management and managerial reforms in International Organizations. IOs are inherently political organizations and, whilst management systems and tools can and should improve

c

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Political

Political resources (consent, collective interests)

representation Negotiation and decision-making

Q. Q) OC

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Programmes and Objectives

PUBLIC VALUE GOOD QUALITY POLICIES

Internal

π «

Agreements

§

Si

C % TO (/>

Financial, physical and human resources

processes and operations

provision of goods and services

Outputs, Dutcomes and impacts

EFFICIENCY EFFECTIVENESS

FIGURE 0.1 Generation of Public Value through the interaction between the Repre-

sentation and the Managerial Systems in international organizations Source: Adapted from Rebora (1999)

6 Management of IIs and INGOs

the level of efficiency and effectiveness of their action, public value cannot be generated without a sound representation system that produces quality policies. In this book we will extensively explore the managerial system of IOs and the current attempts of organizations to improve their strategic positioning and fit within their environment, to modernize their human and financial management systems, to improve operations and program delivery modalities, and to create a solid organizational profile through well-managed communications and interactions with external parties. We will do so by taking into consideration IOs’ specificities in terms of institutional settings, core business and operations, stakeholder environment, types of available resources and conditions attached to their use. While we will not ignore the representation system, we will refer to it mainly for its effects on managerial systems and we will consider it the boundary of our scope of analysis. A fundamental assumption of this work is that IOs are profoundly influenced by their representation systems; that is, that management depends on the quality and timeliness of decision making and that governing bodies act as “principals” and define the mandate of managers as “agents”. It is also a basic assumption of this work that, contrary to the idea of absolute supremacy of the political and representative system and the non-existence of an autonomous management system proposed by some scholars (Maerschmeier 1994), there is, in fact, “room for management” in International Organizations and the main question for research and practice is how to define and better use it.

Synopsis This work is divided in four main sections. In Section 1 we define the three main families of International Organizations: International Institutions (IIs), International NGOs (INGOs) and Transnational Hybrid Organizations (THOs). While IIs are a quite well-defined group, we tackle significant terminological and classification issues to better define INGOs and THOs. The purpose of this section is to create a basic understanding and knowledge of the institutional and operational characteristics of the organizations under investigation. In Section 2, we describe the broader context in which IOs operate, we discuss the complex architecture of the international development cooperation sector, and the evolving dynamics among its main actors. We first explore the notion of “development” and its evolution. We also describe the main frameworks for international development cooperation and the transition from a “western”, donor-driven model to a more balanced, partnership-oriented approach. We then delve into the challenges related to the coordination of actors and program activities in complex and articulated areas such as international development and humanitarian aid, where actors compete for both resources and visibility and the incentives for collaboration are not always clear. This chapter extensively explores the experience of the UN Delivery as One (DaO) as an attempt to unify operations within the UN system of organizations and strengthen consistency from the ground

Introduction 7

up in response to the growing criticisms of the UN system for its redundancies, duplications, high level of fragmentation, and lack of harmonization. The next chapter within Section 2 focuses on the evolving roles of IIs and INGOs and the dynamics among them. Within the current frameworks for international cooperation, IIs are now required by member states to transform their role and model of intervention from implementing agencies to facilitators and enablers of national partner organizations. This requires organizations to evolve and change their organizational settings, partnership, and knowledge management attitudes. Vice, versa, NGOs are required to become IIs’ implementing partners (IPs); INGOs are to assume their global role and stand side by side with IIs, while local and national NGOs are to scale up their intervention and augment their capacity to become reliable implementing agents on the ground. In the following chapter, we analyze the evolving funding mechanisms of IIs. These mechanisms fundamentally contribute to shaping organization strategies and operational capacity. In the last two decades, donor policies to finance IIs have sharply shifted away from un-earmarked funding that is allocated by recipient organizations through regular budgeting processes and moved toward the financing of specific “earmarked” projects and programs, often bilaterally negotiated. This is the result of increasing mistrust by donors in IIs’ resource allocation capabilities and their desire to maximize the VfM within a bilateral technical cooperation perspective. We discuss the potential threat to “multilateralism” posed by the current funding patterns and organizations’ attempts to overcome the imposed constraints to their independence and autonomy. A separate chapter is dedicated to the issue of coordination in the humanitarian sector, where a multitude of public and non-profit actors compete for legitimacy and resources in a non-hierarchical context. We introduce and describe the various mechanisms of coordination currently in place and we discuss the need for tailored frameworks and mechanisms to make this coordination work. Section 3 explores the current management reforms in IOs. Each chapter explores a separate management function. The main objective of this section is to elaborate how managerial frameworks can be adapted to the specificity of IOs and to showcase management tools and systems through actual practices and case studies. In other words, we will respond to questions such as: What is strategic management and how can it help organizations achieve their missions? What is Result-Based Management (RBM) and how can it help leaders to better orient organizations, resources and staff toward their objectives? How to gear the Human Resources Management (HRM) function and tools to motivate staff, nourish talent, and develop the organization? How can full accrual accounting be used to increase transparency, provide information on the financial sustainability of the organization and ultimately improve financial management? What are the intricacies of the governance of IOs and how can managers navigate them? This section opens with the fundamental subject of strategic thinking and planning. Here we operationalize the notion of strategy for IIs and INGOs as the positioning of an organization within a competitive space and as the fit with its environment.

8 Management of IIs and INGOs

We explore the difference between strategic thinking and planning and highlight the importance of developing the resources and attitude for organizations to think strategically, rather than plan reactively. We finally identify a strategic management approach based on the organization’s profile and reputation, operational capacities, and intended public value for stakeholders. The second chapter of this section is dedicated to the transition towards RBM. We first review the notions of result and results chain (output, outcome, impact) in the international development sector. Based on these conceptual lenses, we explore the current RBM practices in IIs and we investigate what motivates organizations to manage and report by results. In the final part of this chapter, we showcase and compare spontaneous initiatives of the most influential donor member states to assess orientation of results and performance accountability of multilateral development and humanitarian organizations. These initiatives are generating considerable momentum for RBM in IIs. In the subsequent chapter, we focus on practices and reforms in the area of budgeting, accounting, and financial reporting. We start by introducing some indispensable notions of accounting and by reviewing the transition by public and non-profit organizations around the world to full accrual accounting as a move to increase accountability and transparency. We then tackle the specificities of IIs. We explain the main mechanisms and issues related to budgeting. We analyze one of the main controversial issues of accounting reforms, the co-existence of cash accounting (budgeting) and accrual accounting (reporting) and offer insights into how organizations can successfully manage it. Finally, we focus on the transition to accrual accounting and the adoption of the International Public Sector Accounting Standards (IPSAS) by the United Nations system organizations and we discuss the related expected benefits and implementation challenges. A separate chapter is dedicated to the theme of governance. Three main issues are explored: i) the main features of IO’s institutional governance, intended as a series of legislative and policy requirements, conventions, and other expectations designed to ensure accountability, decision-making and proper management; ii) “good governance”, intended as the adoption of governance principles and criteria that ensure participation, fairness, transparency, and accountability; and iii) the role played by IOs in international regimes and “global governance”. We conclude this section with a chapter dedicated to the transformation of HRM from a bureaucratic to a “strategic” function that enables the organizations to better achieve their missions and to utilize their talents. This chapter identifies the specificities that call for a tailored approach to HRM reforms in IIs, such as personnel profile, mix between diplomats, volunteers and professional staff, institutional nature, organizational settings and geographical distribution, and lack of homogeneous organizational culture. For each of the main phases of the HRM cycle—from job grading to performance appraisal to career development—we analyze and compare current experiences and new tools being introduced by IIs and INGOs through mini-case studies, and we draw general lessons and an overall status of the transition to the “strategic” HRM approach.

Introduction 9

Section 4 of this work explores how IIs and INGOs can build and manage their institutional profile. We first tackle the interrelated subjects of communications, external relations, and resources mobilization. Together these functions play a crucial role in contributing to organization legitimacy, capacity and, ultimately, success. We identify the key success factors necessary to build the profile of IIs and INGOs and we tackle the fundamental issues of creating synergies, interdependency and a “unified narrative” of the organization towards internal and external stakeholders. In the last chapter of this section, we approach the concept of “ethics” for organizations that, for their very nature, should promote sustainability and ethical values, but are often accused of a lack of transparency and accountability. After having defined ethics, we introduce the new concept of “ethical organizations” and innovatively break down the subject into the ethics “of” organizations and the ethics “within” organizations. The former relates to the behavior of the organization as a whole, shaped through decisions and actions of its governing bodies, leadership, and membership, while the latter refers to the behavior of individuals. This chapter allows us to reflect on the need to align institutional nature, values, governance, and operations of IIs and INGOs. We conclude our work with a broad look at the challenges of today’s globalized world for International Organizations, an overall view on the status of the management reforms, and indications for future research.

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SECTION 1

The context

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1 INTERNATIONAL INSTITUTIONS Classification and main characteristics Daniele Alesani

1.1 Introduction International Institutions (IIs) are the result of the need of sovereign states to come together, as an international community, to promote cooperation, development, and social well-being as well as ensuring pacific co-existence. IIs have often been described as “clubs of states” for their constituencies are normally nation states. IIs’ accountability to the individuals and communities that are the ultimate beneficiaries of their activities is usually mediated by the political representation mechanisms. While treaties and alliances among states have existed for centuries, establishment of formal IIs began in the nineteenth century. The history of international relations shows the first IIs were formed in the aftermath of the Napoleonic Wars. They were mainly focused on specific themes, such as the International Telecommunication Union (ITU), still in operation today. Of notable significance was the emergence of the League of Nations following World War I. This institution was designed to foster collective security in order to sustain peace. It is in the ashes of this experiment that the United Nations was created after World War II, together with the Bretton Woods institutions. These organizations were set up as a system of international relations intended to maintain peace, develop friendly relations based on the principle of equal rights and self-determination, achieve international economic, social, cultural and humanitarian cooperation, and to establish a stable and global financial and monetary system. In the second part of the twentieth century the number and complexity of intergovernmental organizations progressively grew to encompass more than 250 formal IIs, a UN system composed of more than 30 separate entities, several regional and global Development Banks (among the only remaining institutions to have a triple-A credit rating) and “supra-national” institutions, to whom states delegate entire areas of their sovereignty, such as the European Union.

14 Management of IIs and INGOs

The very existence of IIs as autonomous entities has long been debated. White (2005), for example, asks “how can an intergovernmental organization made by states which do not have superiors in international law be independent of the will of its own member states?”. IIs are subject to international law to the extent that a separate “will” is conferred through treaties of the member states that established them. The character of international law distinguishes IIs from other less formal unions of states (for example the G8) and gives them the power to make decisions that are legally binding to their membership, including the states that did not directly agree to a given decision. The decisions of the UN Security Council are a classic example of this: the 15 members, representing a global membership, make decisions that are legally binding and to be respected by all members. In this chapter we will classify IIs by their mandates, areas of intervention and main institutional features. We will identify several “families” of organizations and describe their main operational characteristics in order to present an overview of the management challenges facing modern IIs.

1.2 Towards a definition of International Institutions

1.2.1 Minimal characteristics Perhaps the most widespread and accepted definition of an International Institution (II) is offered by the Yearbook of International Organizations which identifies three minimal conditions for an organization to be considered an II. An II must: 1 be based on a formal instrument of agreement between the governments of nation states; 2 include three or more nation-states as parties to the agreement; 3 possess a permanent secretariat performing ongoing tasks.

Being funded by a treaty or other formal agreement between governments confers to the organization the public international law personality needed to operate with legitimacy and based on a recognized mandate by sovereign states. The second condition confers to the II its “multilateral” character. The third requires the II to have a permanent secretariat and a stable organizational structure to perform ongoing activities in pursuit of its institutional mandate.

1.2.2 A more comprehensive definition Over time, scholars have developed a more comprehensive list of requirements to identify IIs (Wallace and Singer 1970; Jacobson, Reisinger and Mathers 1986; Shanks, Jacobson and Kaplan 1996; Pevehouse and Goldstein 2005). Their main aim was to isolate IIs from other types of cooperative arrangements, such as ad-hoc agreements and ongoing collaborative meetings between states that are not

International Institutions: classification and main characteristics 15

institutionalized (e.g. G8 meetings or committees composed of states without an organizational structure). Volgy et al. (2006) have offered the most comprehensive effort to date to define the characteristics of IIs. The authors define a “formal” II based on the set of criteria on membership, governance, structure and organization and budgeting in Table 1.1. In terms of membership, the authors explicitly allow the inclusion of non-state subjects with the condition that they do not have veto power on collective decisions. The inclusion of Non-Governmental Organizations (NGOs) and representatives of business or civil society or social groups (i.e. unions) in II’s membership is not uncommon; examples include the International Labor Organization (ILO) and the ITU. The need for a codified set of Rules of Governance to be specified in the Charter of the organization is pivotal to ensure that the organization has clear decision-making and can therefore operate with effectiveness. Regularity of the governing bodies’ meetings is a minimum condition of the constituencies’ interest and active participation in the organization. This definition also requires organizations to have a permanent secretariat and staff independent from the member states, of adequate number, to fulfill the organization’s mandate and paid for with the II’s own resources. Finally, IIs need to be able to count on stable financial resources allocated by members through a regular budgeting process, sufficient to continuously cover its program of work and its administrative structure and to be independently managed. TABLE 1.1 Set of criteria to define a “formal” II

Criterion Membership Number of states Mix

‘Formal’ International Institution

Representation

Three or more Predominantly states; no veto on collective decision by non-state members Representing central government or its sub-units

Governance Rules of governance Meetings

Specified in charter or constitutional act Routinized and meeting at regular intervals

Structure and organization HQ/Secretariat Staffing Budgeting Funding mechanism Amount Source

Permanent Independent of any other organizations or any single state Non-symbolic; paid by the organization itself Financial resources periodically established and regularly available Sufficient to cover adequate administrative support and core operations Majority funding not controlled by another organization or by one state

Source: Adapted from Volgy et al. (2006)

16 Management of IIs and INGOs

Stability and predictability of funds is a critical factor for modern IIs in light of the escalation of voluntary funding and the high volatility of this kind of resources. While it is common for IIs to be mainly funded through the contribution of few main donors (in certain UN organizations about 80 percent of the financial resources come from the top 10 state donors), if the institution is almost exclusively financed by one member or another institution it does not qualify as a separate and independent entity.

1.3. Possible classifications of International Institutions

1.3.1 Classifications based on membership, scope, sector and mandate To date there is not a common classification for intergovernmental organizations, and different criteria can be applied. Based on the scope of their membership, IIs can be grouped into the following broad groups: 1 Universal membership organizations, that have a widespread, geographically balanced membership, management and policy control. 2 Intercontinental membership organizations, whose membership and focus exceed that of a particular continental region, although not to a degree justifying its inclusion in the previous type. 3 Regionally defined membership organizations, whose members or preoccupations are restricted to a particular continent or sub-continental region. 4 Cultural, linguistic, ethnic, religious, or historical organizations, open to members based on some cultural, linguistic, ethnic, religious, or historical link. Examples include the Commonwealth of Nations, La Francophonie, the Community of Portuguese Language Countries, the Latin Union, or the Organization of the Islamic Conference. Alternatively, IIs can be classified based on their sector of intervention. Some organizations are focused on one sector while others are “multipurpose”. A classic example of the former type is the World Food Programme (WFP), with a clear mandate to “fight hunger” through different means, from provision of food in emergencies to resolution of food insecurity situations. An example of the latter category is the United Nations Education, Science and Culture Organization (UNESCO), a specialized agency with five main program areas ranging from protection of cultural heritage to environmental studies to promotion of basic education for all. A univocal categorization of sectors of operation for IIs is yet to be identified. At a high level, literature and practitioners usually refer to the dichotomy between “humanitarian” and “development” organizations although in reality organizations mainly operating in one of the two fields often bridge over the other. One of the

International Institutions: classification and main characteristics 17

most reliable classifications was issued by the UN system Chief Executive Board for Coordination in 1979 and is still currently utilized for consolidation of programmatic and financial data on the UN system. Based on this classification, IIs operate along the 20 main programmatic areas shown in Table 1.2. This categorization should also be regarded as a high level political agreement on “world view” of the technical cooperation sector. IIs can also be categorized by the extent of power delegated by their member states, and the attributes of their international legal personalities. “Intergovernmental Organizations” in principle do not have sovereign powers delegated to them. This is the most widespread type of II. By signing their constitutional treaties, member states simply enter a series of obligations. For this reason, in these organizations, decisions are usually taken on a consensus basis and collectively enforced. By contrast, “Supranational Institutions” are based on the transfer of specific areas of sovereignty by member states. As described by Etzioni (2001), these organizations make significant decisions that have a direct impact on individuals through their own organs (e.g. criminal tribunals) and representatives of “the people” (e.g. European Parliament). Individuals and national governments are legally obligated to comply with all decisions of the supranational bodies and usually can interact directly with them in regard to their obligations.

1.3.2 Families of intergovernmental organizations The classification utilized by the Yearbook of International Organizations blends together the above identified criteria to arrive at the identification of five main families or group of IIs: 1 2 3 4 5

the the the the the

United Nation system organizations; International Financial Institutions; supranational organizations; organizations for security and defense; organizations for economic and social integration at the regional level.

TABLE 1.2 UN Classification of areas of intervention

Political affairs “General” development issues

Transportation Communication

Statistics Natural resources Energy Agriculture, forestry and fisheries Industry

Trade and development Population Human settlements Health Education

Source: adapted from Administrative Committee on Coordination (1979)

Employment Humanitarian assistance and disaster management Social development Culture Science and technology Environment

18 Management of IIs and INGOs

Since the objective of the present work is to investigate the management systems and reforms of IIs, going forward we will adopt this classification of IIs because it has the advantage of identifying groups of organizations that are similar in terms of institutional and operational settings, governance and business practices.

1.4 The United Nations system Among the five identified families of IIs, the present work dedicates particular attention to the United Nations system for a number of reasons:  the UN has implemented a consolidated stream of managerial reforms, envisaged since the late 1980s and initiated in the middle of the 1990s;  there are a large number of studies, researches and official documents, about the United Nation system and its governance and managerial reforms;  the recognized nature of “system” of the group of UN Organizations. The concept of UN system has always been in place but in the last decade has become more and more important in parallel with the progressive growth of the number of organizations and the increasing competition for earmarked voluntary resources donated by constituencies (the so called “extra-budgetary resources”). Whoever attempts to describe the United Nations needs to be mindful of distinguishing two very different dimensions of the institution at large:  the “Core” United Nations, composed of the six main organs included in the Charter—the General Assembly, the Security Council, the Economic and Social Security Council, the Trusteeship Council, the International Court of Justice and the Secretariat with its technical apparatus, including its subsidiary bodies;  the United Nations “system”, composed of more than 30 organizations—funds, programs and specialized agencies—independent and separate, to various degrees, from the Core of the United Nations.

1.4.1 The “Core” United Nations The Core of the United Nations revolves around the operations of the six main organs of the UN system established by the Charter. In the context of this book and in consideration of its managerial perspective, we will focus on the description of the General Assembly, the Security Council, the Economic and Social Council and the Secretariat.

1.4.1.1 The UN General Assembly The General Assembly is the main deliberative, policymaking and representative organ of the United Nations. Established in 1945 under the Charter of the United

International Institutions: classification and main characteristics 19

Nations, the General Assembly occupies a central position as the chief deliberative, policymaking and representative organ of the United Nations. Comprising all Members of the United Nations, it provides a forum for multilateral discussion of the full spectrum of international issues covered by the Charter. The Assembly meets in regular session intensively from September to December each year, and thereafter as required. It also plays a significant role in the process of standard-setting and the codification of international law. According to the Charter of the United Nations, the General Assembly may:  discuss and make recommendations on the general principles of cooperation;  initiate studies and make recommendations to promote the development and codification of international law, the realization of human rights and fundamental freedoms, and international collaboration in the economic, social, humanitarian, cultural, educational and health fields;  discuss and make recommendations on the peaceful settlement of any question relating to international peace and security, except where this is discussed by the Security Council;  receive and consider reports from the Security Council and other United Nations organs. The General Assembly also discusses all matters related to the functioning of the other organs of the UN, approves the UN budget and contribution scale of the Member States, and elects the Secretary-General and the non-permanent Members of the Security Council.

1.4.1.2 The Security Council The main functions and powers of the Security Council are:  to maintain international peace and security;  to investigate any dispute or situation which might lead to international friction and recommend terms of settlement;  to formulate plans for the establishment of a system to regulate armaments;  to determine the existence of a threat to peace or an act of aggression, and to recommend what action should be taken;  to call on members to apply economic sanctions and other measures not involving the use of force to prevent or stop aggression. The Council is composed of five permanent members—China, France, the Russian Federation, the United Kingdom and the United States of America—and 10 nonpermanent members. Decisions on substantive matters require nine votes, including the concurring votes of all five permanent members. This is the rule of “great

20 Management of IIs and INGOs

power unanimity”, often referred to as the “veto” power. The membership and governance of the system has been the object of several attempts at modification to reflect the changing balance of power in the international political arena1 but none of them has so far succeeded.

1.4.1.3 The Economic and Social Council The Economic and Social Council (ECOSOC) was established under the United Nations Charter as the principal organ to coordinate economic, social, and related work of the UN specialized agencies, functional commissions and five regional commissions. The Council also receives reports from the UN funds and programs. ECOSOC serves as the central forum for discussing international economic and social issues, and for formulating policy recommendations addressed to member states and the United Nations system. It is responsible for:  identifying solutions to international economic, social and health problems;  facilitating international cultural and educational cooperation;  encouraging universal respect for human rights and fundamental freedoms. It has the power to make or initiate studies and reports on these issues. It also has the authority to assist the preparation of major international conferences in the economic and social and related fields, and to facilitate a coordinated follow-up to these conferences.

1.4.1.4 The Secretariat The Secretariat is the technical structure that supports the activities of the three governing and deliberative organs above. At its head is the Secretary-General, who is appointed by the General Assembly on the recommendation of the Security Council for a five-year, renewable term. The Secretariat is organized into departments of administrative, political or programmatic nature. The duties carried out by the Secretariat are as varied as the problems dealt with by the United Nations. Program activities range from administering peacekeeping operations to mediating international disputes, from surveying economic and social trends and problems to preparing studies on human rights and sustainable development. On the programmatic side, the Department of Economic and Social Affairs (DESA) and the Department of Peacekeeping Operations (DPKO) are the largest and most visible units within the Secretariat. The first serves as the technical support and operational mechanism to the ECOSOC activities; the second is tasked with supporting the implementation of the resolutions of the Security Council, with particular reference to the peacekeeping and peace-building missions in the field, which are coordinated under a logistic, military and legal point of view to ensure that results are achieved and rule of law is maintained.

International Institutions: classification and main characteristics 21

1.4.2 The United Nations system The United Nations system is made up of the organizations established by the Charter of the United Nations, that is, the “Core” United Nations, a number of programs established by the General Assembly under its authority derived from Article 22 of the Charter, and the specialized agencies provided for in Article 57 of the Charter.

1.4.2.1 The funds and programs The funds and programs were a category of official activities created by the United Nations to meet needs not envisaged at San Francisco, such as Palestine refugees, development assistance, food aid, or the environment (a list of these organizations is included at the end of this chapter). They are subordinate to the United Nations, but since they are immediately controlled by distinct inter-governmental bodies—usually called Executive Boards and formed by 20 to 50 members chosen on a geo-political representation basis—and derive most of their financial resources from sources other than the United Nations budgets, they are somewhat more akin to specialized agencies than to “subsidiary organs” such as UN commissions and committees. Moreover, as their activities are more operational and carried out at the field level, they have needs dictated by an environment quite different from those of headquarters-centered administrations. The programs and funds apply UN rules and regulations in the realm of administration and personnel.

1.4.2.2 The specialized agencies The specialized agencies were brought into a relationship with the United Nations through negotiated agreements (for an overview of these organizations see the list at the end of this chapter). These organizations are legally independent International Organizations with their own rules, memberships, organs and financial resources. Some of the agencies existed before the World War I, some were associated with the League of Nations, others were created almost simultaneously with the United Nations and yet others were created by the United Nations itself to meet emerging needs. Given the diversity of their respective fields of action, history and experience, each agency has its own needs and concerns, not to speak of “corporate culture”.

1.4.2.3 Interagency coordination bodies The United Nations system is composed of a large number of entities with an impressive variety of areas of intervention. A number of coordination organs is intended to confer to this group of organizations its attribution of “system”. Their mission ranges between harmonization of management practices to programmatic coordination to joint inspections on frauds and mismanagement. The main

22 Management of IIs and INGOs

coordination bodies within the UN system and their functions are described below. Organs such as the ECOSOC and the General Assembly Committee on Programme Coordination (CPC) can be legitimately considered coordination bodies, but they are not included in this paragraph since their main nature is the one of governing bodies. The UN System Chief Executive Board for Coordination (CEB). The CEB is intended to align the strengths of a decentralized system of specialized organizations into a cohesive and functioning whole. It ensures that the UN system “delivers as one” at the global, regional and country levels. The CEB is currently formed of three “pillars”: the High Level Committee on Programmes (HLCP), the High Level Committee on Management (HLCM) and the United Nations Development Group (UNDG). The pillars of the CEB have complimentary roles. While HLCP and HLCM work mostly at the Headquarter and policy level, promoting coordination of core programs and administrative regulations and procedures, the UNDG focuses on the field and operational level. In particular, the UNDG oversees the “Delivery as One” (DaO) initiative, intended to enhance consistency among UN organizations on the ground. The UN Secretariat Office for Coordination of Human Affairs (OCHA). OCHA is the part of the UN Secretariat responsible for bringing together humanitarian actors to ensure a coherent response to emergencies. OCHA also ensures there is a framework within which each actor can contribute to the overall response effort. In particular, OCHA’s goals are to create a more enabling environment for humanitarian action and increase the effectiveness, coordination and delivery capability of humanitarian actors through partnerships with UN system organizations, member states and other humanitarian actors on the ground. The competencies of OCHA expand outside the UN system to embrace a wide variety of state and non-state actors, and this is also the strength of the body. The Joint Inspection Unit (JIU). The JIU is an independent external oversight body mandated to conduct evaluations, inspections and investigations at the system-wide level. The JIU Inspectors have powers of investigation in all matters related to the efficiency of the services and the proper use of funds. Their independent view is aimed at improving management and methods and at achieving greater coordination among organizations. The International Civil Service Commission (ICSC). The International Civil Service Commission (ICSC) is an independent expert body established by the United Nations General Assembly to regulate and coordinate the conditions of service of staff in the United Nations common system, while promoting and maintaining high standards in the international civil service. By its very nature, the UN system is a largely non-hierarchical group of organizations and the metaphor of the “Core” UN playing the role of the “parent company” for the whole UN system often recalled in media is far from reality. The non-hierarchical nature of the system becomes evident from the fact that its coordination mechanisms normally act by consensus and through not directly enforceable recommendations addressed to the organizations’ governing bodies.

International Institutions: classification and main characteristics 23

1.4.3 Operational diversity of UN system organizations There are several elements that make UN organizations a “system”. All UN system organizations participate within a unique architecture of multilateral technical cooperation designed for development and humanitarian purposes by the global international community of states. All of them refer to the same funding principles, seek integration of their activities and maximum combined effectiveness of their actions. On the other side, from a managerial perspective there are several differences among these organizations in terms of governance and decision-making, organizational settings, operations and budgeting and funding arrangements.

1.4.3.1 Governance and decision-making The governing structure of the UN is based on two kinds of organs:  plenary organs (General Assemblies and Conferences) that include all members of an organization, also called legislative organs, because they are international law making organs;  executive organs (Executive Boards) that include a restricted group of member states chosen through a geo-political representation mechanism, and that run the organization on behalf of all members. When compared to national systems, plenary organs are comparable to parliaments, while executive organs are comparable to governments. The United Nations and the specialized agencies directly refer to their own representative organs, usually called assemblies or conferences, while funds and programs lack an independent organ and all refer to the United Nations General Assembly (UNGA). Also, in the funds and programs it is the UNGA that elects the members of the Executive Board. Therefore, in a sense the specialized agencies are more independent from the Core UN because they receive their mandate, legitimation and appointed Board from their own Assemblies, independent from the UNGA. This greater institutional independence plays a fundamental role in many managerial and operational aspects. Another notable difference among organizations relates to the decision-making mechanisms. The plenary organs of the United Nations normally decide by consensus, not to be confused with unanimity. Consensus is the absence of open contrariety to a given proposal (Zamora 1980). The decision-making process is centered on “consensus building”, an informal process through which one or more influential members seek critical support for a draft proposal/recommendation which eventually is formally presented for consensus vote. Many Committees of the UNGA operate by consensus, while the UNGA resolutions are taken with a two-thirds majority vote. For many organs, including the ECOSOC and the executive board of the big funds (United Nations

24 Management of IIs and INGOs

Development Programme (UNDP), United Nations Population Fund (UNFPA) and United Nations Office for Project Services (UNOPS)) consensus is the most desirable alternative but in case this cannot be reached, rules of procedure allow the organ to take a qualified majority. The “weighted” majority vote model is adopted by the International Financial Institutions and, among the UN system, by the International Fund for Agricultural Development (IFAD). This mechanism reflects the nature of members as “shareholders” of the Institutions. This variety of decision-making models highlights the different institutional characters of the UN entities. Consensus is supposedly closer to an idea of multilateral democracy and equality of member states, while weighted majority is closer to a stockholder/business model where the bearers of “capital” (contributions to the organization) have the more significant say.

1.4.3.2 Organizational settings Organizational settings are based on agencies’ mandates and core undertakings. Most of the policy-making and standard-setting organizations such as Food and Agricultural Organization (FAO), International Telecommunication Union (ITU), World Meteorological Organization (WMO) and UNESCO are highly centralized and have the majority of their staff at the Headquarters since the bulk of their activity is to promote political dialogue, advance knowledge on specific areas and to draft and issue standards. International Financial Institutions such as IFAD are also rather centralized but they have regional and country outposts to manage their operations on the ground. Humanitarian organizations, such as the United Nations Office of the High Commissioner for Refugees (UNHCR), the United Nations Children’s Fund (UNICEF) and WFP, and implementation oriented development organizations, such as UNDP and UNFPA, place the large majority of their human and financial resources on the ground and directly manage their projects and programs. UNDP’s organizational approach deserves particular attention. The organization promotes development through capacity building, studies and research, reforms and liberalization of entire economic sectors and support to enterprises and local industries. The organization is also intended as field coordinator of the other UN organizations devoted to specific aspects of development, and as financial intermediary of the system on behalf of donors. Symbolic of these attributes of UNDP is the role of the Resident Coordinator (RC). Traditionally the RC covered both the roles of UNDP country representative and focal point of the UN system as a whole towards the hosting government counterparts. The role of the RC has been further strengthened under the “Delivery as One” Initiative.2 As their business on the ground becomes more articulated and their decentralized workforce grows, few organizations have gone through a process of “regionalization”, consisting of the establishment of regional service centers and platforms for program coordination. For example, UNFPA currently has seven regional offices established

International Institutions: classification and main characteristics 25

for programmatic coordination, while UNHCR, UNDP and World Health Organization (WHO) have established global service center outposts where specific administrative functions serve the entire organization.

1.4.3.3 Budgetary and funding arrangements Funding modalities differ quite significantly among organizations. In principle, UN system organizations can be divided in two large groups: “assessed” and “nonassessed” organizations. The former group is constituted by the United Nations secretariat and the specialized agencies, which can count on a core amount of mandatory contributions by all member states. These contributions are called “assessments” because they are based on a quota system linked to their capacity to contribute through a formula based on countries’ Gross Domestic Product. Organizations’ “regular” budgets, funded through these resources, are complemented by voluntary, “extra-budgetary” contributions, usually earmarked for specific projects, themes or beneficiary groups. By contrast, funds and programs are “non-assessed” organizations in the sense that they are entirely funded through voluntary contributions. These organizations still make a distinction between “core” and “non-core” resources for fundraising purposes. The “core” resources are non-earmarked and utilized by the organization and internal management to cover administrative costs and the ordinary work program as presented by the secretariats to the governing bodies. The non-core resources are earmarked for specific undertakings. When talking about the UN system in general, assessed and core resources are normally called ‘un-earmarked’, because they come commingled and untied to the organizations, while extra-budgetary and non-core resources are called “earmarked”, because they are tied to specific program activities indicated by the donor or bilaterally agreed with the recipient organization. The funding arrangements of the United Nations system organizations have profoundly changed. As of 2011, the amount of earmarked resources at the UN system level largely surpasses the amount of non-earmarked resources. This dynamic is partly due to the decreasing confidence donors have in ability of the organizations to efficiently and effectively allocate funds for their ordinary program of work and their preference for funding specific projects that can deliver “value for money” from the donors’ perspective. This is surely intended to stimulate management by results and competition for resources among organizations but it could also result in fragmentation and pose a threat to the multilateral nature of organizations.

1.4.3.4 Operations and delivery method Following their own vocation and mission, UN system organizations can be involved in a series of activities ranging from policy making and conferencing to standard setting, from capacity building for technical and industry development purposes to project implementation, from humanitarian intervention to development of

26 Management of IIs and INGOs

economic models, from education and training to food and commodity delivery. Organizations involved in ground operations can opt for a direct program delivery or outsource it to “implementing partners” (IPs). In the past, the UN system has been often criticized for adopting a paternalistic and out of context model of intervention on the ground; this mounting political pressure towards “national ownership” caused a trend to outsource delivery to beneficiary national governments and local NGOs. This dynamic clearly requires the UN organizations to evolve their roles and capabilities from direct implementation to planning and control, knowledge management and capacity building of public and non-profit organizations in beneficiary countries.

1.4.4 Quantitative data on the UN system The United Nations system is an articulated, composite and stratified family of organizations. Over the years, the system has grown at a considerable pace both financially and in terms of human resources. Between 2002 and 2009, the total financial resources available to the UN system as a whole grew from roughly 19 billion US$ to over 28 billion US$ per year (CEB Financial Statistics 2010), an escalation on which the global financial crisis had no significant impact. As mentioned above, the main donors have in recent years decisively shifted towards earmarked contributions, which have now become the largest source of funding (2009: 14.6 billion US$, against un-earmarked resources for 8.4 billion US$; CEB Financial Statistics 2010). The UN system has progressively expanded its global presence to about 85,000 staff in 2011 and strived to create a truly international workforce by balancing local and international profiles and decisively pursuing gender balance. Data extracted from the CEB HR Network Personnel Statistics (Table 1.3) well render the idea of the complexity and heterogeneity of these “people based” organizations. The majority of UN staff (about two thirds) are allocated in Regional and Country Offices, the rest at the HQ locations. Looking at the gender balance in terms of geographical allocation, it is worth noting the relative prevalence of women in HQ and of men in field offices and in “project posts”. The percentage of “local staff” as opposed to expatriates in the field is much higher than in HQ locations, due to the direct involvement with the local population in service delivery, language barriers and the need to be perceived as a local workforce. Country offices are normally managed by expatriates and employ “local” profiles for lower professional and administrative/support roles. Staff profiles in the UN system are divided in three main categories: General Staff (651 to 7 assistants and administrative staff), Professionals (from P1 to P5 based on length of work experience, content of work and staff supervisory duties), and Directors (D1-D2-UG in relation to the position covered). Traditionally, men have mostly occupied the higher positions—more than two thirds of the directors’ posts are still occupied by men—but this situation is changing rapidly: in only five

International Institutions: classification and main characteristics 27

TABLE 1.3 UN system personnel profile as at 2011 Location

Total

Headquarters

%

Fields/Regions

%

All staff Male Female

84,354 48,431 35,923

30,600 14,122 16,478

36 29 46

53,754 34,309 19,445

64 71 54

Composition

Total

General (Admin) Staff

%

Professionals

%

Directors

%

All staff Male Female Expatriates

84,354 48,431 35,923 36,552

53,357 30,111 23,246 8,622

63 62 65 24

28,289 16,413 11,876 26,165

34 34 33 72

2,708 1,907 801 1,765

3 4 2 4

# Post

Regular Budget (core resources) % Other funds (extra-budgetary/non-core resources) %

Year 2011 Year 2005

26,264 25,015

31 58,090 46 29,364

69 54

Years of service

Fewer than 5

%

5 to 15

%

15 to 25

%

0ver 25

%

Professionals/ Directors General Staff

13,235

43

12,341

40

4,155

13

1,265

4

22,571

42

20,739

39

6,779

13

3,264

6

Staff nationality Top 10 Donors

# Staff

United States Japan United Kingdom Canada Norway Sweden Germany Netherlands Australia Spain

5,080 926 2,432 1,840 258 415 1,414 635 659 1,135

Staff nationality Other main donor countries

# Staff

Austria France Italy Russian Federation

1,195 4,212 2,809 896

Programme countries with highest # staff

# Staff

Afghanistan China Cote d’Ivoire Dem. Rep. of Congo

1,867 886 1,076 3,289

28 Management of IIs and INGOs

TABLE 1.3 (continued) East Timor Egypt Ethiopia Haiti India Kenya Lebanon Liberia Nigeria Pakistan Philippines Sudan Thailand Uganda

859 832 1,693 1,481 1,897 2,495 1,323 1,293 900 953 1,625 3,284 879 966

Source: adapted from CEB HR Statistics (2012)

years, the number of women among directors has grown by 50 percent while men only 5 percent. As far as the length of service is concerned, professionals and field staff experience higher turnover than general and HQ staff; this is due to their different staff profiles and motivations and to the relative volatility of their funding sources. Finally, the most represented countries in terms of staff nationality are the top donors of the UN (US, UK, Germany), countries that hosts headquarters of one or more organizations (Austria, Italy) or programme countries where the UN system currently carries on activities (Democratic Republic of Congo, Ethiopia, Sudan, Philippines, etc.).

1.5. Global and regional International Financial Institutions International Financial Institutions (IFIs) differ widely in terms of institutional arrangements, core business and organizational settings but share the mission to promote development and well-being, advancing access to credit and/or financial resources, with favorable terms, through ad hoc financial tools, and bringing knowledge to economies and enterprises. The IFIs are also commonly known as “Development Banks” to differentiate them from commercial banks. The term “development” derives from the fact that the IFIs complement their lending services with technical assistance aimed to ensure proper utilization of funds to achieve economic, political and social advancements. The competitive advantages of IFIs can be summed up in two main factors: 1 provision of credit at a lower rate and with more favorable conditions than those available in the financial market; 2 transfer of knowledge and capacity building aimed at achieving the expected economic and social outcomes of the lending activities.

International Institutions: classification and main characteristics 29

1.5.1 IFIs: an overview 1.5.1.1 IFIs’ classifications IFIs can be classified based on the scope of their operations into: 1 Global development banks, such as the World Bank (WB) group and the International Monetary Fund (IMF) and International Fund for Agricultural Development (IFAD). These organizations may have large lending portfolios of up to hundreds of billions of US$ and a global outreach. Their operations are usually limited by segment of clients—e.g. private ventures, low-income countries, middle-income countries- and by technical area of expertise—e.g. agricultural development, as in the case of IFAD. 2 Regional development banks have a limited geographical scope. The most known regional institutions are the African Development Bank (AfDB), Asian Development Bank (ADB), Inter-American Development Bank (IADB), European Bank for Reconstruction and Development (EBRD), Islamic Development Bank (IDB), European Investment Bank (EIB). It is worth noting that the “regional” attribute does not refer to the membership. “Non-regional members” are usually among the main contributors of these institutions. Alternatively, IFIs can be classified based on their “micro” versus “macro” economic focus:  Macro-economic focus—their lending activities are intended to solve macroeconomic imbalances and are triggered, for example, by severe trade balance deficits, unsustainable public debt, crises of the banking sector, extreme volatility of direct foreign investments, and/or sudden instability of the domestic currency. These are very large lending operations which can arrive at several billion US$. The clearest example of this kind of institution is the International Monetary Fund (IMF).  Micro-economic focus—these institutions are involved more directly with enterprises and specific social groups. These institutions can for example provide technical assistance to develop social, economic or environmental policies; offer advantageous loans or grants to small and medium enterprises in key sectors of developing countries’ economies; participate with equity capital in enterprises with difficult or no access to financial markets. The size of their lending operations is on average much smaller and normally in the order of tens of millions of US$. Some IFIs may operate both at the micro and at the macro levels, as in the case of the International Bank for Reconstruction and Development (IBRD), servicing middle income and creditworthy countries with a growing focus on “soft issues” such as projects related to women rights, environmental sustainability and labor standards.

30 Management of IIs and INGOs

1.5.1.2 Financial arrangements The IFIs generally rely on a mix of capital and interest repayments from “clients”, earning from investments in financial markets and contributions by member states. Members fund the initial capital of the institution and provide periodic “replenishments” to restore its financial stability or enhance its lending capability. Each IFI stands on a different balance among these three categories of resources depending on its mission, the financial products offered and its ability to issue bonds and to invest in the financial markets. Organizations that lend to creditworthy middle-income countries and offer equity capital to business ventures stand mostly on resources borrowed from the market and repayments of interest and capital. Organizations oriented towards pure development objectives, supporting the poorest and most heavily indebted countries, mainly stand on replenishments from member states to fund grants to beneficiary countries and to cover the risks of defaulted loans and guarantees. The financial credibility of IFIs’ is influenced by the balance between their main assets—financial investments and credits related to future repayments by clients— and liabilities—cost of functioning and repayments of loans contracted with the financial markets—but it is strongly enhanced by the financial backing of the member states.

1.5.1.3 IFIs’ governing mechanisms Similar to the UN system organizations, development banks have two main governing organs: the Board of Governors (BoGs) and the Board of Directors (BoDs). The BoGs is the plenary organ of the organization and its supreme decision-making organ; representatives from all member states form the BoG; the BoD is the executive organ of the organization and is composed of a select group of representatives elected by the BoGs or directly appointed by the main donor countries. The extent of the delegation of functions from the BoG to the BoD varies among IFIs. Usually the BoG takes fundamental decisions on membership, increases in the bank’s capital, approval of strategic documents and budgets. The BoD runs the day-to-day operations, with particular reference to the decision on loans and investments, control and oversight. The president of the Bank usually has a technical profile but is elected by the BoG, allowing a political dimension. The president leads the management team of the Bank and chairs the BoD. As already mentioned, IFIs’ decision-making is based on voting rights assigned in different measures to member states. Shares can be proportional to the scale of contributions given by the member state, as in the case of WB, IMF, IDB, and EBRD. Alternatively, the voting share system can be designed in a way to preserve the voting rights of the beneficiary countries, which normally do not have significant contribution capacity but are the ones directly affected by the Bank’s operations. This is the case of some Regional Banks such as AfDB and ADB. For example, in the ADB the regional countries hold 65 percent of the BoGs’ voting

International Institutions: classification and main characteristics 31

shares and 75 percent of the shares of the BoDs. In practice, notwithstanding the efforts to balance the governance mechanisms in favor of the regional members, non-regional members still have substantial influence on decision-making, either because some decisions require a qualified majority of the votes or because of their overwhelming technical and analytical capacity, putting them in a privileged place when lending and investment activities are proposed.

1.5.2 The main Financial Institutions 1.5.2.1 The World Bank group The World Bank group is a group of five distinct organizations working in synergy as a system to promote development and social well-being in the developing countries: the International Bank for Reconstruction and Development (IBRD) and the International Development Association (IDA) are lending organizations supporting respectively middle- and low-income countries on a variety of development and social issues. The International Finance Corporation (IFC) addresses the private enterprises segment, lending and investing in firms in developing countries with limited or no access to credit and capital. The Multilateral Investment Guarantee Agency (MIGA) focuses on ensuring firms and financial institutions against the “political risks” of expropriations, inconvertibility of local currencies, wars and disorders, breach of contracts or non-honoring of sovereign financial obligations. The International Centre for the Settlement of Investment Disputes (ICSID) provides an international forum for settlement of investment disputes among investors, financial institutions and governments/regulators and fosters the creation of a stable platform for trade exchanges based on the rule of law. The membership, mission and main activities of the five organizations are synthesized in Figure 1.1. IBRD and IDA constitute the core of the WB group, while IFC, MIGA and ICSID are “affiliate” organizations, created after the initial establishment of the group to fulfill specific purposes. The WB group is a complex system and its components are highly interdependent and complementary in terms of core business and clients’ segmentation. The following paragraphs further analyze the WB group organizations.  The International Bank for Reconstruction and Development (IBRD) The IBRD was created with the objective of supporting the reconstruction of the European and world economies after the tragedies of World War II, managing the funds of the Marshall Plan. During the 1960s and the 1970s the mission of the bank changed substantially as the de-colonization process unfolded. The bank assumed the role of a lending agency for middle-income and creditworthy low-income countries with limited or costly access to the financial markets. IBRD raises most of its funds on the world’s financial markets and has become one of the most established

32 Management of IIs and INGOs

W orld Bank G roup

INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT - Fundation: 1945

INTERNATIONAL DEVELOPMENT ASSOCIATION

• Fundation: 1960

INTERNATIONAL FINANCE CORPORATION

* Fundation: 1956

* Mission: to foster • Mission: poverty economic development reduction in least developed and non credit through funding and lending to private sector trustworth countries in developing countries • Activities: long term * Activities: close to an loans at close to 0 investment bank interest rate, long pre­ * Activities: quasi· participation to equity, amortization period, commercial lending to offer o f derivatives, developing countries — strong granting activity structured financial investment and resource cross subsidization by products to reduce IBRD and coverage of collection on financial currency, sector and markets, technical potential losses through country specific risks; cooperation on sectoral "replenishment” by self financed and members —heavy policies and banking indipendent management services conditionality * Mission: reduction of poverty and promotion of development in middle income countries/credit trustwhorth

MULTILATERAL INVESTMENT GUARANTEE AGENCY

INTERNATIONAL CENTRE FOR THE SETTLEMENT OF INVESTMENT DISPUTES

• Fundation: 198B

* Fundation: 1966

• Mission: promote foreign direct investm m t (FDD in developing countries

* Mission: improve security Qf investments In developing countries

• Activities: assurance * Activities: conciliation against political risk, and arbitration of faciliation of FDI conflict international resolution between investment disputes investors and host between foreing governmentsinvestors and host knowledge sharing and governments technical assistance activities to help countries to define investment policies

FIGURE 1.1 The World Bank group Source: our elaboration

borrowers since issuing its first bond in 1947. The competitive advantage of this financial institution is being able to borrow resources at a much lower rate and then lend them to its “clients” at favorable, “quasi-commercial” conditions. Knowledge services of the bank are focused on Poverty Assessment, Social and Structural Reviews, Public Expenditure Reviews, Sector Reports, depending on the objectives of the lending operation. In the last decade, as more middle-income countries gain independent access to markets, IBRD oriented its activities towards “soft issues” such as women’s rights, environmental sustainable reconversion of energy sources, implementation of labor standards, improvement of the role of civil society.  The International Development Association (IDA) The IDA focuses on “Least Developed Countries” (LDCs) and “Heavily Indebted Poor Countries” (HIPD). Usually for these “clients” the IDA represents the only alternative to access credit in light of their limited financial solidity and credibility. The main objective of the IDA is to improve living conditions and boost economies rather than maintaining the financial bottom-line based on repayments. For this reason, IDA lends money with no interest and long repayment timeline (30 to 50 years). IDA also operates through grants earmarked for specific initiatives and reforms where states are not considered capable of repayments. Given its mission and the financial fragility of its operations, IDA is mainly financed through contributions from donor countries and transfers from IBRD and IFC. There is therefore a process of subsidization internal to the WB group aimed at maximizing the utilization of the resources for development purposes: the areas of the group

International Institutions: classification and main characteristics 33

that are producing margins and income from their lending and investment operations are supplying capital to segments that are a more risky and financially challenging market.  The International Finance Corporation (IFC) The IFC was created in 1956 with the aim to stimulate private investments and growing business in the World Bank’s borrowing countries. The IFC invests in potentially viable companies through equity capital and offers financial advisory services and structured financial products with the objective of fostering job creation, generating tax revenues, improving corporate governance and environmental performance, and contributing to local communities. IFC increasingly turns to small and medium-size enterprises to foster development from the ground up. The institution demonstrates particular interest in promoting sustainability; for all its investments, the IFC articulates the expected impacts on sustainable development and assesses the quality of the benefits realized. Many of the IFC projects are aimed at addressing constraints to private sector investment in infrastructure, health, and education, and developing domestic financial markets through institution building and the use of innovative financial products. With regards to financial markets of developing countries, the IFC pursues strengthening of local banks, stock markets and other intermediaries through a dedicated Capital Markets Department. The IFC currently finances all its operations through issue of high rating bonds, financial investments and fees for its advisory services.  The Multilateral Investment Guarantee Agency (MIGA) MIGA addresses “political risks” that can prevent private entities from investing and lending financial resources in developing countries. The main service provided is the insurance of international businesses and investors against losses related to specific events such as currency inconvertibility and transfer restrictions, expropriations of private property by governments, war and civil disturbance. MIGA concentrates its activities in key economic sectors for economic development and social well-being, such as infrastructure building, healthcare, transportation, broadcasting and communication and utilities. In these areas, participation of international businesses in public bids may dramatically increase efficiency and transparency of public spending but it may be discouraged by perceived political risk, including the risk of government clients not honoring their sovereign financial obligations. The competitive advantage of MIGA is the coverage of risks which commercial insurance does not normally assume, and its “public value” is the significant mitigation of serious obstacles to investments in politically risky areas.  The International Centre for the Settlement of Investment Disputes (ICSID) The ICSID was created in 1966 to remove major impediments to the free international flows of private investments posed by non-commercial risks and the absence of international methods for investment disputes settlement.

34 Management of IIs and INGOs

The ICSID is an impartial international forum facilitating the resolution of legal disputes between investors and governments through conciliation and arbitration. The arbitration function of the ICSID is based on the explicit consent of the involved parties, and its proceedings are therefore binding. In many instances, parties reach a settlement before the proceedings are issued, a sign that the ICSID’s activity also facilitates the consensual outcome of disputes.

1.5.2.2 The International Monetary Fund The International Monetary Fund (IMF) was funded in 1944 as part of the Bretton Woods system together with the WB. It was originally conceived as a mutual fund where member states could borrow funds to solve temporary macro-economic imbalances. The IMF works to foster global growth and economic stability. It provides policy advice and financing to members in economic difficulties and also works with developing nations to help them achieve macro-economic stability and reduce poverty (IMF 2012). The current functions of the IMF are drastically different from its original ones, grounded in the gold standard system and the regulation and support of a fixed exchange regimes among world currencies (Isard 2006). In the years following the end of the golden standard in 1971 and the oil crisis, the IMF’s role shifted into examining the economic policies of borrowing countries and providing policy advice to generate recovery and growth. The new challenge for the IMF in a globalized world is to promote and implement policy that reduces the frequency of crises among emerging-market countries, especially the middle-income countries that are open to massive capital outflows (Bosworth et al. 1999). On a global scale, the new role of the IMF is to monitor the overall macro-economic performance of its member countries, particularly early signs of situations of imbalance, and to utilize policy advice and conditional lending tools to help nations avoid economic collapse. Arguably the IMF has encountered its most important challenge during the global financial crisis of 2007—where a number of states incurred drastic imbalances caused by long range impacts of the global financial crisis, the bailout of their banking institutions and sometimes entire sectors of the economy—and the Euro debt crisis in 2009, which pointed to the need for structural changes in the public spending patterns of major European economies based on the growing unsustainability of their public debt.

1.5.2.3 The regional development banks Regional development banks were created between the 1960s and 1990s, mostly as a consequence of the process of de-colonization and nation building in Africa and Asia, and the fall of the communist bloc in Europe. Their original mission was the resolution of macro-economic imbalances and financial crises of the newly independent economies, vulnerable to international speculation and sudden drops of currency values as a function of their transition to free market models. Over time, the mission and focus of these institutions evolved based on the pace of development and the challenges faced by the national economies within each region.

International Institutions: classification and main characteristics 35

In comparison with the global institutions, regional banks are better suited to provide region- and country-specific expertise. They also provide a more appropriate balance of power between borrower countries and donor countries, thus facilitating the buy-in and participation of the borrowers. A list of the main regional development banks is included at the end of this chapter. Institutions widely differ in terms of portfolios and core activities. In some cases they mainly run lending operations and are internally organized by segments of borrowing countries (e.g. African Development Bank, AfDB). Where regional economies have grown strong and become main players in the global markets, regional institutions have reoriented their mission towards them, beginning to invest and lend resources to economically viable projects and enterprises in order to facilitate their access to capital and to accelerate privatization of entire economic sectors (e.g. Asian Development Bank, ADB). A few organizations adopted a more micro-economic focus with lending and investments operations aimed as support for sustainable development, social and gender issues, improvement of environmental sustainability and enforcement of labor and safety standards. Regional banks usually strictly pursue an economic development mission rather than a political agenda. The EBRD is an exception in that its clients need to commit to democratic and free market principles in order to be eligible for a loan. This arises from the very reason for constitution of the institution, born to support the former communist eonomies in transition towards free market models. The other regional bank, with strong political and religious connotations is the Islamic Development Bank (IDB), focused on the Muslim states participating in the Organization of Islamic Cooperation.

1.5.3 Emerging issues and converging rationalities in IFIs 1.5.3.1 The “conditionality” issue: orientation towards results and political acceptability One of the common characters of development banks as lending institutions is the imposition of “conditions” in order to gain access to credit. For this reason, IFI lending is also called “concessionary”. Much of the debate on the notion of conditionality centers on conditions’ fairness, effectiveness and acceptability. There are two main types of conditions: ex-ante and ex-post. Ex-ante conditions require the borrower to meet certain conditions and prove it can maintain them before receiving any aid. Usually these conditions are basic prerequisites to achieve the objectives of the lending operation, such as improvements of government accountability and anti-corruption measures, creation of independent central banks or public authorities. Whenever the lending institution judges that enough progress has been made to satisfy the imposed conditions, it allows access to credit. Ex-post conditions are obligations to be carried out by the borrower upon receipt of the aid. These conditions can be related to the way borrowed financial

36 Management of IIs and INGOs

resources will be spent or can refer to specific economic models, policy actions or reforms to be undertaken. Ex-post conditions are usually heavier and with longerterm impacts. Borrowers can perceive certain ex-post conditions as unfair as these may cause significant political consequences for the borrower, e.g. conditions imposing too extreme economic models to foster growth or too restrictive fiscal and monetary policies causing sacrifices for large segments of the population (Brown 2009). The need for conditions as a means for achieving the main objectives of development banks loans has been long debated in the literature and by the international community.3 The main expected benefit of “concessionary” loans is their attitude toward creating the right conditions for a successful recovery or development of a given economy. This is related to the identification of the right recipe of economic models, reforms and restrictions for the use of funds within a specific borrowing country. It is also important for the IFI to establish credible and transparent mechanisms to monitor the execution of conditions. One of the main criticisms of concessionary loans is the “one size fits all” approach. Institutions have the tendency to replicate the same free market economic models in all countries, including those that are structurally unprepared for them or that are unwilling to follow the imposed direction, without real accountability for their possible failure or inadequacy. A second criticism relates to IFIs’ “pressure to lend” as an incentive contrary to a fair and equitable application of conditions. IFIs funds need to be constantly invested in the financial market or lent to “clients”. This may result in an unwillingness to control/block credit if conditions are not fully enforced and in a stretched interpretation of their fulfillment, not positive for the achievement of concrete development results and fairness across borrowers. Finally, conditions are usually of a technical and economic nature, but for some IFIs lending is instead based on political considerations. Therefore, some institutions such as the IDA and some regional banks have larger discretionary margins in defining and interpreting their own conditions. This debate on the notion and application of conditions has had a great impact on the IFIs’ approach to concessionary lending over time. At the same time, it seems clear that conditions have become and will continue to be non-negotiable components of IFIs’ operations for the donors’ community.

1.5.3.2 The balance of political and economic rationalities in IFIs and IIs From the overview of the main IFIs we can make an important observation: institutions are usually associated in “groups” but preserve their institutional and financial independence from each other to better achieve their mission. In the case of the World Bank group, IBRD and IDA share the same core business but focus on two different segments of the lending market, middleincome/trustworthy low-income versus least developed/heavily indebted countries. A scenario where the lending operations of IDA and IBRD were commingled

International Institutions: classification and main characteristics 37

would be detrimental for the IBRD rate without representing any concrete benefit for IDA, which is largely financed through donors replenishments of its Fund. The separation between the two organizations helps the IBRD maintain its strength on the financial market and the high selectivity of the lending project it approves, therefore contributing to keeping its borrowing costs at the lowest possible level. On the other hand, IDA can freely conduct its operations based on where resources are “most needed” in development terms. This observation leads to a more general point: in each II, and in particular in IFIs, a combination of “political”, “economic” and “technical” rationalities can be observed. In the case of the IFIs, the political rationality orients the institution towards lending and funding decisions based on political opportunity and donors’ foreign affairs priorities. Typically, organizations heavily dependent on replenishments and extra-budgetary resources will be more exposed to this kind of rationality. The technical rationality orients the allocation of resources based on evidence and analysis on the root causes of poverty and drivers of social and economic development; this kind of rationality is usually the norm at the organizations’ secretariats. Also technical in nature is the knowledge transfer and capacity building activity of these organizations. Finally, the economic rationality is brought forward by the “treasury” departments of the organizations and is linked to borrowers’ creditworthiness and repayment capacity. This rationality tends to promote maximum efficiency of the operations and avoids the default of leading operations. Each organization needs to find a balance among these three rationalities through its financial and governance arrangements (see Figure 1.2).

P o litic a l R a tio n a lity

* Political opportunities

• Institutional relations with beneficiary countries and management of conditionality clauses

* Foreign affairs priorities of main donors

Donor • Sectoral Policies (i.e. Health, sanitation, etc.) • Conditionality negotiation • Technical cooperation and assistance to project * management

T a rh n ir a l

Technical C ooperation Agency

Banking Services

Financial Interm ediary

• Financial Tools (loans, grants, warranties) • Evaluation of investment portfolios • Efficiency of lending/credit policy, liquidity and solidity (rating on financial markets)

E c o n o m ic R a tio n a lity

FIGURE 1.2 Political, technical and economic rationalities in IFIs Source: our elaboration

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1.6 Other families of IIs

1.6.1 Regional organizations devoted to economic and social integration Organizations for economic integration have “regional” scope. They embed and promote a system of rules to enhance regional cooperation and integration. These organizations lead processes by which states within a particular region increase their level of interaction with regard to economic, security, political, and also social and cultural issues. Past efforts at regional integration have often focused on removing barriers to free trade, increasing the free movement of people, labor, goods and capital across national borders, reducing the possibility of regional armed conflict (for example, through Confidence and Security-Building Measures), and adopting cohesive regional stances on policy issues, such as the environment, climate change and migration. The basic theory behind regional economic cooperation and integration is the creation of a large geographical area in which there exists a generally free and open global environment for trade, investment and the movement of people. Integration is not an end in itself, but a process to support economic growth strategies, greater social equality and democratization. Integration is also a means to pursue social mobility, create business opportunities and compete with other global players. Regional integration initiatives may fulfill the following important functions (Van Langenhove 2003):  strengthen trade integration in the region;  create an appropriate enabling environment for private sector development;  develop infrastructure programs in support of economic growth and regional integration;  develop strong public sector institutions and good governance;  reduce social exclusion and develop an inclusive civil society;  contribute to peace and security in the region;  create environmental programs at the regional level;  improve the region’s interaction with other regions of the world. The word “integration” recalls the joining of individual states within a region into a larger socio-economic-political entity. The degree of integration depends upon the willingness of independent sovereign states to share, or indeed relinquish, parts of their sovereignty. The institutional mandate of these organizations can have a supranational or intergovernmental character, or a combination of both. For example, the Organization for the Economic Cooperation and Development (OECD) promotes a basic level of integration, the intergovernmental type, and represents a network of policy makers and regulators, while the European Union (EU) has completed its evolution into a supranational entity to which states have delegated sovereign powers in several important areas, including monetary policy and regulation of the main economic sectors.

International Institutions: classification and main characteristics 39

The organizations for regional integration can be seen as the response to the diminishing importance of states in the current economy, where phenomena are both local and global, and economic subjects such as multinational corporations and opinion groups transcend national identifies. These organizations are an attempt by nation states to embrace the international nature of the main social and economic drivers and to act on them in a coordinated and effective fashion. Given the broad mandate and possible scope of the regional integration organizations, operations and organizational settings are obliged to adapt to the historical relations among members, their political and religious affiliations, and the level of homogeneity of social and economic development within the region. Some of the main organizations for regional integration are the Arab League (AL), the African Union (AU), the Association of Southeast Asian Nations (ASEAN), the North American Free Trade Agreement (NAFTA) the Mercado Comun del Sur (MERCOSUR), the European Union (EU). The mission of these organizations is extremely broad in scope. Some organizations, such as NAFTA and MERCOSUR, have a marked trade liberalization agenda and they mainly act as forums for the governments to liberalize commerce, lower trade barriers and tariffs, and to regulate in common the industry sectors which are more sensitive for regional international trade. They are weaker, however, in the integration of labor markets. Freer trade and liberalization often have detrimental impacts to some sectors of developing economies (the small corn producers in Mexico, for example), yet borders are still patrolled as in the preliberalization era, precluding legal emigration as a remedy for these impacts. It is customary for organizations such as NAFTA and MERCOSUR to embed a mechanism for the resolution of trade disputes as well, aimed at giving more certainty and bringing under a sure rule of law the commercial exchanges within the free-trade area. These organizations’ negotiations normally operate within the framework provided by the main World Trade Organization (WTO) agreements. It is not uncommon for these organizations to also occupy a negotiation space in the area of sustainable development and the intersection between economic and social policies; environmental standards and labor standards for traded goods, regulations on productive sectors are part of the scope of action. Yet despite these advances and although they facilitate free capital and trade flows across borders, they are weaker in regulating, liberalizing, and rationalizing the flow of labor across borders, leaving resolution of this thorny issue to the nation states involved. Organizations such as the AL are more concentrated on policy coordination and formulation of common positions in foreign policies. The League was funded in 1945 by a group of Arab countries, namely Egypt, Lebanon, Iraq, Saudi Arabia, Syria and Yemen and it has been subsequently enlarged to include 14 more North African countries including Algeria, Tunisia and Libya. The goal was to create a regional organization of Arab states with a focus on economic development, dispute resolution and coordination of political aims. The organization has set itself the task to pursue primary political aims and to represent the Arab homeland voice

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around the world. The AL has so far concluded a mutual defense treaty in 1950 and established a common market in 1965. The AU is an interesting case of organization in transition between intergovernmental and supranational levels, with a strong propensity to be a “universalpurpose” organization similarly to the United Nations’ model. The AU incorporates a multitude of governing and operational bodies which range from the Economic, Social and Cultural Council to the Peace and Security Council, and the Court of Justice to the African Investment Bank and the African Monetary Fund. The AU also encompasses a Human Rights Commission and a formation of eight different economic communities. Resolution of conflicts among members of the organization is one of its most important areas of intervention; the Peace and Security Council (PSC) has the power, among other things, to authorize peace support missions, to impose sanctions in case of unconstitutional changes of government, and to “take initiatives and action it deems appropriate” in response to potential or actual conflicts. The PSC is a decision-making body in its own right, and its decisions are binding on member states. The AU also has the constitutional right to intervene on a member state in circumstances of war crimes, genocide and crimes against humanity. One of the key debates within the organization is the relative priority to be given to integration of the continent as an economic and commercial unit or to integration of the sub-regions. Currently, there are eight regional economic communities recognized by the AU, each established under a separate regional treaty, although the perspective of a unified union and market remains far from sight. The Union of South American Nations (UNASUR) is the youngest regional integration initiative, set up to replace MERCOSUR and to grow to a level of supranational union. This project is quite ambitious and has set as its goal to follow the model of the European Union, including freedom of circulation of goods, people and a common labor market and monetary policy, a unified currency and a parliament. The Constitution of the UNASUR was signed in early 2011; it will be up to its constituencies to live up to the expectation it has created.

1.6.2 Organizations for security and defense Many organizations of the other IIs’ families play an important role in the promotion of security and defense. This is true for example for the United Nations Security Council and for many of the regional integration organizations (EU, League of Arab Nations, African Union), where peaceful and stable inter-state relations at a regional level have been interpreted as one of the pillars of development and advancing cohesiveness. In light of their prominence on the global scene and without expectation of comprehensiveness, it is worth mentioning two regional organizations specifically dedicated to security: the North Atlantic Treaty Organization (NATO) and the Organization for the Security and Cooperation in Europe (OSCE). The reason for a limited space granted within this volume to this family of organizations is that,

International Institutions: classification and main characteristics 41

while it is acknowledged that good management and administrative reforms are important in these organizations as much as in the UN family and in the International Development banks, the military and security nature of these organizations make them more interesting and to be explored further in publications tackling a political or international affairs perspective. NATO constitutes a system of collective defense in which its member states agree to mutual defense in response to an attack by any external party. The coalition has known different phases consistent with the developments of the political affiliations and alliances within Europe. During the Cold War, NATO was the armed coalition representing the US-allied forces opposed to the Warsaw Pact states that were part of the Soviet bloc. The Cold War constituted a period of extreme preparatory activity for the military forces of NATO, yet they maintained a holding pattern with no actual military engagement as an organization. The early 1990s (belated) intervention in the Balkan conflict was the first real military operation of NATO, almost 50 years after its constitution. The operations in Afghanistan and in Libya have more recently followed. In the post Cold War era, NATO’s membership has largely expanded to include several of the former Soviet bloc countries in a mechanism that almost overlaps with a European system of common defense, while at the same time not overlapping the mandate of the European Union. Since 2002, there is in fact a systematic group of agreements which allows the EU the possibility of using NATO military assets in case it wants to act independently in an international crisis, on the condition that NATO itself does not want to act. This is an interesting case of “self-determination” of IIs establishing a regulated system of interdependence based on similarity of mission and membership. In terms of decision-making, NATO’s supreme body, the Parliamentary Assembly, represented by the ministries of defense of the members, operates based on the principle of unanimity. No decisions are taken at majority; this testifies to the extremely cohesive character of the alliance and is clearly in line with the military and defense nature of the founding treaty. A complex mechanism regulates the command of military operations and ensures that the political dimension of the decision-making of the constituencies is followed by the military operations. As NATO took on the implementation of some important resolutions of the UN Security Council in Afghanistan and more recently in Libya, the organization has been increasingly seen as the intended response of the western democracies to the lack of a United Nations army to implement resolutions that imply the use of force. Yet NATO is very different from the United Nations peacekeeping or peace-building operations placed in the international arena. The OSCE operates along three main dimensions: military and defense, economic and environmental and human rights. Along the military and defense dimension, the OSCE is active in arms control, border management, combating terrorism, preventing conflicts and managing post crisis situations, facilitating military reforms and increasing policing capabilities of member states. This is the most traditional operational dimension of the organization.

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Along the economic dimension, OSCE targets the areas of the economy which are more prone to create internal and international conflicts, such as migration management, transport and energy security. In terms of environment, the most targeted areas are hazardous waste management, water management and access to environmental information. Most activities are conducted in cooperation with partner organizations. Finally, along the humanitarian dimension the OSCE supports member states’ commitments to respect human rights and fundamental freedoms, it helps promote the principle of democracy building, and promotes and affirms tolerance throughout the region. In many of these areas the western democracies usually tend to use the OSCE to push the eastern countries, at different phases of transitions to fully democratic societies, to advance their agendas and to promote faster changes. A unique aspect of the OSCE is the non-binding status of its provisions. The OSCE Final Act represents a political commitment by all signatories to build security and cooperation in Europe on the basis of its provisions. This allows the OSCE to remain a flexible process for the evolution of improved cooperation which avoids disputes and/or sanctions over implementation by agreeing to these commitments.

1.7 List of United Nations funds, programs and specialized agencies

1.7.1 Funds and programs  International Trade Centre (ITC): defines itself as the development partner for small business exporters based in developing countries. It provides intelligence to strengthen exporters’ competitiveness and preparedness, it advises policy makers in developing countries on how to build institutional infrastructures and capacity to facilitate business and international commerce, and it establishes and improves networks among businesses and governments.  Office of the United Nations High Commissioner for Refugees (UNHCR): leads and coordinates international action to protect refugees and resolve refugee problems worldwide. Its primary purpose is to safeguard the rights and wellbeing of refugees. It strives to ensure that everyone can exercise the right to seek asylum and find safe refuge in another state, with the option to return home voluntarily, integrate locally or to resettle in a third country. It also has a mandate to help stateless people.  United Nations Children’s Fund (UNICEF): comprehensively tackles children’s healthcare, safety and well-being as its core mission. This mandate is by its very nature extremely broad and extends to emergency operations, social policies and education alike. UNICEF implements or supports concrete projects and initiatives on the ground and is at the same time active in the policy-making arena.  United Nations Conference on Trade and Development (UNCTAD): its goals are to maximize the trade, investment and development opportunities of developing countries and assist them in their efforts to integrate into the world

International Institutions: classification and main characteristics 43











economy on an equitable basis. The primary objective of the UNCTAD is to formulate policies relating to all aspects of development including trade, aid, transport, finance and technology. The Conference ordinarily meets once every four years. United Nations Development Programme (UNDP): the organization constitutes the UN global development network. Its mandate is extremely broad as is reflected in its various activities. UNDP has four main functions: democratic governance, poverty reduction, crisis prevention and recovery, and environment and energy. In the first area UNDP supports transitions to democratic regimes by providing policy advice and technical support, improving institutional and individual capacity within countries, educating populations about and advocating for reforms, and promoting negotiation and dialogue. In the second area UNDP helps countries develop strategies to combat poverty by expanding access to economic opportunities and resources, linking poverty programs with countries’ larger goals and policies. In the third area UNDP manages programs to reduce risk of armed conflicts and promote recovery from crisis, such as programs on disarmament, demobilization of ex-combatants, de-mining and integration of displaced persons. United Nations Capital Development Fund (UNCDF): is one of the most recently created organizations, active in the microfinance area. In particular, the organization promotes the development of the financial sector in Least Developed Countries (LDCs) with the aim to improve the inclusiveness and the accessibility to financial services (i.e. loans and investment capital) for small and medium enterprises and rural/local communities. To reach its objectives, the organization also finances directly microfinance institutions and financial service providers and grants technical assistance to local financial institutions and government institutions to build the necessary infrastructures and capacity on the ground. United Nations Volunteers (UNV): advocates the role and benefits of volunteerism for development, integrates volunteers into development programs, and mobilizes volunteers for development projects. It was created to be a development partner for UN organizations by providing volunteers for their development programs. UN volunteers help to organize and run local and national elections and support a large number of peacekeeping and humanitarian projects. United Nations Office on Drugs and Crime (UNODC): is tasked with a coordinated, comprehensive response to the interrelated issues of illicit trafficking in and abuse of drugs, crime prevention and criminal justice, international terrorism, and corruption. These goals are pursued through research, guidance and support to governments in the adoption and implementation of various crime/drug/ terrorism- and corruption-related conventions, treaties and protocols, as well as technical/financial assistance to said governments to face their respective situations and challenges in these fields. United Nations Environment Programme (UNEP): coordinates UN environmental activities, assisting developing countries in implementing environmentally sound

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policies and practices. Its scope covers issues ranging from the atmosphere to the marine and terrestrial ecosystems. UNEP develops international environmental conventions, promotes environmental science and information and promotes development and implementation of public policies working in conjunction with civil society. UNEP has also been active in funding and implementing environment-related development projects. United Nations Human Settlements Programme (UN-HABITAT): promotes socially and environmentally sustainable towns and cities with the goal of providing adequate shelter for all. Its activity extends to analysis, research and provision of information on sustainable urban settlements addressed to governments and national policy makers. United Nations Population Fund (UNFPA): has the mandate to raise awareness of and increase access to reproductive health and healthcare in developing countries. UNFPA is also active in producing population data (censuses) and supports countries in using population data for policies and programs to reduce poverty and to ensure that every pregnancy is wanted, every birth is safe, every young person is free from HIV/AIDS and every girl and woman is treated with dignity and respect. United Nations Relief and Works Agency for Palestine Refugees in the Near East (UNRWA): is a relief and human development agency dedicated to the protection and the provision of education, healthcare, social services and emergency aid to the Palestinian refugees living in Jordan, Lebanon and Syria, as well as in the West Bank and the Gaza Strip. This organization’s mandate is very similar to UNHCR and it is the only UN organization dedicated to help a population in a specific region or conflict. The United Nations World Food Programme’s (WFP): its main activity is the delivery of food and essential supplies to the poorest, most vulnerable people and to the emergency and conflict areas with the immediate aim of avoiding starvation and malnutrition. WFP also helps build assets and promote the selfreliance of poor people and communities, particularly through labor-intensive public work programs with the main goal of eliminating the need for food aid itself. WFP is the world’s largest humanitarian organization addressing hunger worldwide.

1.7.2 Specialized agencies  International Labor Organization (ILO): founded on 14 December 1946, is responsible for drawing up and overseeing international labor standards. It is the only “tripartite” United Nations agency that brings together representatives of governments, employers and workers to jointly shape policies and programs promoting Decent Work for all.  Food and Agriculture Organization (FAO): founded on 14 December 1946, is a forum where all nations meet to negotiate agreements and debate policy in the agriculture, forestry and fishery industries. FAO is also a source of knowledge

International Institutions: classification and main characteristics 45













and information to help developing countries improve their capacity in these industries. United Nations Educational, Scientific and Cultural Organization (UNESCO): founded on 14 December 1946, has as its main objective to widen access to basic education for all and design effective programs. In the scientific area, its aim is to promote research, facilitate international scientific unions and bodies, directly support natural and human science projects of global relevance. In the cultural area, the organization is active in identifying and preserving the world cultural heritage assets and sites and promoting information on them around the world. In the communication and information arena, the organization is committed to supporting and promoting independent and free broadcasting, freedom of information, and advanced use of media and new technologies for development. This is mainly a policy based organization but it has targeted implementation projects in all the main areas of intervention. International Civil Aviation Organization (ICAO): founded on 13 May 1947, codifies the principles and techniques of international air navigation and fosters the planning and development of international air transport to ensure safe and orderly growth. Universal Postal Union (UPU): founded on 1 July 1948, regulates the system of multilateral agreements among member states for the international postal service management. Notably, the UPU issues and manages the international standard for postal exchange and is a policy based organization. World Health Organization (WHO): founded on 10 July 1948, acts as a coordinating authority on international public health. The organization focuses on the establishment of standards and common policies for promotion of public health, prevention of diseases and pandemics, issuance and control of vaccinations and prophylaxes. The organization carries out significant programs of immunization in developing countries against infectious diseases. WHO directly conducts and financially supports health research in areas of communicable diseases, reproductive health and tropical diseases. WHO also promotes capacity development in the healthcare and public health areas on scientific and technical levels. WHO is a research, policy and implementation organization, one of the most complex of the entire system. International Telecommunication Union (ITU): founded on 1 January 1949, coordinates the shared global use of the radio spectrum, promotes international cooperation in assigning satellite orbits, works to improve telecommunication infrastructure in developing countries and establishes worldwide standards for broadcasting signals and radio transmissions. Broadcasting companies and national regulators heavily participate in it. World Meteorological Organization (WMO): founded on 20 December 1951, is the UN system’s authoritative voice on the state and behavior of the Earth’s atmosphere, its interaction with the oceans, the climate it produces and the resulting distribution of water resources. The mandate of the organization is

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strictly scientific. The organization works closely with the UN Environmental Programme (UNEP) to promote the establishment of networks for making meteorological, climatological, hydrological and geophysical observations, as well as the exchange, processing and standardization of related data, and assists with technology transfer, training and research. International Maritime Organization (IMO): founded on 13 January 1959 to develop and maintain a comprehensive regulatory framework for shipping. Its current responsibilities include safety, environmental concerns, legal matters, technical cooperation, maritime security and the efficiency of shipping. Safety on the sea, respect of national and international sea territory and protection of maritime environment are currently integral parts of IMO’s mandate. World Intellectual Property Organization (WIPO): founded on 17 December 1974, promotes and protects intellectual property, notably through the management of a system of international patents. The mandate of the organization also contains the more complex mission to facilitate the transfer of technology related to individual property to developing countries in order to accelerate economic, social and cultural development. International Fund for Agricultural Development (IFAD): founded on 6 April 1978. This is an international financial institution operational in the area of agricultural development. Its portfolio consists of developing country governments and increasingly businesses dedicated to projects aimed at fighting starvation and providing regular access to food. United Nations Industrial Development Organization (UNIDO): founded on 1 January 1986, promotes and accelerates sustainable industrial development in developing countries and economies in transition and works towards improving living conditions in the world’s poorest countries by drawing on its combined global resources and expertise. United Nations World Tourism Organization (UNWTO): founded on 11 March 2004, serves as a global forum for tourism policy issues and a practical source of tourism know-how, with particular attention paid to playing a decisive role in promoting sustainable and responsible development in developing countries. International Atomic Energy Agency (IAEA): founded on 29 July 1957. The organization serves as an intergovernmental forum for scientific and technical cooperation in the peaceful use of nuclear technology and power worldwide. The organization also inhibits the proliferation of the energy for military purposes, including nuclear weapons, mainly through inspections and missions in countries that are active in the development and use of nuclear energy applications. IAEA’s reports are especially used by the Security Council to establish the existence of threats to peace and security from undeclared military programs. To all intents and purposes, IAEA operates like a specialized agency, although its status is specific and even more independent than the other organizations of this category.

International Institutions: classification and main characteristics 47

1.7.3 Other related agencies and organizations  World Bank (WB) and International Monetary Fund (IMF): share the same goal of raising living standards in their member countries. Their approaches to this goal are complementary, with the IMF focusing on macro-economic issues and the WB concentrating on long-term economic development and poverty reduction. WB and IMF have been in partnership with the United Nations since their founding. The formal relationship between the organizations was defined in a 1947 agreement that recognizes the institutions as independent specialized agencies of the UN as well as members and observers in many UN bodies.  World Trade Organization (WTO): neither GATT (the predecessor to WTO) nor WTO has a formal agreement with the UN. The relationship of these entities to the United Nations dates back to 1952 when Eric Wyndham White (the first Executive Secretary of GATT) and Trygve Lie, the UN SecretaryGeneral exchanged letters which took note of the “close de facto working arrangements which existed between the United Nations Secretariat and the Secretariat of the Interim Commission (GATT)”. With the creation of WTO (1 January 1995), there was a further exchange of letters underlining the cooperative nature of the relationship between the then WTO Director-General (Renato Ruggiero) and UN Secretary-General (Boutros Boutros-Ghali) in October 1995 of which the UN General Assembly took note in resolution 322 (12 December 1995).

1.8 List of regional development banks  African Development Bank (AfDB): founded in 1964 as part of the pan African movement at the beginning of the de-colonization period in the mid-twentieth century with the mission to “contribute to the development and unity of Africa”. Like the World Bank, the AfDB is a “group” consisting of three interrelated institutions, or “lending windows”. Like the WB, the institutional differentiation is based on the segment of clients served: the AfDB provides nonconcessional (i.e. market or quasi-market conditions) loans to middle-income countries, while the African Development Fund (ADF) provides concessional loans and grants to countries that cannot borrow from the other institutions or from the financial markets. A third institutional pillar is constituted by the Nigerian Trust Funds, set up by the country’s government to provide resources to low-income countries. This institution is interesting, because the Nigeria Fund has the same client segment of the ADF but claims its independence to make decisions regarding loans; it is in other words a hybrid between bilateral and multilateral cooperation in that funds are utilized based on the Nigerian Government’s guidance but using the AfDB’s expertise and capacity building facilities.  Asian Development Bank (ADB): founded in 1966 to provide economic growth and fight absolute poverty. After the Asian financial crisis of 1997, the bank

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focused on fighting the effects of the crisis and ensuring structural conditions to avoid the extreme volatility of investments and other macroeconomic imbalances mainly responsible for the crisis. Given the unexpectedly robust recovery and growth in the region, the bank was obliged to re-think its role in the region to avoid obsolescence and re-organized itself, in 2008, with a renewed strategic framework focusing on inclusive economic growth, environmentally sustainable growth and regional integration.  Inter-American Development Bank (IADB): chartered in 1959 with the purpose of contributing to the acceleration of the process of economic development in Latin American and Caribbean countries. Like the ADB, the bank has recently sought to adjust its mission to maintain its relevance in the region. In particular, it has strengthened its lending capacity, increased the maximum loan amount and is now open to considering private loans with the aim of fostering development through the private sector. The institution is now prone to a greater diversification of the projects in which it invests, including NGOs and private companies. The bank has a Fund for Special Operations that provides assistance to the poorest countries without being a separate institutional entity. It is mainly financed through member states’ contributions; the institution is at its own ninth replenishment, in this case called capital increase, that is necessary to face the expected level of demand of grants and loans and to maintain the institution’s good solidity and liquidity ratios.  European Bank for Reconstruction and Development (EBRD): created in 1991 during the disintegration of the Soviet Union. Its mission was directly related to supporting the transition of the former soviet republics into market-economies. For this reason, unlike other IFIs, EBRD’s charter expressly adopts a political mandate requiring the member countries in which it operates to commit to multiparty democracy and pluralism. Similar to other regional banks, the strategic orientations of EBRD are currently changing. The bank was established with the understanding that it would close once the post-communist economies had completed their transition to democratic and market-oriented states. The transition has occurred more quickly than anticipated. This led the EBRD to concentrate on the east and south of the European region where member countries remain in an early stage of transition. Once the bank has achieved its mandate, it may either close or merge with the European Investment Bank, the EU’s development bank with operations both inside and outside of the Union.

Notes 1 For a review see Weiss (2003) and Chapter 10 on Governance later in this book. 2 While the RC mechanism is still administered by UNDP, the organization now deploys a second manager to function as country representative to clearly distinguish between the two roles. 3 Some literature contributions: Cordella and Dell’Ariccia (2002); Muuka (1998); Woods (2001).

2 INTERNATIONAL NON-GOVERNMENTAL ORGANIZATIONS Definitions, classification, and relation with the UN system Eduardo Missoni 2.1 Defining NGOs The generic term of International Organizations (IOs) is often used in reference to both International Institutions—which we tried to define and classify in the previous chapter—and a growing number of entities that result from the association of non-state actors. The latter have been defined as International Non-Governmental Organizations (INGOs), though their legal nature, purpose, organization and role are far from uniform. In the case of International Institutions, the characteristics of their membership and of the relations between their members is implicit in the definition. International Institutions are established new juridical entities, with their own governance and management structures, created through formal agreements among member states, and represented by their governments; thus relations among them are inter-national.1 On the contrary, in the case of INGOs a clear, unambiguous, and theoretically acceptable definition remains to be formulated. Both the concept of “non-governmental” and “international” need to be further defined in order to circumscribe our field of interest. As we will see, the widely used term Non-Governmental Organization (NGO) is itself an essentially contested concept (Willets 2011) and is often used as a synonym for “non profit-”, “civil society-” or “third sector-” organizations. Regarding the attribute “international”, its common use, in the case of INGOs, obviously refers to links between NGOs based in different countries. An organization associating non-governmental subjects based in multiple countries would be more precisely referred to as trans-national2 or multinational, i.e., subjects operating and linking with others beyond the borders of one nation, or with presence in more than one country. From a juridical standpoint International Non-Governmental Organizations do not exist in international law.

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The classification adopted by the Union of International Associations (UIA) in its Yearbook of International Organizations, collects under the same heading both InterGovernmental Organizations (IGOs) and International Non-Governmental Organizations (INGOs), classifying organizations instead according to 15 organizational criteria. The first four (Types A–D) refer to “Conventional International Organizations” including Non-Governmental Organizations of a non-profit nature (thus explicitly excluding multinational companies) that have members in at least three countries and do not have their activities or decision-making structured to favor any particular country. Looking specifically at international NGOs, UIA (2011) adopts a number of additional criteria related to organizational life as indicators of the eligibility of an organization (Aims, Members, Structure, Finance, Relations with other organizations). The aims must be genuinely international in character, with the intention to support operations in at least three countries. Membership must be open to any appropriately qualified individual or entity in the organization’s area of operations. Closed groups are excluded. Voting power guidelines must ensure that no one national group can control the organization. National organizations which accept foreigners as members are therefore excluded, as are religious orders or communities governed on a hierarchical basis, as well as informal social movements. For the purpose of this work, the term INGOs refers, then, to Non-Governmental Organizations resulting from a formal, moral and operational agreement (of no international juridical value) among independent organizations separately and autonomously established in at least three countries, that are included, or eligible to be included, in the Yearbook of International Organizations as Conventional International Organizations. Nevertheless many managerial issues discussed in this book apply also to NGOs that, although not fitting in the definition above, operate internationally and have or could obtain consultative status with the Economic and Social Council (ECOSOC) of the UN. The term NGO had not been used in official documents before the adoption of the United Nations Charter, in 1945, where it was formally introduced for the first time under Article 71 in relation to the activity of ECOSOC, opening the door for suitable arrangements for consultation with NGOs. ECOSOC Resolution 1996/31 governs the relationship with ECOSOC, today, allowing “international, regional and national NGOs, non-profit public or voluntary organizations” (UN DESA NGO Branch 2011) to obtain consultative status with ECOSOC if they comply with a number of criteria that we will discuss later in detail. According to those criteria an NGO may be defined as an organization whose aims and purposes are in conformity with the spirit, purposes and principles of the Charter of the United Nations, that is independent from any government, has established headquarters and organizational structure, that has in place democratic decision-making and representation processes, and that derives its own resources mainly from the contributions of its affiliates (ECOSOC 1996). Thus the ECOSOC definition of NGOs does not introduce the idea of “international” NGOs.

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It must also be stressed that both the UIA (2011) and the ECOSOC definition (ECOSOC 1996) allow for entities very different in structure and goals to be referred to as NGOs. For example, the mission, interests and structure of the International Federation of Pharmaceutical Manufacturers and Associations (IFPMA), which represents the research-based pharmaceutical industry, differ substantially from those of Nobel laureate Doctors Without Borders/Médecins Sans Frontières (MSF), which is an international movement made up of 19 national associative organizations providing worldwide independent, impartial assistance to people whose survival is threatened by conflicts or catastrophes. Similarly the International Chamber of Commerce (ICC), which defines itself as “The world business organization”, clearly differs from he World Fair Trade Organization (WFTO), whose mission is to improve the livelihoods and well-being of disadvantaged producers by linking and promoting Fair Trade Organizations, and speaking out for greater justice in world trade. Indeed the four organizations offered as examples are INGOs. The literature uses many different criteria to define NGOs. Several alternative terms are used—including throughout the UN system—to refer to NGOs. The “terminological muddles” are even worse if we extend our look beyond the UN system (Lewis 2007). Over the late twentieth and early twenty-first centuries, throughout the world there was a mushrooming of organizations occupying the social space between the market and the state known variously as “non-governmental”, “non-profit”, “voluntary”, “civil society”, “third”, “social economy” or “charitable” sector. This set of organizations includes a sometimes bewildering array of entities, with most varied purposes and organizational arrangements, including social clubs, professional organizations, day care centers, grassroots development organizations, health clinics, environmental groups, religious congregations, sports clubs, human rights organizations, community associations, homeless shelters, and many more (Salamon et al. 2003). Although our interest here is limited to those of international relevance, due to the high interdependence between organizations acting transnationally and those operating at the local or national levels, we need to better understand the characteristics of our field of study and get acquainted with its terminology.

2.2 Non-profits Whereby voluntary organization, charitable organization or charity are terms widely used in Britain, non-profit organization3 (NPO) is commonly used in the USA where the market has long been dominant and alternative forms of organization receive tax benefits if they are non-commercial and non profit-making. The legislation related to charities in Britain, known as Statute of Charitable Law, goes back to 1601, while Alexis de Tocqueville in his Democracy in America (1835–40) described a widespread system of non-profit associations across American society in the early nineteenth century. Beside associations active in a variety of sectors,

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another type of organization emerged in the USA at the end of the nineteenth century: foundations. Based on capital rather than on people supporting a cause, foundations became soon important players undergirding the “non-profit” sector as well as American society in general. Names of wealthy people such as John Rockefeller, Andrew Carnegie or Henry Ford—just to name a few—are linked to homonymous Foundations to whom they transferred an important part of their fortune for philanthropic purposes. A model that was later followed also in other parts of the world. The term “non-profit sector” emerged in the 1960s in the USA to distinguish organizations that do not distribute their profits to their investors, making them eligible for tax exemptions. The Internal Revenue Code (published by the Internal Revenue Service) has been instrumental to the recognition of the sector. Listing 20 categories of organizations eligible for exemption, it provided an operational definition for the non-profit sector in the USA (Mertens 2007). The legal form of non-profits can be diverse and depends upon individual countries’ laws, regulations and practices. However, four main family groups of non-profits can be found worldwide:    

unincorporated associations; trusts, charities and foundations; companies not for profit; entities formed or registered under special non-profit organizations laws.

The essence of being non-profit is that any surplus is not distributed to its members, board or owners. Instead, it is reinvested in the funding of the NPO’s mission and programs. Formalizing its existence under national laws, a NPO accepts minimum established standards that guarantee responsible behavior, transparency and accountability to its members, stakeholders and the wider society. Nevertheless, even if an NGO is validly set up and is recognized within one country’s jurisdiction, once it tries to move transnationally into other countries its “legal” existence may no longer be granted unless it completes further registration or local formalities. Just as in the case of transnational corporations, there is still no universal incorporation of NGOs (Stillman 2007).

2.3 Civil society The term civil society has roots in the different meanings that philosophers, such as Hobbes and Kant, theorized. There are references to civil society in the works of thinkers such as Rousseau or Hegel and, later, in Marx and Gramsci. Gramsci extensively explored the concept in his Quaderni dal carcere4 where he viewed civil society as the space for the elaboration of ideas and consensus-building processes. According to Norberto Bobbio, civil society is the realm for a wide-range of relationships between individuals, groups, and social classes that develop outside the power relationships that characterize state institutions. Civil society is the place

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where economic, ideological, social and religious conflicts develop and are settled. Mobilization, association, and organization of social forces in the pursuit of political power are the areas in which political parties “select, aggregate and finally transmit demands coming from civil society … that are destined to become the object of political decision” (Bobbio 1978: 26). The term Civil Society Organizations (CSO) is increasingly used to indicate non-state, non-profit, voluntary organizations formed by people within the social sphere of civil society; organizations that draw from community, neighborhood, workplace, social organizations and other institutions, and are seen as a channel through which people seek to exercise citizenship and contribute to social and economic change. They cover a broad spectrum of organizational interests and forms, ranging from formal organizations registered with authorities to informal social movements coming together around a common cause. The term CSO is often used as a synonym for NGO. However, the term NGO is rather used for organizations that have a formal structure, offer services to people other than their members and are, in most cases, registered with national authorities. From this perspective, NGOs may be considered part of civil society and eventually represent one type of CSO. Nevertheless, the term CSO is more often used to refer to organizations in which a higher level of informality, a looser structure and lack of recognition characterize them, eventually differentiating them from NGOs. Community Based Organizations (CBO) sharpen the distinction because they are, by definition, strictly linked to a local context. Sometimes some moral value is associated to the term civil society. Recognizing that “in many conceptualizations, civil society’s values are pre-defined as positive, progressive or democratic”, CIVICUS specifically includes “Values” among the “dimensions” used to measure civil society: “The ratio of tolerant vs. intolerant, progressive vs. fundamentalist, pro-poor vs. anti-poor civil society actors in a country is crucial for judging its overall state. Values such as democracy and transparency are critical measures of civil society’s legitimacy and credibility” (CIVICUS 2011). Nevertheless, recognizing that there are no universally accepted values, but that all writers on civil society emphasize the free association of individuals in groups and processes of political debate, Willets (2011) argues that any group, no matter how radical, fundamentalist or undesirable it may be, is part of civil society as long as it engages in normal political debate. Yet it is excluded from the definition when it resorts to violence against political opponents. From the mid 1990s onwards, the UNDP and the World Bank have preferred to talk about their relationships with civil society rather than with NGOs and, since 2000, the term appears more frequently in UN documents, implying a desire to engage with a wider range of groups, with the inference that NGOs are only a part of civil society. In fact, within the term civil society, the UN Secretariat and some governments would tend to associate both NGOs and the private sector commercial organizations (Willets 2011). In reporting to the General Assembly, the at that time Secretary-General of the United Nations, Kofi Annan, described under the “Civil Society” chapter all non-state actors, including the “business community”.

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Nevertheless, he specified: “Non-governmental organizations are the clearest manifestation of what is referred to as “civil society”, that is, the sphere in which social movements organize themselves around objectives, constituencies and thematic interests” (UN 1997). Other UN agencies, such as the World Health Organization (WHO), have clearly defined commercial enterprises as the for-profit part of the private sector. It has included among these the associations that are non-profit in nature but which represent business or commercial interests (WHO 2001). Referring to its Constitution and the subsequent World Health Assembly resolutions in setting up the current system of official relations, the WHO would also tend to use the term NGOs when referring to the official relations system, while using the term CSOs when referring to interaction with civil society in general (WHO 2002). Recognizing the risk of making undistinguished reference to non-profit organizations advocating for the common good and others representing the interest of commercial sectors, representatives of Public Interest NGOs (PINGOS) increasingly stress, in international circles, the distinction between Business Interest NGOs (BINGOs) and PINGOS (COIC 2011). Until recently the civil society concept by and large referred to the local or the national space, while we now witness a growing discourse regarding an emerging “global civil society” formally or informally linking together, across national boundaries, a great variety of groupings such as social movements and networks (Lewis 2007: 66). Without attempting to give a precise definition of the terms, for our purpose we may say that social movements and their global equivalents are scarcely structured, spontaneous collectivities, that bring together, individuals, groups and organizations with a common cause, sharing the awareness of a common destiny and building concerted action, but with loose associations among their participants and without having one overall formal organization. With the impressive breakthroughs in communication technologies, in recent years, as well as global interconnectedness, social movements have progressively organized as networks, policentric and flexible, increasingly generating and instantly sharing information, to create synergic action. A number of authors have defined networks as new organizational models which are multi-stakeholder and cross-sectoral (i.e. linking business, state and the third sector). Among them Waddell (2011) refers to global action networks or GANs as a specific type of network combining to a significant degree seven characteristics and with different “level[s] of organizing”. GANs belong to the kind of hybrids that we will describe later (see Chapter 3).

2.4 Third sector and social economy As in the term civil society, the concept of third sector also defines the space between the state and the market and poses similar challenges in operational terms. However, the concept of civil society is at least historically more related to socio-political dynamics whereas the idea of third sector may offer the analytical framework into

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which organizations can be categorized from an economical perspective on the basis of a relatively clear conceptual distinction in relation to government agencies and for-profit businesses (Lewis 2007; Barbetta and Maggio 2008). When the nonprofit sector is led by values of socio-political commitment, adopts participatory management structures and promotes social cohesion and the spirit of cooperation, it can be viewed as the “infrastructure” of civil society (Barbetta and Maggio 2008). The term third sector is believed to have its origins in the work of Amitai Etzioni and Theodore Levitt, leading to an idea of the third sector as a loose category encompassing all organizations operating between state and private firms and which are, in principle, privately run and do not pursue profit-oriented goals. Law, power of compulsion and formal codification of legitimacy being the main tools of the first sector (state); exchange, rational calculation of competitive economics and market, drive the second (private for-profit business). Finally, income does not usually motivate participation in the third sector, resources are mobilized by the ability to seek and attract them voluntarily while value-driven action and commitment hold the organizations together (Lewis 2007). Also, in the francophone world, where Delors and Gaudin (1978) seem to have introduced the term, organizations are considered belonging to the third sector if placed in between the public sector or “state” on one side, and the private “capitalist” sector on the other side. It is recognized, however, that several situations are exempt from this dichotomous approach. To go beyond a definition based on exclusion, Mertens (2007) proposes a number of criteria that should characterize organizations of the third sector. According to that author, these will be differentiated from the capitalist sector by being non-profit (constraining the distribution of any economic surplus, that will generally be reinvested in the main purpose and activity of the organization) and its investors having no unconditional right of ownership on the surplus; having a prevalent social purpose serving its members or the wider community (whereby the beneficiaries of its activities are different from investors);5 and adopting democratic decision-making which is not conditioned by economic power (e.g., one member one voice, rather than voting power based on number of shares held). In addition, third sector organizations are distinct from state organizations as they are legally separated from the government and independent of any public administration (if admitted, representatives of public authorities on the board are a minority). Finally, in the third sector organizations are voluntary and membership is by free choice.

2.4.1 Third Sector vs. Social Economy Besides the purely conceptual approach, in practice the third sector includes both organizations that pursue the interests of their members (organizations of mutual interest) and organizations that deal with issues of a wider general interest (such as service to the community). However, as Mertens (2007) points out, the conceptualization of the third sector is highly dependent on the societies and contexts in which it

56 Management of IIs and INGOs

emerges; an aspect which becomes relevant in describing the third sector from a global perspective. For example, the analysis of the extensive scientific French and Anglo-Saxon literature on the subject, shows cultural differences between the two approaches. French scholars build on the concept of social economy, whereas North American literature focuses on the idea of non-profit organizations. The constraint of non-distribution of profit is core to the Anglo-Saxon conceptualization of the third sector, which in North America is mainly represented by philanthropy, representing about 90 percent of organizations classified as non-profit. Whereas in France, as in Belgium, where the welfare state has been traditionally strong and caring for many of the activities that in the USA philanthropy takes charge of, third sector organizations tend to be the building blocks of the concept of social economy. Their role seems to go back to the organizations of mutual interest and, more particularly, to cooperatives, with economic democracy and rules for the allocation of profits constituting basic elements of these definitions. Since the 1970s in France, the concept of social economy is used to classify the coming together of cooperatives, mutual societies and associations. Since then, the institutional adoption of the term has gradually been used to designate the third sector, not only in France but also in other countries (Belgium, Spain, Portugal, Italy and Sweden, and the province of Quebec) and in European Institutions. With the term “social economy” or “third system” the European Commission refers to cooperatives, mutual societies, associations and foundations (CMAF), promoted by Social Economy Europe which was established in 2000 as a Permanent European Conference under the name CEP-CMAF (Social Economy Europe 2011). The term social economy is more and more associated with the idea of social enterprise, independent from the legal nature of the organization. This concept includes nonprofit-distributing organizations that reinvest gains in the organization, as well as organizations that allow the distribution of a limited amount of gains; still, with limits to assuming a profit-maximizing modus operandi. The European Research Network EMES defines social enterprises according to a bi-dimensional pattern: an economic one and a social one (Borzaga and Defourny 2001; Defourny and Nyssens 2008).6 So defined, the concept and practice of social enterprise goes beyond the purpose of this textbook. However, for completeness we cannot avoid mentioning the related concept of social business provided by the economist and Nobel laureate Muhammad Yunus who defined two different types of social business companies. The first describes companies that focus on providing a social benefit, rather than on maximizing profit for the owners, and that are owned by investors who seek social benefits such as poverty reduction, healthcare for the poor, social justice, global sustainability, and so on. Such enterprises seek psychological, emotional, and spiritual satisfaction rather than financial reward, and do not receive any dividends. The second describes profit-maximizing businesses (PMB) that are owned by the poor or disadvantaged, such as the renowned Grameen Bank, founded by Yunus himself, where dividends and equity growth directly benefit the poor. Owners, in this model, thereby help their clients to reduce their poverty (Yunus 2007). Yunus (2010) further summarizes his definition of “social business” according to seven criteria.7

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2.5 In search of operational definitions In practice, the boundaries between the three social sectors (state/public; private/ profit; third sector/non-profit) often remain unclear, overlapping and highly context specific (Lewis 2007: 70). State involvement in the funding and establishment of CSOs/NGOs may blur the borders between state and non-state entities, and the borderline between market and non-market may also be blurred by organizations that are non-profit but closely related to commercial enterprises, as well as those falling into one of the categories of social economy. In addition, from a global perspective, a number of hybrid situations such as Global Public-Private Partnerships (GPPPs) and Waddell’s (2011) GANs need to be taken into account and will be separately described later (see Chapter 3). In order to fill the gap in basic knowledge about the scope and structure of the third sector internationally, in 1991 Salamon and his collaborators at Johns Hopkins University launched the Johns Hopkins Comparative Non-Profit Sector Project8 (Salamon et al. 2003). They considered inadequate the following three types of available definitions of the entities that were the object of their study:  the economic definition focusing on the source of organizational support, whereby a civil society organization is one that receives most of its revenue from private contributions, thus not from market transactions or from government support; with “voluntary” or “charitable” being attributes used to describe it;  the set of definitions based on the legal status and differentiating organizations by their legal form (e.g. Associations, Foundations, etc.);  a third set of definitions focusing on the purposes the organizations pursues: e.g. a civil society organization promoting the public good, an NGO or charity seeking to address the structural roots of poverty and distress. To overcome the limitations of those definitions, as an initial step of the project, Salamon et al. (2003) developed a “structural-operational” definition based on five structural or operational features according to which entities of the “civil society sector” would be described as:  Organizations, i.e., they have some structure and regularity to their operations, whether or not they are formally constituted or legally registered;  Private, i.e., they are not part of the apparatus of the state, even though they may receive support from governmental sources;  Not profit distributing, i.e., they are not primarily commercial in purpose and do not distribute profits to a set of directors, stockholders, or managers. Civil society organizations can generate profits in the course of their operations, but any such profits must be plowed back into the objectives of the organization;  Self-governing, i.e., they have their own mechanisms for internal governance, are able to cease operations on their own authority, and are fundamentally in control of their own affairs;

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 Voluntary, i.e., membership or participation in them is not legally required or otherwise compulsory. To solve the “terminological muddles” referred to above, Salamon et al. (2003) adopted a solomonic option and used terms such as “non-profit sector”, “non-profit organizations”, “third sector” and “voluntary organizations” interchangeably with the term “civil society organization” or “civil society sector”. Nevertheless, they emphasize that the term “civil society” seems the closest to gaining truly universal usage and has the advantage of avoiding the negative connotations associated with the terms “non-profit” or “non-governmental”. In summary, those interchangeable terms were used in the Johns Hopkins study to refer to a broad array of organizations that are essentially private, i.e., outside the institutional structures of government; that are not primarily commercial and do not exist primarily to distribute profits to their directors or “owners”; that are self-governing; and that people are free to join or support voluntarily. Additionally, Salamon et al. (2003) formulated a classification scheme for differentiating those entities according to their primary activity and proposed an International Classification of Non-Profit Organizations (ICNPO) that identified the following 12 different categories of non-profit activity: 1) Culture and recreation; 2) Education and research; 3) Health; 4) Social services; 5) Environment; 6) Development and housing; 7) Civic and advocacy; 8) Philanthropic intermediaries; 9) International; 10) Religious congregations; 11) Business and professional unions; 12) Other. For our purpose the inclusion of a distinctive “international” field of activity is of specific relevance. However, it mainly refers to national organizations whose activities extend beyond the borders of the country where they are based (like the majority of Development NGOs) rather than to organizations with an international or, better said, transnational structure and membership, which are instead the focus of this textbook.

2.6 Other transnationally operating non-profits Notwithstanding our attempt to limit the field of analysis to “conventional International Organizations” (UIA 2011), due to their transnational relevance, in this chapter we will also introduce two additional “international” actors: Development NGOs and Global Philanthropy. Both have decision-making bodies favoring one country (or a few individuals in the case of Foundations) with limited or relatively non-influential representation of members from other countries. Nevertheless, in various chapters, especially in those referring to new global organizational settings and relations between the UN and the private sector, when making reference to NGOs (and to terms such as civil society or non-profit organizations that we may use interchangeably), we include these transnationally influential non-profits. Non-Governmental Development Organizations were originally established in industrialized countries to promote and implement projects in low-income countries, but in the 1990s they moved into a mainstream position in development

Members

Aims

Aims and purposes of the NGO in conformity with the spirit, purposes and principles of the United Nations, and the work of the NGO must be relevant to the work of ECOSOC and its subsidiary bodies. The NGO must be of recognized standing within the particular field of its competence or of a representative character.

ECOSOC

TABLE 2.1 Comparison of criteria defining INGOs

Membership must be open to any appropriately qualified individual or entity in the organization's area of operations. Closed groups are excluded. Voting power must be such that no one national group can control the organization. National organizations which accept foreigners as members are therefore excluded, as are religious orders or communities governed on a hierarchical basis, and also informal social movements.

The aims must be genuinely international in character, with the intention to cover operations in at least three countries.

Yearbook of IO

Voluntary, i.e., membership or participation in them is not legally required or otherwise compulsory.

Johns Hopkins

(continued on next page)

Voluntary, and membership is a free choice.

Having a prevalent social purpose serving its members or the wider community (whereby the beneficiaries of its activities are different from investors).

Others

There must be individual or collective participation, with full voting rights, from at least three countries. The Constitution must provide for a formal structure giving members the right periodically to elect a governing body and officers.

The organization shall have authority to speak for its members through its authorized representatives. The organization shall have a representative structure and possess appropriate mechanisms of accountability to its members, who shall exercise effective control over its policies and actions through their voting rights or other appropriate democratic and transparent decisionmaking processes.

It shall have a democratically adopted constitution which shall provide for the determination of policy by a conference, congress or other representative body, and for an executive organ responsible to the policy-making body. The NGO shall have an established headquarters, with an executive officer.

Representation and decisionmaking

Structure

Organizations, i.e., they have some structure and regularity to their operations, whether or not they are formally constituted or legally registered.

Yearbook of IO

ECOSOC

TABLE 2.1 (CONTINUED)

Organizations, i.e., they have some structure and regularity to their operations, whether or not they are formally constituted or legally registered.

Johns Hopkins

Adopting democratic decision making which is not conditioned by economic power (e.g., one member one voice, rather than voting power based on number of shares held).

Others

The NGO should not be established by a governmental entity or intergovernmental agreement; where the NGO accepts members designated by governmental authorities, such membership must not interfere with the free expression of views of the organization

Links to other organizations

Johns Hopkins Not profit distributing, i.e., not primarily commercial in purpose and do not distribute profits. Can generate profits in the course of their operations, but they must be plowed back into the organization.

Private, i.e., not part of the ”state”, even though they may receive support from governmental sources. Self-governing, i.e., they have their own mechanisms for internal governance, are able to cease operations on their own authority, and are fundamentally in control of their own affairs.

Yearbook of IO Not profit distributing, i.e., they are not primarily commercial in purpose and do not distribute profits to a set of directors, stockholders, or managers. Can generate profits in the course of their operations, but any such profits must be plowed back into the objectives of the organization.

Private, i.e., they are not part of the apparatus of the state, even though they may receive support from governmental sources. Self-governing, i.e., they have their own mechanisms for internal governance, are able to cease operations on their own authority, and are fundamentally in control of their own affairs.

Source: elaboration of the author based on ECOSOC (1996); Salamon, Sokolowski and List (2003); Mertens (2007); UIA (2011)

The basic resources of the organization should be derived in the main part from contributions of the national affiliates or other components or from individual members. Any financial contribution or other support, direct or indirect, must be openly declared to the Committee and fully recorded in the financial records.

Finance

ECOSOC

TABLE 2.1 (CONTINUED)

Others

62 Management of IIs and INGOs

policy. Indeed, they became important partners to donors and intergovernmental organizations, and played an increasing role in the international scenario. Some of them later assumed the characteristic of genuine International Organizations. Global Private Philanthropy is the term commonly used to indicate major private Foundations that have been playing an increasing role in financing development and influencing global governance, at least in certain sectors (such as the Bill and Melinda Gates Foundation in health).

2.6.1 Non-Governmental Development Organizations For many people, the concept of NGO (and even more of INGOs) has become inseparably linked with the business of international development, to the multilateral institutions and bilateral donors and international aid channeled to developing countries from governments and publics in industrialized countries. This is partially justified by the increase—with the emergence of neoliberal development policies in the early 1980s—in the number of NGOs involved in the aid system, in the role of donors, and project implementers or “partners” working with local organizations. This represented a veritable phenomenon and an increasingly important element of the “aid industry” (Lewis 2007). Often referred to as Non-Governmental Development Organizations (NGDO) (Fowler 1997), these organizations represent an important sub-group of NGOs, devoted to development and poverty reduction work at local, national and global levels around the world. NGDOs may be involved in development efforts in one or more countries, and may be genuinely international, with international scope, or local according to the characteristics of their structure and membership. By definition NGDOs legally established in a “developed” country are international in the scope of their mission and operations but not necessarily international in terms of membership and structure. Nevertheless, an increasing number of them tend to organize transnationally, both establishing affiliates in multiple industrialized countries and integrating in their governance structure members (individuals or partner organizations) from the developing countries where they operate. However, only when their membership does not favor any specific group or nationality and/or is made of independent national organizations (eventually sharing characteristics, such as the brand, mission and values, procedures, and others), may they genuinely considered “international” for the purpose of this book. A few figures help to understand the relevance of NGDOs and trends inside the sector. In the year 2000, development INGOs had an income equivalent to 28 percent of the total Official Development Aid (ODA) of OECD countries, derived from private contributions (42 percent), public contributions (42 percent) and consultancies and other services sold (16 percent). Concentration, internationalization, oligopoly have progressively characterized the development INGOs’ scenario. Some 90.5 percent of total INGOs’ income was concentrated in 20 percent of major INGOs, whereby the income of the lowest quintile was less than 0.5 percent of the total. Ten major

International Non-Governmental Organizations 63

development INGOs concentrated 21 percent of the total income of the sector, and only eight INGO “families” concentrated up to 50 percent of total income and up to 80 percent of funds for emergencies and humanitarian aid (Woods 2000).

2.6.2 Global Private Philanthropy Several contributors use the term foundation as a synonym for philanthropic organization. It may be difficult to differentiate foundations from other non-profit, Non-Governmental Organizations, and the term itself is often used as a synonym of fund, trust or endowment. The difficulty in the classification is reflected in the number of existing foundations according to different sources. According to Sulla (2006), more than 100,000 foundations currently exist worldwide and roughly 70,000 of these are from the USA. According to European sources, only in the European Union, approximately 200,000 organizations are labeled or call themselves “foundations” (The European Foundation Centre 2005). However, the OECD estimates that there are 85,000 European foundations (Scott 2003). The rather high disparity between the reported figures clearly shows the lack of common classification criteria. With respect to their international relevance, it may be noted that private philanthropic foundations have increasingly become important players on the international development scene, with the USA having a history of philanthropic giving dating back to the 1920s when the Rockefeller foundation was established. Today, the world’s biggest foundation in terms of financial resources disbursed is the Bill and Melinda Gates Foundation, with a total asset value of 33,912 billion US$, at the end of 2009, and an increasing influence on global policies. Taking into consideration definitions suggested by a variety of sources including the OECD/DAC and the World Bank, a private foundation (distinguished from the public one, governed with public funds and through public bodies) is characterized by being:     

non-governmental; non-profit; possessing a principal fund of its own; managed by its own trustees and directors; promoting social, educational, charitable, religious or other activities serving the common welfare, either by making grants to third parties or operating their own programs and projects.

We can distinguish four recognizable forms of what we generally call philanthropic organizations or foundations based on their origin: 1 traditional foundations (linked to a personal capital or endowment and usually governed by the same individual or his/her family); 2 corporate foundations (linked to the business culture and the Corporate Social Responsibility approach);

64 Management of IIs and INGOs

3 social entrepreneurs or venture philanthropists (individuals, “philanthrocapitalists”); 4 partnerships (public and private resources and boards). This fourth group, refers to a number of “hybrid” transnational organizations resulting from public-private partnerships that are often legally incorporated as foundations, but do respond to the above described criteria of “internationality”, and will be dealt with in Chapter 3.

2.7 NGOs and the UN system The right for NGO involvement in the formal proceedings of the UN was established at the San Francisco Conference that agreed with the text of the UN Charter (Article 71). In the Charter, the term Non-Governmental Organization was used for the first time in an official document: The Economic and Social Council may make suitable arrangements for consultation with non-governmental organizations, which are concerned with matters within its competence. Such arrangements may be made with International Organizations and, where appropriate, with national organizations after consultation with the Member of the United Nations concerned. (UN Charter, Article 71) While providing for NGOs to participate in intergovernmental diplomacy, Article 71 vaguely referred to consultation and restricted the role of NGOs to the work of ECOSOC. ECOSOC first consolidated the main aspects of the consultative arrangements for NGOs in a single text as Resolution 288B (X), 27 February 1950. The text was subsequently readopted with revisions as Resolution 1296 (XLIV), 23 May 1968, and then again as Resolution 1996/31, 25 July 1996 (Willets 2000). Since the 1970s, a wider range of activities has been developed going far beyond the official procedures established until then, extending the NGO participation beyond ECOSOC to all parts of the UN system. In July 1997, a report to the General Assembly by the Secretary-General Renewing The United Nations: A Programme For Reform stressed the need to reach out to civil society (UN 1997). The Millennium Summit Declaration in September 2000 similarly stressed the need for the UN to work in different types of partnerships with civil society (UN 2000). The Secretary-General’s report on the reform of the organization, Strengthening the United Nations: An Agenda for Further Change (UN 2002) reflected on this growing importance of NGOs in the work of the United Nations and the need to further strengthen the UN’s relations with civil society. Therefore, the SecretaryGeneral appointed in February 2003 a High-Level Panel of Eminent persons on United Nations Civil Society Relations, chaired by the former Brazilian president Henrique Fernando Cardoso, to produce a set of practical recommendations as to how the organization’s work with civil society could be improved. The panel

International Non-Governmental Organizations 65

submitted its report, in June 2004, to the Secretary-General (UN 2004) who forwarded his own response to the General Assembly in September 2004, emphasizing how expanding and deepening the relationship with NGOs would further strengthen both the institution and the intergovernmental debate (UN 2004a). These developments led to a general UN review of existing policies and strategies. Many UN agencies have introduced new and improved forms of communication and collaboration. A number of UN entities have modified their accreditation system for attendance of CSOs in their governing bodies, “up-graded” and expanded headquarters units dealing with civil society issues and designated liaison officers at the departmental level. Mechanisms are being established at the senior management level for involvement of CSOs, with and without official status, in policy-making via “NGO Liaison Committees” and “Civil Society Advisory Committees” (WHO 2002). One agency, UNAIDS, has also included representation of CSOs within its governing body and we will analyze this in detail in Chapter 5. These historical developments are described in detail by Willets (2011). Here we will focus on the current framework of consultative arrangements.

2.7.1 The NGO “statute” Non-governmental organizations (NGOs) may engage with the United Nations through consultative status with the Economic and Social Council (ECOSOC) or association with the Department of Public Information (DPI). Since the first NGOs were granted consultative status in 1946, the participation of NGOs in intergovernmental bodies has increased significantly. Today, more than 3,500 NGOs have consultative status with ECOSOC,9 and over 1,500 NGOs are associated with DPI (ECOSOC 2011). ECOSOC Resolution 1996/31 governs today the relationship between NGOs and ECOSOC which allows international, regional, sub-regional and national NGOs, as well as non-profit public or voluntary organizations to obtain consultative status with ECOSOC. Some authors refer to that resolution as the “NGO statute”. This is not a standard term to refer to these three ECOSOC resolutions. But Resolution 288D did officially refer to Resolution 288B as “the revised statute”, and it is a useful way of indicating their constant use and their unchallenged status (Willets 2000). To apply for the Consultative status with ECOSOC, NGOs “at the national, subregional, regional or international levels” must comply with a number of established requirements, which are reviewed by the ECOSOC NGO Committee, to determine eligibility. The main requirements are:  the aims and purposes of the NGO must be in conformity with the spirit, purposes and principles of the Charter of the United Nations, and the work of the NGO must be relevant to the work of ECOSOC and its subsidiary bodies;  the NGO must be of recognized standing within the particular field of its competence or of a representative character;

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 the NGO shall have an established headquarters, with an executive officer;  it shall have a democratically adopted constitution which shall provide for the determination of policy by a conference, congress or other representative body, and for an executive organ responsible to the policy-making body;  the organization shall have authority to speak for its members through its authorized representatives;  the organization shall have a representative structure and possess appropriate mechanisms of accountability to its members, who shall exercise effective control over its policies and actions through the exercise of voting rights or other appropriate democratic and transparent decision-making processes;  the NGO should not be established by a governmental entity or intergovernmental agreement; where the NGO accepts members designated by governmental authorities, such membership must not interfere with the free expression of views of the organization;  the basic resources of the organization should be derived mainly from contributions of the national affiliates or other components or from individual members. Any financial contribution or other support, direct or indirect, must be openly declared to the Committee and fully recorded in the financial records. In practice, according to Willets (2011), the majority of NGOs do not possess the formal policy-making structure required by the statute, but this has been no barrier to accreditation. For most NGOs, the main obstacle to gain consultative status is represented by bureaucratic procedures. In fact, the formal application by an NGO must include answers to a questionnaire about their work, copies of their annual reports, and full details of their funding (i.e., membership fees and autonomous fundraising). The non-profit distributing nature of NGOs is not an explicit requirement. There are three categories of formal relationship between NGOs and ECOSOC, and accredited NGOs can apply to become reclassified from one category to a higher one (ECOSOC 1996). General consultative status can be recognized to organizations that:  are concerned with most of the activities of the Council and its subsidiary bodies;  can demonstrate that they have substantive and sustained contributions to make to the achievement of the objectives of the United Nations;  are closely involved with the economic and social life of the peoples of the areas they represent;  have a considerable membership which is broadly representative of major segments of society in a large number of countries in different regions of the world. Special consultative status can be given to organizations that:  have a special competence in, and are concerned specifically with, only a few of the fields of activity covered by the Council and its subsidiary bodies;  are known within those fields.

International Non-Governmental Organizations 67

The Roster is a list which may include organizations that:  do not have general or special consultative status but that the Council, or the Secretary-General of the United Nations in consultation with the Council or its Committee on Non-Governmental Organizations, considers as entities that can make occasional and useful contributions to the work of the Council or its subsidiary bodies or other United Nations bodies within their competence;  are in consultative status or a similar relationship with a specialized agency or a United Nations body. It should be noted that only the category of general consultative status is linked to the international nature of the NGO, while for the other two categories the possibility to establish a formal relationship with the UN is extended to NonGovernmental Organizations at the national, sub-regional, regional or international levels. While there appears to be no specific indication for the classification of NGOs with a limited geographical scope, the explicit condition of being “broadly representative of major segments of society in a large number of countries in different regions of the world” to become accredited in General consultative status, may be interpreted as limiting the accreditation of NGOs with a national or regional scope to the Special consultative status. This would be in line with the practice, before 1996, to classify those NGOs in Category II. In fact, “national NGOs” are now encouraged to apply for Special status or placement in the Roster. However it has been reported that, by 2005, among the supposedly global NGOs 14 were clearly regional and 15 were national (Willets 2011). Once accredited to ECOSOC, NGOs acquire a number of rights, including those of presenting written statements and to address the Council with oral “hearings”. These options are summarized in Table 2.2. Besides the important symbolic relevance of the rights and options of participation granted to NGOs, these provisions legitimize the physical presence of NGOs in the UN buildings, their political presence in the policy-making processes, and any activities they undertake to influence delegates, within the limits of diplomatic decorum (Willets 2011).

2.7.2 Suspension and withdrawal of consultative status Consultative status is supervised by ECOSOC’s Committee on Non-Governmental Organizations, which is composed of 19 UN member states and meets twice a year. It periodically reviews the activities of NGOs on the basis of the reports they must submit every fourth year to the Committee and other relevant information, and determines the extent to which the organizations have complied with the principles governing consultative status. According to that review, the NGO Committee may recommend to the Council the suspension or the exclusion from consultative status of NGOs that have not met the requirements. If that is the case, the concerned NGO is given written reasons for that decision and has the

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TABLE 2.2 NGOs participation rights in ECOSOC and subsidiary bodies

General

Special

Roster

Attend UN meetings

yes

yes

Designate UN representatives Invited to UN international conferences Receive all documents Propose items for ECOSOC agenda Circulate written statements at ECOSOC meetings Circulate written statements at ECOSOC subsidiary bodies’ meetings Can speak at ECOSOC

yes yes

yes yes

Yes, for meetings within their field yes yes

yes yes

yes no

yes no

Up to 2,000 words Up to 2,000 words

Up to 500 words Up to 1,500 words

no

yes

no

Can speak at ECOSOC subsidiary bodies’ meetings Must submit quadriennal reports

yes

Only if no other body covers the issue yes

If invited

yes

yes

no

If invited the same as Special status

Source: elaboration of the author based on ECOSOC (1996)

opportunity to present its response for appropriate consideration by the Committee. If the NGO’s consultative status or listing on the Roster is withdrawn, the organization may be entitled to reapply not sooner than three years after the effective date of such a withdrawal. The situations which may lead to suspension up to three years or to withdrawal are also established in the statute (ECOSOC 1996): a if an organization, either directly or through its affiliates or representatives acting on its behalf, clearly abuses its status by engaging in a pattern of acts contrary to the purposes and principles of the Charter of the United Nations including unsubstantiated or politically motivated acts against Member States of the United Nations incompatible with those purposes and principles; b if there exists substantiated evidence of influence from proceeds resulting from internationally recognized criminal activities such as the illicit drugs trade, money-laundering or the illegal arms trade; c if, within the preceding three years, an organization did not make any positive or effective contribution to the work of the United Nations and, in particular, of the Council or its commissions or other subsidiary organs. While the introduction, in 1968, of the section on “Suspension and withdrawal of Consultative status” produced some concern among NGOs that feared that the

International Non-Governmental Organizations 69

new provision could limit their freedom to criticize governments, their ability to be critical, as Willets (2011) illustrates, has steadily expanded. Advanced by developing countries that suspected western funding would be used to support opposition groups in those countries, the possibility of losing accreditation in the presence of “substantiated evidence of secret governmental financial influence” was also included. This provision was later amended and is not included in the current 1996 version. However, NGOs’ freedom of operation has repeatedly been an issue in a number of countries where the state tends to take interest in NGOs from the perspective of ensuring financial control and accountability, particularly if there are foreign funds being channeled to the NGO sector. The state may put in place different strategies to define its relationships with NGOs. In some cases to monitor their work, the state might enact laws and regulations restricting INGOs’ rights to operate.10 In other situation the state may promote their coordination, resort to co-optation, or even create “quasi-governmental” NGOs: formally NGOs but ultimately the tools of government. In the worst cases, such as in authoritarian regimes, the state may impose or push for their dissolution (Lewis 2007). The suspension criterion related to “unsubstantiated or politically motivated acts against Member States” has been used in several occasions by governments to block applications from INGOs perceived as questioning their policies, mostly in relation with human rights. Among reported examples are the suspension of the World Sikh Organization and a variety of Tibetan-oriented NGOs that the Indian and Chinese governments prevented respectively from accreditation at ECOSOC. Regarding, the third criterion, it has been applied in a simple bureaucratic fashion, the failure to make an effective contribution becoming in fact the failure to submit a quadrennial report (Willets 2011).

2.7.3 The organizational arrangements of the relations between the UN and civil society 2.7.3.1 Internal UN bodies Over the years the UN has established a number of units and bodies to care for the relationship between the UN and NGOs.  DPI-NGO. Since 1968, NGOs which enjoy consultative status with ECOSOC and have strong public information programs are granted association with the UN Secretariat’s Department of Public Information (DPI) upon written request to the DPI/NGO Section. NGOs can be associated with DPI without having consultative status with ECOSOC. DPI-NGO oversees partnerships with associated NGOs and provides a wide range of information services to them. These include weekly NGO briefings, communication workshops, an annual NGO conference and an annual orientation program for newly associated NGOs. NGOs associated with DPI disseminate information about the UN to their membership, thereby building knowledge of and support for the organization at the grassroots level.

70 Management of IIs and INGOs

 NGLS. In 1975 several UN agencies established the United Nations NonGovernmental Liaison Service (NGLS) to serve as a UN system—civil society interface. The mission of the service is to promote constructive relations between the United Nations and civil society through dynamic partnerships fostering greater coherence around crosscutting and emerging issues on the UN’s agenda and to facilitate meaningful civil society engagement in UN processes.  UN—DESA NGO. The DESA NGO Branch is part of the Office for ECOSOC Support and Coordination (OESC), a division of the Department of Economic and Social Affairs (DESA) of the United Nations. It is the focal point within the UN Secretariat for NGOs in consultative status with the ECOSOC and for NGOs seeking status. It provides support to NGOs in their collaboration with the United Nations, including facilitating NGO registration to the many subsidiary bodies of ECOSOC, such as the Commission for Social Development, the Commission on the Status of Women, the Commission for Population and Development, the Commission on Sustainable Development, the UN Forum on Forests, and the Permanent Forum on Indigenous Issues. DESA NGO also serves the Committee on NGOs in the process of accreditation of NGOs to the UN Economic and Social Council.  UNDEF. In 2005 the UN Secretary-General established the United Nations General Trust Fund (UNDEF) to support democratization efforts around the world. UNDEF supports projects that strengthen the voice of civil society, promote human rights, and encourage the participation of all groups in democratic processes. The large majority of UNDEF funds go to projects of local civil society organizations, both in the transition and consolidation phases of democratization. In this way, UNDEF complements the UN’s traditional work with governments to strengthen democratic governance around the world. UNDEF subsists entirely on voluntary contributions from governments.

2.7.3.2 The Conference of Non-Governmental Organizations in Consultative Relationships with the United Nations An important moment in the history of NGO/UN relationships was the creation, in 1948, of the Conference of Non-Governmental Organizations in Consultative Status with the Economic and Social Council (CONGO). CONGO is itself an independent, international, non-profit membership association of Non-Governmental Organizations. It aims at facilitating the participation of NGOs in United Nations debates and decision-making. CONGO is most active at the major UN centers of New York, Geneva and Vienna but its work stretches out to all regions of the world. CONGO does not take positions on substantive matters. However, it provides, through special and ad hoc NGO Committees, for a discussion of substantive matters between its members and officials of the UN Secretariat and UN system agencies, UN delegations and other experts. NGOs with full CONGO membership status include national, regional and International Organizations in consultative

International Non-Governmental Organizations 71

status with the ECOSOC. CONGO associate membership is open to NGOs associated with the UN system but not holding that consultative status. Members represent a large range of vital interests in areas such as human rights, gender, peace and disarmament, social justice, governance, environment and sustainable development. CONGO and its members collaborate with the larger community of NGOs through standing NGO committees, which follow issues that are of key substantive interest regarding their mandates and objectives.

2.8 Case study: the Bill and Melinda Gates Foundation* Guided by the belief that every life has equal value, the Bill and Melinda Gates Foundation works to help all people lead healthy, productive lives. In developing countries, it focuses on improving people’s health and giving them the chance to lift themselves out of hunger and extreme poverty. In the United States, it seeks to ensure that all people—especially those with the fewest resources—have access to the opportunities they need to succeed in school and life. Based in Seattle, Washington, the Foundation is led by CEO Jeff Raikes and Co-chair William H. Gates Sr., under the direction of Bill and Melinda Gates and Warren Buffett.11 With its endowment of approximately 37.4 billion US$ and around 3 billion US $ of total giving per year, the Bill and Melinda Gates Foundation is presently the largest philanthropic foundation in the world.12 Both praised and criticized for its influence on global health policy-making, the Foundation employs over 1,000 people. It is one of the most relevant global health donors and by far the largest private source investing in global health (Murray et al. 2011).

2.8.1 History and structure A very young foundation compared to many others, especially in the USA, the Bill and Melinda Gates Foundation was set up in 2000 and incorporated the existing William H. Gates Foundation, established in 1994. In 2006 the Foundation was re-designed into a two-trust structure, consisting of the Bill and Melinda Gates Foundation (hereafter BMGF), which distributes funds to grantees, and the Bill TABLE 2.3 Basic facts about the Bill and Melinda Gates Foundation

Founding Employees year

2000

Asset (bn US$)

Yearly spending Percentageof yearly (bn US$) spending that goes to Global Health

Over 1,000 Approx. 37.4* Approx. 3*

Approx. 60%**

No. of grants given per year

273***

Source: elaboration of the author from the Foundation fact sheet, financial sheets and web-based information Notes: * As of December 2011 ** Fiscal year 2010 *** 2010, only for Global Health program

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and Melinda Gates Foundation Asset Trust, which manages the investment assets that provide proceeds to the BMGF to pursue its charitable goals. When Warren Buffet pledged more than 30 billion US$ to the BMGF, through shares of the Berkshire Hathaway (to be paid in annual installments), the Foundation became the largest in the world. In 2008, Bill Gates stepped down from the Microsoft Company to be fully committed to the work of the Foundation, followed by his wife Melinda, as they became the co-chairs. The BMGF was set up and still revolves around three funding programs: Global Health, Global Development and the United States. A Global Policy and Advocacy Program has also been created with the mandate of informing about the Foundation’s activities and influencing public policy on specific global issues. Through the activities of the Global Health and Global Development Programs, the BMGF targets developing countries’ populations, while through the United States Program it provides access to education to the poorest people in the USA.

2.8.2 Financials: investments and spending Figure 2.1 shows the annual expenditures13 of the BMGF from its creation. The graph shows the significant budget increase of the Foundation in the decade under consideration, with a 2010 expenditure of more than 2.5 billion US$, considerably larger than most UN system organizations. Figure 2.2 shows a breakdown of grants’ expenditures in 2010, where about 60 percent of the total amount of expenditures pertained to the Global Health program. Recent figures show that the amount of grants’ expenditures in 2011 has increased by almost 30 percent when compared to 2010, but the proportions among expenditures for different funding areas have approximately remained the same.14

4500 4000 3500 3000 2500

2000 1500

1000

500 2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

FIGURE 2.1 The BMGF annual spending since its creation (million US$) Source: elaboration of data collected through the BMGF annual reports 2000–10

International Non-Governmental Organizations 73

■ Global Health

15%

■ Global Development 20 %

60%

■ United States ■ Non-Program Grants

FIGURE 2.2 Breakdown of BMGF spending per area in 2010 Source: elaboration of data collected through the BMGF annual reports 2000–10

The BMGF is a non-profit organization, receiving proceeds from continuous investments for the deployment of its activities and the disbursement of grants committed. As is common in many foundations, the chairs establish general investment criteria consistent with good governance principles and identify companies which do not comply with institutional guidelines—for example, the BMGF does not invest in tobacco companies’ stocks. Besides this general rule, the Foundation has come under fire for some recent investment choices regarding its relationship with corporations which, because of the nature of their work, undermine the causes that the Foundation is promoting. An example is well explained in the recent work of David Stuckler et al. (2011). They show that the BMGF will soon become the world’s largest stakeholder in Coca-Cola and Kraft. This raises ethical questions related to conflict of interests in the Foundations’ relationship with other institutions as well as transparency issues in showing how the Foundation makes decisions on its investments.15 Other contributors have raised ethical concerns on the BMGF’s extensive use of partnerships with corporations (for example, in the oil industry) (Piller, Sanders and Dixon 2007). The BMGF believes businesses play a crucial role in helping to solve social problems, which is why corporations are often partners in the Foundation’s work, both dedicating resources and expertise. Examples of these partnerships are with pharmaceutical companies to advance drugs delivery in developing countries (like Merck with antiretroviral drugs in Botswana) or with food companies to support agricultural projects (like Coca Cola supporting small scale farmers in Kenya and Uganda).

2.8.3 Governance and grant-making The BMGF is led by a Management Committee, which consists of the co-chairs and trustees, the CEO, senior advisors, the presidents (one for each funding program), and other senior administrative officers. All the co-chairs are family members (Bill Gates, his wife Melinda and his father William).

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The co-chairs and trustees are responsible for identifying the strategies of the Foundation. They also lead a process of internal self-evaluation, reviewing the specific strategies of each of the Foundation’s funding areas at least annually, as well as proceeding to a more comprehensive evaluation of the Foundation’s strategy every three to five years. The committee meets regularly to ensure that all funding programs perform efficiently and to facilitate cross-functional connections between programs, while program officers oversee the overall grant-making process. Under the umbrella of the Management Committee, the Foundation’s structure is fairly decentralized. Every funding program (Global Health, Global Development and United States) is led by a President and each funding initiative is the responsibility of a Director. While every funding initiative follows its own strategic paper, the overall priority areas of the Foundation are entirely set by the interests and passion of the Gates family. These are communicated every year through the annual letter from the co-chairs. The grant-making process reflects the structure’s decentralization, and it is organized differently across different programs. In most cases, the Foundation’s staff members proactively develop projects for prospective applicants, requiring letters of inquiry (LOIs), which can lead to full requests for proposals (RFPs) from potential grantees. Staff members review each proposal and assess its feasibility and sustainability in accord with the Foundation’s priorities and the annual budget allocated. In recent years, the BMGF undertook a grantee perception survey, asking over 1,500 grantees about the major problems they face in dealing with BMGF funds. The report, published in 2010 on the BMGF’s website, highlighted poor responsiveness and fairness to grantees and lack of clarity in communication of the Foundations’ goals and strategy, while acknowledging at the same time good levels of knowledge, policy and practices.

2.8.4 Conclusion: the relevance for global health This very brief sketch of the BMGF offers an example of how a private foundation is structured in order to pursue its charitable mission. Private philanthropic foundations have demonstrated that they are relevant actors in global health in recent years, both among the group of donors (Murray and Anderson 2011) and with respect to their influence in health policy-making (Sridhar and Batniji 2008). While influencing policies is nothing new for foundations, what is new is the concern about this influence, which has acquired so much relevance in such a short period of time due to the emergent role of the BMGF. There are even frequent criticisms regarding BMGF’s power to distort global priorities (McCoy et al. 2009). From this case study on the BMGF, two combined aspects emerge which have raised the attention of the international debate in recent years: the outstanding size of BMGF’s grants and its governance structure. This combination has raised concerns about the lack of accountability in the prioritization of resources for public health, showing how a few private individuals decide which health research areas to allocate billions of dollars every year.

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The global financial crisis appears to have exacerbated the focus on the decisions concerning allocations; with the shortage of resources, inevitably competition increases among issues needing funding. Studying foundations’ planning and grantmaking processes becomes therefore relevant to understanding how and to what extent foundations’ decisions reflect global public health needs and at the same time what their influence is over other global health actors’ agendas. Defining influence is not straightforward, but we can certainly pick the size of the BMGF grants’ expenditures and the extension of its network as two of the main features of this influence in prioritizing resources. Its contributions to publicprivate partnerships, to the WHO and to research centers and universities makes the BMGF one of the most relevant foundations in terms of its impact on health research and outcomes as well as its capacity to fund path-breaking research and support neglected funding areas. However, this demands transparent prioritization too, and the need to critically assess the decision-making processes of private foundations to get a clearer picture of how priorities are set. This comes with a call for a more accountable role of these players in global health.

Notes * Case study by Elisa Ricciuti. 1 For the same reasons, strictly and juridically speaking also the term International Organizations applies exclusively to unions based on international agreements among nation-states, deriving in International Institutions only when the agreement leads to new juridical entities with autonomous bodies. 2 Keohane and Nye (1971) describe “transnational interactions” as the movement of tangible or intangible items across state boundaries when at least one actor is not an agent of a government or an inter-governmental organization. 3 Some would use “not-for-profit” rather than “non-profit” in order to emphasize that a defining criterion is the intention of the organization not to make profits for private gain (see the International Centre for Not-for-profit Law, http://icnl.org/contact/faq. htm#difference). 4 “Prison notebooks”. 5 Mertens (2007) points out that with the development of corporate social responsibility and, more broadly, because of the predominance of a customer-oriented marketing approach, almost all companies introduce a social content into their mission, vision and declared values, but rarely inform about their priorities in achieving their objectives. By definition, their social purpose is necessarily subordinated to profit-making and distribution. 6 According to EMES, the economic features qualifying a social enterprise can be summarized as follows: a productive activity as core business; a high degree of autonomy and independence from any public authority or any private company; a significant level of economic risk; and a minimum amount of paid work. On the other hand, the “social” dimension of the enterprise must be respected by fulfilling five criteria: an explicit aim to benefit the community; being a collective initiative of a group of citizens belonging to a local community who share its social aims; decision-making power not based on capital ownership; a participatory nature, involving parties affected by the activity; and limited profit distribution. 7 The criteria are: 1) the business’ objective is to overcome poverty, not profit maximization; 2) financial and economic sustainability; 3) no dividend is given beyond investment money; 4) when investors are paid back, subsequent profits are reinvested in the

76 Management of IIs and INGOs

8

9 10

11 12 13 14 15

company; 5) environmentally conscious; 6) the workforce is paid the market wage with better working conditions; and 7) do it with joy. The Johns Hopkins Comparative Non-Profit Sector Project (CNP) is the largest systematic effort ever undertaken to analyze the scope, structure, financing, and impact of the nonprofit activity throughout the world in order to improve our knowledge and enrich our theoretical understanding of this sector and to provide a sounder basis for both public and private action towards it (http://ccss.jhu.edu/index.php?section=content&view=9&sub=3). On 1 September 2011, there were 144 organizations in general consultative status, 2,408 in special consultative status and 984 on the Roster. For example in the past couple of years, Ecuador has passed a series of laws that regulate civil society operations more strictly. The latest law, published in July 2011, requires international groups to sign a treaty with the government that would disclose information on their objectives, specific activities and funding sources for them to secure government authorization to operate in Ecuador. Under the law, the Ecuadorian government could revoke the agreement if it deemed that the group violated certain prohibitions—described by the Human Rights Watch to be “vaguely defined”—such as activities that are “incompatible with public security and peace.” (Che de los Reyes, In Ecuador, “Closure of 16 Foreign NGOs an Omen for Other International Groups?” Posted on Devex, 8 August 2011 09:53:23 AM http://www.devex.com/en/blogs/the-development-newswire/in-ec uador-closure-of-16-foreign-ngos-an-omen-for-other-international-groups) Another recent example is Russia where laws have been passed that restrict the rights to freedom of expression, association, and assembly significantly hindering the operation of national NGOs as well as international NGOs supporting them. See “RUSSIAN FEDERATION: International NGOs call for end to Russian crack-down on civil society”. Posted on 19 December 2012 on the site of the International Federation for Human Rights (FIDH) www.fidh.org/RUSSIAN-FEDERATION-International-12656. Bill and Melinda Gates Foundation. The Foundation Fact Sheet. www.gatesfoundation. org/about/Pages/foundation-fact-sheet.aspx (last accessed 9 December 2012) The Foundation Center Statistics: Top 100 US Funders. www.foundationcenter.org (last accessed 9 December 2012) Expenditures refer to actual payments made in the year. Data from the BMGF Annual Report 2011, www.gatesfoundation.org (last accessed 9 December 2012). Among others: The Lancet Editorial (2007).

3 TRANSNATIONAL HYBRID ORGANIZATIONS, GLOBAL PUBLIC-PRIVATE PARTNERSHIPS AND NETWORKS Eduardo Missoni

3.1 Introduction In the two previous chapters we have defined this book’s two main objects of study: International Institutions (IIs) and Non Governmental Organizations (NGOs). This chapter examines how the interaction between the two, as well as with other private actors, may evolve into new forms of hybrid public-private organizations. Hybrid organizations that bring together government and non-government/ non-profit organizations at the international level are not recent phenomena. Among the first historical examples is the Red Cross and Red Crescent Movement. It brought together the International Committee of the Red Cross (ICRC), a private humanitarian institution founded in 1863 in Geneva, Switzerland, by Henry Dunant, and the International Federation of Red Cross and Red Crescent Societies (IFRC) founded in 1919. The Movement coordinates today the activities of the 187 National Red Cross and Red Crescent Societies.1 A second example of longstanding hybrid organization, is the International Labour Organization (ILO), founded at the beginning of the last century. The League of Nations established the ILO as an II and one of its agencies following the Treaty of Versailles ending World War I. With the establishment of the United Nations, the ILO adopted a new Constitution, which came into force on 1 November 1945, rendering it a UN Specialized Agency. The hybrid nature of ILO is due to its tripartite governing structure representing governments, employers and workers. It also shows that, under certain conditions, the concepts of II and hybrids—and specifically Transnational Hybrid Organizations (THO) that we define below—may overlap. Over the last decades the interactions between IIs and NGOs have considerably increased and progressively extended to other transnational private actors such as Global Private Foundations (also known as “Global philanthropy”) and the corporate sector. These interactions have spurred global initiatives and action

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networks, establishing new forms of public-private ventures or Global Public-Private Partnerships (GPPPs). (See below the section “From the idea of ‘partnership’ to global public-private partnerships. A historical overview”). Willets (2011) defines Hybrid International Organizations as those entities that include in their membership both states and/or other governmental institutions, and transnational actors—“on an equal footing with governments”. The author however limits his analysis to the association between public institutions and NGOs. Hybrid organizations need to be differentiated from a wide range of other types of looser forms of public-private interactions that do not establish an independent organization with a legal personality “owned” by its public and private constituencies. Thus we adopt the following definition: Transnational Hybrid Organizations (THO) are regional or global independent organizations (i.e. with their own statute, legal personality, membership, governance structure, and resources) that include states in their membership, represented by governmental institutions and/or International Institutions, and at least one private transnational for-profit and/or non-profit, singlecountry and/or multi-country organization, with all components having representation and voice in the collective decision making. As discussed below, scholars describe the interactions between states, IIs and the private sector using a great variety of terms. From a public management perspective, some envisioned the trend toward the establishment of Inclusive Institutions, mainly related to non-state actors’ increasing sense of ownership and shared responsibility (Rittberger et al. 2004). Global Public-Private Partnerships (GPPPs)—or simply Global Partnerships (GPs)—has probably become, in the last few decades, the most commonly used term to designate a wide range of public-private interactions including “initiatives” agreed to among multiple public and private organizations. Only in a few cases are GPPPs established as organizations with independent legal personalities, allowing them to be referred to as THOs. More recently, focusing on interconnectedness and the goal, rather than on the collaboration between different social sectors, Waddell (2011) has introduced the concept of Global Action Network (GAN). This definition includes THOs and any other type of GPPP, but extends to include any globally networked action, not necessarily involving both public and private actors (see Figure 3.1).

3.2 Defining and classifying Transnational Hybrid Organizations and Global Public-Private Partnerships Willets (2011) describes five examples of transnational hybrids involving Governments and NGOs on an equal footing (but not Transnational Companies—TNCs) that are highly influential in the development of international law in their respective domains:

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G lobal Action N etw orks (GANs) Transnational Hybrid O rganizations (THOs)

T H O based on an In te rn atio n al A g re e m e n t

(own legal personality, membership, budget, corporate governance, staff, etc.)

Global Public-Private Partnerships (GPPPs)

G P P P o rg an izatio n s

(own legal personality, budget, corporate governance, staff, etc.;

G PPP Inititiatives H o ste d by exis tin g IO

Transnational non-hybrid organizations/networks

GPPP-initiative's own governing body, autonomous budget, assigned staff

Private (corporate or non-profit) M's in te ra ctio n w ith p rivate s e c to r

Without private sector participation in governing body

FIGURE 3.1 Classification of THOs, GPPPS and other global networks Source: our elaboration

    

the the the the the

International International International International International

Labour Organization (ILO); Conference of the Red Cross and Red Crescent; Council for Science (ICSU); Organization for Standardization (ISO);2 Union for Conservation of Nature (IUCN).

Extending the analysis of THOs to include the private for-profit sector leads to a vast array of new transnational or global public-private organizational models resulting from the described trend toward the establishment of new global entities comprising the three sectors of society (i.e., public, business and civil society). A number of different words, all eliciting a sense of common purpose or joint activity, have been used interchangeably with partnership: alliance, association, collaboration, compact, dialogue, forum. Indeed, the first difficulty encountered when turning to GPPPs as objects of study is represented by the jungles of acronyms, definitions, categories and structures associated with those entities, mainly characterized by a more or less structured interaction between public and for-profit private actors. Given the intrinsic and instrumental values associated with partnership, the

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term is now widely employed for its “mobilizing” capacity, and as an extremely flexible concept that embraces a range of actors inspired by very different motivations and objectives. It also involves very different types of relationships between partners (Utting and Zammit 2006). In his report Enhanced cooperation between the United Nations and all relevant partners, in particular the private sector the UN Secretary-General offered a broad, but an admittedly insufficient definition: Partnerships are defined as voluntary and collaborative relationships between various parties, both State and non-State, in which all participants agree to work together to achieve a common purpose or undertake a specific task, and to share risks and responsibilities, resources and benefits. (UN 2005) From the point of view of managerial disciplines, it is important to understand how those “risks and responsibilities, resources and benefits” are distributed and represented in the decision-making process. In an attempt to restrict the field of study, Buse and Harmer (2009)—who looked specifically at global health partnerships—suggest limiting the analysis to “relatively institutionalized initiatives, established to address global [health] problems, in which public and for-profit private sector organizations have a voice in collective decision-making.” We have integrated the latter condition in our definition of THO. In fact this allows the exclusion of several “partnerships” that do not grant both public and private representation at the board level, and cannot therefore be described as public-private partnerships. They should rather be referred to as public-private interactions or initiatives. The use of the term Public-Private Partnerships (PPPs) also has caused confusion for having been employed widely at the national level to describe outsourcing arrangements, including “project financing”, often with the aim of shifting responsibility and risk from the government to the private sector (Rein et al. 2005). Probably having that typology in mind, Waddell (2011) defines “partnerships” as task oriented, with a relatively limited and well-defined objective, the main rationale behind them being to coordinate activities, resources and skills. “They are organized on a hub and spoke model, with a central coordinating committee or organization of some sort.” However, this is not the meaning commonly assigned to global “partnerships” about which, over the years, there has been intense debate (Buse and Harmer 2009). Most authors agree in identifying a number of common core features of partnerships, such as: a common goal, multi-actor, multi-stakeholder, multi-level, voluntary involvement, shared risks, pooling of resources and talents, mutual benefits, and a common organizational identity that also preserves the unique and distinctive characteristics of each partner. Among the added values of “partnerships” Rein et al. (2005) see the emergence of innovative approaches and mechanisms, the creation of networks, and the possibility of arriving at a greater understanding among the different sectors of society.

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Waddell (2011), whose Global Action Networks encompass almost any kind of “partnership”, considers inter-organizational networks as part of a “communityorganizing strategy” that develops robust connections where conflict, confusion, and multi-directionality previously existed. He also argues that the shared ambition of involved partners to influence the “whole system” and move it in a certain direction, changing its rules and the way it operates, characterizes GANs. There may be risks involved in bringing together very disparate entities. Crosssector partnerships are “by their very nature unnatural relationships” (Rein et al. 2005). Issues such as loss of autonomy, conflict of interest, reputational impacts, implementation challenges, and implications for the investment of resources and time are particularly relevant in terms of governance. The quality of the “partnership” is dependent on the levels of five core parameters: legitimacy, representation, accountability, transparency and effectiveness (Rein et al. 2005; Buse and Harmer 2009). Others have branded global partnership networks as amounting to a new form of global governance with the potential to bridge multilateral norms and local action. The analysis of the implications of a re-location and diffusion of authority from government and IIs to public-private “implementation networks” goes beyond the purpose of this work but this trend should not be overlooked (Bäckstrand 2005).

3.2.1 Proposed classifications At the World Summit on Sustainable Development (Johannesburg 2002), where partnerships were strongly advocated, many felt the need to distinguish “Type I agreements”, based on inter-governmental negotiated agreements (declarations, action plans and treaties, such as the Johannesburg Declaration and Johannesburg Plan of Implementation), from multi-stakeholder partnerships collectively branded as “Type II agreements”. Type II agreements were related to partnerships linked to the implementation of the Agenda 21 commitments, identified as voluntary, self-enforced and non-negotiated agreements of a “coalition of the willing” among non-state and state actors. These entities share the responsibility for implementing complex and cross-sectoral issues within the sustainable development agenda that cannot be limited to governments but have to be diffused into wider sectors of society (UN 2002a; Bäckstrand 2005). Several classifications have been proposed to categorize public-private partnerships. These may be based on the nature of activity or on the terms of the constituent membership. The classification proposed by the UN evolved over the years (Utting and Zammit 2006). The UN (UN 2005; Witte and Reinicke 2005) loosely groups partnerships under the following four functions:  Advocacy: the UN partners with business and civil society in order to advance a cause or to place an issue on the global agenda. Such partnerships leverage the reputation and networks of the United Nations and key stakeholders to promote vital development issues, including the Millennium Development Goals.

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 Developing codes of conduct and other norms and standards: the United Nations engages with stakeholders in order to develop common standards, norms, shared values and ethical behavior that help facilitate market transactions, structure business conduct and promote United Nations goals.  Sharing and coordinating resources and expertise: the United Nations partners with business and civil society in order to benefit from complementary resources and to coordinate contributions to key development issues, including humanitarian relief efforts. Especially important is the dissemination and sharing of existing know-how, knowledge and technology that often contribute to capacity-building.  Harnessing markets for development: the United Nations partners with business and civil society to support the development and expansion of sustainable markets locally, regionally and globally. There are two types of partnerships: partnerships that provide access to markets (producer networks); and partnerships that bridge or deepen markets (providing incentives for business to invest). Merging categorizations that Carlson (2004) and Waddell (2011) present results in similar purpose-based groupings. Kaul (2006) uses a different approach. Based on the interests they serve, she classifies global partnerships into three venture classes, further subdivided into seven types according to their specific objectives:3  Business ventures: seeking mainly private gain that would accrue to at least one partner (types 1–3);  Double bottom-line ventures: seeking to combine private returns on investment with social or public-interest goals (type 4);  Social ventures: pursuing as a primary objective such public interest concerns as poverty reduction, communicable disease control, and sustainable development (types 5–7). Widdus (2002) classifies partnerships according to their status of legally independent entities or hosting arrangement inside an existing organization. This helps to distinguish them in legal terms: 1 Public sector host (for example, national, bilateral or multinational institution); 2 Commercial host (for example, pharmaceutical, private medical, or non-healthrelated for-profit company); 3 Non-profit host (for example, non-governmental organization, educational and research institution, or civil society group); 4 Operating independently from any host organization with its own legal personality. Widdus’ types 1–3 have no legal personality and may suffer limitations in terms of granting equal voice in decision-making bodies to all actors involved, eventually favoring the decision-making process and voting rights internal to the hosting organization. Only type 4 hybrids are incorporated as a new independent THO. In

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the majority of cases, they are incorporated as non-profits (foundations or associations) according to the laws of the host country. Moreover, the relations among partners, including voting rights, are regulated in their Statute (as in the case of the Global Fund to Fight AIDS, Tuberculosis and Malaria—GFATM, which is incorporated as a Swiss Foundation). Only a few cases of THOs are also IIs. This is the case, for example, of the ILO established under international treaty law, or of the Global Water Partnership Organization constituted as an intergovernmental organization coordinating a wider network of public and private stakeholders. We choose to keep THOs distinct from other type of interactions between IGOs and private actors. From a legal point of view THOs can be differentiated into only two types: 1 THOs based on international agreements; 2 GPPP-organizations with their own legal personality, membership, governance structure and resources (Widdus’ type 4). However Global Public-Private Partnerships include also GPPP-initiatives (that may sometimes evolve into organizations, thus into THOs). These can further be subdivided into:  Partnerships that associate public and private actors in an initiative/program which is hosted by an II, an INGO or a company (Widdus’ types 1–3) eventually with their own budgets, autonomous decision-making bodies and procedures, and specifically assigned staffs (contracted by the hosting organization or seconded by partners), but without becoming incorporated as a new self-standing organization;  IGOs’ specific initiatives in which the international organization interacts with the private sector without establishing a joint decision-making body. By definition, any “partnership” or network associating only private partners (profit and non profit) are not THOs, while Waddell’s (2009) functional concept of GAN includes all the above-mentioned organizational arrangements (see Figure 3.1).

3.3 Organizational arrangements of THOs and other publicprivate interactions Almost by definition, there cannot be one single reference organizational model for hybrids. The purpose, membership and the way a THO—or any other global public-private interaction—has been established and developed determines its organizational parameters. At the very beginning, when an issue is identified, and it is assumed that bringing together actors with very different views could valuably contribute to an effective response, the first goal is to develop connections and create peer, mutually respectful relationships; alignment is sought around a collective vision and identity. This is the

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first step beyond the very loose “elite committee model” (Mitchell-Weaver and Manning 1990) and constitutes Waddell’s “exploration” stage. At this stage, key stakeholders are identified and convened, a shared vision is built and an action research project is implemented to define the possible organizational infrastructure. The second stage is “initiation” with scenario development and search conferences that pave the way to an initial centralized network piloting structure, building the core team and solving a number of operational issues. The next stage is “Infrastructure development”. Now, the new networked organization has gained some legitimacy, has the support of a small but leading multi-stakeholder group, and needs to engage more people and organizations. The secretariat is being developed, and regional nodes of the network and sub-networks are eventually developed. If participants include public and private actors, and the transnational grouping is incorporated (as an autonomous entity), it can be now described as a THO. In the fourth and final development stage, the organization has gained global recognition “as a mover and a shaker” in its issue arena. This is the time to re-organize, scale up operations, integrate connections with other issue networks, mainstream and broaden the addressed issue into other organizations. In this phase, the risks are bureaucratization and tackling the challenge of maintaining the right balance between “administrative/efficiency” and “movement/effectiveness”. Finally the network may “die” for not being able to address the challenge that motivated the partnership. Arguably it will self-dissolve for having successfully achieved the goal, rather looking for renewal through modifying and adjusting the goal (Waddell 2011).

3.3.1 Membership Inter-sectoral and transnational membership define THOs, i.e., membership that includes governmental institutions and/or International Institutions and at least one private transnational for-profit and/or non-profit single-country and/or multi-country organization. Not all hybrids have evolved in the way described above, nor do they have a complex network feature. No doubt, for example, that the International Labour Organization (ILO) is a THO because of its tripartite representation and decision-making process, with public (national governments) and private (representatives of employers’ organizations and trade unions) sectors both represented. However, the ILO is established through an international agreement among its member states, which qualifies it as an II. Even if Waddell (2011) takes the ILO as an example of his concept of GANs, inter-organizational networking is very limited if at all present in the ILO. The situation is completely different in GPPP organizations where diversity of participants and their inter-organizational networks are the most striking characteristics. The GFATM, or the Global Alliance for Vaccination and Immunization (GAVI) are good examples of THOs that bring together governments, representatives of the corporate sector, global philanthropy, NGOs and even grassroots organizations, granting voting rights to all stakeholders.

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Members of THOs are almost always only collective entities (governments and organizations), one exception being the International Union for the Conservation of Nature (IUCN), which allows a limited number of individuals to become members who have rendered outstanding service in the field of conservation (Willets 2011). Waddell (2011) extends the concept of “membership” in GANs to all those participants that have expressed a formal commitment to the partnership, eventually as “signatories” to some founding document of the initiative. He identifies four types of members:  “citizens”, simply potential participants, somebody who has rights but does not necessarily exert them;  “participants” who are active in realizing the goals of the organization, but do not participate in decision-making;  “co-owners” are those who have the formal authority and decision-making power; and  “customers” those who pay for the activities. According to our definition, to be identified as a THO an organization must grant all constituencies (i.e., public and private) representation and a voice in the collective decision-making. Thus, only transnational organizations where “co-owners” include both the public and the private sector can be defined as THOs.

3.3.2 Governance architecture We have argued that some significant level of joint decision-making of the multi-sector actors participating in the partnership should characterize THOs. Representation can be verified through the analysis of their governance architecture, network management and communication structures. Most THOs have some kind of executive board for decision-making that is accountable to their partners, and a broader stakeholder forum that enables the partnership’s different constituencies to participate and express their views. Also the way the THOs’ management is organized is often derived, at least conceptually, from the partners’ experience. For example, IGOs have offered the concept of “Secretariat”, and Waddell (2011) argues that it may limit development and innovative potential of global networks; that potential is strictly linked to the recognition that the category of global action networks should be perceived as a “distinct type of organization that requires unique skills, structures, processes and strategies.” Waddell (2011) consciously states that “given GANs’ early development stage, we still do not know what all of these are.” The founding period of any new organizational model is one of experimentation and intense learning (Waddell 2011). This may justify the otherwise worrying statement of Richard Feachem, the then Executive Director of the GFATM who, taking the helm of the initiative, emphatically declared: “As the Global Fund goes forward, together with all of you

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here, we tread into the unknown and into the darkness. No one has gone where we are going. The only light is the light of our imaginations … ” (Feachem 2002). In their independent evaluation of several global health partnerships, Buse and Tanaka (2011) found that lack of clear and common vision for future operations and weak strategic planning were common features. They reported William Foege’s4 statement that: “An effective coalition is able to define what the last mile looks like” concluding that a clear vision is strictly linked to effectiveness. By the very nature of THOs, each organization has its unique governance architecture. a) General Assembly Some THOs have a supreme decision-making body resembling a members’ general assembly, typical of IIs and most INGOs, which, among other responsibilities, elect a board, council or executive committee. This is obviously the case of ILO, with its International Labor Conference, for the reasons we have already discussed. Other examples are those of the International Conference of the Red Cross and Red Crescent, the World Conservation Congress, which is the IUCN’s members’ Assembly, or the Forest Stewardship Council’s (FSC) General Assembly. While these kind of arrangements have traditionally best offered to their memberships reasonably democratic representation, some authors consider them dysfunctional. They point to how, in such contexts, the decision-making process may become cumbersome, highlight divisions (because of its negotiations-like setting), consume excessive amounts of time, and may result in negative outcomes for minorities (Waddell 2011). As multi-stakeholder organizations, THOs may establish different subgroupings (commissions, forums, etc.) organized around specific topics or geographicregions. Sometimes these sub-groupings represent the THO’s constituencies who elect board members. In most cases, the bylaws of THOs neither make explicit the rules for these sub-groupings nor their role in electing board members (Waddell 2011). In many THOs, and especially in the GPPP organizations, the board is the only decision-making body and it is there where members’ and stakeholders’ interests should be adequately represented. b) The Board In the absence of a general assembly, conference or similar elective body bringing together the representatives of all members, governing boards are not elected, but established through the different constituencies that they express. Often boards’ architecture is designed to ensure representation and voice of specific stakeholders’ constituencies (social sectors, interests, geographic regions, etc.), but in several cases co-optation of board members is the rule.

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In some cases, there may be also non-voting members of the board (as in the case of WHO on the board of the GFATM). In addition, when THOs are incorporated, the legal requirements of the hosting country may oblige it to include on the board a citizen of that country (this is the case in Switzerland where many THOs are based). Buse and Harmer (2007) have observed that too often boards of global health partnerships lack representation of a number of stakeholder groups. In the author’s sample of 23 organizations, low- and lower-middle income countries were under-represented on governing bodies, NGOs were least represented, whilst the corporate sector enjoyed disproportionate representation. However, unbalanced representation was not a deliberate choice, but a consequence of the desire to restrict the size of governing bodies to make them better managed, while accommodating funding organizations’ demands for representation. The authors also argued that the high representation of the corporate sector was at odds with its financial contributions, while IIs’ representation was modest. In some cases certain stakeholders are technically represented on the board, but inadequate mechanisms exist to enable members to properly represent their constituencies and for them to evaluate the performance of their representatives (Buse and Tanaka 2011). The board often will establish committees in the areas of finance, budget, and nomination, and others commonly associated with organizations. In some cases technical or advisory panels are appointed (such as the Technical Review Panel in charge of evaluation of proposals submitted to the GFATM, or the StopTB Working Groups concerned with specific areas of activity of that partnership). c) Management The Management of THOs is commonly called the “Secretariat”, borrowing the term from traditional IIs. Often in the first phases of a THO’s development, the intention and the promise is to keep the managerial structure lean. A THO’s size generally grows with time and its budget. Size, in fact, has been found to be another critical success factor. Large secretariats may not be feasible or desirable, yet their size and structure should be a deliberate strategic consideration of any THO bearing in mind the consequences of under-resourcing in achieving goals (Buse and Tanaka 2011). But lack of strategic considerations can also lead to inefficiencies, which in turn require growing secretariats, and finally result in constant understaffing. The GFATM was originally thought as a fund-raising and financing institution, but ended up as a new grant-maker, duplicating tasks and procedures both at the global and country levels (Missoni and Pacileo 2008). As THOs’ portfolios, areas of work and networks grow, professional management structures and strategies become increasingly critical to optimize their performance, monitoring capacity and accountability (Buse and Tanaka 2011).

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3.3.3 Financing Private corporate partners often tie their financial contributions to the establishment of new, independent initiatives housed outside of the UN bureaucracy (considered inefficient), or at least based on separate budgetary allocations and independently managed funds. Private resources would therefore only be made available to independently managed initiatives, focused on a “quick fix” (i.e. results based) of high profile development problems (Yamey 2002). The then UN Secretary-General, Kofi Annan, supported this view, and pushed partnerships outside the formal UN system machinery: “The UN must act as a catalyst, to stimulate action by others” (UN 2001). The promotion of public-private alliances has also been based on the assumption that hybrid organizational settings would attract private resources. However, corporate partner financial contributions remain generally modest and THOs’ funding still comes mostly from the public sector, while partnerships are often underfunded as private partners’ initial commitments often do not live up to expectations (Buse and Harmer 2009). Innovative funding mechanisms beyond partners’ direct contributions have also been put in place to ensure needed resources for GPPP-organizations and initiatives, such as bonds backed by government guarantees. For example, the International Financial Facility for Immunization (IFFIM) linked to the GAVI used this instrument to fund the purchase of large quantities of vaccines. A solidarity levy on airline tickets is another approach, introduced through the initiative of UNITAID, to support GFATM’s (as well as others) purchase of drugs against HIV/AIDS, malaria and tuberculosis. The GFATM also relies on another market-based mechanism whereby credit card and other companies contribute a share of their profits on goods marked with the (PRODUCT) RED trademark (Sandor et al. 2009).

3.4 Lessons learned and challenges THOs and other more or less structured global public-private interactions have undoubtedly contributed to increased awareness on a number of issues of social relevance, putting them firmly on the global political agenda. They have contributed to generating additional resources for specific actions and for the development of new products, and facilitated the development of norms and standards. Global initiatives have, for example, the merit of providing increased accessibility of quality products (for example drugs, vaccines, devices) to national and local communities who did not have them before and, in some cases, of having contributed to improving regulations and management procedures in the specific areas where they are active (Buse and Harmer 2007). On the other hand, the proliferation of “partnerships” and their performance has been criticized. In 2007, the issue of global health partnerships was the cover story of the prestigious US magazine Foreign Affairs: Today, thanks to a recent extraordinary and unprecedented rise in public and private giving, more money is being directed toward pressing health

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challenges than ever before. But because the efforts this money is paying for are largely uncoordinated and directed mostly at specific high-profile diseases—rather than at public health in general—there is a grave danger that the current age of generosity could not only fall short of expectations but actually make things worse on the ground. (Garrett 2007) The growing number of THOs produces fragmentation, especially among GPPPs engaged in aid for development, as well as doubts about their sustainability when their activities are not aligned with each given country’s own programs. These are common concerns highlighted by the International Development Agency of the World Bank (IDA 2007) in studies that the International Monetary Fund (IMF) (Hsiao and Heller 2007) and McKinsey Consulting (Conway et al. 2006) have published. A very similar criticism is directed at the IIs and UN system organizations, in particular, within the context of raising extra-budgetary resources earmarked for the implementation of “special programs” and similar “vertical” initiatives, which result in fragmentation and challenges, if not obstacles, to coordination. Legitimacy and accountability of GPPPs, is widely debated. In the health area, for example, where GPPPs have played a very significant and increasing role, over the last 10–15 years, even where an individual GPPP can claim legitimacy and accountability within its specific area of intervention, the sum of all GPPPs’ activities “does not necessarily lead to a coherent health policy but can contribute to a fragmentation both at [the] global and national level[s]” (Bartsch 2007). Also, GPPPs compete among themselves and with other institutions to attract resources. As Bartsch (2007) points out: “the proliferation of global initiatives might lead to distortion of funding and further verticalization of health policies”. GPPPs can be used by “big players” to circumvent consolidated organizations, such as the World Health Organisation (WHO), thus weakening their role and the effort to address the priorities of global public health policies. The issue of coordination among development organizations is further discussed in Chapter 5. The absence of a clear framework of norms and principles within which partnership agreements could be developed, and the trivialization of the conflicts of interest arising from the participation of for-profit private partners, both pose a further challenge to ethics. At least in the long term, for-profit partners will demand some economic return (Nishtar 2004; Caines 2006). At the country level, the main concern seems to be related to the way bigger GPPPs operate. In the health sector, for example, the GFATM, the GAVI, Stop TB and Roll Back Malaria (RBM), differ considerably in their modus operandi: the first two function mainly as financing agencies, while Stop TB and RBM aim to coordinate interventions in their respective areas of interest in addition to providing technical assistance (Caines 2006). Generally, the negative impact is linked to incompatibilities, often noted by observers and practitioners, between well-resourced vertical programs5 and under-resourced and weak public systems. Global partnerships do not take local systems’ structural weaknesses into consideration; rather, at times,

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they risk making things worse. As in the case of GFATM, whose competitive recruiting of (often scarce) personnel for its projects, effectively takes them away from other sectors of the local health system (Italian Global Health Watch 2008). Global initiatives also have imposed the multiplication of parallel and additional administrative processes with the consequent waste of resources and increasing transaction costs. In order to benefit from each global initiative, countries must invest heavily in following a variety of procedures (planning exercises, applications, reports, templates, timing, etc.), that are specific to each global initiative. Many GPPPs have set up specific national coordination mechanisms to guide and manage their activities (such as the CCM of GFATM, or the ICC of GAVI), however their functions often overlap. Funding from each GPPP usually comes through separate channels, which are often not aligned to the normal institutional channels. Because they tend to assume that public services do not function properly and because they want rapid results, GPPPs have often chosen to work outside of national public systems and, in the end, often only “suck resources out of them” (RealHealthNews 2008). An additional concern is the inability of global initiatives to adapt to local situations, a lack of flexibility that frequently forces countries to adapt their needs to those of the GPPPs. Even communication with local partners is often ineffective and the THOs may find it difficult to understand local needs, limits and dynamics. Lastly, even at the local level, the roles of the different international partners are rarely well-defined. Thus, one could argue that certain THOs, specifically those that we have described as GPPP-organizations and a number of IIs’ hosted public-private initiatives, should be deeply rethought. Nevertheless, THOs have to be analyzed separately from the overall globalization process. Probably, “Heterarchy” is becoming an ordering principle of global governance that “is here to stay”. This does not mean that states and their institutions have lost importance; rather they are becoming part of a network of institutions and new actors in global governance. Not all actors and not all types of actors have an interest in all decision-making processes, even if a given process would be open to their participation. Only those with a direct stake in a particular issue area or transnational problem needing resolution would actively seek to participate (Rittberger et al. 2004); others may not have the needed capacity and resources to participate. Nor might they have adequate strength for it (for example some civil society organizations and governments of the poorest countries). It is beyond the scope of this work to discuss the consequences of hybridization of global governance. However, we wish to highlight the risk that private interests may heavily undermine progress toward the common good because of their economic power and within the context of reduced or non-existent regulatory capacity of intergovernmental institutions.

3.5 From the idea of “partnership” to Global Public-Private Partnerships. A historical overview The idea of “partnership” was conceptualized in the mid-1940s as a precursor to the coming peace between nations (Buse and Harmer 2009). However, it was toward the end of the past century that this “feel good” evocative concept became

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one of the trendiest words in the international development community (Missoni 2006). Repeatedly, declarations and commitments published at the conclusion of international events included the launching of new partnerships. However, the need for a wide commitment and participation in the pursuit of shared development goals has been often mystified with the establishment of partnerships (mainly in terms of public-private interactions) whose promotion often responded more to ideological criteria than to sound comprehensive evaluations of costs and benefits, both globally and locally. As in the case of other fashionable and inspiring concepts— such as development (Rist 1996), globalization (Petras and Veltmeyer 2002), governance (Rhodes 1996)—the same word may be subject to many different interpretations, with an undefined use eventually becoming instrumental to ideology. The notion of partnership for development is not new. The Pearson Commission (1969) focused on partnerships between donors and recipient countries and considered the “specification of reciprocal rights and obligations” between partners and the “establishment of clear objectives that are beneficial to both parties to be essential requirements” (Pearson 1969). In the 1970s, amidst calls for a New International Economic Order (NIEO), the UN engaged in normative work to regulate and monitor the activities of TransNational Corporations (TNCs) through the United Nations Centre on Transnational Corporations (UNCTC) and provided developing countries with advice about how to deal with TNCs that were perceived to be responsible for key aspects of underdevelopment and to exert undue influence over many third-world states. During the 1980s, there were several attempts to ensure international regulation of specific products. Successful examples were the 1981 WHO/UNICEF International Code of Marketing of Breast Milk Substitutes, the 1985 FAO Code of Conduct on the Distribution and Use of Pesticides and the 1988 WHO Ethical Criteria for Medicinal Drug Promotion (Utting 2000). By the late 1970s and early 1980s, neoliberal ideologies had influenced public policy and attitudes toward private sector relations with the World Bank and the IMF, championing a greater role for the latter. Increasing Official Development Aid (ODA) funds were channeled through NGOs. By the end of the 1980s, formal, sometimes challenging consultations with UN agencies, as well as conflict-ridden relations that had characterized their relations with industry, gave way to tentative explorations of ways to link up NGOs, industry and the public sector. The new “entente between private-for-profit (corporate) and public sectors in particular” is also considered a result of changes in the international scene. An ideological shift took place from “freeing” the market to “modifying” the market. Following the new prevailing socio-political orthodoxy, a form of neo-corporatism was conceptualized in which a variety of stakeholders, including private sector representatives, were now believed to have a legitimate say in public policy-making (Buse and Walt 2000). Partly reflecting the influence of neo-liberalism, UN policy towards TNCs changed. Instead of trying to regulate foreign direct investment (FDI), UN entities such as UNCTAD sought to facilitate the access of developing countries to FDI. Deregulation was encouraged. By the early 1990s various regulatory initiatives

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ground to a halt, including several inter-governmental codes. In 1992 UNCTC ceased to function as a separate entity (Utting 2000). By the turn of the last century, OECD indicated the “partnership model” as a new framework for development cooperation. The “partnership model” offered greater clarity regarding the roles of partners but insisted on local “ownership” as a guiding principle. Identified development goals would be reached only through “concerted actions developed through a process of dialogue and agreement in a true spirit of partnership”. A multi-stakeholder approach to development was considered essential for success, as well as “an individual approach that recognizes diversity among countries and societies and that respects local ownership of the development process” (DAC 1996). International institutions were facing mounting criticism of bureaucratization, ineffectiveness, and lack of transparency by governments. States used such criticisms, particularly the large donor countries, to justify budget arrears and cooperation fatigue as well as the imposition of a policy of “zero real budget growth”, progressively limiting UN autonomy, paired with a shift toward earmarked voluntary contributions. Criticism of ineffectiveness, coupled with dwindling budgets, and agency entrepreneurship, provided an incentive for UN institutions to identify new and more effective institutional mechanisms and ways to increase their financial resources. In 1997, the UN Secretariat faced its biggest financial crisis of unpaid membership arrears. The US suspended its contribution to the UN budget, which then accounted for roughly 30 percent of the organization’s revenues. The same year, US entrepreneur and philanthropist Ted Turner donated 1 billion US$ to the UN to support its programs, the largest private grant in the modern history of International Institutions. The UN Foundation was established to manage the Turner grant, one of the most celebrated examples of a public-private institution (Andonova 2005). Partnership with businesses was possibly seen as a way for major multi-lateral institutions to regain a central position in global policy-making and to access new funding sources and greater legitimacy (Buse and Walt 2000). The then UN Secretary-General Kofi Annan soon became one of the strongest advocates of partnerships with businesses and the promotion of the private sector, convinced that “in today’s interdependent world, the United Nations and the private sector need each other” (Annan 1998). The idea was suggested that partnering with civil society and business had “turned into a necessity for the United Nations in order to ‘get the job done” (Witte and Reinicke 2005). On the other hand, to face economic globalization, businesses looked to the UN under a new light. The private sector was also compelled to make considerable concessions and to reconsider traditional corporate strategies under the pressure of civil society group actions in industrialized countries. Partnering with International Institutions could help to improve the image of transnational companies, increase their influence in the global arena, and obtain direct financial benefits (tax breaks, market development, penetration and manipulation) (Buse and Walt 2000). Addressing the World Economic Forum (WEF) in Davos on 31 January 1999, Annan invited the business community to join the United Nations to “initiate a

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global compact of shared values and principles, which will give a human face to the global market” (Annan 1999). The Global Compact was officially launched at UN Headquarters in New York, on 26 July 2000, and soon became one of the most visible public-private initiatives. The Global Compact is a coalition of UN agencies, governments, companies, labor organizations, and civil society organizations that have pledged to promote and implement ten Global Compact Principles on human rights, labor, the environment and anti-corruption, derived from UN conventions (Andonova 2005). The then emerging global health players, Bill and Melinda Gates, who emphasized from the beginning the value of public-private partnerships, convened major players in global immunization and challenged them to give concrete responses to the reduced international attention to children’s immunization. The key UN agencies, leaders of the vaccine industry, representatives of bilateral aid agencies and major foundations met, in March 1999, at Bellagio in northern Italy, to respond to the challenge. Rather than establish a new international organization, participants agreed to work together through a new partnership: the Global Alliance for Vaccines and Immunizations (GAVI). In November 1999, the Gates Foundation pledged 750 million US$ over five years to GAVI. Two months later, in January 2000, GAVI was formally launched at the World Economic Forum in Davos, Switzerland.6 The new alliance soon became the prototype and most quoted example of a new organizational model, i.e., the Global Public-Private Partnership (GPPP), an independent organization including national governments, public health and research institutions, technical agencies, philanthropists, the industry, the UN and its specialized agencies (Missoni 2004). In June 2000 the UN, OECD, IMF and WB jointly presented the report A Better World for All. The report intended to assess progress toward poverty reduction and to outline a common vision. Obstacles to the desired “development effort to pursue faster, sustainable growth strategies that favor the poor” were identified: Weak governance. Bad policies. Human rights abuses. Conflicts, natural disasters and other external shocks. The spread of HIV/AIDS. The failure to address inequities in income, education and access to health care, and the inequalities between men and women … Limits on developing countries’ access to global markets, the burden of debt, the decline in development aid and, sometimes, inconsistencies in donor policies ( … ). (UN et al. 2000) For the report, the response to these failures would be “strategic partnerships that capitalize on each partner’s intrinsic strengths, reflect shared goals and objectives and build on existing achievements” (UN et al. 2000). In the language of international meetings sponsored by, or with the participation of, UN agencies and other international and bilateral public actors, the rhetoric of partnership became dominant with the concept progressively focusing on the need to create joint public-private ventures.

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The United Nations General Assembly adopted the Millennium Declaration in September 2000, in which it pledged development of “strong partnerships with the private sector and civil society organizations in pursuit of development and poverty eradication.” The UN listed “a global Partnership for development” as its 8th Millennium Development Goal (UN 2000). Thus, behind easily shared “evocative” principles and values, the idea of global partnership was turning into a new operational and organizational approach. The GAVI model elicited early and increasing concerns (Hardon 2001; Yamey 2001; Boseley 2002; Brugha et al. 2002) that the then executive director of GAVI simply dismissed as “complete nonsense” (Godal 2002). Nevertheless, the model was adopted for the Global Fund—the joint UN-G8 initiative, launched at the Genoa Summit in 2001—to Fight HIV/AIDS, Tuberculosis and Malaria (GFATM). While views differed on the approach to a new Global Fund, in the preparatory phase, G8 health experts were in agreement in rejecting the need for the establishment of new formal structures and suggested instead to strengthen existing institutions (Missoni 2004). On the eve of the third millennium, establishing global public-private partnerships became one of the most notable features of the global arena; the model was repeatedly proposed at every summit as the answer to the most varied and dramatic issues that the world is facing today. For example, one of most controversial outcomes of the Johannesburg 2002 World Summit was the focus on public-private partnerships as the preferred means to deliver services. The Johannesburg Summit concluded with hundreds of partnership proposals (UN 2002a) with predictable consequences regarding coordination and fragmentation of resources. From being a nascent experiment in the late 1980s, GPPPs are now part of mainstream development discourse and a dominant model for cooperation in a complex world. The efficiency and the effectiveness of the model remain, however, controversial.

3.6 Case study: The UN opening to the corporate sector—the Global Compact

3.6.1 The origins Announced by the then UN Secretary-General Kofi Annan at the World Economic Forum in Davos, in January 1999, and formally launched at the UN, on 26 July 2000, the United Nations Global Compact (UNGC), simply known as the Global Compact (GC), is intended to encourage businesses worldwide to adopt sustainable and socially responsible policies and to report on their implementation. Reportedly, the private sector played an important role in the process toward initiating the GC. Since 1998, the International Chamber of Commerce (ICC) had established a systematic dialogue with the United Nations in an effort to influence UN

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decision-making. Previously, in 1997, the Executive Director of the World Business Council on Sustainable Development co-hosted a meeting with the then President of the UN General Assembly, which concluded that “a framework” for corporate involvement in UN decision-making be worked out under the auspices of the Commission on Sustainable Development. The ICC also conceived the Geneva Business Partnership, which enabled 450 business leaders to meet with representatives of intergovernmental organizations so as to determine “how to establish global rules”, and lobbied hard to keep non-business groups out of the agreement. A coalition of civil society groups proposed an alternative, called “Citizen’s Compact on the United Nations and Corporations”, demanding that the UN develop rules which would bind corporate behavior globally to UN endorsed norms within a legally enforceable framework. In answer, the then ICC President, Adnan Kassar, reportedly insisted: “There must be no suggestion of hedging the Global Compact with formal prescriptive rules. We would resist any tendency for this to happen.” From that perspective, the Global Compact may be considered an outcome of the industry effort, with the ICC joining the initiative with the UN since 1999 (Richter 2003; Buse and Lee 2005). Indeed, the GC was explicitly designed as non-hierarchical and non-regulatory in character and is visualized as a learning network focusing on norm diffusion and the dissemination of practical know-how and tools, rather than a compliance-based framework (Berliner and Prakash 2012). This, inevitably left open significant accountability issues (see below “The accountability issue”). The GC is a principles-based framework for businesses, stating ten principles in the areas of human rights, labor, the environment and anti-corruption derived from four widely disseminated UN documents: the Universal Declaration of Human Rights, the Declaration on Fundamental Principles and Rights at Work, the Rio Declaration on Environment and Development, and the UN Convention Against Corruption (Box 3.1).

Box 3.1 The ten Global Compact principles The Global Compact was initially launched with nine principles. In 2004, a tenth principle against corruption was added in accordance with the United Nations Convention against Corruption adopted in 2003. Human rights Businesses should: Principle 1: Support and respect the protection of internationally proclaimed human rights; and Principle 2: Make sure that they are not complicit in human rights abuses.

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Labor standards Businesses should uphold: Principle 3: the freedom of association and the effective recognition of the right to collective bargaining; Principle 4: the elimination of all forms of forced and compulsory labor; Principle 5: the effective abolition of child labor; and Principle 6: the elimination of discrimination in employment and occupation. Environment Businesses should: Principle 7: support a precautionary approach to environmental challenges; Principle 8: undertake initiatives to promote environmental responsibility; and Principle 9: encourage the development and diffusion of environmentally friendly technologies. Anti-corruption Principle 10: Businesses should work against corruption in all its forms, including extortion and bribery.

With over 8,700 corporate participants and other stakeholders from over 130 countries in 2012, the GC is the largest voluntary corporate responsibility initiative in the world. Under the GC, companies are brought together with UN agencies, labor groups and civil society with the following two objectives: “Mainstream the ten principles in business activities around the world” and “Catalyze actions in support of broader UN goals, such as the Millennium Development Goals (MDGs)” (UNGC 2012). The GC “seeks to combine the best properties of the UN, such as moral authority and convening power, with the private sector’s solution-finding strengths, and the expertise and capacities of a range of key stakeholders. The GC is global and local; private and public; voluntary yet accountable” and “exists to assist the private sector in the management of increasingly complex risks and opportunities in the environmental, social and governance realms, seeking to embed markets and societies with universal principles and values for the benefit of all” (UNGC 2012). According to our classification, the GC is a GPPP initiative. The GC is a good example of a GPPP initiative aiming at developing codes of conduct, norms and standards that structure business conduct in the global economy. In the framework

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of the GC, conflict and different perspectives need to be managed, engaging a broad range of stakeholders with very diverse interests (Witte and Reinicke 2005).

3.6.2 Governance The current governance of the GC is the result of changes introduced in 2005, following a governance review which broadly focused on participation quality and dynamics, the use of the GC brand and integrity issues (Wynthoven and Stausberg 2010).

3.6.2.1 Membership The GC involves all relevant social actors: companies, whose actions it seeks to influence; governments, labor, civil society organizations, and the United Nations. GC requires of business members a commitment to its core principles by the company’s Chief Executive Officer (or equivalent), and support by the Board or equivalent governance body. Participation implies a widely visible commitment to the implementation, disclosure, and promotion of its ten universal principles. Upon joining the GC, companies are expected to make a regular annual monetary contribution to support the work of the GC Office. Members are requested to annually submit a Communications on Progress (COP) report. The GC aims to improve the governance and performance of participants in relation to the ten principles, wherever they operate (Berliner and Prakash 2012). Commitment to the principles is intended to spread from large corporations, including the firms in their supply chains, reducing risk and uncertainty for the provider of the final product (Kaul 2006). The COP is the only long-term requirement firms must meet to maintain membership. There is no active monitoring, or even verification of materials that firms need to submit. Instead, it relies on members of the public, issue activists, or local networks affiliated with the GC to highlight cases of poor performance or disingenuous reporting, identified as “systematic and egregious abuse”. However the complaints system has been criticized for being unresponsive and lacking transparency (Berliner and Prakash 2012). Non-business participants are an integral part of the GC. They include entities such as civil society organizations, business associations, labor organizations, academic institutions and cities. To participate, each organization must commit in writing to promote the principles of the GC and pledge to take part in its activities. Each offers knowledge and thought leadership in shaping special initiatives and work streams, developing tools and research, setting international labor standards, furthering partnership projects, and helping to hold business accountable with respect to their commitments to the GC and its ten principles. Unlike business participants, non-business organizations are not required to submit a Communications on Progress.7

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3.6.2.2 The hosting organization and Secretariat The GC Office is the UN entity formally entrusted with the support and overall management of the GC initiative. It has received the endorsement of the UN General Assembly (A/RES/60/215) and has been given UN system-wide responsibilities for promoting the sharing of best practices. The GC Office also has responsibilities with regard to advocacy and leadership on issues, fostering network development and maintaining the GC communications infrastructure. Furthermore, the GC Office plays a central role in advancing the partnership agenda across the UN system and has overall responsibility for brand management and implementation of “integrity measures” (see below “The accountability issue”). Since 2005, the GC Office has been particularly active in developing the UN System of Private Sector Focal Points, i.e., staff designated by UN agencies with the task of fostering partnerships with business. The Executive Director of the GC reports to the UN Secretary-General.

3.6.2.3 Board The GC Board is not a governing body, but a multi-stakeholder advisory body of 20 individuals acting in a personal, honorary and unpaid capacity. The Board meets annually (since June 2006) to provide ongoing strategic and policy advice for the initiative as a whole and make recommendations to the GC Office, participants and other stakeholders, and is also expected to play a role in the implementation of the GC’s integrity measures. The Board, which has been touted as the first UN advisory body with both public and private sector representation (Buse and Lee 2005), is comprised of four constituency groups—business, civil society, labor and the United Nations— with differentiated roles and responsibilities. While the Board as a whole holds an annual formal meeting, the constituency groups are expected to interact with the GC Office on an ongoing basis. The secretary-general, the chair of the Foundation for the GC and the executive director of the GC Office have ex-officio seats on the Board.

3.6.2.4 Stakeholders’ meeting The GC Leaders Summit provides a wider forum of GC stakeholders in a triennial gathering of the top executives of all GC participants and other stakeholders. At the Leaders Summit, GC participants produce strategic recommendations and action imperatives related to the future evolution of the initiative. The Leaders Summit aims to deepen the commitment of participating leaders from business, labor and civil society to the GC and its principles, to build and scale up momentum within the business sector, and to foster enabling environments and collective action.

3.6.2.5 Local networks Partly in response to criticism of the concentration of GC activities at the UN headquarters in New York, which tends to favor large corporations and well-funded

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NGOs, the GC made efforts to encourage the founding of country and regional networks worldwide to advance the initiative and its principles. The role of the networks is to facilitate the progress of companies (both local firms and subsidiaries of foreign corporations) engaged in the GC with respect to implementation of the ten principles, while also creating opportunities for multi-stakeholder engagement and collective action. Local networks are self-governed. They have the opportunity to nominate members for election to the GC Board, provide input on major activities undertaken by the GC Office and convene the Annual Local Networks Forum. This decentralization process has played a major role in internationalizing the discourse on Corporate Social Responsibility (CSR) and engaging business associations and some companies in discussions on CSR in developing countries. It also may have served to correct the image of the GC as a developed countries- and TNC-centered initiative (Utting and Zammit 2006).

3.6.2.6 The Global Compact in the UN system Within the UN system, seven agencies are represented in the Inter-Agency Team.8 The team is responsible for ensuring coherent support for the internalization of the principles within the UN system and among all participants, and has an advisory role with respect to the management of the integrity measures complaints procedure.

3.6.3 Financing The GC Office is funded by voluntary contributions from governments to the Global Compact Trust Fund.9 The donor group meets twice annually to review progress made and ensure the effective and efficient use of the contributions that donor governments have provided to the trust fund. The trust fund is administered according to UN Financial Rules and Regulations. Fees from corporate participants and additional private contributions are received, administered and distributed through the Foundation for the Global Compact, a non-profit entity incorporated under New York State law; fees are therefore tax deductible for US taxpayers.10 The Foundation is authorized by the GC Office to fundraise on its behalf. Its relationship with the United Nations is set out in a Memorandum of Understanding (MoU) between the Foundation and the UN, and the primary beneficiary of the Foundation’s funds is the GC Office.

3.6.4 Implementation and evaluation The UN has actively encouraged adoption of the GC. The GC was marketed at numerous workshops and meetings across the globe, usually involving officials of the GC and UN agencies. Also outside of the UN system, IGOs were involved in encouraging the GC. In 2003 the G8 encouraged firms to join the GC. In 2005, the Organization for Economic Co-operation and Development (OECD) praised

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the GC as being complementary to its own Guidelines for Multinational Enterprises (Berliner and Prakash 2012). Private sector businesses, particularly large northern multinationals, have shown a positive response to partnering with the UN. The partnership provides brand value, demonstrates “good corporate citizenship” and increases reputation (Witte and Reinicke 2005).

3.6.4.1 The accountability issue On the opposite side, civil society organizations have repeatedly highlighted accountability issues and criticized the GC for creating undue corporate influence at the UN and enabling firms to engage in “bluewash”—improving their corporate image through association with the UN. The case was reported of prominent corporate members who joined the GC but continued to violate GC principles while at the same time publicizing their membership. Examples include Unilever which was found discharging mercury into the groundwater in India; Aventis, SA whose genetically modified corn, approved only for animal consumption, was found in human food; and Nestlé, an obvious target given reports of persistent violations of the International Code on the Marketing of Breast Milk Substitutes (Buse and Lee 2005). High profile advocacy and development NGOs who joined the GC (such as Human Rights Watch, Amnesty International, Oxfam International, Lawyers Committee for Human Rights, and Human Rights First) felt at some point the need to publicly complain about the weakness of accountability mechanisms. They asked for more transparency, stricter monitoring, and for greater participation of human rights NGOs and trade unions when the GC is applied at the national level (Utting and Zammit, 2006). In general, these organizations called attention to the need for restricting commercial and corporate influences in UN affairs: to bring social values into the market via the GC as opposed to the GC facilitating commercialism at the UN. Some were calling for reforms and more stringent rules, others were asking for a fundamental re-design of the GC as an instrument of real corporate accountability. Those pressures eventually led to some reforms of the functioning of the GC (Berliner and Prakash 2012). Since 2003, companies have been required to submit an annual Communication on Progress (COP), which should illustrate what participants have been doing to further the GC principles, as well as provide standardized and comparable indicators and analysis of achievements and difficulties. However, a review carried out in mid2005 found that only 38 percent of companies had complied (Utting and Zammit 2006), which showed the limits of the GC as an initiative that is neither designed, or have the mandate or resources to monitor or measure participants’ performance.11 A set of Integrity Measures was adopted that include more explicit guidelines governing restrictions on the use of the GC logo; a mild “naming and shaming” procedure whereby companies that do not report on progress for two years in a row would be declared “inactive” and identified as such on the GC website; and

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the introduction of a formal complaints procedure whereby “systematic and egregious actions that undermine [a company’s commitment] to, and the reputation of, the Global Compact” could be examined, providing the possibility that the GC Office could ultimately revoke a participant’s status if malpractice continues (Utting and Zammit 2006).

3.6.4.2 Regulatory, co-regulatory or self-regulatory arrangements? Civil society groups also questioned the unregulated character of the GC, fearing that the GC could undermine efforts to bring about international legally-binding regulation and, in the process, erode democratic decision-making and accountability within society (Buse and Lee 2005). From the perspective of regulatory politics, the GC has provided indeed an alternative to stronger international regulation of business. Promoting standards and compliance mechanisms through voluntary approaches, it has fueled the arguments of some governments and business interests to lobby against regulation and corporate accountability in other areas of negotiations. For example, the Norms on the Responsibilities of TNCs and other Business Enterprises with Regards to Human Rights, adopted in 2003 by the UN Sub-Commission on the Promotion and Protection of Human Rights, was claimed by those forces to be unnecessary because the GC and other voluntary instruments already existed. However, crowding-out regulatory initiatives associated with corporate accountability is an unintended effect. The GC’s literature stresses that the arrangement is a non-regulatory one and that the GC is meant to complement and not substitute regulation, and that it aims to contribute to improved public governance by relying on the enlightened self-interest of members (Utting and Zammit 2006). Ruggie (2001) argued that the networked, horizontal, non-hierarchical, and learning-based approach of the GC are non-conventional forms of regulation that will become increasingly prevalent in a globalizing world. The same author, however recognizes that “learning model has no direct leverage over determined laggards. They require other means, ranging from legislation to direct social action.” Recent reviews indicate that voluntary programs, which do not impose real obligations on firms or do not back them with sufficient monitoring have a greater chance of failure. Some, such as the representatives of Greenpeace, consider that more measures and monitoring of compliance are needed, rather than more declarations of intent from corporations. In the case of the GC, international governmental networks appear to prefer more inclusive programs while INGO networks place greater value on program integrity. Such a conflictual and differentiated nature of global society and its actors needs to be taken into account in developing mechanisms of global governance (Berliner and Prakash 2012). In short, the GC story continues to demonstrate both tensions over the degree of public sector involvement that the commercial sector is willing to tolerate within co-regulatory arrangements, and broader tensions over the appropriate relationship between the private sector and the UN (Buse and Lee 2005).

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Notes 1 The hybrid nature of the Movement is to be found In the highest policy-making body of the Movement—the International Conference of the Red Cross and the Red Crescent—governments, the ICRC and the Federation have each one vote. 2 ISO is described as hybrid due to the characteristics of its membership and governance, nevertheless it is listed among the NGOs in Consultative Status with ECOSOC. 3 Type 1—Trading comparative advantage; Type 2—Pioneering new institutions (especially for missions markets); Type 3—Designing rules and setting standards to facilitate interactions; Type 4—Advancing the frontiers markets to open up new business opportunities and reduce poverty or advance sustainable development; Type 5—Brokering affordable price deals to make critically important private goods more broadly available in poor countries; Type 6—Leveraging research and development, especially in areas of concern to the world’s poor; Type 7—Managing for strategic results, in particular where problems require attention. 4 Foege is an American epidemiologist credited with devising the global strategy that led to the eradication of smallpox. 5 Which are not a characteristic unique to GPPPs. Bilateral development agencies, as well IGOs and INGOs, often execute “vertical” aid programs. 6 www.gavialliance.org 7 www.unglobalcompact.org. 8 The seven agencies are: Office of the UN High Commissioner for Human Rights (OHCHR), the International Labor Organization (ILO), the United Nations Environment Programme (UNEP), the United Nations Office on Drugs and Crime (UNODC), the United Nations Development Programme (UNDP), the United Nation Industrial Development Organization (UNIDO) and the United Nations Entity for Gender Equality and the Empowerment of Women (UN Women). 9 In 2012 donors included: China, Colombia, Denmark, Finland, France, Germany, Italy, Republic of Korea, Norway, Spain, Sweden, Switzerland and the United Kingdom. 10 The annual fees are set as follows: 10,000 US$ for companies with annual sales/revenues of 1 billion US$ or more; 5,000 US$ for companies with annual sales/revenues of between 250 million and 1 billion US$; 2,500 US$ for companies with annual sales/ revenues of between 25 million and 250 million US$; 500 US$ for companies with annual sales/revenues of less than 25 million US$. 11 www.unglobalcompat.org.

SECTION 2

Management of international cooperation

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4 THE EVOLUTION OF INTERNATIONAL DEVELOPMENT COOPERATION Eduardo Missoni

4.1 The birth of development discourse and international aid Over the decades, we have become accustomed to thinking of a world divided into developed and developing countries, with “development” as an almost universally desired objective. And “development” in the vast literature on the subject has come to “encompass almost all facets of the good society, everyman’s road to utopia” (Arndt 1987). Understood as an unavoidable process that societies undergo, development was hardly used as a concept before World War II. Nevertheless, the Covenant of the League of Nations, the predecessor of today’s United Nations, and the first permanent International Institution (II), indicated the well-being and development of the peoples living in countries “under the sovereignty of the States which formerly governed them” and that are “not yet able to stand by themselves under the strenuous conditions of the modern world” as a “sacred trust of civilization”. The tutelage of those peoples was entrusted to “advanced” nations who would exercise it “as Mandatories on behalf of the League” (League of Nations 1919). The first institution to explicitly include “development” in its mission was possibly the International Bank for Reconstruction and Development (IBRD), now part of the World Bank group. For the League of Nations, international cooperation was mainly linked to the achievement of “international peace and security”, whereas the Charter of the United Nations Organization, established in 1945, clearly linked international cooperation to the resolution of international problems of economic, social, cultural, or humanitarian character, and included among its aims the promotion and respect of human rights and fundamental freedoms for all. The UN Charter engaged all members in international economic and social cooperation in the pursuit of “higher standard of living, full employment, and conditions of economic and social progress and development” as well as “solutions of international economic, social, health, and related

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problems, and international cultural and educational cooperation; and universal respect for, and observance of human rights and fundamental freedoms for all” (UN 1945). In line with that approach, Polanyi Levitt states that: “development in a meaningful sense implies a social and economic transformation to eradicate injustices of the past” (2012: 17). In the aftermath of World War II the reconstruction of Europe was among the most urgent problems. The launch of the Marshall Plan, on 5 June 1947, responded to the need of restarting the war-devastated European economy, to provide an economic outlet to the reconversion of the American industry, creating at the same time a political and economic bloc of nations allied with the USA that could prevent the spread of Soviet communism. The Marshall Plan (officially the European Recovery Programme—ERP) is often indicated as the first example of international aid. In 1948, from the Marshall Plan and the Conference of Sixteen (Conference for European Economic Co-operation), emerged the Organization for European Economic Co-operation (OEEC) which sought to establish a permanent organization to continue work on a joint recovery program and, in particular, to supervise the distribution of aid. In September 1961, the OEEC was superseded by the Organization for Economic Co-operation and Development (OECD), and the former Development Assistance Group (DAG), formed as a forum for consultations among aid donors on assistance to less-developed countries, was constituted as the Development Assistance Committee (DAC). Economic growth and the expansion of world trade were clearly spelled out as part of the OECD’s aims and associated with the idea of development.1

4.1.1 The development paradigm and its measure Most authors would agree that United States President Harry Truman inaugurated the “era of development”—and development aid—on 20 January 1949, with his “State of the Union Address” in which he referred to “a bold new program for making the benefits of our scientific advances and industrial progress available for the improvement and growth of underdeveloped areas … a program of development based on the concept of democratic fair dealing” (Truman 1949). Development was thus used as metaphor for economic growth, with the general prevalence of the economic dimension over any other space of human well-being, and the increase of the Gross Domestic Product (GDP) as the main imperative. Development became the universal ideal that should guide the progress of the “underdeveloped” world, whereby “underdeveloped” was used as a synonym for “economically backward regions” and underdevelopment as a state of deficiency, rather than as the result of historical circumstances. Conceived in technocratic and quantitative terms, growth and aid were proposed as the only possible, paradigmatic answers. By a substantial part of the literature, the new discourse would serve for the emerging power of the USA to justify the dismantling of colonial empires and gain access to new markets (Rist 1996) and “development” soon became “the password for imposing a new kind of dependency, for enriching the already rich world and for shaping other societies to meet its commercial and political needs” (George 1976).

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The international development agenda was given conceptual support during the 1950s in the form of modernization theory elaborated by Walt W. Rostow and other American economists. In his The Stages of Economic Growth: A Non-Communist Manifesto, Rostow (1960) uses the “take-off” metaphor to identify five stages of growth that societies may be led through on the path to modernization: the traditional society, the pre-conditions for take-off, the takeoff, the drive to maturity, the age of high mass-consumption. In the 1950s, development attention focused on the establishment of urbanindustrial nodes as the basis for self-sustained growth with the assumption that a “trickle down effect” would take place that, in the long run, would spread modernization from urban to rural areas. In the following decade the importance of agriculture was reassessed, together with the recognition that employment does not grow along with industrial production. Awareness grew also that the balance of payments imposed limitations while theorists placed a growing emphasis on the need for institutional incentives to activate market forces. The UN declared the 1960s the “development decade” with a call to industrialized countries to considerably increase their Official Development Aid (ODA)2 in order to reach as soon as possible a volume of about 1 percent of their combined GDP. In 1969, reporting to the World Bank, the Commission on International Development—also known as the Pearson Commission after its chair—recommended that “each aid-giver increase commitments of official development assistance for net disbursements to reach 0.70 percent of its gross national product by 1975 or shortly thereafter, but in no case later than 1980” (Pearson 1969). Since then, the adequacy of a quantitative disbursement goal (Vähämäki et al. 2011) has been intensely debated and mounting pressure has been put on increasing the absolute amount of disbursements over time. This approach, however has also encountered considerable criticism. Clemens and Moss (2007) argue that the 0.7 percent goal arose from an economic model with no modern credibility, and that—contrary to conventional wisdom—none of the UN documents contains a promise to meet the goal. Most practitioners in development cooperation would agree with Clemens and Moss that ODA/Gross National Income (GNI) per se does not constitute a meaningful metric for the adequacy of aid flows. Nevertheless, the disbursement goal has perhaps always been the most practical and powerful goal in development cooperation (Vähämäki et al. 2011), and it cannot be denied that it represents a good proxy of the amount of resources dedicated to the sector and allows comparisons with resources devoted to other policies. Metrics should in fact be reoriented (and work is indeed being done in that direction) towards combined efficiency and effectiveness indicators.

4.1.2 Institutionalization of ODA The establishment of DAG/DAC in 1960 was part of an extraordinary upsurge of related institutional developments, concentrated in the early 1960s, which laid the foundation of the current aid system.

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Besides the clear economic motivation of foreign aid—to promote the capitalistic model in Developing Countries (DCs) and their industrialization through the protection and subsidization of local industrial sector (the so called “import substitution industrialization”)—the political and ideological motivation for development policies was equally evident. The USA represented at that time at least two thirds of the total ODA funds, which were explicitly used as a strategic means to contain the spread of communism. Indeed, during the years of the Cold War, aid priorities were determined by strategic and geo-political criteria rather than by population needs and quality of the policies of beneficiary countries (Bonaglia and De Luca 2006).3

4.2 Critics from the south During the mid-1960s, the foundations of classical development theory were also attacked. Dependency theory, developed mainly by Latin American scholars, such as Raúl Prebish, Fernando H. Cardoso, Theotonio dos Santos, Osvaldo Sunkel and others, especially André Gunder Frank, pointed out that the causes of underdevelopment should be sought beyond domestic economic factors (Muñoz 1981). According to these scholars, the structural position of backward countries in the world system mainly caused underdevelopment, along with the fact that resources tend to flow from a “periphery” of poor and underdeveloped states to a “core” of wealthy states. This dynamic enriched the latter at the expense of the former through the progressive deterioration of the terms of trade. In addition, the interests of bureaucratic and political elites of those “peripheral” countries would functionally converge with those of the elites of the developed countries in promoting distorted forms of development that encouraged investments in areas with no direct benefit for the population, e.g. military expenditures (Prebisch 1949) as well as mega-projects, that were often ill-conceived and enormously costly such as the TransAmazonic Highway in the 1970s. In 1964, the UN established the Conference on Trade and Development (UNCTAD), under the direction of Raúl Prebisch, to address the problems of export dependent peripheries. In Africa, Julius Kambarage Nyerere, who served as the first president of Tanzania, decided to face the “underdevelopment” of his country by committing his fellowcitizens to relying first of all on their own forces. The Arusha Declaration (1967), passed by the Tanganyka African National Union (TANU) on 5 February 1967, promoted the concepts of self-reliance and self-centered development. Self-reliance is the approach proposed to undertake the “war against poverty and oppression” in Tanzania, struggling to move “the people of Tanzania (and the people of Africa as a whole) from a state of poverty to a state of prosperity”. The Declaration indicated an alternative and autonomous, although not autarchic, way to development. This approach refused to rely on external aid and money provided through gifts and loans, as they “will endanger our independence”, and identified in agriculture, people and their hard work “the foundation of development”, with money being “one of the fruits of that hard work”. Land, people, good policies and good

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leadership were the keywords of that strategy, that oriented society “toward the development of man instead of material wealth” (Nyerere 1974: 32). In the 1970s, the debate was fuelled by the Movement for the New International Economic Order and the so-called “basic needs” approach. Both concepts were born from the observation that despite a positive overall economic performance of the Third World, growth failed to alleviate poverty. The Declaration for the Establishment of a NIEO, adopted by the United Nations General Assembly in 1974 (UN 1974), resulted from the so-called “North-South Dialogue” between industrial and developing countries, focusing on restructuring of the world’s economy to permit greater participation by and benefits to developing countries. The Basic Needs approach was adopted by the 1976 World Employment Conference and placed priority on policies and programs ensuring access to clean water, nutrition, appropriate shelter, health-care, education and security to the poorest populations (ILO 1976). The modest reorientations observed in those years clashed in the following decade with the debt crisis of developing countries and the reaffirmation of the role of the market in the name of neoliberal principles.

4.3 Applying the “Shock Doctrine”:4 the neoliberal response to crisis The Reagan Administration in the USA and the Thatcher Government in Great Britain championed the neoliberal ideology, with the International Monetary Fund and the World Bank serving as their global implementers. According to those principles, the state is the main obstacle to development and every barrier to market penetration must be removed in developing countries. Foreign investments, rather than international aid should provide external resources to developing countries whose governments were considered inefficient, corrupt, and therefore incapable of a productive and efficient allocation of resources. With the same perspective, in response to the debt crisis, the WB and the IMF, through Structural Adjustment Programs (SAP), imposed neoliberal policies on developing countries with the effect of impeding their autonomous choices that, according to those financial institutions, “would end up damaging world trade” (Isernia 1995: 50). Since 1958, all of the major industrialized nations had adopted the Bretton Woods financial system, in which the gold standard regarding the exchange value of currencies prevailed. However, in 1971 this system ended when the then president of the USA, Richard Nixon, opted to unilaterally disengage the US Dollar from the gold standard, preferring the accumulation of a deficit instead of increased monetary withdrawals. President Nixon took this decision, in large part, to alleviate some of the stress placed on the American economy by the inflation of the 1960s and, above all, to alleviate the financial strain created by the ever-increasing cost of the Vietnam War. Thus, the dollar soon became a currency for speculation, primarily in the southern countries of the world. Unfortunately, at the same time,

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the price of imports for these developing countries soared while the value of exports plummeted. From 1973 through 1974, the quadrupling of the price of oil for OPEC5 adherent nations further compounded this situation, dealing a significant blow to industrialized nations, but hitting harder developing countries that did not produce oil. This oil price spike later provoked the subsequent recession in 1974–75 (FDIC Div. of Research and Statistics 1997). With their newfound wealth from the so-called petrodollars, OPEC nations began to invest heavily in commercial banks. These banks started to re-direct part of their excess of liquidity from the increasing investments in many developing countries, particularly in Latin America and Southeast Asia. The latter were now “eager borrowers” in order to help them react to the increase in oil prices and the recession. These loans were made with extremely advantageous conditions for the borrowers, but were always linked to the market and, thus, carried variable rates and short terms. The types of loans extended, combined with rising inflation and the recession, trapped loan recipients in a vicious cycle, in which new debts were generated by contracting additional loans specifically for the repayment of old debts,6 thus, stimulating an ever increasing export of capital.7 In addition, in 1979, the Office of the Comptroller of the Currency (OCC), a division of the US Treasury Department, reinterpreted a key lending regulation. This decision exacerbated the already shaky situation to a breaking point. The OCC claimed that no single borrower could occupy more than 10 percent of the lending capital of an institution, and since many banks were already in violation of this rule, lending to developing countries was severely reduced (FDIC Div. of Research and Statistics 1997). Thus, with debt consistently growing from 1973–82, spurring inflation8 and the cost of imports, combined with decreased exports and international donations, many developing countries faced insolvency. Federal Reserve Chairman Paul Volcker’s decision to dramatically increase interest rates in the USA, letting them rise up to 21 percent in 1981, meant higher interest payments on foreign debts, thus the “Volcker shock” deeply affected DCs leading to SAPs and the “dictatorship of debt” (Klein 2007: 159–61). Despite the very public warning signs,9 little was done to try to stem the inevitable. Thus, in 1982, Mexico was the first country to openly declare that it was unable to repay the loans, fully launching the debt crisis. By the end of 1982, 40 countries were in arrears and by the end of 1983, 27 nations, including the four largest in Latin America that accounted for 74 percent of the debt (Mexico, Brazil, Venezuela, and Argentina) were in debt-restructuring negotiations (FDIC Div. of Research and Statistics 1997). The Bretton Woods institutions were called to contain the damage through the introduction of conditionality (see Chapter 1) of their loans, i.e., by binding the financial assistance for the indebted countries and the access to credit with the application of macro-economic measures, thus ensuring that obligations to private creditors were fulfilled after the eventual debt restructuring under the terms of the so-called Paris Club.10 At this point “development” was replaced by macro-economic and structural adjustment by demand of private and

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official creditors. The Washington Consensus of deregulation, liberalization and privatization became the “universal prescription” (Polanyi Levitt 2012). The operational mechanisms to bring these objectives to fruition were termed Structural Adjustment Programs. The SAPs aimed at changing the way in which each country’s economy was organized in order to raise productive capacity and enable developing countries to pay back the debts they had taken out with commercial banks. SAPs typically required the reduction/removal of direct state intervention in the economy’s production and redistribution sectors. The conditions that SAPs envisaged included slashing public expenditure, with substantial cuts in the health, education, and other welfare spending, liberalizing imports, removing restrictions on foreign investment, privatizing state companies and financial deregulation, devaluing currency, cutting wages, and weakening labor protection mechanisms. In essence, the elements within the SAPs served to destabilize many of each country’s public organizations and institutions to make space for private, market-driven programs derived from western models (Bello 2002). The debt crisis and rise of macro-economic recipes and SAPs contributed to the increasing power of the international financial organizations as they imposed these new programs on individual countries as a condition for ODA. The necessity for an outside force to stabilize the debt situation called for the IMF to be the so-called “International Lender of Last Resort” (ILLR) (Devlin and French-Davis 1995), while the increased activity of the World Bank through SAPs enabled both organizations to take a prominent role in manipulating the direction of international development politics for the coming decades. These adjustment policies had dramatic (often debilitating) effects on large swaths of the population and forced social safety nets and welfare support provisions to be introduced alongside SAPs in order to dampen their impacts. Among the measures introduced to lessen the effects of SAPs, such as high rates of unemployment and deprivation, the World Bank promoted the construction in assisted countries of national Development or Social Funds. Ironically, these funds would provide resources to respond to the problems SAPs helped to create. While Funds operated differently from country to country, they were all autonomous and independent from mainline government agencies, often with the creation of new ad hoc agencies, channelling funds to private non-profits for the implementation of social programs. Although the World Bank financed them directly, governments eventually bore the costs of these programs that were being repaid through normal lending arrangements. Substantially, social funds represented a mechanism to subsidize with public funds the privatization of social services. The public sector and the social services it offered were dismantled while the “easy access” to public resources from the non-profit sector facilitated the multiplication of both national and international NGOs. In an increasingly fragmented institutional environment, and competing among themselves for resources and visibility, NGOs were mostly unable to meet sufficiently the expectations and the social needs of the community they intended

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to serve. Nevertheless they soon became the preferred vehicle by which international aid would be disbursed (Hall and Midgley 2004).

4.4 Fight against poverty, partnership and development goals “People are the real wealth of a nation. The basic objective of development is to create an enabling environment for people to enjoy long, healthy and creative lives.” This was the incipit of the first Human Development Report, which further down read: “Excessive preoccupation with GNP growth and national income accounts has obscured that powerful perspective, supplanting a focus on ends by an obsession with merely the means.” Human development was thus defined as “a process of enlarging people’s choices” the most critical ones being identified in “leading a long and healthy life, to be educated and to enjoy a decent standard of living”, with additional choices including political freedom, guaranteed human rights and self-respect. The Human Development Index (HDI) was proposed as a new indicator to measure progress, based on longevity, knowledge and decent living standards (UNDP 1990: 9–16). Additional elaborations on indicators for human progress and poverty reduction followed the new index, up to the most recent update of the HDI (UNDP 2011). The process also fed into the international agenda for economic and social development. During the 1990s, widespread debate at a string of international summits11 aimed at redefining the world agenda for economic and social development, with the result that the world’s attention began focusing on the fight against poverty. Debate centered upon Shaping the 21st Century: The Contribution of Development Co-operation, a report by the Organization for Economic Cooperation and Development that laid the foundation for what would lead to the Millennium Declaration in 2000 (OECD/DAC 1996). The report suggested to move emphasis of ODA contributions from a selective and fragmented, “project” approach, to a “program aid”12 approach, increasing alignment to the national strategies and policies of the recipient countries. In 1999, the World Bank and the International Monetary Fund started to hint at reducing poverty by including access to subsidized credit and debt relief in their Poverty Reduction Strategy Papers (PRSPs), national plans that envisaged the involvement of a range of local public and private players. PRSPs became the general reference documents for many types of other donors (bilateral and multilateral) also participating in cooperative interventions toward development goals. PRSPs designed coordinated interventions that were integrated into the national plan. It was assumed that those interventions could be financed through the monetary mechanisms of those countries, and increase the efficiency of the aid, together with the ownership of the partner country. PRSPs would also reduce the weight of the different negotiations and management with some donors. Program Aid structured into Sector Wide Approach (SWAp) became an integral part of that policy, especially in the health and education sectors.

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4.4.1 The partnership discourse In order to meet the new challenges of the global era, the idea was also emerging that the partnership should be extended to all the actors in development to include joint ventures between the public sector and the private sector. The joint UN-OECD-IMF-WB report, A Better World for All, concluded advocating “true partnership” as the way to overcome the limitations of past development strategies (UN et al. 2000). Partnership would soon become the new mantra of the development agenda, confounding the call to all actors in development to share goals and commitment in the fight against poverty, with the establishment of new public-private ventures (see Chapter 3). The Millennium Declaration would also reflect this approach.

4.4.2 The Millennium Development Goals In September 2000, with Resolution 55/2 the UN General Assembly adopted the Millennium Declaration establishing eight Millennium Development Goals (MDGs) to be reached by 2015. Largely based on goals that the OECD/DAC defined in 1996, the UN further subdivided the MDGs into 21 targets, as well as providing a set of indicators to monitor progress. This was the first time in development cooperation history that all countries and main actors in development agreed on “what” should be done and formally adopted common results that they intended to achieve on a global level (Vähämäki et al. 2011). To reach the MDGs, by 2015, both donors and DCs were now facing five main interdependent challenges: financing development, improving aid effectiveness, ensuring policies’ consistency, reducing DCs’ vulnerability, and increasing public awareness of and investment in development education (Bonaglia and De Luca 2006).

4.5 Financing development The tragedy of 11 September 2001 suddenly modified the international agenda as well as the priorities of donor countries. The organizers of the International Conference on Financing Development, planned for that year in Monterrey, rescheduled for the following spring. At the Conference, the 0.7 percent ODA/GDP target was reaffirmed, while the president of the United States of America, George W. Bush, determinedly spoke on the inappropriateness of the “arbitrary levels” imposed for ODA (Cevallos 2002). In the same year, in Barcelona, the European Union (EU) governments committed to collectively reach a ODA/GNI proportion of 0.38 percent by 2006, with each country of the EU individually reaching the 0.33 percent level by the same year.13 These targets were reviewed three years later and differentiated between old and new Member States (by 2010 old Member States should increase their ODA to a new individual baseline of 0.51 percent GNI, whereas the new Member States

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TABLE 4.1 The Millennium Development Goals

MDG

Targets

Goal 1 – Eradicate extreme poverty and hunger

Target 1.A: Halve, between 1990 and 2015, the proportion of people whose income is less than $1 a day. Target 1.B: Achieve full and productive employment and decent work for all, including women and young people. Target 1.C: Halve, between 1990 and 2015, the proportion of people who suffer from hunger.

Goal 2 – Achieve universal primary education

Target 2.A: Ensure that, by 2015, children everywhere, boys and girls alike, will be able to complete a full course of primary schooling.

Goal 3 – Promote gender equality and empower women

Target 3.A: Eliminate gender disparity in primary and secondary education, preferably by 2005, and in all levels of education no later than 2015.

Goal 4 – Reduce child mortality

Target 4.A: Reduce by two thirds, between 1990 and 2015, the underfive mortality rate.

Goal 5 – Improve maternal health

Target 5.A: Reduce by three quarters the maternal mortality ratio. Target 5.B: Achieve universal access to reproductive health.

Goal 6 – Combat HIV/Aids, malaria and other diseases

Target 6.A: Have halted by 2015 and begun to reverse the spread of HIV/AIDS. Target 6.B: Achieve, by 2010, universal access to treatment for HIV/ AIDS for all those who need it. Target 6.C: Have halted by 2015 and begun to reverse the incidence of malaria and other major diseases.

Goal 7 – Ensure environmental sustainability

Target 7.A: Integrate the principles of sustainable development into country policies and programs and reverse the loss of environmental resources. Target 7.B: Reduce biodiversity loss, achieving, by 2010, a significant reduction in the rate of loss. Target 7.C: Halve, by 2015, the proportion of the population without sustainable access to safe drinking water and basic sanitation. Target 7.D: By 2020, to have achieved a significant improvement in the lives of at least 100 million slum dwellers.

Goal 8 – Develop a global partnership for development

Target 8.A: Develop further an open, rule-based, predictable, non-discriminatory trading and financial system. Target 8.B: Address the special needs of least developed countries. Target 8.C: Address the special needs of landlocked developing countries and small island developing states. Target 8.D: Deal comprehensively with the debt problems of developing countries. Target 8.E: In cooperation with pharmaceutical companies, provide access to affordable essential drugs in developing countries. Target 8.F: In cooperation with the private sector, make available benefits of new technologies, especially information and communications.

Source: adapted from the UN official list of MDG indicators (http://mdgs.un.org/unsd/mdg/host.aspx? Content=indicators/officiallist.htm)

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should reach 0.17 percent GNI. The collective average target for the Union was established at of 0.56 percent ODA/GNI) (EU 2005). The so-called Monterrey Consensus also insisted on the idea of a new global partnership, linking it to the opportunity offered through globalization to increase DCs’ participation in international trade and investments. But opportunities would come with risks. To minimize them, countries should engage in virtuous domestic macro-economic policies that favor simultaneously growth and poverty reduction, mobilization of all available financial resources and promotion of the private sector. Once again, to attenuate the unavoidable costs related to the process of globalization, social safety nets should be introduced to protect the most vulnerable members of the population. Nevertheless, maintaining the traditional rhetoric, the Monterrey Declaration recognized that national leadership and ownership of development policies are essential to an effective partnership (Bonaglia and de Luca 2006). Also, the 2001 OECD/DAC Guidelines on Poverty Reduction (OECD 2001) envisaged the need for aligning national public and private players with the donor community in the development of national strategies. The public-private partnership paradigm was now established. At the Johannesburg Summit on Sustainable Development (2002), hundreds of new public-private initiatives were launched in response to environmental and developmental challenges (UN 2002c; Missoni 2004). The perception of a certain level of “Summit fatigue”—solely in the biennium 2000–2001, 15,484 meetings were held and 5,879 reports were produced—induced the then UN Secretary-General Kofi Annan to make a call to Member States for “self moderation” and to cut the number of official meetings (Wurst 2002). But resources would be soon re-directed to other geo-strategic priorities. In a few weeks, the Iraq war absorbed more than 70 billion US$, representing five times the amount of money spent in Africa the year before, and more than twice the volume of financial aid needed yearly by that continent to reach the MDGs (Oxfam International 2003). The Monterrey Conference pointed to the need to explore “innovative sources of finance provided that those sources would not unduly burden developing countries” (UN 2003a). In 2004, a UN meeting of heads of state commissioned a technical study to develop new mechanisms to help raise steady, predictable and concessional funding to achieve human development and other poverty reduction goals. Since then, the idea of innovative financing14 has been regularly promoted at the global, G8 and European Union summits, stimulating new thinking around aid policies (Sandor et al. 2009). Implementation mainly has focused on the health sector with financial mechanisms that are strictly market-oriented and narrowly targeted to develop and/or buy products (such as drugs or vaccines). Arguably this approach does not contribute to countries’ institutional development (Missoni 2012).

4.6 In search of aid effectiveness Driven by global commitment to the Millennium Development Goals, after a decade of aid “fatigue”, annual volumes of aid were again on the increase (around

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60 billion US$ in 2002, close to 120 billion US$ in 2008). However, the prevalence of market forces also influenced the institutional architecture of global aid, including a remarkable upsurge and multiplicity of new private actors. The mushrooming of new organizations and global public-private ventures, bilateral programs as well as the rise of non-state actors—above all the Bill and Melinda Gates Foundation—often overshadowed intergovernmental institutions and brought increased inefficiency to the global aid system, an unsustainable fragmentation also at the country level, and confusion in global aid governance (IDA 2007). A new approach was needed to better manage those resources. A Working Party on Aid Effectiveness was created as a donor-only group in 2003, evolving into a joint partnership of donors and developing countries in 2005, and finally becoming an international partnership for aid effectiveness with 80 participants drawn from bilateral and multilateral donors, aid recipients, emerging providers of development assistance, civil society organizations, global programs, the private sector and parliaments. The work of the task force was first acknowledged with the Rome Declaration (OECD 2003) at the first High Level Forum (HLF) on Aid Effectiveness. The Rome Declaration solely focused on the harmonization of donor procedures and practices so as to reduce transaction costs for partner countries. With the Paris Declaration on Aid Effectiveness, in 2005, five pillars of aid effectiveness were defined: ownership, alignment, harmonization, management for results, and mutual accountability (OECD 2005) (Table 4.2). The declaration still represents the highest-level existing statement of international norms regarding aid delivery, with its 56 partnership commitments and 12 indicators of progress.15 It also reflected a global understanding on “how” to achieve the MDGs. In the process, the results management perspective became an integral part of global development aid policy. In the Declaration, both partner countries and donors TABLE 4.2 The five principles of the Paris Declaration on Aid Effectiveness

Ownership

Developing countries are responsible for their own future. They must draft policies accordingly, and donors should respect and support them.

Alignment

Donors should use developing countries’ own systems, relying on those countries’ institutions and procedures. Donors should not set up implementing systems of their own in developing countries.

Harmonization

Donors must coordinate policies and efforts, so developing countries do not become overburdened with a multitude of bilateral missions.

Managing for results

Attention should not focus on how much money is spent for development purposes, but rather on what is achieved.

Mutual accountability

Since aid needs to be transparent, donors and recipients must be held responsible.

Source: elaboration of the author based on OECD (2005)

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committed “to strengthening results-based management in development cooperation.” The Declaration highlighted the principle of ownership as a prerequisite for the other principles (Vähämäki et al. 2011). The Paris Declaration commitments were reviewed at the third HLF on Aid Effectiveness in September 2008 in Accra (Ghana) (OECD 2008). The purpose of the Accra Agenda for Action (AAA) was to take stock of progress so far, and to accelerate the momentum of change. The AAA identified three main areas where progress towards reform was still too slow: country ownership, building more effective and inclusive partnerships, and achieving development results and openly accounting for them. The fourth HLF on Aid Effectiveness was held in Busan, South Korea from 29 November 2011 to 1 December 2011, with the participation of political leaders, government representatives, parliamentarians, civil society organizations and private sector representatives from both developing and donor countries (OECD 2011). It was also the last one that the OECD Working Party would organize. In fact it was decided that, by June 2012, a Global Partnership for Effective Development Cooperation (GPEDC) would replace the Working Party. Many developing countries engaged in the new aid-effectiveness agenda. Those that signed up include not only traditional partner countries (recipients), but also middle-income countries that are at once recipients and donors.16 The BRICS group (Brazil, Russia, India, China, South Africa), which traditionally kept a distance from the OECD, perceiving it as western-dominated, also endorsed the final document. However they did not commit in their capacity as donors to applying the Paris principles, considering them only as voluntary guidelines. The mission of the GPEDC is to enforce aid effectiveness principles as defined in the Paris Declaration, with a further shift from the conventional donor–recipient mode to a development–partnership approach. A follow-up mechanism, with clear indicators, was agreed upon in order to monitor progress and review results at senior policymaking levels. There was a consensus that the creation of a new institution should be avoided, working instead with those already in existence, to pool resources and achieve greater efficiency. Hence, the GPEDC is intended to be “a light global structure”, replacing the OECD/DAC Working Party. At its final meeting, at the end of June 2012, the Post Busan Interim Group approved a three-layer structure for the GPEDC: The ministerial meeting, a review and decision-making body to be held once every 18 to 24 months. A Steering Committee, with three co-chairs representing various constituencies (“recipient partner countries”, “cooperation providers” and “recipient and provider countries”; the latter being emerging markets that provide as well as receive foreign assistance)17 and 15 other members representing different constituencies including legislators, civil society, private sector, multilateral development institutions, the UN Development Group and OECD-DAC. A Joint Support Group that combines resources from the OECD and the UN, to serve as the GPEDC Secretariat.

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The GPEDC is designed to become globally inclusive, with participation of government and non-government entities. Whether international development policy-making will move towards an efficient multilateral regime or whether an increasingly fragmented system will continue to exist remains an open question. The positions of most developing countries are not obvious. It is possible that some key players might even prefer to see no harmonization of donors’ activities, and keep the possibility of separate negotiations with potential partners. Fragmentation and duplications also create redundancy of resources that may be preferable from a recipient government perspective. Rising powers like China, India and Brazil need to draft policies for their increasing international involvement, individually and/or as a group.18 These donors must decide if they are ready to negotiate as peers with developing countries and emerging powers in the definition of new principles for international development policy. All actors should be prepared to respond to the demand for transparent mutual accountability (Fues 2012). A number of international initiatives involving governments, IIs and representatives of civil society were launched to promote accountability. The International Aid Transparency Initiative (IATI) was launched at the HLF in Accra19 and recommended the creation of a common set of openness standards by which donors could be judged. The IATI Standard was agreed in 2011, received continued support in Busan and an increasing number of partners are joining.20

4.7 The future of international cooperation, aid and development The idea of development continues to be associated with economic growth. Growth is proposed as the most desirable effect of “development” and converted into a “global faith” (Rist 1996). Development found its way into globalization, another aspect of the westernization of the world, with growth and progress in a linear evolutionary perspective (Pinci 2012). More than 40 years ago the first Report to the Club of Rome already indicated the existing “limits to growth” which the quantitative restraints of the world environment posed and, to avoid “the tragic consequences of an overshoot”, the Report called for “the initiation of new forms of thinking that will lead to a fundamental revision of human behavior and, by implication, of the entire fabric of present-day society” (Meadows et al. 1972: 185–96). Today those limits are evident and, for example, ever growing inequalities and recurrent environmental catastrophes increasingly challenge the idea of a “growth society” and the sustainability of such a development concept. Polanyi Levitt (2012: 17) considers development, instead, as a “creative social process” capable “to free-up and empower people to exercise their intelligence and collective wisdom”; a process “from within” that cannot be measured by the volume of economic transactions. The transfer of goods and services, or technical competence will not produce development unless the context is taken into account with its multiplicity

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and complexity of geographical, historical, cultural, social, political, economic and environmental determinants (Pinci 2012). Overcoming social exclusion and poverty is undoubtedly a fundamental step, nevertheless a reductionist approach such as the one adopted with the MDGs may lose sight of the interdependence between individuals, communities and nations that associates humanity in a single “destiny community” needing to rethink its “way” (Morin 2011). Some authors have argued that aid failed because it did not contribute to economic growth (in their view synonymous with development) and suggest that greater emphasis should be placed on the role of the private sector and private capital solutions to development financing (Moyo 2009). Unfortunately, aid also failed to create the conditions for better life conditions for the majority of the population, or to empower people and communities to a “development from within”. This is because aid came with strings attached, often imposing neoliberal policies favorable to foreign capital rather than people—and because of an overwhelming number of uncoordinated private and public-private initiatives occupying the space of public responsibility. An increasing number of transnational companies are engaging in the definition and implementation of their Corporate Social Responsibility (CSR) policies, and if they are able to show credibility in that direction they may be good allies of IIs and governments in supporting and implementing development initiatives. But, as a whole global market forces, have no social responsibility; they aim at creating a borderless world for capital, not for people or labor. To defend society against the destructive capacities of the global market to invade, reorganize and exploit human and natural resources, civil society and social movements cannot secure their objectives for better life conditions without a government able to make and enforce laws (Polanyi Levitt 2012). In today’s globalized society important decisions affecting people’s everyday life are resulting from negotiations and decisions taken at the global level. Unfortunately, when it comes to pushing public concerns (such as human rights, health, education) into international negotiations and regulation, businesses exert heavy influence on the agenda. The emerging idea and practice of multi-stakeholder governance (developed through GPPPs and consolidated in the Busan agenda and the GPEDC), including the corporate sector in the decision-making processes, further promotes the confusion between private and public interests. Instead, to enact people-oriented global policies, governments need to establish strong alliances with civil society, built on a global scale, to increase awareness and organize and coordinate advocacy. International cooperation in the twenty-first century is about conceptualizing a new path. For that purpose we may need to “decolonize the imaginary” (Latouche 2011) of development (fundamentally abandoning the slavery of growth) and re-value local practices, which are an essential starting point in developing an equitable, caring and sustainable society. However, in the absence of a parallel action at a global level, local efforts may prove ineffective. IIs and NGOs represent a strategic

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link between the two levels. Thus, their assets, power balances, leadership and management will play a fundamental role.

Notes 1 www.oecd.org 2 The OECD/DAC has measured resource flows to developing countries since 1961. Special attention has been given to the official and concessional part of this flow, defined as “Official Development Assistance” (ODA). The DAC first defined ODA in 1969, and tightened the definition in 1972. ODA is the key measure used in practically all aid targets and assessments of aid performance. ODA is defined as “those flows to countries and territories on the DAC List of ODA Recipients and to multilateral institutions which are: 1) provided by official agencies, including state and local governments, or by their executive agencies; and 2) each transaction of which: a) is administered with the promotion of the economic development and welfare of developing countries as its main objective; and b) is concessional in character and conveys a grant element of at least 25 percent (calculated at a rate of discount of 10 percent)” (www.oecd.org). 3 Indeed, strategic and geo-political criteria largely determine aid flows and patterns to this day. 4 Naomi Klein (2007) argues that in several countries the introduction of neoliberal policies was enforced by applying a “shock doctrine”, whereby unpopular reforms are pushed through by taking advantage of (and eventually favoring) severe socio-economic crisis. 5 Organization of Petroleum Exporting Countries. 6 The service of debt is essentially composed of returning a portion of the borrowed capital plus the interest. 7 1981 represented the first year in which there was a negative balance between new loans to developing countries and the repayment of debt—the net exportation of capital was about 7.2 million US dollars; in 1985, that figure was 10 times greater (IMF 1986). 8 The loans were primarily made in US Dollars. The value of the dollar rose 11 percent in 1981 and 17 percent in 1982, making it extremely difficult for recipient countries to repay loans as the power of their domestic currency was severely reduced. 9 The Wall Street Journal published an article just prior to the full eruption of the crisis, stating, “It doesn’t show up on any maps, but there’s a new mountain on the planet—a towering 500 billion US dollars of debt run up by the developing countries, nearly all of it within a decade … to some analysts the situation looks starkly ominous, threatening a chain reaction of country defaults, bank failures and general depression matching that of the 1930s” (Wall Street Journal 1981). 10 The Paris Club is an informal group of public creditors, existing as an analogous body to the London Club of private creditors, created to find coordinated solutions to the difficulties of payment in indebted countries, through renegotiations of the loan agreements (e.g. duration of payment scheme). 11 The UN summit for Children in 1990; the Rio de Janeiro conference on Environment in 1992; the Cairo conference on Population in 1994; the Beijing conference on Women in 1995; the Copenhagen conference on Social Development in 1995 and the Istanbul conference on Habitat in 1996. 12 According to the OECD, program aid or assistance consists of contributions for general development without sector specific allocation with a high degree of aid fungibility. Budget support plus commodity assistance—untied program support—can contribute to multiple sectors and activities under the same program and can be given as general budgetary support or sector-level support. Financial program aid is sub-divided into budget support (sometimes referred to as direct budget support) and balance of payments support, such as debt relief and import support. Participating donors define budget support as a type of resource transfer in which funds are channelled directly to recipient governments. The recipient uses internal procurement and accounting systems, and

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13

14

15 16 17 18 19 20

the funds are not linked to projects. Budget support entails “a lump sum” financial contribution. The Barcelona Commitments included: volume of official development assistance, coordination and harmonization, untying of aid, trade-related technical assistance, global public goods, innovative sources of financing, reform of international financial system, debt relief. Innovative financing involves non-traditional applications of solidarity, PPPs, and catalytic mechanisms that 1) support fundraising by tapping new sources and engaging investors beyond the financial dimension of transactions, as partners and stakeholders in development; or 2) deliver financial solutions to development problems on the ground. www.aideffectiveness.org/Events-Processes-Rome-Paris-Accra-Busan.html. Such as Colombia, Egypt, Thailand, Mexico, South Korea and Chile. China, India and Brazil have stated that they would not participate as co-chairs or Steering Committee members yet. Brazil, Russia, India, China and South-Africa increasingly express themselves in joint positions as the BRICS. Presenters included: UK, UNDP, Rwanda and CIVICUS. www.aidtransparency.net/.

5 COORDINATION AND COHERENCE AMONG THE MAIN ACTORS OF THE DEVELOPMENT SECTOR Trends, initiatives and ways forward Daniele Alesani

5.1 New paradigms for international development cooperation and coordination among development actors Since the second half of the past century, the system of multilateral aid and technical cooperation has become increasingly complex and articulated. In a scenario of progressive increase of voluntary contributions from donors most players privileged competition over collaboration, and organizations grew apart with stratified and overlapping mandates. The most recent paradigms for aid and development, from the Paris Declaration to the Busan partnership, call on IIs to renew their role and to improve their ability to deliver results in a consistent, systematic and organic way. In the current scenario, IIs are encouraged to focus on their competitive advantages, leaving to governments and civil society organizations the ownership of planning and implementing operational activities that national and local communities can better manage. The main actors of the development sectors have before them a significant challenge, because for them coordination and collaboration are new concepts, requiring a paradigm shift in their interorganizational relations and partnership attitudes as well as improved management tools. Media and donors’ communities mainly focused their demands for consistency and coordination on the United Nations system.1 In this context, the breadth and diversity of the UN system represented a weakness, as often it remains difficult for diverse and fairly independent organizations to plan and work together strategically. The political pressure for reform reached its maturity in 2006 with the appointment of the High Level Panel on System Wide Coherence and the writing of its report (UN 2006). The main “case for reform”, from the donors’ perspective, was the cumbersomeness of the UN’s field operations and the significant duplications of programming and implementation. Developing country governments, for their part, found that dealing with the UN entailed excessive transaction costs.

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The search for visibility, competition for funding, governance bodies that set divergent priorities, and different business practices had hindered interagency cooperation. In this context, there was a widespread perception that without ambitious and far-reaching reforms the United Nations would have been unable to deliver on its promises and maintain its legitimate position at the heart of the multilateral system (Ghebali and Tortora 2007). This chapter will concentrate on the UN system’s efforts, over the last decade, to improve its internal consistency and coordination in order to better deliver on its statutory objectives.

5.2 Consolidated coordination mechanisms within the UN system Three main types of coordination mechanisms exist within the United Nations system: 1 policy orientation, coordination and review; 2 headquarter level program coordination, harmonization of business practices and administrative procedures; 3 promotion of consistency, efficiency and effectiveness of operational activities for development on the ground.

5.2.1 Policy orientation, coordination and review Policy coordination mainly takes the form of high level recommendations, reports, and deliberations issued by the main governing bodies of the UN system. Together with the General Assembly’s Second and Third Committees, the United Nations’ Economic and Social Council (ECOSOC) is the main organ for policy orientation and coordination in the social and development sectors. The ECOSOC operates through its thematic commissions, ad hoc mechanisms and annual ministerial reviews. Within the ECOSOC, the Committee for Programme and Coordination (CPC) is tasked to ensure that these are compatible and mutually complementary. An interesting coordination mechanism activated in 2005 within the ECOSOC is the International Development Cooperation Forum (DCF). It reviews trends in international development cooperation and facilitates coherence among the various development actors. The DCF has universal membership and is a multi-stakeholder platform. It brings together decision-makers from developing and developed countries, parliamentarians, civil society organizations, local governments and private philanthropic organizations. The DCF sessions and events spur debate on national policies that have supported the achievement of significant development goals. They reflect on how development cooperation can best deliver results and identify good practice that can be fed back into policy making at the country level. Outputs of this mechanism do not have specific enforcement but nonetheless

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represent extremely valuable inputs to strategies and planning of the UN system organizations. The United Nations Department of Economic and Social Affairs (DESA) supports ECOSOC in its policy orientation and coordination agenda. DESA has established and manages a number of coordination mechanisms—conferences, task forces, partnership building initiatives. Among them, the Triennial Comprehensive Policy Review (TCPR) is notable. Since its inception in 2004, the TCPR has assumed a significant role within ongoing policy making to ensure continuous consistency between the development of mandates of single organizations and a coherent vision of the UN system operations. The TCPR periodically evaluates the effectiveness and efficiency of the United Nations development system’s support for national efforts in developing countries. Outputs of the TCPR process are, for example, solutions to improve the consistency and functioning of the UN system on a global scale and on the ground, proposals to review the funding and organization of activities for development, and clarification of mandates of single organizations to ensure consistency and avoid duplications of the activities for development. This is a periodic, very high-level review, and it directly originates from the member states’ views on the main priorities for the strengthening of the UN system’s operational effectiveness.

5.2.2 Program coordination and harmonization of business practices The headquarter-based coordination among the Secretariats of the UN system organizations is mainly managed through the Chief Executive Board for Coordination (CEB) and its High Level Committee on Management (HLCM) as well as the High Level Committee on Programmes (HLCP). Both these mechanisms adopt a “top down” approach and consensus-based decision-making which are intended to promote broad agreement. The HLCP serves two main functions. On one hand, it follows-up on intergovernmental decisions and major UN conferences, summits and policy reviews/ frameworks—i.e. TCPR, the Millennium Declaration, the Paris Declaration—to implement recommendations in an integrated fashion and maximize their impact at a system-wide level. On the other hand, the HLCP proactively identifies and tackles emerging issues requiring a system-wide response, with a view to elaborating common strategies, policies, methodologies and tools, and serves as a forum for inter-agency dialogue, consultation, coordination and knowledge-sharing regarding new program initiatives. The HLCM focuses on harmonization of business practices and administrative processes. Implementation of these tools and frameworks is left to the single organizations. The HLCM is organized in networks tackling the main issues related to finance and budgeting, human resources and information system management.

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5.2.3 Consistency, efficiency and effectiveness of UN system activities for development in the field These efforts are mainly channeled through the Resident Coordinator System and the United Nations Country Teams (UNCTs). The UNCTs, established in about 180 countries worldwide, encompass all the entities of the UN system that carry out operational activities for development, emergencies, recovery and transition in program countries. The main purpose of the Country Team is for individual agencies to plan and work together, to ensure the delivery of tangible results in each area of intervention. In all operational activities for development, the UNCTs are led and coordinated by the Resident Coordinator (RC), while activities in emergency and healthcare are coordinated either by the Office for Humanitarian Coordination (OCHA) or by subject matter leader organizations (e.g. UNAIDS). UNCTs normally operate through working groups and task forces with the participation of all agencies that are set up to engage in specific aspects of management, operations, program and evaluation. RCs are senior officials who provide UNCTs with technical assistance and policy advice, build human and institutional capacity, pilot projects, and advocate for globally agreed upon norms and standards. RCs liaise with the hosting government representatives on behalf of the UN system on a broad range of programmatic issues, complementing country directors of the UN agencies. The RC system is overseen by the UN Development Group (UNDG), which centrally provides guidance on business operations, coordination, planning and programming, and promotes coherent and effective oversight of country operations. At global level, the UNDG is organized in thematic task forces with representatives from all organizations. A lean and effective technical team supports it.

5.3 The search for UN system-wide coherence and focus on field operations The search for system-wide coherence has a long history.2 This process was accelerated with the management reforms of Kofi Annan’s tenure as UN Secretary-General. Renewing the United Nations: A Programme for Reform (A/51/950) recommended extensive reforms of operational activities aimed at establishing new management and leadership structures for the UN. Other reform attempts include the improvement of ECOSOC, the establishment of the Triennial Comprehensive Policy Review of Operational Activities for Development of the UN System as well as various outcome documents of major conferences such as the Millennium Declaration (A/55/2) in 2000, the Monterrey Consensus in 2002, the Rome Declaration on Harmonization in 2003 and the Paris Declaration on Aid Effectiveness in early 2005. The World Summit in 2005 spurred a comprehensive re-thinking of the institutional and operational settings of the UN system to strengthen coordination and operational

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consistency. In 2006, the ad hoc High Level Panel on System Wide Coherence (HLPC) produced its report, Delivery as One (UN 2006), which included extensive recommendations on a framework for a “unified and coherent UN structure at the country level [ … ] matched by more coherent governance and funding and management arrangements at the center”, but avoided concrete proposals to merge agencies: measures which were strongly supported by many developed countries states. The HLPC: 1 proposed to consolidate the UN system activities at country level under a “One UN” framework; 2 identified soft governance and institutional reform mechanisms to foster consistency at the headquarter and policy level; 3 clarified mandates and proposed institutional, funding and operational changes for organizations in the areas of environment, gender, human rights, humanitarian issues and recovery; 4 mandated the CEB to pursue an aggressive agenda for business practice harmonization; 5 indicated the need to reform the funding patterns to increase predictable, unearmarked and multi-year funding to be managed with flexibility by the “One UN” on the ground. The recommendations of this organ became a manifesto to reform the UN system that is still being implemented.

5.4 The UN system: towards a comprehensive country needs assessment and planning One of the most recurrent criticisms of the consolidated planning of the UN system organizations was its inability to take into account hosting country’s national priorities, mainly caused by a sectoral and top down approach to aid. This was coupled with a fragmented approach to planning as each agency would develop its own assessments and plans without regard for a consistent division of labor among organizations (Morgan 2002). This situation progressively changed with the emergence of the Common Country Assessment framework (CCA) and the United Nations Development Assistance Framework (UNDAF). These are United Nations system-wide frameworks for the analysis and definition of the priorities at the country level and are built into the principles of ownership and buy-in by the beneficiary government and the representatives of civil society. The CCA analyzes the situation of a given country and identifies development priorities with specific reference to the achievement of the Millennium Development Goals. The UNDAF identifies coherent and integrated answers to the identified

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national priorities and needs based on United Nations’ perceived competitive advantages. In particular, the UNDAF identifies:  priority areas of activity for the UN system;  expected results and planned activities for each participating agency;  mechanisms for implementation, including the extent and modalities of government and NGOs’ involvement as implementing partners;  estimated resources needed to implement the planned activities;  monitoring and evaluation mechanisms. The UNDAF cycle is aligned with the medium term strategic plan of the hosting government to ensure consistency with national public sector priorities. Upon issuance of the UNDAF, each participating organization starts planning its country program based on its mandate. Figures 5.1 and 5.2 show the logic underlying the link between CCA, national priorities (including the ones identified by the Poverty Reduction Strategy Papers issued by the International Financial Institutions supporting the country) UNDAF and organizations’ programs. The CCA process facilitates the identification of the main challenges for development, which are then translated into priorities for UN system intervention. The single agencies and the non-UN partners draw from the outcomes identified by the UNDAF to identify their own intended outcomes and outputs. CCAs and UNDAF have been recently introduced and certainly represent a radical switch in the planning frameworks and tools for multilateral technical C om m on C ountry A s sessm ent Linkages to the Millennium Development Goals (MDGsl

National Priorities Included in Poverty Reduction strategy Papers (PRSPs), Budgets and other national planning documents/processes

United Nations Development Assistance Framework(UNDAF) Selected MDG-linked outcomes reflecting UN s y s te m 's comparative advantage

UN Agency Country Programme and Projects

UN Agency Country Programme and Projects

UN Agency Country Programme and Projects

FIGURE 5.1 Links between CCA, UNDAF and organizations’ country programs Source: adapted from the UNDG website

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Com m on C ountry A ssessm ent (CCA)

Information gathering

United Nations Development A ssistance Fram ework (UNDAF)

C ountry P rogram m es/ Programm e

S elected p rio ritie s fo r UN system assistance

Assessment

Identity challenge

UNDAF Priority 1

UN agency 1 Country ■ Programme 1 (CP) outcome

Agency 1 CP output 1

Agency 1 CP output 1

Non UN partner contributions

Analysis

Cause 1 Cause 2

UNDAF Priority 1

Short list o f challenges to development

UN agency 2 Country Programme (CP) outcome

Agency 2 CP output 1

Agency 3 Project outcome and output

FIGURE 5.2 Links between CCA, UNDAF and Country Programmes: A results-based

management perspective Source: adapted from the UNDG website

cooperation. At the same time, the following limitations are emerging and need to be addressed in the future (Balogun 2012; Garcia 2011):  Varying attitude of beneficiary governments’ towards United Nations system intervention. In some cases governments have been very receptive to the paradigm shift in aid planning and implementation, which puts them “in the driving seat”, while in others they have been more resistant to this change, assuming a more reactive approach;  Weak coordination among agencies and organizations’ own country programs. While overall consistent with the CCA and UNDAF, programs are often not well interlinked and follow different procedures as well as and implementation and evaluation modalities. This is due to the lack of a comprehensive understanding of the individual organizations’ respective contributions to MDGs and UNDAF outcomes and the lack of an explicit “division of labor” among organizations;  Need to strengthen credibility of the RC as leader of the UNCT. In many countries the RC is still perceived as not objective and mainly accountable to UNDP. In parallel, the concept and identity of the UNCTs as a group accountable to the RC and representing the UN system as a whole needs to grow and be fully accepted (Clark 2011);  Incompatibility between joint planning and persisting competition for additional voluntary funds among agencies. In a context where about 80 percent of

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the financial resources granted by donors to the UN system are short term donations on a voluntary basis (IDA 2005; CEB 2010) organizations are wary of losing their individual visibility and their operational independence. More in general, current funding patterns are a limitation to a coordinated system-wide planning. In fact member states privilege earmarking contributions for very specific purposes not necessarily aligned with national priorities included in the UNDAF (Sagasti et al. 2005);  Limitations of UNDAF as a tool for joint planning and fund-raising. Identified priorities and activities are funded exclusively through single agencies’ budgets, and there is no system-wide mechanism to ensure that priorities are adequately funded based on identified resource needs. Moreover, additional voluntarily funded projects and activities often do not respond to the priorities defined in the UNDAF and the CCA.

5.5 Consistency, operational efficiency and effectiveness at the country level: the “Delivery As One” initiative

5.5.1 Overview The UNCTs and the RC system were significantly revamped under the “Delivery as One” (DaO) initiative which intends to improve coordination among agencies, consolidate activities on the ground, simplify stakeholders’ interactions with the UN and improve operational efficiency and effectiveness. The DaO postulates a new paradigm for the UN presence in the field and a radical shift in business processes, decision-making mechanisms, partnerships and interactions. Given the scale of the proposed change, a phased implementation was established. The pilot phase launched in 2007 and involved only eight initial countries: Albania, Cape Verde, Mozambique, Pakistan, Rwanda, Tanzania, Uruguay and Vietnam. These countries were chosen based on their governments’ interest in engaging in the reform and in representing the diversity of development challenges, social circumstances and geographical conditions faced by multilateral aid agencies. The pilot phase, still ongoing as of 2012, is allowing UNDG to fine tune the principles and the tools for implementation of the One UN before its expansion to a larger scale. The objective of the DaO is to achieve unitary action on the ground. As shown in Figure 5.3, the UN system as a whole needs to be able to produce a unified program to support national priorities, the execution of which ought to be clearly allocated to different organizations based on their competitive advantages, expertise and operational capabilities. Operations and business practices need to be streamlined and harmonized and present a unitary interface between beneficiaries and the UN. Finally, leadership needs to be centralized at the country level and decisionmaking needs to descend organically from the UN country team representing all organizations.

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One Programme O ve ra ll UN syste m in te rve n tio n to su p p o rt na tio na l p rio ritie s

UN Agencies Each UN a g e n cy o ffe rs d istin ct e xp e rtis e and p re se n ts d iffe re n t co m p e titive a d v a n ta g e s

Operations Leadership T h e R e sid e n t C o o rd in a to r o ve rse e s th e UN C o u n try Team on the field

C o m m o n or h a rm o n ize d busin e ss p ra ctice s and p ro ce d u re s s im p lify p a rtn e rships

FIGURE 5.3 A graphic representation of the UN Deliver as One model Source: adapted from the UNDG website

5.5.2 The four pillars of the Delivery as One initiative and its expected benefits More specifically, the DaO initiative stands on four main principles: “one program”, “one budget”, “one leader” and “one office” (Figure 5.4). Under the “one program” principle, the UNDAF and CCA frameworks are enabled to function at their fullest, since the One UN unified program substitutes the programs of single agencies. As programming is unified, the beneficiary government’s involvement can be stronger and more organic. The expected result is that the one program comprehensively mirrors the national development framework, strategy and vision. It is country owned, and the government signs off on it. In this model, the UNCT’s role increases greatly as it drastically reduces duplications and overlapping among agencies by involving all UN agencies, including the ones without a presence in the country (“non-resident agencies”). Particular attention is put on cross-cutting issues which, by their very nature, different organizations need to tackle. The expectation is that a unified UN country program should allow a more strategic and results-oriented approach with clear outcomes, explicit allocation of tasks and organic division of labor among UN organizations. The bigger size and scope of the joint program budget would allow more flexibility to re-allocate resources in consonance with changes in priorities.

Coordination and coherence among the main actors of the development sector 131

One

One Leader

Programme

and Team

One Budgetary

One

Framework

Office

FIGURE 5.4 The four principles of the DaO Source: adapted from the UNDG website

The “one budgetary framework” is a strictly complementary principle to the one budget. In the traditional funding model, country offices budgets are composed of a mix of “regular” resources—centrally allocated from the organizations’ headquarters for the implementation of their country programs—and additional voluntary resources granted by single or groups of donors for specific projects. Financial resources are pooled among organizations only in the case of “joint programs” funded by voluntary resources. Under the DaO framework, organizations pool financial resources from a variety of sources for the execution of the One UN Program. In principle, additional voluntary resources are also allocated based on a common assessment of the funding needs of the identified priorities to ensure a balanced and maximizing approach. Practically, the activities agreed to by the UN Country Teams are presented in one financial framework, showing each agency’s planned contribution together with its funding source. Unfunded results are identified and common fundraising and donors’ outreach is done to bridge the identified “funding gaps”. In this model, reporting on budget execution is unified: at the end of the year, UN agencies and implementing partners provide information on progress made against the planned results and actual expenditures. Prerequisites of this model are a commonly agreed upon and transparent process that identifies the budgetary allocations, the ability to link funding to country

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level performance of the single participating organizations, and more in general a system-wide attitude towards joint fundraising and resource pooling and allocation among UN organizations. Evidently, the DaO model proposes a very significant degree of change in this area. The principles of one program and one budgetary framework can only function with a strong UNCT, coordinated by an empowered leader identified with the Resident Coordinator. In the DaO model the RC has the authority to negotiate and shape the One Country Program with the government on behalf of the entire UN System. A clear accountability framework must be established between the RC and the UNCT members—in particular the country directors of the participating organizations—on the agreed outcomes and on the compliance with the strategic plan. The RC should also be accountable to the UNCT members, especially in terms of fair and equal representation of all the UN organizations in matters delegated to him or her. An essential precondition to make the RC system work is the availability of adequate infrastructure and staff to support and manage the UNCT coordination processes and to ensure effective dialogue and communication with partners. Evidently, this creates coordination costs that need to be kept at a minimum, as increased operational efficiency is one of the main intended results of the initiative. Finally, in order to “deliver as one” the UN logistics and physical operations need to be integrated in “one office”. Concrete applications of this principle are the utilization of joint premises, with expected economies of scale and savings in terms of administrative services, IT infrastructures, security, and rental costs.

5.5.3 Expected benefits of the DaO initiative The expected benefits of the DaO model can be summarized as follows:  Better alignment of UN system organizations’ programs, with national priorities as well as multilateral funding tied more closely to them;  Improved governments’ accessibility to the wide range of experiences and expertise offered by the UN system family as a “one-stop shop”;  Increased attention to cross-cutting issues from a programmatic and budgetary perspective;  Reduction of transaction costs among agencies achieved by comprehensively addressing the issue of coordination, creating mechanisms of involvement of non-resident organizations without the need to set up costly country offices and by simplification of the communication tools with stakeholders and harmonization of internal business practices and administrative procedures. Figure 5.5 graphically represents the DaO from a results-based perspective.

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Better respond to national needs

One Programme

One Leader

Combine comparative advantages of UN system organizations

Identification of synergies among UN organizations

Incentives system coherence

Reduced fragmentation

Reduced competition for funds

Incentivizes joint resource mobilization

More strategic approach

One Office

Enhanced national leadership

Unified and strengthened leadership

Simplified resource flows

One Budget

Reduced duplications

Better assistance by Un system to beneficiary countries

National ^ Development goals more achievable

Reduced transaction costs

Harvests economies of scale in service provision

FIGURE 5.5 The expected benefits of the DaO initiative DaO independent evaluation Source: adapted from United Nations (2012)

5.5.4 The experience of the Mozambique Delivery as One pilot The DaO initiative involves significant change management efforts and a countrytailored approach to support its four principles. Change efforts include training and communication on the ground, roll out of new harmonized administrative tools and procedures, new partnerships and negotiation dynamics with the hosting governments, inevitable initial redundancy and the UNCT and RC staffs’ “learning by doing”. The UNDG has a relevant role as enabler, facilitator and global coordinator of the initiative. The experiences of the eight DaO pilots are extremely diverse. In this section, we will briefly describe the main areas of work and change implemented by the Mozambique pilot and some of the main lessons learned as at 2010 (UN, Government of Mozambique 2009). As of 2010, the first main area of work in Mozambique was for the UNCT to produce a more comprehensive and inclusive planning process. This implied the creation of new consultative and decision-making approaches and the development of new internal collaboration dynamics and partnerships with actors outside the UN system. A crucial point in having a program owned by the hosting government is for UN agencies to strengthen the national capacity to plan for development, and to foster autonomous capacity to control and evaluate results. This required investing resources and focusing on capacity building and technical training and,

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more in general, it required a paradigm shift in the relations with the hosting government. Another main area of work was the creation of task forces on cross-cutting themes—HIV/AIDS, humanitarian coordination and response, incorporation of gender equality into the political agenda—and their empowerment through donor grants of additional resources. Donors’ investment of supplementary financial resources on the processes of system-wide coherence allowed it to become a “positive-sum game”, to catalyze energies and resources on these themes and to create new partnerships and alliances on the ground. The institutionalization of the country team and its thematic committees (e.g. steering committee, program committee and program coordination group, operations management team) together with the implementation of harmonized internal business practices was a significant effort in the Mozambique experience. In the short-term, this created redundancies and duplications since the UNCT staff were both involved in their own agencies’ and in the system-wide governance and processes, however it served to grow awareness of and a sense of identification with the UN system as a whole. One of the most difficult changes implemented by the Mozambique Country Team had to do with achieving a unified budgeting framework. In particular, for the first time in 2009, the UNCT started basing the allocation of the joint country program on single agencies’ performances in achieving the commonly set program outputs. This dynamic was completely new to the organizations and understandably raised confrontation dynamics which had to be carefully managed by the RC. Finally, efforts were made to increase involvement of “non resident” agencies in key initiatives and processes. Regular information flow and data exchange were set up among these agencies, thus allowing the agencies to participate in policy dialogue, contribute to the One UN country planning and provide technical advice not available among the resident organizations. The Mozambique pilot brings about a series of precious lessons learned: first of all is the need for a comprehensive change management plan to integrate all aspects of the reform process, from communication and partnership to new administrative processes. Moreover, the case shows that the UNCT’s willingness to harmonize business operations and procedures clashed with the inconsistency between the new tools proposed by the UNDG and the agency-specific tools, with the consequent need to take the harmonization exercise to the headquarter level to make it successful. A persistent short-term and project-oriented mentality proved to be a significant difficulty, incompatible with the notion of a unified UN system country program. The assimilation of the new decision-making processes and setting up of the new joint organs, in parallel with the need to manage agency-specific governance processes, created significant complexity and proved extremely time consuming. This was coupled with the perceived risk that the new interagency tools and coordination mechanisms would overlap, rather than substitute, the previous agency-based ones.

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5.5.5 Challenges to the extension of the DaO initiative on a global scale As mentioned above, the DaO postulates a radical shift in the business models, programming, budgeting and funding practices, and governance and decision-making dynamics of the UN system organizations. As the DaO enters its next implementation phase and scales up to a new group of 21 “self-starter” countries, significant challenges are faced with regards to its sustainability and its ability to achieve the expected benefits (Kohler 2011; UN 2012 and 2012a). These issues mainly relate to policy, technical and operational differences and inconsistencies among agencies.

5.5.5.1 Policy and technical differences Within a policy perspective, harmonization is hindered by the fact that UN organizations are based on different “philosophies” (Kohler 2011). The approach to Human Rights is one issue where these different ideologies come into play. At the normative level, all UN agencies are under the aegis of the Universal Declaration of Human Rights. However, there is reluctance in many agencies to be explicit and proactive on the UN’s human rights and rights-based commitment because of their different mandates and histories. If agencies do not unequivocally ground their policy development in a humanrights base, it is not possible to have policy coherence at a normative level. Differences in economic and social models for development hinder policy cohesion as well. The most visible of these differences relates to the dichotomy between the Keynesian and structuralist schools versus neoliberal paradigms or the so-called Washington consensus (Palley 2004). Interestingly, there is an evolution in the traditionally neoclassical policy positions prescriptions of the IFIs, as a result of the lessons from the global financial crisis. There are also divergent approaches on technical issues. One example is on the topic of child nutrition, with FAO, WHO and UNICEF attributing different importance to availability of food, time for care, or access to health services and water and sanitation. This results in often inconsistent policy advice (UNICEF 2009). Another aspect concerns agency subcultures and allegiances. UN agencies are often associated with groups of states that influence the agency’s policy positions through their governing bodies (Kohler 2011). A related issue is the agencies’ relations with the host government and country elites. For example, UNDP and UNICEF maintain the largest field operations within the UN system and have developed, over time, strong relations with host governments to ensure their continued presence but, as a result, they are frequently less assertive on policy issues than they ought to be, considering their mandates.

5.5.5.2 Operational challenges and differences in business practices From an operational perspective based on the experience of the first pilot projects (UNDG 2010a; UN 2012a; UN DESA 2012; UN Evaluation Group 2012), the UN system faces the following challenges in making the DaO experience a successful one:

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 Persistence of a defensive approach to interagency integration and division of labor among UN system organizations. Organizations have so far approached this subject with a reactive approach. Going forward, organizations need to take a proactive approach based on interagency fundraising, common programming and implementation based on the respective competitive advantages.  Lack of predictable and timely funding to the one UN Program. In order to function correctly, the one budgetary framework principle needs a steady and significant flow of “unearmarked” resources. Unfortunately, multilateral funding for development remains highly volatile and with a significant percentage of funds earmarked for specific projects and beneficiaries. Moreover, donors continue to fund single agencies directly while the One UN Program paradigm needs joint funding that can be allocated with flexibility by the UNCT along the One program’s priorities. The growing interest for “soft earmarking” of financial resources and the increase of “pooled” funds and Multi-Donor Trust Funds are aimed at improving this situation and gaining more significant allocation flexibility for the UN system organizations (for further references see Chapter 7).  Slow pace of harmonization and simplification of business practices. This process needs buy-in from organizations’ headquarters, where change happens at a much slower pace and where there has been strong inertia towards UNDG’s proposed harmonized solutions.  Need to reduce interagency transaction costs. The introductory phase of any major change in management process generates redundancies and duplications in decision-making, accountability and governance processes. As the DaO initiative matures it is imperative that the functioning of the UNCT and the RC system is streamlined and integrated with the existing mechanisms at the agency level. This can only be achieved through devolution of power and responsibilities from the single organizations to joint organs. Trust in these organs’ impartiality and representativeness of the UN system as a whole still needs to mature.  Need for improved alignment of UN system capacities with beneficiary countries’ priorities and technical support needs. Going forward the UN family needs to evolve its expertise on the ground based on the capacity building and technical support needed by the beneficiary government and implementing partners at country level.  Insufficient use of national capacities and systems. The current frameworks for technical cooperation require the development and deployment of countrybased professionals in program implementation and the utilization of national public sector systems—from procurement to financial management. This path of self-reliance and sustainability is still at its early stages but the DaO has the potential to significantly support it. From a managerial and administrative perspective, the most pressing of the above challenges is the ability of the DaO to deliver a real reduction of the transaction

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costs associated with planning, programming and delivery of aid. The principles and pilot applications of the DaO initiative show the potential to produce:  Economies of scale, e.g. through the establishment of UN system-wide procurement services and Long Term Agreements (LTAs), and joint negotiation of Security Services and ICT management;  Diversity reduction, e.g. through harmonized mechanisms for the evaluation of reliability and financial capacity of implementing partners such as the Harmonized approach to Cash Transfer (HACT);  Reduction of fragmentation, overlapping, inconsistencies and duplications of the operational activities for development. Moreover, the joint program review and evaluation processes can instil a positive and re-enforcing feed forward mechanism. On the other side, the DaO initiative carries the main risks of duplicating bureaucratic structures and creating a redundancy of governance mechanisms and satisfying administrative procedures, if it is developed as an additional program instead of substituting existing participating organizations’ mechanisms. Overcoming this issue is only marginally a matter of administrative change, as it largely lies with the political willingness of the single organizations’ top management to release spheres of power for the benefit of UNCTs’ organs and the the RCs.

5.6 An inconvenient dilemma for the current coordination initiatives in the development sector The DaO initiative moves from the ground up and postulates a comprehensive rethinking of the functioning of the entire UN system. Its agenda for change addresses the core criticism moved by many observers and member states: the UN inability to deliver comprehensive, systematic support in an efficient and effective manner by maximizing and consolidating the presence of the UN system organizations under a unified team and program of action. In other words, the agenda of the DaO can be described as a “centripetal” force to become one, starting from the field operations. While it is clear that the radical shift proposed by the DaO needs to be tackled progressively and that field operations are the right place to start, success can only be reached by rethinking the institutional settings of the UN system as a whole. Up to this point, headquarters not always seems to have played a proactive role, perhaps based on the perceived need to preserve individual organizations’ visibility towards donors and protecting their consolidated areas of activity. This can be seen as unintended consequence of the continuous mandate expansion and organizational growth within a loosely hierarchical system without an effective consolidation or rationalization from the top. Both the institutional inertia and the willingness of member states to allow some degree of redundancy in the system—in order to have “choices” on organizations to fund and negotiation tables on which to play—contributed to create this situation. Since this dynamic is long embedded in the mindset of top managers and country

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delegates, the streamlining, rationalization and re-centralization of the institutional settings of the UN system is now difficult and extremely painful to achieve. Some commentators argued against the very premise of the DaO initiative to transform the UN system on the ground into a “one-stop shop” able to provide the widest possible range of “public goods” to governments and populations in need. In this view, commentators stated that change should take the form of a “centrifugal” force that propels multiple agencies to compete in the market for aid which would likely result in a natural selection of the most “fit” organizations (Schornich and Sequeira 2009). This argument builds from the proposition that competition for aid has drastically changed since the inception of the UN—the UN organizations are now “forced to compete against McKinsey when providing technical support to Latin American governments, with the Gates Foundation when fighting HIV/AIDS in Africa, and with the US military when building schools in the foothills of Afghanistan” (Schornich and Sequeira 2009). Clearly, not all sectors and fields are exposed to the same level of competition. There are “natural monopolies” that require agencies like the UNHCR to secure the rights and well-being of refugees across political borders or UNRWA to protect Palestinian refugees. In these fields, a UN monopoly is justified by the high political and fixed costs of setting up an inter-governmental cooperation mechanism, by decreasing marginal costs of providing the service, and by positive network effects. In these areas, a “centripetal” movement towards consolidation and rationalization makes sense to support optimization of the “monopoly”. On the contrary, in areas linked to technical assistance, policy advice and provision of individual goods the UN organizations need to research their competitive advantages and compete against each other and with a variety of businesses, NGOs and public-private partnerships. This may result in the “privatization” of certain segments, as non-UN subjects may certainly become more cost-efficient for donors, likely resulting in some UN organizations being on the “losing” side of competitions for resources and needing to radically re-think their value proposition. The model of system-wide program negotiation by “consensus” proposed by the DaO may hinder this dynamic by creating compromises and sub-optimal organizational settings. The current financial crisis across the globe represents the ideal testing for this proposition, as resources for development are decreasing and donors are actively pursuing ways to “do more with less”. As the trope of “free markets always being more efficient allocators of resources than government” continues to have sway in many circles, particularly among donors who have been successful in the private sector, this is likely to remain a major challenge for the UN community in the coming years.

5.7 Case study: UNAIDS at the crossroad between UN system coordination, modernization of governance settings and management reform This case study analyzes the evolution of UNAIDS as interagency coordinating institution, describes the organization’s reforms that allowed it to become more

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effective and analyzes the internal and external factors that led to this transformation. Through this case we intend to showcase the importance of the institutional design and operational empowerment of coordination mechanisms.3

5.7.1 Background The Joint UN program on HIV/AIDS (UNAIDS) was created in 1994 in response to the growing pressure to reform the UN system’s response to the pandemic. The following UN organizations are UNAIDS “cosponsors”: UNHCR, UNICEF, WFP, UNDP, UNFPA, UNODC, ILO, UNESCO, WHO and the World Bank. ECOSOC resolution 1994/24 that established UNAIDS stated that the UNAIDS program “will draw upon the experience and strengths of the cosponsors to develop its strategies and policies, which will be incorporated in turn into their programmes and activities”. Moreover, at country level “the participation in UNAIDS of the cosponsors will ensure the provision of technical and financial assistance to national activities in a coordinated manner”. From the outset, UNAIDS was seen as a groundbreaking initiative, since it was the first entity of this kind to be given the task of improving UN governance by transcending organizational barriers between agencies with the goal of creating an integrated response to one of the most critical challenges for development and, indeed, humanity. Through UNAIDS, the cosponsors were tasked to converge their policies, harmonize their goals and objectives, build new common tools and instruments, share funds, knowledge and expertise, and jointly deliver programs at the country level. UNAIDS was also intended as a vehicle to build broad, long-term partnerships with a network of activists, groups of people affected by the disease, international NGOs and a wide range of civil and faith-based organizations.

5.7.2 UNAIDS’ governance UNAIDS’ governance is represented in Figure 5.6. Its three main organs are the Programme Coordinating Board (PCB), the Committee of Cosponsoring Organizations (CCO) and the UNAIDS Secretariat. The graph shows also the partnerships and institutional interactions with the main external stakeholder groups. The PCB acts as the governing body of UNAIDS and is in charge of all issues concerning policy, strategy, finance, monitoring and evaluation. It comprises 22 member states chosen according to geographical representation. It also comprises representatives of the ten cosponsors and five civil society organizations (CSOs). Cosponsors and CSOs fully participate in PCB’s discussions but do not have the right to vote. The CCO serves as a permanent forum of the partner organizations, and it has the main functions of coordinating and managing the organizations’ commitments and joint actions to combat HIV. The Secretariat is responsible for preparing the biennial work plan and budget, and for reporting on Joint program activities. It provides support in policy formulation, strategic planning,

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Other Govts (recipient countries)

UNICEF UNDP

UNHCR

UNESCO

22 Member States

WHO cosponsors

UNFPA

Media

WFP 5 CSOs

World Bank

ILO UNODC

Civil Society

Committee of Cosponsoring Organizations (ССО) Programme Coordinating Board (PCB)

UNAIDS S f ir r e ta r ia t

Λ /

International NGOs

Research, Universities

Global and Regional Forums

UNAIDS technical Support

REGIONAL AND COUNTRY LEVELS

► Members of Executive Board ' Binding Resolutions

FIGURE 5.6 UNAIDS’ governance settings Source: adapted from Nay (2009)

technical guidance, research and development, advocacy and external relations. In a few cases, the UNAIDS Secretariat operates directly on the ground by providing coordinated technical and financial assistance to strengthen national capacities to plan, coordinate, implement and monitor the overall response to HIV/AIDS. The effectiveness of UNAIDS as a coordination mechanism stands on the cosponsors’ commitment and their ability to bring an identifiable comparative advantage to the UNAIDS partnership, gather and share dedicated financial resources for the joint program on HIV/AIDS and to perform effective activities on the ground.

5.7.3 1994–2004: Inertia of the multilateral system and resistance to coordination During its first decade UNAIDS helped develop a policy dialogue and share information about cosponsors’ ongoing HIV activities, but was unable to provide sustainable interagency partnerships and operational integration of activities to tackle the epidemic. UNAIDS faced a number of limitations, partly because of its institutional and governance arrangements, partly because of environmental factors:  Scarce financial and human capacity. During the 1990s, donors’ attention to the epidemic still remained low and many developing countries were politically

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unwilling to accept their vulnerability to HIV. The donor community’s lack of commitment kept HIV programs in most agencies at a very low level of funding and constituted an obstacle to the provision of interagency funds for implementing the Joint Program (JP).  Policy inconsistencies, limited trust among cosponsors and lack of incentives for coordination limited the empowerment of UNAIDS planning and operational coordination functions.  Limited effectiveness of UNAIDS’ resolutions and decisions. PCB’s resolutions are binding, but to be effective the governing bodies of the cosponsoring organizations have to legally endorse them. PCB did not demonstrate clear authority over the cosponsors. The consensus rule was established for the CCO and full accountability was put on cosponsors for developing interagency partnerships. This allowed an inertial and conservative pace of coordination during this first phase.  Loose interagency coordination mechanisms. The Interagency Task Teams (ITTs) were established as the main tools for coordination and partnership on specific cross-cutting themes. ITTs produced very uneven results since they were highly dependent on voluntary initiatives by cosponsors and relied on ad hoc decision-making mechanisms. These challenges resulted in UNAIDS’ low operational capacity and made it impossible to “scale up” its intervention. They also confined the Secretariat to the role of collecting information on cosponsors’ scattered activities on HIV/AIDS and helping formalize resolutions and guidelines presented post facto as a joint UN program. At this stage, the Secretariat had neither the influence nor the mandate to force cosponsors to hold policy dialogues, combine expertise and integrate operational activities on cross-cutting themes.

5.7.4 UNAIDS governance and management reforms in the context of the global commitment to fight HIV/AIDS: UN system coordination Three main environmental factors led to a renewed interest in UNAIDS and to the launch of its governance and management reforms: (a) the increased pluralism and complexity of the UNAIDS response system; (b) the global commitment to fighting HIV/AIDS and (c) the initiatives to strengthen the UN’s system-wide coherence. In the early 2000s, the recognition of HIV/AIDS as major challenge to development, the significant increase of funding and the proliferation of thematic forums and networks made the global response to the pandemic a pluralistic and complex system. In this new environment, the UN system became one of the “development partners” competing in a pluralistic system rather than the leading organization, and faced increasing challenges from other state and non-state actors to deliver services jointly, with greater efficiency and accountability. The renewed attention of world leaders and the commitments to combating the epidemic created a favorable context for UNAIDS’ international visibility, as

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cosponsors obtained supplementary financial support to strengthen their programs. On the other hand, it also revealed how little progress had been achieved by UNAIDS since its inception in terms of coordination and integration of the various policy areas for the prevention and mitigation of the epidemic. The establishment of a specific results framework and the commitment by the cosponsors to undertake joint periodic reviews helped create the conditions for reforming and strengthening UNAIDS. A stream of new initiatives to strengthen the UN’s system-wide coherence also contributed to spurring improvement of UNAIDS’ governance. An independent evaluation of UNAIDS, issued in 2003–4, identified a series of weaknesses such as lack of accountability by the cosponsors, persisting fragmentation, rivalries and implementation inefficiencies. As donors’ warnings were not leading to noticeable improvements, some OECD countries in 2005 set up a Global Task Force for improving AIDS coordination among multilateral institutions and donors. The Task Force called for a reform of UNAIDS governance mechanisms and management systems with tangible objectives to be assessed and measured. The General Assembly, at the 2005 World Summit, endorsed these recommendations and became an important point of reference to promote change. While cosponsors did not seem to play a proactive role in promoting UNAIDS reforms, the enlargement of the UNAIDS partnership to include four new organizations—ILO, UNODC, WFP and UNHCR—represented an important driver of change. This enlargement contributed to strengthening the coordination rules and to tightening the governance mechanisms, which in turn supported stronger accountability by cosponsors and fostered transparency and predictability in decision-making. An important shift towards a results-based approach to coordination happened in the context of the allocation of the 2006–7 UNAIDS financial resources. Until then, allocation of funds had been based on consolidated decisions rather than a performance review. At this meeting, participants adopted informal criteria to assess the quality and scope of each organization’s program and then voted for a sharing of the funds. This came as a shock as it was a “negative sum game” for some organizations, but in the medium-term it represented an important step forward towards the creation of incentives for active participation in and commitment to UNAIDS. A further important internal factor of change was the ability of the UNAIDS Secretariat to act as “reform broker” by channeling to itself various demands and inputs from the UN system environment that would improve its efficiency and effectiveness. The Secretariat played the main role of facilitator among cosponsors and in shaping principles and instruments to improve UNAIDS management. In 2006–7, the UNAIDS secretariat established a joint policy framework, which was successfully endorsed by all cosponsors and established as a worldwide guide for internationally recognized action. It issued standards for policy development and operational coordination. It supported the identification of measurable policy objectives and benchmarks and established a result-based management approach,

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which extended to a joint funding framework. The Secretariat also contributed by setting up budget control procedures to track the use of joint funds as well as an independent oversight process which would gather indicators to measure the impacts of cosponsors’ AIDS programs. Policy streamlining and harmonization would not have been effective without a clear identification of the cosponsors’ respective areas of operations. In 2005 the Secretariat promoted an important effort which led to the issuance of a “UNAIDS division of labor”. The Secretariat identified a number of technical support areas: a lead organization and a number of partners for each area according to the agencies’ mandates, ongoing field programs and competitive advantages. For instance, UNICEF was identified as leader organization for activities among orphans and vulnerable children, UNESCO for HIV prevention education in primary/secondary school, UNFPA for prevention activities among key populations and UNHCR for all activities related to refugees and internally displaced people. Lastly, new mechanisms were created to channel UN system assistance to the field via a variety of organizations and beneficiaries ranging from national AIDS councils to civil society organizations and affected populations. Since 2006, UNAIDS created one-stop shops called Technical Support Facilities (TSF) in about 60 countries to support the design of programs and problem-solving in various areas of prevention and fight against HIV. In 2006 it created a global permanent forum, called Global Implementation Support Team (GIST), to build rapid and coordinated technical responses to governments’ requests. It also created a further mechanism, called the AIDS Strategy and Action Plan (ASAP) to complement existing options for technical country assistance.

5.7.5 Challenges ahead Since the early 2000s UNAIDS has been on a path of continuous improvement and has achieved increased effectiveness and credibility as an interagency coordination institution but several challenges remain. From a policy perspective, the cosponsors’ reaction to UNAIDS’ strategic framework and joint programming has been uneven. While most organizations have aligned their performance indicators and reporting systems to the UNAIDS’ frameworks, including greater efforts on program assessment and evaluations, organizations seem to continue to follow their own programmatic priorities. Their communication and advocacy activities scarcely reflect UNAIDS as a family. The division of labor established at the global level helped UN agencies to clarify the scope of their mandates and to reduce potential conflicts, however, it is not sufficient to produce integrated programs at the country level. The constitution of Joint UN Teams on AIDS within UNCTs, and the deployment of Joint Programs of support on AIDS in the Delivery as One pilot countries are platforms to advance the operational coordination in the field. Finally, coordination mechanisms such as TSF, GIST and ASAP, activated on a global scale, are at risk of institutional inertia, while at the same time they must continue to remain as flexible resources for national stakeholders.

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5.7.6 Lessons learned from the UNAIDS case First, the UNAIDS case offers insights into the effectiveness of alternative approaches to coordination in the international development sector and in the UN system. In particular, one may place coordination mechanisms on a continuum between “soft” and “hard” models to achieve change based on (1) their institutional design, governance and enforceability of joint decisions, (2) availability of joint financial resources, and (3) policy and operational mechanisms. As in many other UN system coordination initiatives, UNAIDS was initially set up as a “soft” coordination institution. This configuration was not fitting with the ambitious objectives that ECOSOC attributed to the Joint Program. As a result of mounting external pressure to improve coordination effectiveness and deliver results, several changes to the governance model were made and UNAIDS moved towards a “hard” model. This increased UNAIDS’ impact and enabled it to deliver results. In parallel, management systems adopted a results-based approach and more sophisticated tools for policy and program coordination, backed by the influx of additional resources. The UNAIDS case allows us to reflect on the suitability of different coordination mechanisms to achieve specific expected results. In the context of a decentralized and non-hierarchical system, like the UN, soft coordination models are often considered more acceptable to the participating organizations because they overlap, rather than substitute, consolidated governance mechanisms and other existing organizations. Soft coordination mechanisms are often seen as safe forums for discussion, since the consensus principle for decision-making protects the status quo in cases of possibly “undesired” outcomes. Based on their characteristics, soft mechanisms are effective in areas that require broad agreement on general frameworks and where implementation can be left to single organizations. These mechanisms are usually process oriented and time consuming, their decisions do usually achieve a broad-based agreement, however they risk uneven implementation by organizations. The HLCM and HLCP of the CEB well represent this model and have been quite successful in advancing the harmonization of business practices and the “top down” program coordination agenda. On the other hand, hard coordination mechanisms work well when the intended objectives are the restructuring of core operations, the integration of business practices or the identification of joint programs and budgets. In these cases, governance settings need to privilege efficiency over broad consensus, decisions need to be immediately enforceable, and change management needs to be supported with additional resources and ad hoc infrastructures. Change often provokes discontent and may result, at times, in short-run disruptions; strong sponsors and clear incentives for change need to be found as consolidated practices and positions are at stake. As the UN system’s agenda to enhance coherence progresses and the calls for a radical and systematic rethinking of the UN system become a priority for organizations, hard coordination approaches gradually become more acceptable and

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practised. These have great potential but need to deploy a sufficient amount of resources, adequate technical and change management skills and ought to adopt a long-term perspective to be sustainable and effective. They also need to resist the classic “bureaucratic trap” of coordinating institutions: the creation of interagency infrastructures and governance without the streamlining and delegation of power back to the single, participating organizations, which make the overall coordination useful and sustainable.

Notes 1 See, for example, the UN Joint Inspection Unit reports on UN performance at the country level issued in 2005. 2 For an overview see Von Freiesleben (2008). 3 The main sources for this case study are Castilho and Poate (2002), Nay (2009a, 2009b), Poate et al. (2009), UNAIDS (2007), UNDP (2008).

6 CHANGING PARADIGMS FOR PROGRAM IMPLEMENTATION Daniele Alesani*

6.1 A new role for IIs in technical cooperation programs’ implementation: status and challenges The new paradigms and frameworks for development cooperation, from the Paris Declaration onwards, have put national governments and civil society organizations “in the driver’s seat” of development programs and reshaped the expected role of International Institutions (IIs). While traditionally donors have mainly driven development programs, and IIs were responsible for their overall implementation, in the current scenario the latter are expected to play the role of facilitators among various players, to give impulse and monitor program execution and to selectively implement activities limited to their competitive advantages. This is often described as a transition from a “direct” to an “indirect” program delivery approach. This transition can be well understood in the context of the overall New Public Management (NPM) reform, which originated in the 1980s in several national public sector systems and more recently extended to intergovernmental organizations (Geri 2001). The NPM agenda promoted the adoption of a managerial approach to government: downsizing, outsourcing and privatizing with the intent to increase efficiency and effectiveness in the provision of public goods and services (for a review, see Alonso et al. 2011). The main philosophy behind the NPM is that governments need to be run like enterprises in order to maximize the use of public resources and, where politically and technically convenient, de-regulate and open up competition for the provision of goods and services of public interest (Keeling 1972; Pollitt and Bouckaert 2004). One of the main lessons learned from more than 20 years of NPM reforms is that outsourcing and privatization mechanisms cannot plainly substitute the whole of government; public sector organizations need to set up, regulate and

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monitor these mechanisms to ensure provision of public value and social orientation. In turn, public sector organizations need to evolve into their new roles, adapt their core competences and advance their management tools, as well as their organizational culture and approaches to partnerships and contracting out (Pallot 2001). In the context of development cooperation activities, this reform agenda requires IIs to abandon the traditional bureaucratic and reactive approach to beneficiary governments and NGOs and to embrace a more holistic and strategic approach to them as “implementing partners” (IPs). In practice, this means that IIs must adopt new management tools and systems along the project management cycle to: 1 2 3 4

align planning with national priorities and strategies; select suitable partners for in-country development activities; ensure tight financial control of implementing partners; monitor program execution and evaluate results.

In this chapter, we start with a review of the main criticisms to the traditional model of program delivery and the expected benefits and challenges of the new model. We then analyze the main management tools that IIs are implementing to strategically manage relations with their IPs as well as the status of their implementation. The analysis allows us to understand how far organizations have gone to align themselves to the new role that the “indirect” implementation approach requires while identifying the remaining challenges and open issues.

6.2 The changing aid environment and a new role for development actors Consolidated models of technical cooperation came under attack during the 1990s for a series of reasons (Baaz 2005; Cox, Thornton and Cameron 2006; Kanbur and Sandler 1999): a Excessive focus on donors’ interests and exclusion from the planning phase of the recipient countries’ governments, seen as beneficiaries rather than “owners” of the development activities. b Instrumental use of “conditions” requiring of recipient governments policy reforms and structural changes in domestic public sectors in order to gain access to technical cooperation and financial aid. The most controversial “conditions” applied by the International Financial Institutions (IFIs) are the ones requiring the implementation of macro-economic reforms—for example, government downsizing, privatization of strategic economic sectors, trade liberalization and elimination of barriers to international commerce—based on development models elaborated by IFIs (Polak 1991). This practice raised the important issue of “asymmetric accountability” between donors/IIs and aid recipients (Raffer

148 Management of IIs and INGOs

1993), as the latter were held responsible both for implementing the required conditions and repaying the contracted loans, whereas the former were visibly not held accountable for failure of the proposed economic models and the possible negative social impacts of the suggested reforms. c Bypassing of government systems. Public budgeting, procurement and governance systems are traditionally weak in recipient governments. These weaknesses represent a burden and a risk and have resulted in IIs and donors setting up Project Implementation Units (PIU) outside the existing government structure and ad hoc procurement and financial management systems to manage international contributions. This practice prevented the integration of international aid money and resources in beneficiary governments and represented an obstacle to their mainstreaming. d “Paternalistic” attitude and little utilization of local resources. Given the scarcity of technical and administrative capacity in recipient governments, IIs and bilateral cooperation agencies heavily relied on internationally recruited professionals to implement development activities. This prevented international aid from fostering local technical expertise or promoting self-reliance. In sum, the traditional model of technical cooperation received criticism for being short-sighted, perpetrating dependency on external resources and capacities, and therefore failing to effectively pursue national development priorities in a sustainable way. As discussed earlier in this work, the international community has revisited comprehensively this traditional model during the last two decades through a series of frameworks, from the 2005 Paris Declaration on Aid Effectiveness to the 2007 “Delivery as One” initiative, the 2008 Accra Agenda for Action, and the 2011 Busan Partnership. These frameworks intended to reorient technical cooperation for development towards the following principles (Figure 6.1):  transparency and mutual accountability between donors and recipient governments as the main conditions for a balanced partnership for development;  alignment of international aid to nationally identified priorities and program ownership by recipient governments;  focus on capacity building and knowledge transfer from IIs and bilateral agencies to recipient governments;  improvement of national governance systems and tools to mainstream aid;  coordination and consistency among various bilateral and multilateral development institutions based on a rational “division of labor” among them and on organizations’ competitive advantages;  development activities directly managed by governments and often delegated to local authorities and NGOs. In the traditional model of international cooperation bilateral donors and multilateral institutions held firmly in their hands the planning and implementation of

Changing paradigms for program implementation 149

^Harmonization \ Consistency · Division of labor:

Shift in programme implementation roles

Donors

International Institutions ^

ЇУ W

Г /. # N

V

International NGOs and civ society

/

Beneficiary G overnm ents .Self-reliance : Growth in capacity |

FIGURE 6.1 Alignment, empowerment and decentralization in technical cooperation

for development Source: our elaboration

development activities which international professionals normally managed from these organizations and only selectively outsourced to third parties. The so-called “Tripartite System” represents a good example of this model (Figure 6.2). Donors mainly channel multilateral resources for development through the United Nations Development Programme (UNDP), which is also responsible for assessing the macro-economic situation of the country, identifying the main causes of underdevelopment and formulating a comprehensive plan for action. In this model, UN specialized agencies formulate sectorial programs, implement and monitor operational activities and are entrusted with financial resources to execute them. National governments and local NGOs are called upon to support implementation at the discretion of the specialized agencies. UNDP is then responsible for assessing progress towards high-level objectives and re-planning for the future. The new model of technical cooperation promotes strong decentralization and devolution to national governments and civil society organizations on the ground. Under the “National Execution” paradigm (also called NEX), the UNDP represents the UN system, and national governments work in partnership, sharing the responsibility of assessing the country situation and identifying priorities and plans for development. Both are comprehensively responsible for identifying agents who will implement programs in the various sectors. As a consequence, the UN specialized agencies and other field based agencies are now in an ancillary position;

150 Management of IIs and INGOs

Tripartite System

National Execution UNDP

UNDP Planning and financial resources

Support to planning and financial resources

R e c ip ie n t G o v e rn m e n t S p e c ia liz e d A g e n c ie s Implementation and technical assistance

Co-planning, implementation and sub-contracting

S p e c ia lize d A g e n c ie s R e c ip ie n t G o v e rn m e n ts /N G O s

Implementation and technical assistance

Implementation and final beneficiary

NGOs Implementation and final beneficiary

FIGURE 6.2 Changing programme delivery paradigms within the UN system Source: adapated from UNDP (1995)

they support sectorial programming and provide technical advice and support to implement programs as required by the governments. Under the NEX modality (Figure 6.2), UN system organizations as a whole are no longer in charge of the planning and implementation process, but rather give impulse, support and monitor each phase, while making sure that intended results are achieved. While they retain a funding and resource allocation role, their main activities are shifting towards the ex-ante (policy dialogue and support to program formulation) and ex-post (control and evaluation) stages of the program cycle. There are a number of expected benefits and open challenges to the NEX paradigm (UNDP 1995). From the perspective of the recipient governments these are:  Increased sense of ownership on formulation of priorities and plans and therefore accountability over expected results. Program ownership may on the other hand create additional administrative costs and require investments that some governments may not be willing or capable of bearing.  Improved self-reliance. Governments are encouraged to directly procure goods and services and to recruit local officials and consultants to executive development activities. Only in exceptional circumstances where procurement procedures are weak or supplies are not locally available do IIs or bilateral cooperation agencies manage these processes internationally. In few cases, over-reliance on poor or scarce local resource can reflect negatively on the overall efficiency and effectiveness of the programs.

Changing paradigms for program implementation 151

 Increased capacity of the national government to assess macro-economic conditions, plan for development, implement reforms and monitor results. Commitment to capacity building by IIs and governments needs to be high and advancements need to be monitored periodically to produce concrete results.  Improved efficiency thanks to lower staff, management and overhead costs. This needs to be supported by continued capacity-building activities of IIs, as local experts and structures cannot be expected to be as effective as technical cooperation agencies in the short term.  Mainstreaming of aid and achievement of sustainable results thanks to the integration of international aid programs within national governance systems. In order to achieve this benefit, governments need to be willing to strengthen their democratic governance, to make their public budgets and finances more transparent and results-based, and to improve their internal regulations and rules. The expected benefits of the NEX model from the perspective of international and local NGOs and civil society can be summarized as follows (UN Joint Inspection Unit 1993; Adams and McCracken 1994):  More rapid and flexible response to local needs. NGOs are expected to be operationally more flexible and efficient than IGOs and governments, whose activities are more severely constrained by bureaucracy and hierarchical structures. Moreover, NGOs are generally more aware of local conditions and capable of a more comprehensive geographical penetration.  Increased grassroots participation through access to local supply channels for procurement and recruitment as well as to local facilities and expertise.  Improved operational effectiveness achieved through adapting programs to local contexts. NGOs are expected to have strong awareness of local necessities and conditions and to achieve high levels of acceptance and buy-in of the development activities thanks to their consolidated relationship with local communities and mutual trust. One of the main issues of the NEX model identified in the literature is the difference in scale and administrative capacity between IIs and most of the national and local NGOs, which may create an obstacle for functional and successful partnerships. Given their small scale and geographical limitation, outsourcing of national scale programs to local NGOs can also create consolidation problems to IIs (Uvin 1995). International NGOs are clearly better positioned to cope with IIs’ partnership requirements, but they do not offer the advantages of grass-roots participation and local belonging either. Another important challenge is to ensure alignment of NGOs’ orientations and activities. When NGOs implement technical cooperation projects funded by IIs they represent the international community’s aid effort and significantly shape local communities’ perception of it. Therefore, IIs need to adequately select their

152 Management of IIs and INGOs

implementing partners and establish proper accountability mechanisms from the planning to the reporting phase.

6.3 IIs: from “administration” to “strategic management” of implementing partners The new paradigms for international cooperation re-shape the expected role of IIs, governments and NGOs. In this context, IIs’ traditional “bureaucratic” approach to partnership is not adequate to ensure the expected results in terms of program ownership and alignment with national priorities, harmonization and improved effectiveness of development activities, empowerment and capacity building of beneficiary governments and local communities. In order to ensure these results, IIs are progressively adopting a more strategic approach to better select IPs and to comprehensively control the programmatic and financial aspects of NEX activities. In the United Nations system, the UNDG has developed the majority of new frameworks and tools to improve IP management in an effort to promote a harmonized approach to NEX activities from 2005 onward. The UNDG ExCom agencies—UNDP, UNFPA, WFP, UNICEF—are the most active and advanced organizations in this area. In the next paragraphs, we explore in further detail the new IP management tools implemented by IIs along the main project cycle phases, analyzing their expected contributions, their current status of implementation and remaining challenges. For this purpose, the project cycle can be broken down into the following four main phases (see Figure 6.3): 1 Planning and programming. In this phase, IIs perform macro assessments of the beneficiary country, elaborate programs of work, select their IPs and assign budgets to them. 2 Funding, appraisal and risk management. In this phase, IIs assess the operational and financial risks of dealing with specific IPs and adopt appropriate risk management and mitigation decisions. 3 Monitoring and evaluation. In this phase, IIs periodically verify the advancement of technical activities delegated to IPs and their financial stewardship based on narrative and financial reporting and direct monitoring. Projects and country programs are evaluated against their expected results to support decisions on future planning and retention of IPs. 4. Audit. In this phase, independent auditors engaged by IIs provide assurance on IPs’ activities and financial reports. As IIs become increasingly able to assess risks of dealing with IPs and monitor implementation, the need for audits and their usage progressively diminish. In the following paragraphs, we refer to the experience the UNDG ExCom agencies as these organizations are heavily committed to increasing its capacity to strategically manage its IPs and its leverage on them.

Changing paradigms for program implementation 153

P la n n in g a n d P ro g ra m m in g

A u d it

I Implementing j Partners ’ j management cycle

F u n d in g , a p p ra is a l a n d ris k m anagem ent

M o n ito rin g a nd E v a lu a tio n

FIGURE 6.3 Implementing partners’ management cycle Source: our elaboration

6.3.1 Planning and programming From the perspective of IIs, the main output of this phase is to identify development objectives aligned with national priorities and strategies, formulating expected results and a concrete program of work. This phase can be broken down into three components: 1 Country assessment and planning. IIs issue a Country Program Document (CPD) based on an assessment of the macro-economic, social and political conditions of each country. 2 Assessment and selection of IPs based on their operational capacity, trustworthiness and general suitability to implement IIs’ programs. 3 Programming and IPs’ contracting. A Country Program Action Plan (CPAP) is issued based on the II’s decision on which activities to implement directly or to outsource to IPs. Contractual documents are signed with each IP to identify their performance obligations and financial resources requirements (Letter of Understanding—LoU and Annual Work Plan—AWP).

6.3.1.1 Country assessment and planning For country assessment and planning IIs leverage on interagency processes such as the Common Country Assessment (CCA) and the United Nations Development Assistance Framework (UNDAF).

154 Management of IIs and INGOs

Analysis and Planning

Selection and Assessment

Programming and Contracting

Country Programme Document Implementing Partner Assessment Tool

Country Programme Action Plan

Outcomes O u tp uts "j Strategies I· A ctivitie s і D uration і

Letter of Understanding

Annual Work Plan

Estimated ] cost

^

FIGURE 6.4 The planning and programming phase Source: our elaboration

Based on their identified competitive advantages and institutional mandates, each II identifies its expected contribution to the UNDAF objectives and lays out a multi-year CPD. These documents usually contain a narrative on the expected activities and results to be achieved as well as a financial plan quantifying the amount of resources needed to execute the program. The financial plan is usually based on the IIs’ revenue forecasts and foreseeable budget allocations. CCA and UNDAF were introduced with the intent to enhance IIs’ coordination, strengthen effectiveness and a results-based approach, increasing participation and buy-in of the recipient government. Their application to date shows a good level of participation by both IIs and beneficiary governments and improvement in the quality of planning. The main area for future improvement is the ability to identify a clear “division of labor” among agencies and to create horizontal integration thus avoiding duplications among agencies’ country programs (UNDG 2009).

6.3.1.2 Assessment and selection of IPs In parallel with the issuance of the CPD, IIs need to select partners able to provide quality services and meet program expectations. Traditionally, IIs have selected their partners through unstructured approaches, often based on political considerations or consolidated relations rather than on partners’ capacities and risk management considerations.

Changing paradigms for program implementation 155

While this limitation still persists, to a certain extent, some IIs have started adopting more holistic and merit-based tools to assess their potential partners. For example, one of the UN Funds and Programmes recently adopted a multi-dimensional IP assessment framework covering eight different dimensions: 1 2 3 4 5 6 7 8

governance and leadership; human resources; program monitoring and evaluation; financial management; procurement systems; comparative advantages; knowledge management; partnership.

In practice, the link between assessment results and selection stands out more clearly for partner NGOs than for recipient governments. Within the current international cooperation frameworks, these are considered “natural” IPs and they can be excluded only in specific and “extreme” circumstances of diffused corruption, lack of transparency or minimal financial management and controls, and/or unwillingness to buy into multilateral objectives. Nonetheless, recipient governments’ assessment results are still useful to enable IIs’ to launch capacity building and technical support initiatives, which in turn are meant to strengthen governments’ suitability as IPs.

6.3.1.3 Programming and contracting of IPs Upon issuance of the CPD, the II and the beneficiary government prepare and issue the CPAP, which identifies a concrete plan of action, the individuals responsible for implementation of specific projects, the project’s duration and cost, and measurable outputs and outcomes. In this phase, it is crucial for IIs to base their considerations on realistic financial resources/revenue forecasts and to have a comprehensive view of the interdependencies among IPs and the activities assigned to them. Operationally, the first decision that IIs and recipient governments need to take is which activities to implement directly and which ones to outsource to IPs. Once this balance is decided, eligible IPs can be contracted. The main contracting tools are the Letter of Understanding (LoU) and the Annual Work Plan (AWP). The LoU includes the main terms and conditions of partnership, while the AWP is intended as a “service agreement” and includes a detailed list of activities, implementation modalities and the authorized budget. AWPs allow IIs to orient the activities of its IPs within a jointly agreed framework. They represent the most important point of reference to verify the IPs’ substantive progress and financial execution on a periodic basis.

156 Management of IIs and INGOs

In this phase it is crucial to: 1 Ensure that the process is consultative. Preparing a CPAP requires the participation and consultation of all relevant stakeholders, not only to finalize strategies but also to collectively ensure that programs will be embedded within national plans and poverty reduction programs. 2 Foster a result-based and holistic approach. IIs need to continuously maintain consistency between the CPD, the CPAP and the AWPs signed with IPs. Consistency means ensuring that programs are comprehensively translated into activities and projects assigned to IPs, objectives are correctly set out, and performance indicators are properly identified and embedded in AWPs.

6.3.2 Funding, financial stewardship and risk management With program delivery progressively shifting towards governments and NGOs, it becomes fundamental for IIs to ensure IPs’ financial stewardship and accountability regarding transferred funds. Traditionally, IIs treated partnering entities either as “vendors” or as “grantees”. In the first case, institutions would set out commercial-like agreements and were provided payments based on status advancements. In the second, much more frequent case, funds were transferred upfront in a pattern similar to grants. Since the ultimate financial responsibility for multilateral development programs lies with IIs irrespective of the program delivery modalities, the progressive increase of NEX activities requires of IIs a more sophisticated approach to IPs’ funding. In response to this need, IIs are progressively implementing risk-based frameworks aimed at reducing transaction costs and strengthening IPs’ reporting capacity and financial stewardship, thereby reducing the risks associated with the “outsourcing” of program implementation. IIs have reached, to date, different levels of sophistication in gearing their funding modalities to IPs’ financial stewardship and accountability. Some organizations transfer funds to IPs based on a periodic program of work, while some others have begun to differentiate between upfront funding, reimbursement and direct payment of IPs’ vendors based on their level of trustworthiness and implementation capacity. Perhaps the best known mechanism of this kind is called Harmonized Approach to Cash Transfers (HACT) adopted by the UN General Assembly resolution 56/201 in the context of the DaO efforts to promote system-wide consistency and results based approach on the ground. This mechanism is still in its pilot phase. All UN system organizations are encouraged to adopt this approach, although the ExCom agencies—UNDP, UNFPA, UNICEF and WFP—are in the front line with this kind of experimentation. HACT is based on a risk assessment methodology, articulated in “macro” and “micro” assessment phases. The macro assessment focuses on country-wide and public sector specific risk factors, such as the level of transparency of public budgeting, financial management, audit and oversight systems. The micro assessment

Changing paradigms for program implementation 157

Planning and programming

Country Programme Action Plan

Letter of Understanding

Annual Work Plan

Appraisal and financing

Harmonized Cash Transfer НАСТ

Risk Assessment Disbursement modalities identification

FIGURE 6.5 The Harmonized Approach to Cash Transfer Source: our elaboration

covers IP-specific risks and focuses on the solidity and comprehensiveness of the IP’s accounting, reporting, internal-control and auditing systems. These assessments help agencies: i) identify the most suitable resource transfer modality to minimize risks of improper use of funds and poor program implementation, and ii) identify strengths and weaknesses in the public financial management system and the financial management practices of individual IPs (UNDG 2005). Under HACT, the lower the country and IP related risks, the greater the financial autonomy entrusted to the IP. Highly trustworthy IPs are entrusted with advance cash transfers. This funding modality gives a high level of flexibility and upfront resource availability to IPs but, from a risk management perspective, it needs to be carefully utilized as it exposes IIs to scrutiny by their own auditors and constituencies for advances that do not promptly result in activities. IIs that loosely utilize this mechanism increase the risks of misuse and/or underperformance of funding. Medium-risk partners receive reimbursements, while high-risk ones have payments made directly to their vendors by IIs. These funding modalities help IIs keep financial control but introduce some level of rigidity in program implementation. The frequency and depth of assurance activities such as in-depth spot checks, programmatic monitoring, and scheduled audits set up under HACT directly depend on the risk level of each IP. These activities are part of HACT’s dynamic

158 Management of IIs and INGOs

risk management approach and promote a continuous improvement process ultimately aimed at achieving, among all IPs, the highest level of financial trustworthiness and autonomy. Currently, HACT has been mainly implemented in the DaO pilot country offices. Current challenges to its dissemination are related to several factors (UN Joint Inspection Unit 2008; UN DESA 2012): 1 High initial investment and start-up costs related to negotiation of formal agreements between IIs and IPs to utilize HACT, development of joint audit and assurance plans, completion of micro-assessments. 2 Capacity issues. HACT introduces new audit, financial reporting and monitoring requirements that can be cumbersome for both IIs’ country offices staff and IPs. In addition, relevant efforts are required to harmonize IIs’ own cash transfer procedures. 3 Resistance and communication issues. HACT implementation may encounter resistance because its administrative burden assessments are often perceived as invasive and delaying the flow of contributions to the beneficiary country. Long term benefits related to increased reliance on national financial management systems, increased government capacity and reduction of ex-post assurance activities still need to be fully understood.

6.3.3 Monitoring and evaluation 6.3.3.1 Monitoring Monitoring is intended as the continuous assessment of project implementation in relation to agreed schedules, use of inputs, infrastructure and services by project beneficiaries. Monitoring provides IIs’ internal and external stakeholders with continuous feedback on program implementation, while also identifying actual or potential successes and problems as early as possible, to facilitate timely adjustments to operations. Program monitoring usually occurs at many levels, in varying forms, and in close collaboration with implementing partners. Monitoring activities include regular site visits, internal periodic reports and review of output and outcome data. The increasing volume of activities that IPs implement, within a context of information asymmetry, makes IIs’ monitoring more complex and costly. Since IPs spend an increasing amount of multilateral aid resources, growing emphasis is being given to the financial component of program monitoring. Under the DaO and NEX frameworks, IIs systematically require IPs to utilize standardized tools to obtain cash disbursements and to certify execution of expenses. The most known of these tools is called the Funding Authorization and Certificate of Expenditures (FACE) form. FACE forms are “results based”, in the sense that resource requirements and reported expenditures are linked to specific activities, expected outputs and objectives included in the AWP. This facilitates IIs’

Changing paradigms for program implementation 159

Planning and programming

Appraisal and financing

Monitoring and evaluation

Harmonized Cash Transfer НАСТ Country Programme Action Plan

R isk A sse ss.

Disbursement modalities id. P ro gra m m e a nd P roject

Annual Working Plan

M AFV

FACE Forms

FIGURE 6.6 Monitoring and Evaluation Source: our elaboration

integrated programmatic and financial monitoring. In turn, IIs have the fundamental role to ensure proper utilization of resources through verification of the truthfulness of substantive progress and financial execution reported through the FACE forms.

6.3.3.2 Evaluation Evaluation is intended as the analysis of the achievements of a given project or broader program of work in comparison with the intended objectives. The scale and scope of evaluation may vary widely based on the IIs’ size, mandate and core operations. Periodic evaluation of IIs’ country programs is a milestone in their partnership with recipient governments. Program objectives normally refer to the achievement of one or more Millennium Development Goals (MDGs). Based on the current international cooperation frameworks, partner governments are ultimately responsible for achieving the MDGs, while IIs are responsible for facilitating, building capacity for development, intermediating effectively multilateral resources for development, monitoring activities and evaluating results. This paradigm shift is intended to improve partner governments’ buy-in, commitment and active involvement in reaching the development objectives, while creating a direct accountability towards the international community. While country program evaluations mainly shape II–government partnerships, partnership between IIs and other IPs is focused on project evaluation. An evaluation is intended as a periodic assessment of a project’s relevance, performance, efficiency, and impacts in relation to its stated objectives. “Intermediate”

160 Management of IIs and INGOs

evaluations are periodic reviews of progress and likely effects of projects. Such evaluations constitute a way to identify necessary adjustments in project design. “Terminal” evaluations include an assessment of a project’s effects and their potential sustainability. Evaluations can utilize qualitative or quantitative tools. a) Quantitative approach 1 2 3 4 5 6

Self-administered surveys—consist of questions that respondents complete by themselves. Standardized interviews—interviews can take place over the telephone, face-to-face, or through video conferencing. Structured record reviews—surveyors use a specially created form to guide the collection of data. Awareness/attitude questionnaires—such as KAP study (Knowledge, Attitude, Practice). User satisfaction surveys—surveys involving the target population of a given project. Pre-and post-test—analysis of social and economic data before and after the project based on the project’s objectives and expected change.

b) Qualitative approach 1

2 3 4 5

Structured observations study—such surveys are designed to guide observers in focusing on specific actions or characteristics (usually conducted by expert panels or trained observers). Focus groups—brainstorming sessions with small groups where collective ideas emerge. Key informant and in-depth interviews—sessions with subjects selected for their ability to convey opinions and impressions of larger groups. Review and analysis of written documents. Benchmarking—comparing institutions, programs or practices against established standards.

Project evaluations are usually directly managed by IIs’ program officers at the country and local level or commissioned to third parties. Challenges may arise when the scale of the projects varies among IPs and when there is no systematic and harmonized approach to evaluation within a given country office or between “in house” and outsource evaluations. In response to these challenges, IIs tend to adopt an integrated approach by which project evaluations represent building blocks of program evaluations.

6.3.4 Audit and assurance IIs normally engage external auditors to periodically audit IPs’ substantive and financial reports to ensure technical and financial accountability and transparency. This process is usually termed a “NEX audit”. Since, in the development sector,

Changing paradigms for program implementation 161

IIs’ main partners are national governments, it became customary for IIs to engage the national audit offices of the hosting countries to perform NEX audits. These audits can be quite systematic and involve the large majority of partners. Their scope and terms of reference vary among organizations. In cases of unsatisfactory audits of an IP, IIs may ask the return of advanced money, normally negotiate proper measures to strengthen financial stewardship in the future and, in cases of persisting problems, IIs would consider discontinuing the partnership. The progressive implementation of HACT is seen as an opportunity to replace the current ex-post, audit based approach, ensuring IPs’ satisfactory performance with a more proactive, ex-ante, risk-based approach.

6.4 Progress to date and future challenges National execution should be the norm for programs and projects supported by the United Nations system (UNGA, A/RES/47/199, 1992) Since this resolution, the technical cooperation sector embarked in a comprehensive re-thinking of the program delivery modalities and of the role of its main players. New frameworks for international aid and technical cooperation re-qualified and increased the role of recipient governments as well as international and local NGOs as the main implementing agencies. At the same time, they reformulated the IIs’ central contributions as facilitation, provision of multilateral financial resources and technical expertise. This chapter has explored the IIs’ reaction to this paradigm shift and their transition from a reactive and bureaucratic approach to beneficiary governments and NGOs, to a more risk-based and strategic approach.

6.4.1 Progress to date and newly introduced IP management tools IIs are, to date, in the midst of this transition. From a quantitative perspective, IIs are slowly increasing the percentage of “nationally executed” programs. As of 2011 just over one third of the technical activities that the main UN funds and programs financed came under national, as opposed to IIs’, direction (Table 6.1). TABLE 6.1 Funds allocated to IPs as a percentage of 2011–2012 UN funds and

programs expenses Organization UNDP UNHCR UNFPA

59% 35% 29%

UN Women UNICEF Average 36%

29% 28%

162 Management of IIs and INGOs

From a qualitative perspective, IIs are progressively implementing new tools and frameworks to improve management and control of their implementing partners in all program-cycle phases. In the planning phase, IIs are increasingly coming together to elaborate a “systemwide” vision for development (i.e. UNDAF frameworks, One UN Program). They are also increasingly committed to putting beneficiary governments “in the driver’s seat” of planning to promote ownership and alignment with nationally identified priorities and strategies. Governments’ willingness to accept this new role varies across development themes but the new approach is generally seen as increasing their buy-in and sense of responsibility towards achievement of concrete development results. In the programming phase, IIs are adopting new frameworks aimed at improving their ability to select IPs based on their operational capacities and trustworthiness. These tools are intended to replace traditionally unstructured approaches to selection of partners, often based on political affiliations or consolidated relationships. In the programming phase, IIs also make increasing use of action plans to operationalize country programs and comprehensively allocate their activities among partners. These plans are increasingly important in a context of decentralized and outsourced program delivery. More sophisticated IPs’ contracting documents are also being utilized—LoUs include all responsibilities and obligations of the partners and AWPs set out the expected activities and outputs of each partner in line with IIs’ country programs. IIs are also progressively adopting more sophisticated, risk-based and proactive approaches to IPs’ funding. HACT is an example of a risk-assessment framework aimed at identifying proper funding modalities for each IP to minimize the Ґ

Planning and Programming

\

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* UNDAF/CPDs IP selection

* IP assessment tools Programming and Contracting

* CPAP V

'

LoU/AWP_______________

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200

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2006

2007 * CERF

2008 —

2009

2010

% total НА

FIGURE 8.1 CERF income as a share of total humanitarian assistance (data is in cur-

rent prices) Source: adapted from GHA (2011c)

General coordination of responses to crisis situations 189

contributions and a further 254 million US$ in pledges from over 150 donors. Moreover, in the same period, it disbursed a total of 1.9 billion US$ to 82 countries. Of this amount, 33.4 percent has been distributed through the underfunded window. The HR is in charge of the review and approval process of project proposals before their submissions to the CERF Secretariat (GHA 2011a); therefore, the Fund effectiveness directly depends on his/her in-country knowledge and experience to take the correct decisions concerning the soundness of the projects.

8.5.1.3 Recovery and reconstruction funds Recovery and reconstruction funds are pooled to provide support to existing government structures for reconstruction, recovery and peace-building activities. The World Bank or the UN Secretariat, through their own grant procedures (GHA pooled funding mechanisms and large-scale disaster), manage these funds. Among them, the Common Humanitarian Funds (CHFs) are notable since they represent “unearmarked” pooled funds, i.e. multi-donor contributions whose specific destination the recipient organizations freely decide upon based on their emergency’s humanitarian action plan. The pooled humanitarian funds experienced a significant growth from 583 million US$ in 2006 to 854 million US$ in 2010 (Figure 8.2).

164

2010

261

429 85 2009

.243 f 392

* ERFs

120

2008

295 453

■ CHFs sCERF

43

2007

284 385

21 2006

263 Ш 29S 0

100

200

300

400

USD million FIGURE 8.2 Total resources of pooled funds 2006–2010 Source: adapted from GHA (2011a)

500

190 Management of IIs and INGOs

8.5.2 The appeal processes: CAP and the Flash Appeal 8.5.2.1 The Consolidated Appeal Process (CAP) The Consolidated Appeal Process (CAP) is a joint planning, coordination and fundraising tool established through Resolution 46/182. The CAP focuses on protracted complex emergencies and is designed for a comprehensive and coordinated program cycle of one year’s duration. Its strategic planning phase leads to a Common Humanitarian Action Plan (CHAP). The humanitarian activities in the CHAP are divided into “clusters”, or thematic areas. Each cluster has a “lead” organization charged with evaluating needs, defining priorities, and formulating a strategic plan of intervention in partnership with the other organizations involved in the same thematic activities. From a fundraising perspective, the CAP/CHAP includes a unified list of project proposals for donors to consider funding, allowing humanitarian organizations to fundraise in a cohesive and not competitive manner. The ERC at Headquarters coordinates the CAP/CHAP process, whereas the HC heading the Humanitarian Country Team does so in the field. Clusters and OCHA are then responsible for the joint monitoring, review, evaluation and reporting on programs. CAP plays an important role in establishing a strategic approach to humanitarian action (OCHA 2010) and encourages closer cooperation among different actors

C lusters C onduct needs analysis and assessm ent

Clusters and O CHA

HCT/HC

M o n ito r, re v ie w a n d re p o rt

S ef overall strategy and prioritization

HCT/HC w ith O CHA Produce the CAP o r C H AP

FIGURE 8.3 The humanitarian planning process Source: the Humanitarian Appeal website

C lusters D evelop cluste r specific projects, activities and indicators

General coordination of responses to crisis situations 191

involved in the humanitarian response, such as governments, donors, aid agencies, the Red Cross Movement and NGOs.

8.5.2.2 The Flash Appeal (FA) The Flash Appeal (FA) is an initial inter-agency strategy and fundraising mechanism used to set up a coordinated humanitarian response to a sudden-onset emergency (OCHA 2010). The HC (or the RC) triggers the FA in consultation with the Humanitarian Country Team and the hosting government. The FA delimits the roles and responsibilities of various humanitarian organizations within consolidated response action plans and identifies funding needs for up to six months. The FA functions within a less detailed framework than the CAP due to the sudden nature of the appeal. The total contributions for appeals grew significantly between 2000 and 2010 from 1.9 to 11.3 billion US$ per year, with a fluctuating percentage of FA that reached its peak in 2010 because of the natural disaster in Haiti (3.6 billion US$, about 32 percent of the total).

8.6 The 2005 UN Humanitarian Reform and the cluster system

8.6.1 The UN Humanitarian Reform Despite the progress that the humanitarian community made, as the Norwegian ERC Jan Egeland highlighted in 2005, the system was not able to predictably and in timely fashion cover the basic needs of affected populations. Skills and knowledge of how to effectively tackle humanitarian emergencies were often not adequate, accountability among humanitarian agencies was insufficient and the proliferation of humanitarian actors hindered coordination and weakened partnerships (Kyria et al. 2010). In order to identify deficiencies and to adequately address them, in 2005 Egeland commissioned an independent review of the global humanitarian system. In the same year, thanks to an assessment undertaken with the collaboration of NGOs, Red Cross/Red Crescent Movement, IOM and other actors, the UN introduced its Humanitarian Reform, endeavoring to strengthen humanitarian action by guaranteeing greater predictability, accountability and partnership. The essential components the reform introduced were: 1 the “cluster” approach, which aimed to inject consistency and accountability into the coordination system; 2 the strengthening of the HC system, to promote effective leadership in the system and better support in the field of coordination; 3 the creation of a more adequate, predictable, flexible, and timely humanitarian financing system (i.e., the CERF that has been analyzed above), which enables the supplying of agencies with cash-flow before donor contributions become available; 4 the development of partnerships between UN and non-UN agencies.12

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Through these four reforms, the humanitarian community intended to increase access to beneficiaries in a more timely and effective way through an inclusive needs-based relief and protection approach.

8.6.2 The cluster approach Clusters are IASC designated groups of humanitarian actors working in different areas of humanitarian response, including some long-established relief and assistance sectors (e.g. health, shelter and nutrition), provision of services (e.g. logistics and emergency telecommunications), as well as cross-cutting issues (e.g. early recovery, protection and camp management). In addition, clusters were meant to reinforce capacity and effectiveness of the humanitarian response through:  ensuring “sufficient global capacity” to tackle new crises;  aiming at “predictable leadership” at global and local level;  enhancing synergies between UN agencies, international and local NGOs and local authorities through “partnerships”;  improving strategic field level coordination and issues’ prioritization. An agency chosen by the RC/HC leads and coordinates, in consultation with the Humanitarian Country Team, based on the agencies’ operational and coordination abilities. At the global level, clusters endeavor to strengthen system-wide TABLE 8.2 Clusters and cluster lead agencies involved in humanitarian intervention

CLUSTER

CLUSTER LEAD AGENCIES

Agriculture Camp coordination/management in conflict-induced IDPs in natural disasters induced IDPs Early recovery Education

FAO UNHCR IOM

Emergency shelter in conflict area in natural disasters Emergency telecommunications Food Health Logistics Nutrition Protection Water, sanitation and hygiene Source: our elaboration

UNDP UNICEF and International Save the Children Alliance, working in collaboration with the Inter-Agency Network for Education in Emergencies (INEE). UNHCR IFRC WFP WFP WHO WFP UNICEF UNHCR UNICEF

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EMERGENCY CLUSTER ACTIVATION •

The humanitarian coordinator (HC) or resident coordinator (RC) consults relevant partners



He/she proposes leads for each major area and sends a proposal to Emergency Response Coordinator (ERC)



ERC shares proposal with Global Cluster Leads



ERC ensures agreement at global level and communicates agreement to HC/RC and partners within 24 hours of receiving the proposal



HC/RC informs host government and all partners

CERF COORDINATION Immediately after the crisis

FLASH APPEAL 10 days after the crisis

CAP

NGOs

Up to 1 year after the crisis

FIGURE 8.4 The Humanitarian Response flow Source: our elaboration

preparedness as well as coordinating technical capacity. At the country level they adapt to local needs and ensure coordination among humanitarian actors, provide governments and RC/HCs a first port of call and act as last resort providers in their respective sectors. After assessing and analyzing needs, clusters guarantee contingency planning and preparedness. They also inform and advocate on funding mechanisms, ensure mainstreaming of cross-cutting issues, as well as providing monitoring and observance of standards. Clusters are also involved in activities of capacity building among humanitarian partners, civil society and national authorities. Figure 8.4 represents the humanitarian response flow under the cluster approach, regarding the actors involved, their roles and the financing mechanisms put in place to ensure timely and effective intervention on the ground.

8.7 NGO coordination in the field NGO involvement and coordination constitutes an essential part of the humanitarian response. Even if the UN, donors and national governments would prefer to

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interact and engage with a single entity representing the whole NGO community, it is not possible for a single body to fully represent the heterogeneous NGO community. Moreover, NGO coordination structures vary from context to context and adapt differently to crisis situations (conflict or natural disaster) in the given country. Although clusters have increasingly gathered NGOs into sectorial coordination, also by assigning to NGOs the role of co-leaders of cluster meetings, there are still several constraints that may hinder participation of NGO staff. The main constraint is the lack of capacity and resources to take part in cluster meetings. In addition, some NGO-related issues are not covered by cluster meetings, thus pushing NGOs to tackle these problems individually. “NGO Coordination” refers to a distinct set of activities traditionally undertaken by NGOs through a bottom-up approach intending to accomplish common objectives. NGOs often associate with one another and approach the UN, donors or governments on a collective basis (Currion and Hedlund 2010) asking them:  to externally impose coordination by the UN or government;  to resolve a perceived gap in existing coordination mechanisms; or  to address NGO interests that will not be addressed by other actors. A top-down coordination approach with imposed coordination mechanisms often fails to attain their goals; on the other hand, councils, forums and consortia with a bottom-up approach, tend to take root and show resilience. In addition, the way to guarantee participation in coordination mechanisms is to make sure that the different expectations of agencies are acknowledged and that each entity will benefit from cooperation and coordination, thus avoiding gaps and overlapping of functions. Ensuring adequate coordination of the multiple and diverse actors involved in humanitarian response remains a significant challenge for the international community. Understanding the related complex framework of coordination mechanisms and processes is a necessary task for professionals in the humanitarian field. The “Haiti case” in this chapter may help readers to familiarize themselves with those challenges.

8.8 Case study: humanitarian intervention in the aftermath of the Haiti earthquake

8.8.1 The Haitian context and the disaster In 2009, Haiti was ranked 149th in the Human Development Index (UNDP 2009), with 72 percent of its population living on less than 2 US$ a day (World

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Bank 2009) with poverty estimated more widespread in the rural areas than in the urban areas. Haiti also has a high-level of social inequality, with the richer 20 percent of the population controlling over 68 percent of the national income and the poorer 20 percent accruing less than 1.5 percent of it. Official development assistance (ODA) to Haiti sharply increased after 2002, and in 2008 amounted to 175 million US$, of which 20 percent came in the category of humanitarian assistance. Humanitarian assistance funding has always been unpredictable and without a strategic approach, and therefore it often has fluctuated according to political circumstances and donor interests (ALNAP 2010b). On 12 January 2010, at 4:53 p.m. local time, a magnitude 7.3 earthquake hit Haiti, the most violent in the last 200 years (Government of the Republic of Haiti 2010). The catastrophic consequences in terms of human lives and infrastructures were amplified by the fact that the earthquake affected the most densely populated region of the country According to Government estimates, 222,750 people (2 percent of the population) lost their lives and 300,572 were injured. The total affected population was estimated at 3 million (30 percent of the total population of the country). In terms of infrastructures, according to the Post-Disaster Needs Assessment (PDNA), the quake destroyed more than 105,000 homes and damaged another 208,000. More than 70 percent of the private sector’s buildings were disrupted or damaged. In economic terms, the losses were estimated at 7.8 billion US$, an amount greater than the country’s GDP in 2009 (Government of the Republic Haiti 2010).

8.8.2 The response 8.8.2.1 National response The Haitian population led the early emergency response while the government and the international community were trying to overcome the initial constraints. The Haitian civil society, considered by many as vibrant, prior to the earthquake, while severely affected, played an active role in providing assistance to the displaced population. The collapse of many national and municipal buildings and the casualties or injuries of numerous civil servants reduced the response and coordination capacity of the Haitian Government, already weak before the crisis (Grünewald and Renaudin 2010). The three mechanisms of national coordination, i.e., the Centre d’ Operations d’Urgence (COU), the Système National de Gestion des Risques et des Désastres (SNGRD), and the Direction de la Protection Civile (DPC), were severely damaged in terms of material and human resources. Despite the destruction of its headquarters, and the limited ability to implement decisions due to the wiped-out communication lines, the DPC became operational the day after the disaster, even before the authorities had proceeded with the activation of the COU. At the governmental level, a system of regular meetings was set up, chaired by ministers,

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to coordinate support with the heads of UN agencies and the ambassadors of the main donor countries. In addition, only three days after the earthquake, the Government of Haiti had already set up six working groups, involving members of civil society, under the leadership of a minister or senior civil servant, to coordinate distribution of water, healthcare, food, fuel and energy, reconstruction funds, and safe temporary shelters (IASC 2010b).

8.8.2.2 International response In the immediate aftermath of the disaster, International Urban Search and Rescue (USAR) teams13 started to arrive to set up the largest international deployment ever. Teams from Iceland, the Dominican Republic and the US arrived in the country within the first 24 hours. By 15 January, a total of 26 USAR teams were operational. On 23 January, the government officially declared the end of the search for survivors and invited the teams to leave the country. By that time, 67 teams, staffed with a total of 1,900 people, had rescued 134 people. Coordination among the 67 teams in an urban area was tricky, and the USAR teams lacked local counterparts, due to the initial absence of the DPC. The soundness of the intervention of some foreign teams was questioned, as they tended to prioritize the rescue of their own nationals. In addition, the cost to rescue each life was estimated at 1 million US$, thus highlighting the need for the donor community to reflect on the cost of USAR teams, in comparison with the benefits of investing in strengthening Haitian own response capacity. The US military also arrived within 24 hours after the disaster, deploying a joint task force with a contingent of over 22,000 troops. Its initial priorities were logistics, providing relief supplies, medical response, and supporting the United Nations Stabilization Mission in Haiti (MINUSTAH)14 to maintain law and order and to ensure a safe environment for the humanitarian community to work in. The role of the US military force was nevertheless criticized, as they took over the Port-au-Prince airport, handling over 150 flights a day, and assumed the monopoly on decisions regarding which flights to prioritize (DARA International 2010). A UN Disaster Assessment and Coordination (UNDAC) team15 composed of 18 members from IIs and national disaster management authorities arrived in Haiti, within the first 24 hours, and set up an On Site Operations and Coordination Centre (OSOCC) in the MINUSTAH Logistics Base in Port-au-Prince. OCHA staff, the European Civil Protection Mechanism (EU-MIC), and the US Centers for Disease and Control (CDC) also supported the establishment of OSOCC. The UNDAC team, together with technical experts from the EU-MIC and CDC, undertook the initial damage and needs assessment in the areas hit by the earthquake and played a crucial role in the initial response phase, promoting humanitarian coordination, and providing the first assessment (IASC 2010b). Within the first 72 hours, the IIs and NGOs already present in the country provided assistance by employing their pre-positioned relief supplies in-country although

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major human and infrastructural losses constrained them (Binder, Grünewald and Georges 2010). OCHA estimated that the humanitarian organizations responding to the quake numbered 400 by the end of January, while the subsequent real-time evaluation stated the presence of about 2,000 operational agencies involved in the response (DARA International 2010). With such a massive influx of international actors, with varying capacities, degrees of professionalism and resources, effective coordination was critical. Having already established the cluster mechanism, in 2008, to respond to the Gonaives flood emergency,16 the reactivation of the cluster system, on 15 January, was relatively quick and smooth, with the response operations systematized through 12 clusters and 2 sub-clusters. 1 Emergency Shelter and Non-Food Items, led by IFRC; 2 Camp Coordination/Management, led by IOM; 3 Water Sanitation and Hygiene (WASH), led by UNICEF in support of the Direction Nationale de l’Eau Potable et de l’Assainissement (DINEPA); 4 Health, led by PAHO/WHO; 5 Food, led by WFP; 6 Nutrition, led by UNICEF; 7 Agriculture, led by FAO; 8 Early Recovery, led by UNDP; 9 Protection, led by MINUSTAH and the Office of the High Commissioner for Human Rights (OHCHR), articulated in two sub-clusters: 10 Child Protection, led by UNICEF; 11 Gender-Based Violence, led by UNFPA. 12 Education, led by UNICEF; 13 Logistics, led by WFP; 14 Emergency Telecommunications, led by WFP (UN 2010). Whenever possible, the government appointed ministry counterparts to co-lead clusters. Reportedly, participants valued the cluster approach as a means to share information and network with other organizations (Binder and Grünewald 2010). The UN established the Humanitarian Country Team (HCT) at the beginning of February. It included the participation of seven UN Agencies, seven NGOs, the International Red Cross and Red Crescent Movement, observers from the NGO Coordination Support Office (CSO). The Humanitarian Coordinator chaired it. The HC in the Haitian context (where the UN worked through an integrated mission), also acted as Resident Coordinator and Deputy Special Representative of the Secretary-General (DSRSG) (Binder and Grünewald 2010). Humanitarian donors, including the United States Agency for International Development (USAID), the Humanitarian Aid Department of the European Commission (ECHO), Agency for International Cooperation and Development—Spain

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(AECID), the UK Department for International Development (DFID), the Canadian International Development Agency (CIDA) and others, had a crucial role in suggesting program strategies, guidance on key issues, and in advocating in areas of concern. The Humanitarian Donor Group met regularly to debate on specific issues with Cluster Lead Agencies, heads of UN Agencies, and NGOs. Moreover, on these occasions, the Humanitarian Coordinator and OCHA were always invited to attend (IASC 2010b).

8.8.3 International humanitarian funding Under the UN Consolidated Appeal Process, on 15 January 2010, the HCT in Haiti issued an initial Flash Appeal for 562 million US$, to fund the operations of 12 NGOs, 16 UN organizations, and IOM. As of 16 February, the appeal was 100 percent funded. On 18 February, the Flash Appeal was revised to 1.4 billion US$ to fund the projects of 76 aid organizations; this was the largest ever natural disaster appeal and—as of 15 October—it was “the best-funded of all appeals in 2010, with 70 percent of its requirements covered” (Bhattacharjee and Lossio 2011). In addition, the Central Emergency Response Fund (CERF) (see Table 8.3) and the Haiti specific Emergency Relief and Recovery Fund17 (ERRF) (see Table 8.4) played a critical role in providing resources in the early phase of the operations.

TABLE 8.3 CERF funding and appeal needs met by cluster in 2010 and total CERF

resources in 2011 and 2012 Cluster 2010 Agriculture Camp management Coordination and support services Logistics Telecom and data (emergency communications) Economic recovery and infrastructure (early recovery) Education Food Health Health—nutrition Protection/human rights/rule of law Shelter and non-food items Water and sanitation 2010 - Total 2011 - Total 2012 - Total

CERF – funding US$ m

3.5 5.5 – 5.0 0.8 1.0 – 4.9 5.4 1.8 0.6 5.6 2.6 36.6 10.4 11.9

Source: authors’ elaboration based on GHA (2011b) and http://www.unocha.org/

Cluster needs met

54% 46% 101% 74% 18% 40% 98% 76% 74% 96% 60% 67% 88%

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TABLE 8.4 ERRF donors and amounts committed

Donor as of 1 February 2011

US$million committed/contributed

Saudi Arabia Brazil France Denmark Nigeria Equatorial Guinea Gabon Tunisia Congo, Republic of Others Total No. of donors

50.0 8.0 6.7 5.5 2.5 2.0 1.0 1.0 1.0 4.1 81.9 42

Source: adapted from GHA (2011b)

8.8.4 Successes and challenges The following analysis is based on data relating to the first 12 months after the earthquake, i.e., the relief phase and the first part of the recovery phase. In July, the IASC affirmed that “despite the challenging operating environment, the humanitarian operation to a large extent achieved its immediate objectives, and responded effectively to the critical needs identified” (Holmes 2010). In spite of the unusual character of the Haitian earthquake, which had a devastating impact on local capacity, roughly 4 million people (i.e. 40 percent of the population) benefited from food assistance, 1.2 million from potable water, and 1.5 million received temporary shelters. However, numerous challenges hindered the efficiency and effectiveness of the response. Logistical issues played a crucial role in the response process. In the aftermath of the response, the collapse of the seaport and the damages to the airport constrained the delivery of relief supplies. In addition, actors were not prepared enough to tackle a disaster in an urban context. In addition, they concentrated their whole response efforts in the city of Port-au-Prince, often neglecting to intervene in rural areas, also largely affected (Binder, Grünewald and Georges 2010). The humanitarian community lacked sufficient leadership and was therefore unable to support the government properly. In addition, operational agencies did not have a common framework that could orient their activities. Several factors caused the lack of adequate humanitarian leadership. The Humanitarian Coordinator was not properly assisted by OCHA and ERC in formulating a common humanitarian strategy and in the assignment of roles and responsibilities to the various actors on the ground. The ERC system failed to give strategic support from headquarters. In-country coordination mechanisms did not include MINUSTAH

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and the military forces in the country, which set up their own decision-making systems, thus limiting the participation of humanitarian organizations. As a consequence, decisions were not totally taken to address humanitarian considerations and concerns The lack of clarity in the assignments of functions caused some coordination issues. This problem can be attributed to the absence of IASC guidance on the way the cluster system is supposed to connect to UN’s integrated mission and to foreign militaries (Binder, Grünewald and Georges 2010). For several reasons, the international humanitarian community did not adequately involve the local population in the planning and implementation of the operations. First, international actors often under-estimated and under-utilized local capacity because of lack of information about capacities and coordination mechanisms already in place prior to the quake. This resulted in the inability of some international representatives to work in synergy with their governmental counterparts, thus sometimes creating duplicated structures (IASC 2010b). International humanitarian workers lacked information about the local context and were often unable to speak French or Créole, which represented a considerable impediment to the inclusion and engagement of Haitians. The scarcity of adequate information materials created additional obstacles (ALNAP 2010b). Communication efforts were infrequent and created false expectations on the assistance that would be provided. The international community initiated the response without taking into account Haitian population initiatives, such as censuses of people in damaged areas or assessments regarding the current situation. Nor were the vulnerabilities that local actors expressed taken into account. Overall, the humanitarian community prioritized speed over inclusiveness, while the experience of the neighborhood of Bristout-Bobin18 demonstrated that these two factors are not necessarily mutually exclusive. Except for the initial phase, the cooperation between IIs and national authorities was weak. Governmental agencies felt excluded from humanitarian coordination and decision-making processes, to the point that they felt “like strangers in their own city” (IASC 2010b). The cluster approach was already weak before the earthquake in terms of accountability and ownership, and was structured on a topdown basis with scarce connection to national coordination systems in place and local NGOs. The disaster exacerbated these limitations (DARA International 2010). The cluster leadership was weak, mainly because of the lack of experience or adequate skills of the coordinators and their high turnover. As pointed out by former ERC John Holmes, in February 2010, “this lack of capacity has meant that several clusters have yet to establish a concise overview of needs and develop coherent response plans, strategies and gap analyses. This is beginning to show and is leading others to doubt our ability to deliver” (ALNAP 2010b). Newly arrived and inexperienced foreign NGOs further complicated cluster coordination which had priorities other than coordination (such as securing new offices, hiring personnel), and worked independently on the basis of their respective agendas.

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A weak situation analysis, mainly limited to needs and ignoring the overall context, local participation and capacities (Binder, Grünewald and Georges 2010), led to an intervention often based on misperceptions. As highlighted in the Real Time Evaluation, there were also several unintended consequences of the humanitarian response. An overflow of inadequate and useless relief items required considerable resources to be destroyed. During the first months, free access was provided to basic services such as water, healthcare and education, which led numerous fee-based private hospitals and schools to bankruptcy. Years after the earthquake, Haiti is still affected by the same problems which emerged in 2010. This offers food for thought not only about the need for a more coordinated management of relief operations, but also for not losing sight of the transition from disaster relief to development.

Notes 1 The Inter-Agency Standing Committee (IASC) defines a complex emergency as “a humanitarian crisis in a country, region or society where there is total or considerable breakdown of authority resulting from internal or external conflict and which requires an international response that goes beyond the mandate or capacity of any single and/or ongoing UN country program.” 2 IDPs legally remain under the protection of their own government—even though that government might be the cause of their flight (www.unhcr.org). 3 http://fts.unocha.org 4 However, there is one major caveat with this data and it is the fact that reporting before 2005–6 was very poor both on the Financial Tracking Service and other aid databases. 5 The principle of independence was added in 2003, with UN General Assembly Resolution 58/114 (UN 2003). 6 www.unisdr.org 7 A/51/950 Renewing the United Nations: A Program for Reform, Report of the Secretary-General, 14 July 1997 (UN 1997). 8 www.unocha.org 9 www.humanitarianinfo.org 10 www.humanitarianinfo.org 11 http://ochaonline.un.org 12 http://oneresponse.info 13 USAR teams are, indeed, technical teams ready to deploy immediately after the announcement of a “Breaking Emergency”, as soon as the government of the affected country transmits a request for international assistance, and they usually remain in the country for about one week. 14 Security Council Resolution 1542 established MINUSTAH on 1 June 2004. 15 UNDAC is a component of the international emergency response system for suddenonset emergencies. 16 The cluster approach was introduced in the country in 2006. Although, since Haiti was not considered as a chronic humanitarian situation, but as a country affected by sudden-onset natural disasters, clusters were not activated before 2008. 17 The ERRF is a pooled-fund mechanism, established by OCHA in response to the 2008 hurricane and managed by the Humanitarian Coordinator with OCHA support. This fund allowed most urgent actions to be financed and also life-saving activities of underfunded clusters to be adequately resourced. The ERRF has turned out to be a means to supply the Haiti humanitarian response with funding, without committing funds to a particular/certain organization within the Flash Appeal. Saudi Arabia was the prevalent

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donor to the ERRF and contributed 62 percent of the total amount. Among the Development Assistance Committee (DAC) donors, only three countries (France, Denmark, and Sweden) were on the list of the top ten donors. This shows that the Haiti ERRF represents a remarkable example of the unprecedented financial involvement of numerous non-traditional donors in supporting humanitarian response operations (IASC 2010b). Accordingly, a total of 39 donors provided money for the first time. 18 In this neighborhood, aid distribution took place in collaboration with the local community. This initiative tuned out to be a success, compared to others, in terms of reducing waiting time and of traceability of aid to the entitled persons.

9 ACCESSING DEVELOPMENT ASSISTANCE DATA AND STATISTICS Eduardo Missoni and Luca Citino

9.1 Introduction The international development community has increasingly focused on the need to ensure effectiveness of aid to development while increasing the volume of aid flows. Nevertheless, quantitative data remain an essential tool for understanding donors’ levels of commitment, their priorities, and the way aid resources are channeled and used. Comprehensive, transparent and widely accessible aid information is fundamental for mutual accountability among partners in development, responding to the right of taxpayers, in both donor and recipient countries, to information about the use of public funds. Information allows for better planning, and contributes to reducing corruption and improving service delivery. To that purpose, existing standards and reporting systems need to be harmonized and shared across multiple public and private development agencies and made widely accessible to all stakeholders. This is also the aim of the International Aid Transparency Initiative (IATI) launched at the Accra High Level Forum on aid effectiveness in 2008. It involves an increasing number of bilateral and multilateral organizations, as well as INGOs. IATI developed and agreed to continue providing a common and open standard for the publication of aid information, combining three complementary systems: the Development Assistance Committee (DAC), the Creditor Reporting System (CRS) and Forward Spending Survey (FSS).1 It must be noted that the IATI standard sets guidelines for publishing information about aid spending, without creating a new database. The DAC reporting system, described below, remains the primary source of aid information. This chapter concludes with considerations about information related to INGOs’ activity as well as aid to development statistics produced within the UN system.

9.2 OECD aid information and reporting system The Organization for Economic Cooperation and Development (OECD) has been tracking information regarding development aid since 1967, making it the most

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important primary source for comparable data on international development aid flows. OECD statistics mainly compile data that governmental and intergovernmental agencies make available, although recently information provided by main Global Public-Private Partnerships (GPPPs)—such as the Global Fund to Fight AIDS, Tuberculosis and Malaria—and global philanthropy (i.e., the Bill and Melinda Gates Foundation) has been added. Donors are requested to report to OECD according to a common statistical coding standard. This allows comparability of data over time, which is very important given the traditional inconsistency of data collection standards and methodologies among donors. It is also a basic tool to support mutual accountability among donors and toward partners, allowing assessments of donors’ progress toward internationally agreed upon targets (such as 0.7 percent GNP, aid effectiveness, and MDGs). This standardized reporting system for bilateral aid flows only includes information originating from the 24 OECD/DAC members.2 This represents a significant limitation, especially considering the emerging role of ‘new donors’, such as the BRICs (Brazil, Russia, India, China) and other emerging economies, in addition to forms of South–South co-operation, for which OECD only provides occasional studies and estimates. The OECD manages two big databases:3 the annual DAC aggregated database, and the Creditor Reporting System (CRS) (and CRS++, for the inclusion of multilateral and some private actors). CRS also has a side project monitoring the fulfilment of the Paris Declaration aid effectiveness objectives. The two data sets’ definitions are consistent with one another. In the following paragraphs we illustrate in more detail the OECD methodology, and then highlight some of the limitations of the system.

9.2.1 The annual DAC aggregated database The DAC database is a macro-level dataset on aggregate flows. On an annual basis, all donor agencies answer a questionnaire composed of eight statistical tables. Only flows compatible with the OECD definition of Official Development Assistance (ODA)4 are included. Moreover, data do not report on short-term loans, i.e. repayable within one year, nor transfer payments (pensions, remittances etc.). Debt relief operations such as restructuring or debt cancellation of portions of debt are also reported in the DAC database. Flows are reported both in terms of ‘commitments’,5 and ‘disbursements’, i.e. financial resources actually disbursed during the reporting period. There could be a considerable lag of time between commitments and disbursements due, for example, to public finance crises and policy changes within donor governments. Such modifications are not reported in the DAC, but are reported in the CRS. Total ODA flows can be either gross or net, depending on whether or not they include those parts of the principal or interests that have been repaid on loans. The DAC datasets classify flows in the following four broad categories:  Official Development Assistance;  Other Official Flows (OOF);

Accessing development assistance data and statistics 205

 Private Flows at market terms;  Private Grants. It should be noted further that the database registers the resources which flow out of the aid budget of the donor country, and not the resources that flow into the budget of the recipient country. This difference is not trivial insofar as financial flows recorded as ODA can, for example, be subject to considerable administrative and transaction costs, or be used in the donor country for aid purposes. The DAC database includes information about multilateral aid. Table DAC 1 (see Box 9.1) reports donor countries’ contributions to multilateral agencies. Aid flows from multilateral agencies to developing countries can be found in Table DAC 2a.

Box 9.1 Statistical tables of DAC database DAC 1: Official and Private Flows, main aggregates This table allows the monitoring of the total ODA by donors over time. It also includes flows to multilateral agencies by donor information for debt relief operations. This table does not present a breakdown by recipient. DAC 2a: Official Development Assistance (ODA) – Disbursements by recipient and type This table reports total ODA to individual recipient countries, regional or income groupings of countries. It also includes flows from multilaterals to single recipients DAC 2b: Other Official Flows (OOF) by recipient and type This table includes the transactions which cannot be classified as ODA, e.g. export credits or net acquisition by governments and central monetary institutions of securities issued by multilateral development banks at market terms. DAC 3a: Official Development Assistance (ODA) – Commitments by recipient and type This table reports the commitments of donor countries to each recipient in various years (see above for the definition of commitment). DAC 4: Private Flows by recipient and type This table does not report flows from the official sector, so by definition it does not include ODA. These transactions are undertaken by firms and individuals resident in the reporting country.

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DAC 5: Official bilateral commitments by sector This table reports the commitments of donor countries, but contrary to table DAC 3a it does not present a breakdown by recipients. Instead, it makes an analysis of sectoral expenditures DAC 7b: Tying status of bilateral Official Development Assistance (ODA) This table classifies ODA in tied, partially untied, and untied aid. Members have agreed that administrative costs and technical cooperation expenditures should be disregarded when making such classification.

9.2.2 The CRS database CRS is a micro-level dataset with financial data classified according to aid activities and policies (see Box 9.2 and Box 9.3). CRS complements DAC insofar as it helps in looking at the sectoral, sub-sectoral and geographical distribution of aid activities. OECD itself recognizes that aid activity data is used above all for a more detailed analysis of where aid is spent, and whether donors are complying with some international recommendations. As an example, we might want to see whether Donor A is spending enough on issues which are deemed of high priority to the international community, for example, a particular disease.

Box 9.2 Types of aid 100: All Types, Total A: Budget support A01: General budget support A02: Sector budget support B: Core contributions and pooled programs and funds B01: Core support to NGOs, other private bodies, PPPs and research institutes B03: Contributions to specific-purpose programs and funds managed by IGOs B04: Basket funds/pooled funding C: Project-type interventions C01: Project-type interventions D: Experts and other technical assistance D01: Donor country personnel D02: Other technical assistance

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E: Scholarships and student costs in donor countries E01: Scholarships/training in donor country E02: Imputed student costs F: Debt relief F01: Debt relief G: Administrative costs not included elsewhere G01: Administrative costs not included elsewhere H: Other in-donor expenditures H01: Development awareness H02: Refugees in donor countries

Box 9.3 Channels of aid 100: All channels 10000: Public sector 20000: NGOs and civil society 30000: Public Private Partnerships (PPP) 40000: Multilateral organizations 50000: Other 0: To be defined CRS categorizes aid activities according to the ‘type of aid’ and the ‘channel of delivery’. In addition, qualitative descriptions of transactions are recorded (Box 9.4).

Box 9.4 Qualitative descriptions There follow two examples of qualitative descriptions of transactions retrieved from the CRS database on Nepal. The first falls under B03-40000 contributions and is under the supervision of UNICEF, while the second falls under B01-20000 and is under the supervision of Norway:  “To improve the health status of the Nepalese population through increase utilization of quality essential services delivered by a well managed and health sector.”  “Implementing TB control by DOTS strategy gradually to the whole country, with technical, and administrative assistance as well as financial support for the training and supervision of the program.”

9.2.3 The Forward Spending Survey (FSS) Making aid more predictable remains a key challenge to more effective aid. Reliable information on available resources is essential for recipient countries to link development strategies with national planning and budgeting.6

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Activities undertaken directly with partner countries



Activities channeled through NGOs or multilateral orgs.



In donor costs linked to developm ent

B ila te ra l aid

Core budget s

M u ltila te ra l aid

Expenditures of intergovernm ental institutions

FIGURE 9.1 Resource flows covered in the Aid Activity database Source: adapted from OECD website

The DAC survey on forward spending plans, conducted by the OECD since 2008, is the only regular process that brings together most bilateral and multilateral aid spending plans, three years ahead of time, at the global level. The survey collects donors’ indications about their spending plans in the medium-term and offers a perspective on future aid flows. The FSS traces Country Programmable Aid (CPA),7 a core subset of bilateral ODA, and multilateral outflows critical for delivering international aid commitments in support of development goals. The FSS is conducted annually and constitutes an integral part of the DAC’s standard reporting.

9.2.4 Limitations OECD statistics only show and allow comparison between the ODA flows of reporting countries in terms of ‘volume’ (i.e. their relative financial ‘effort’ in dollars). Neither DAC nor CRS give any information about outputs, let alone outcomes that these financial transfers are able to achieve, which are key to measuring ‘aid effectiveness’. For these reasons, in recent years, parallel datasets have been developed, trying to combine information produced by OECD with that from other sources. For example, AidData8 brings together multiple International Organizations (including OECD), bilateral donors, academic institutions and the private sector. One of the main innovations with respect to DAC or CRS has been that of geocoding. This allows both the geographical mapping of aid activities, and their link with local development indicators. AidData envisions a future open mechanism of participatory data accrual that will allow entering data and information directly at the community level. The possibility to link aid flows and development indicators is a good starting point, but it is not enough to assess correlation, thus estimating aid effectiveness

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and its contribution to local welfare. This needs more focused development studies, based on local data collection and field research aiming at disentangling the effect of a given policy from other potential confounding effects. These may provide some useful insights to orient policies at the macro level. These kinds of studies, however, are still limited to the domain of academic research. Indeed, most lowincome countries still face important bottlenecks in the production and storage of statistics, which at the moment impede, a complete assessment of the impact of foreign aid and of development policies in general. Some countries have started to intervene in this direction by introducing local aid tracking systems, often referred to as AIMS (Aid Information Management Systems). These often constitute a richer and more detailed source than the CRS itself, but adopt different definitions, and suffer the limitations of data accuracy, which is typical of developing countries. Merging information coming from the two databases is therefore cumbersome. As outlined by Petras (2009), who studied the case of Malawi and Burkina Faso, while CRS uses the ‘transaction’ as a logical unit for listing aid activities, while AIMS use the ‘project’. Thus, it might be that a project consists of many transactions, or that one transaction encompasses different projects, above all when the entity of the payment is low. Moreover it can be the case that disbursements are not equally accounted for across databases. Discrepancies in amounts disbursed can arise due to factors such as different ways of computing exchange rates, and aid ‘in kind’ not being included in local accounting.

9.3 Aid flows from NGOs ODA funds channelled through NGOs are also recorded in the CRS database. Indeed, when an INGOs is an implementer of publicly financed projects, it is actually delivering ODA and, as such, the OECD registers the activity in its databases. Activities of NGOs are considered whenever:  The financial resources covering the aid activity are official funds;  The first implementing agency is the INGO. ‘Net private grants’ are also reported in DAC statistics as part of the flows that informing countries record. However, they are not ODA and are not to be confused with official aid from those countries. For example, data concerning the activity of the Gates Foundation are included in DAC statistics as part of ‘net private grants’ from the USA, and represent concessional outflows from a private foundation. In addition, as previously outlined, besides ODA flows, the DAC database includes additional non-ODA flows (i.e., public and private financial flows towards developing countries at market terms). In all the other cases, INGOs’ aid flows are not recorded in the DAC reporting system. Mapping the activity of INGOs remains a challenge also to aid recipient countries, where it is generally not recorded in AIMS. This makes it impossible to

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retrieve a complete picture of the INGOs’ activity in developing countries, neither in aggregate terms, nor at the micro level.

9.4 The UN system aid statistics Within the Department of Economic and Social Affairs of the United Nations (DESA), the Office for ECOSOC Support and Coordination (OESC) plays an important role in the review of the progress of the international community towards the Millennium Development Goals (MDGs). To this purpose, OESC provides ECOSOC and the general public with an annual report on the funding of operational activities for development that are undertaken by the UN system. The report provides a selection of aid statistics based on information provided by the 36 entities that compose the UN system. Key questions answered at various levels of detail within the report include:  How much resources flow through the UN system with respect to the total?  Which agencies of the UN system account for which percentage of total resources flows?  Who are the donors? To that purpose, the report disaggregates funding figures into core and non-core resources, and into those for development activities and for humanitarian assistance. Financial flows are further subdivided according to categories such as recipient countries’ GNI and sectors. Their trends and volatility are also analyzed. However, the raw data that are at the basis for elaborating the report are not yet publicly available. As part of the process to build the UN system-wide coherence, the United Nations General Assembly Resolution 63/311 (UN 2009) requested that the Secretary-General create a central repository of information on the United Nations’ operational activities for development, building on the Secretary-General’s comprehensive statistical analysis of the financing of operational activities for development of the United Nations system, ensuring appropriate and user-friendly online access and regular updating of the information contained therein. The central repository of information will be part of a system-wide financial statistics database and reporting system to be established by the Chief Executives Board for Coordination (CEB). An interim repository has been created to ensure access to available information until the system-wide financial statistics database of the CEB is operational.9

Notes 1 www.aidtransparency.net 2 DAC is the committee of the OECD which deals with development cooperation matters. Currently (2012) there are 24 members of the DAC: Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Greece, Italy, Ireland, Japan, Korea,

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3 4

5

6 7

8 9

Luxembourg, the Netherlands, New Zealand, Norway, Portugal, Spain, Sweden, Switzerland, the United Kingdom, the USA and the European Commission (www.oecd. org). www.oecd.org/dac/stats/idsonline Grants or loans to countries and territories on the DAC list of ODA recipients (developing countries) and to multilateral agencies which are: (a) undertaken by the official sector; (b) with promotion of economic development and welfare as the main objective; (c) at concessional financial terms (if a loan, having a grant element of at least 25 percent). In addition to financial flows, technical cooperation is included in aid. Grants, loans and credits for military purposes are excluded. Transfer payments to private individuals (e.g. pensions, reparations or insurance payouts) are in general not counted. Lending by export credit agencies—with the pure purpose of export promotion—is excluded (www.oecd.org). A commitment is a firm written obligation by a government or official agency, backed by the appropriation or availability of the necessary funds, to provide resources of a specified amount under specified financial terms and conditions and for specified purposes for the benefit of a recipient country or a multilateral agency. From a recipient perspective, aid is predictable when (a) the recipient knows what aid is expected, from which donor, in which form, and when; and (b) the donor disburses funds according to the forecast or forward spending plan shared with the recipient earlier. CPA represents the part of aid that is subjected to country allocation decisions by donors and represents aid over which recipient countries have, or could have significant say as it provides a good approximation of the overall flows expected to appear in country aid information systems (OECD 2012). www.aiddata.org/content/index www.un.org/esa/coordination/dcpb_stat.htm

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SECTION 3

Management systems and reforms in International Organizations

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10 GOVERNANCE MODELS AND REFORMS Ivano Bongiovanni, Eduardo Missoni and Daniele Alesani

10.1 Governance in IIs and INGOs: definition and key concepts Governance became a widespread notion in the public sector as part of the overall New Public Management agenda (Rhodes 1996). In that context, governance was defined as “the sum of the many ways individuals and institutions, public and private, manage their common affairs” (Commission on Global Governance 1995). Governance in the public sector has been explored from various angles, including the minimization of the size of the government and its intervention, corporate governance, the notion of “good governance”, and governance as a self-organizing network. However, several further meanings were given to governance—all referring to a new process of domestic governing—including the minimal state, corporate governance, new public management, “good governance”, a socio-cybernetic system, and self-organizing networks (Rhodes 1996). In this chapter we will explore the following three notions of governance with reference to International Institutions (IIs) and International Non-Governmental Organizations (INGOs): 1 organizational/institutional governance, that identifies a series of legislative and policy requirements, conventions and other expectations designed to ensure accountability, decision-making, proper management and efficient use of resources; 2 “good governance” as adoption of governance principles and criteria that ensure participation, fairness, transparency and accountability; 3 international regimes and global governance, including the management of complex transnational inter-organizational networks and international regimes, traditionally defined as “sets of explicit or implicit principles, norms, rules and decision-making procedures around which actors’ expectations converge in a given area of international relations” (Krasner 1983).

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10.2 Institutional governance: organizational arrangements and the “rules of the game” As mentioned in the introductory chapter, according to international law IIs’ charters establish them as separate organizations, with their own governing bodies, secretariats and financial resources, autonomous from the member states (Blokker 2001; Zanghì 2007). This character distinguishes them from simpler and less formalized intergovernmental agreements. INGOs are constituted as foundations, associations or co-operatives under national law and are neither subject to international law nor formally regulated by it (see Chapter 2). As a consequence, legal status, governance and representation models of INGOs are very diverse. For example, regarding institutional forms, out of 249 INGOs headquartered in Switzerland 67 percent are constituted as associations, 16 percent as foundations, 1 percent as co-operatives and 16 percent report having a different legal form or no regular legal status (Rehli 2011). This group encompasses large federations such as the International Olympic Committee, foundations such as the Kofi Annan Foundation, advocacy associations such as the World Wide Fund for Nature, international relief organizations such as the International Committee of the Red Cross, but also many smaller organizations active in very different fields. With regard to membership, INGOs federate national organizations that may be of different juridical nature depending both on organizational choices and the national laws of the countries where they are established (Martens 2003).1 These national organizations may be associations of individuals or capital-based foundations established through an endowment fund and therefore without individual membership (see Chapter 2). The internal governance structure of IIs and INGOs, conceived as a system of organizational mechanisms, is determined by four general criteria (Zanghì 2007): 1 2 3 4

Functional criterion; plurality of bodies; collective bodies; bodies composition.

According to the functional criterion, goals, mission vision and functions of the organization shape its governance. These drivers determine the institutional form, the number and composition of governing and operational organs and the powers attributed to them. Most commonly, IIs and INGOs are organized in a plurality of organs to allow better internal distribution of powers and functions. Similarly to the domestic public sector organizations, International Organizations (IOs) usually have a “threetiered” structure with a representative body, an executive body and a bureaucratic/ operational body (Amerasinghe 2005).2 Exceptions to this model are possible; for example, board-managed INGOs often lack a representative body.

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Organs of IIs and INGOs are composed of a plurality of members, therefore they are “collective” organs, to allow adequate representation (Menon 1992). Members of IOs (Member States for IIs and National Member Organizations for INGOs) are normally represented in the governance bodies by delegates who participate on their behalf in the strategic decision-making and control of the organizations. In some cases, governance bodies are composed of members who are chosen, appointed or elected in their individual capacity for their technical or professional competence according to ad hoc procedures. This is, for example, the case of the International Court of Justice, and of the Council of the United Nations University. This configuration limits the capacity of member states or member organizations to exert direct influence on the organization’s decision-making; such influence would largely depend on the relations between those individuals and their country of origin (or constituency in the case of INGOs). The legal form of INGOs directly influences their governance models. For example, associations tend to be organized as “membership organizations”, with a general meeting of members that elects a board to oversee the management of the organization. Conversely, foundations are “board-managed organizations” and board members are usually appointed by external organizations or are self-recruited and self-perpetuating (Enjolras 2009).

10.2.1 The representative body The representative body of IOs is usually denominated “General Assembly” (United Nations, Organization of American States—OAS, etc.), “General Conference” (IAEA, UNESCO, UNIDO, ILO, etc.), or with similar terms specific to each organization, and is normally composed of all members. In most cases, members can freely designate their representatives. Member states usually maintain a high-ranking diplomat as “permanent representative” at the headquarters of the main IIs, supported by a team of diplomats and technical specialists usually referred to as a “mission”. In other cases, the status of representatives is indicated in the charter, as in the case of heads of state (ASEAN, EU, etc.) or ministers (OAS, WTO, etc.). In some organizations delegates must be chosen from among persons most qualified by their technical competence in the field of activity of the organization (e.g. WHO). The number of members’ delegates is also normally open, but may be explicitly limited (e.g., maximum of five representatives) (Zanghì 2007). The charter of IIs or INGOs usually indicates the frequency of the meetings. Most commonly meetings are held annually (e.g. UN, IAEA), every two years (e.g. FAO, WTO, Amnesty International) or every three years (e.g. ICAO, World Organization of the Scout Movement—WOSM). Four-yearly meetings are rarer (e.g. ITU). The charters regulate the functioning and decision-making rules of the representative body; they usually allow extraordinary sessions to be held to address specific issues (Amerasinghe 2005).

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Typically, the representative body is entrusted with the strategic steering of the international organization and its overall control. Among other functions, it usually deliberates on the participation of delegations, the procedures for membership and admission, and suspension and expulsion measures. It usually elects the executive body, and in many cases the head of the administrative body. The representative body is also entrusted with approving the organization’s budget, eventual dissolution and appointment of members of other governing bodies (Archer 1992). Given its broad functions, the representative organ is usually organized in commissions (e.g. the United Nations) or committees. Some of these sub-organs are composed of all members (i.e. UNGA Fifth Committee) in light of their importance to the life of the organization, while others are composed of a restricted group of members, usually in IIs that choose their memberships based on geo-political representation.

10.2.2 The executive body The executive body is usually composed of a limited number of members. The most frequently used name for this body is “Council” or “Committee” or “Board”, with various qualifications such as “Executive” (e.g. UNESCO, OECD, WHO), or names such as “Governing Body” (e.g. ILO), “Council of Administration” (e.g. UPU), and others. Most commonly organizations have a single executive body; yet there are numerous cases in which functions are divided among different organs, such as in the case of the UN, whose Charter designates responsibility to the Security Council on matters relating to the maintenance of peace and international security and to the Economic and Social Council (ECOSOC) on economic and social issues (Zanghì 2007). The main functions of an executive body are to politically run the organization within the broad strategic directions of the representative organ and give impulse and control the activities of the administrative organ. Members of the executive body are normally elected by the representative body based on criteria that may be indicated in the organization’s Charter, such as technical competencies, defined on the basis of the organization’s functions and objectives (e.g. health for WHO) and on equitable distribution of geographical representation. In executive boards of development organizations it is common to find a balanced presence of donor and beneficiary countries. Global and regional development banks are interesting cases because, in light of their nature as financial institutions, membership and voting rights in the executive boards are both usually based on the contribution capacity of the member states. Periodic rotation and renewal of membership varies among organizations. The case of the UN Security Council is very interesting in terms of membership composition and rotation: besides five permanent members with the right to individually impose “vetoes” on decisions, there are ten rotating members elected every two years on a geographical basis.

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The composition and powers of INGOs’ executive bodies and their “agency” relation with representative bodies and members vary widely. Foreman (1999) classifies them into three general models: 1 International Federation: Representation is equally granted to all member organizations; members normally elect the executive body. 2 Donor-Member-Dominated Federation: inclusion on the international board depends primarily on a member’s capacity to generate resources for the federation. Donor members have a permanent seat (or set of seats) on the international board. The central organization of a donor-member-dominated federation maintains strong controls over the management of recipient country members. National boards of recipient members usually participate in key national management decisions, but final approval rests with the central organization. 3 Global Bumblebee3 Federation: inclusion on the international board is not based on a member’s capacity to raise resources, but rather a member’s geographic region or some other non-resource acquisition-based criteria. Resource acquisition or allocation does not affect the member’s vote in the assembly or eligibility for election to the international board. In terms of management of a member’s country program, national boards within the global bumblebee federation may have different levels of local control. As a national board demonstrates commitment and capacity to uphold the mission of the NGO, the central organization will gradually devolve authority for in-country management decisions (budget allocation, senior management selection, etc.) to the certified national board.

10.2.3 The administrative body The administrative body of IOs is normally called “Secretariat” or “Management”. It is generally led by an individual whose role is variously denominated as “SecretaryGeneral” (SG) (e.g. at UN, Council of Europe, ICAO, NATO, OECD); “Director General” (DG) (e.g. at IAEA, FAO, UNESCO, WHO, etc.), “Chief Executive Officer” (CEO) in many INGOs and Transnational Hybrid Organizations (THOs) or “President” (World Bank). We will generally refer to this role as “the head of the secretariat/management”. The secretariat is tasked with supporting strategic planning, elaborating approved programs of activity consistent with the organizations’ mandates and representative/ executive bodies’ decisions and implementing them by managing the financial, human and physical resources of the organization. The head of the secretariat is usually appointed by the representative body following the executive body’s nomination (Archer 1992) that confers on her/him the representation of the organization. The mandate is usually fixed and can be renewed or terminated at the discretion of the appointing bodies. If appointed by the executive body (i.e., without need for endorsement by the representative body) the head of the secretariat is in a weaker position, and his/her mandate can be terminated by the executive body itself.

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In IIs the head of the secretariat commonly attends all meetings of the representative and executive bodies without voting rights. Nonetheless, she/he often takes on relevant political functions, has an active role in preparing the agenda and has a say in the strategic steering of the organization. She/he can call extraordinary meetings of the executive or representative organs if circumstances require them. In the case of INGOs, the head of management is a voting member of the executive body in a very high percentage of cases (Rehli 2011). This is a way of recognizing the prestige of the office and of conferring to it some degree of authority and organizational representation. Nevertheless the active participation of the head of management to the executive body’s decision-making may hinder the principle of separation of powers (Enjolras 2009).

10.3 Decision-making mechanisms in IIs and INGOs

10.3.1 Allocation of voting powers By their very nature, the governing bodies of IIs and INGOs conduct their work mainly through resolutions. Therefore, decision-making mechanisms and rules directly influence the ability to reach agreement and move organizations forward. IIs refer to two fundamental principles of international law: the principle of absolute sovereignty of states and the principle of voluntary participation and compliance with international treaty law (Pacta non obligant nisi gentes inter quas inita).4 As a consequence, at least in principle, unanimity should be the basis for the decision-making procedure (Le Roy-Bennett and Oliver 2002). The League of Nations used the unanimity principle. The UN Charter departed from it, set out a majority voting system for the General Assembly and other organs and adopted the principle of equal voting rights among member states: the so called “One Member, One Vote” (OMOV) system. The OMOV rule is considered “egalitarian”, because it reflects the sovereign equality of states principle (Szasz 2001; Fleurbaey 2008) and is mainly used in political organizations, such as the UN General Assembly at the world-wide level and the Organization of American States (OAS) and the Organization of African Unity (OAU) at the regional one, but also in many INGOs. With the de-colonization process and the increasing number of member states in the United Nations system, the OMOV rule soon allowed the developing countries to dominate the governing bodies of UN organizations. Although their economic and military power were negligible and their population often very small, through sheer numbers they could easily out vote those states whose financial and technical contributions were essential to the overall functioning of the United Nations. The resulting discontent and mistrust by the main donor states towards mechanisms such as the approval of the regular budgets and programs of the work of IIs led these members to impose caps on their contributions, accumulate arrears, shift to bilateral interaction and contribution modalities, or to even resign their membership. To overcome these emerging problems and ensure adequate funding and continued membership, scholars have suggested and organizations experimented with

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the introduction of weighted voting mechanisms and specific rules on the composition of governing bodies (Szasz 2001). Members’ votes can be weighted based on agreed parameters such as the scale of their contribution to the organization, their GDP, the size of their population, or other criteria indicative of the mandate of the organization. Among the IIs, development banks mostly use the weighted majority principle; in IBRD and IDA member states’ votes are directly proportional to their cumulated contributions, measured in “shares”. This reflects the original intent of the constituencies and the nature of these organizations as international financial institutions. In some organizations, a pre-determined number of seats within the executive organs are reserved for the top donors and the largest program countries to ensure an adequate balance of power, i.e. enough control and “value for money” to donors and enough “voice” to recipient countries. An alternative weighting mechanism is to divide membership in groups and to attribute a fixed percentage of votes to each to preserve the balance of power between them. The development banks use this mechanism. For example, the Inter-American Development Bank assigns 50.02 percent of the votes of its executive organ to “regional members” (the beneficiary countries) and 49.9 percent to the non-regional members (the donor countries); the votes of this second group are then distributed to members based on their contributions. This system is aimed at ensuring, on one hand, that no decision is taken without the consent of the beneficiary group and, on the other, that the main donors have significant weight (the USA has 30 percent of the voting rights and some of the main decisions are taken with a qualified majority of two-thirds of the votes). Another possible mechanism is to reserve seats for the member states that are demonstrably more involved and interested in the mandate of the organization. An example of this is the International Maritime Organization (IMO), whose executive body is composed of states with the heaviest international maritime commerce and possessing the largest international commercial fleets, along with other freely elected states (Zanghì 2007). The voting mechanism of the representative body of most “international federation” INGOs (Foreman 1999) is also essentially based on the universality principle and, as a general rule, assigns one vote5 to each member organization. In a number of INGOs, however, other voting formulas are adopted (e.g. in Amnesty International, where voting rights are proportional to the number of individual members of each constituency).

Box 10.1 Restructuring of the voting mechanism at IFAD The International Fund for Agricultural Development (IFAD) divided its members into three categories: (A) developed states (OECD/DAC); (B) OPEC states; and (C) developing states. Each of these three categories was attributed with an equal number of votes (600). Votes were then allocated to single member states within each category based on specific criteria. Within group A 82.5 percent of the votes were attributed in accordance with members’ contributions and

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the remaining 17.5 percent were equally distributed among members. Within category B, 75 percent of the votes were attributed in accordance with members’ contributions and the remaining 25 percent were equally distributed among members. Within category C votes were equally divided among all members. The influence of the main donors of the Fund (grouped in category A) was also protected by qualified majorities required for most decisions (in most cases two-thirds of the votes) and quorum requirements (Woods 1999). This gave a de facto veto power to group A countries over the combined groups B and C. In 1997 IFAD implemented a reform of the voting mechanism that linked individual contributions and voting rights with the aim to provide an incentive to all member states to increase their contributions to the organization. The original 1,800 votes were divided into two categories: 1,010 contribution votes were distributed in accordance with the scale of members’ contributions and 790 membership votes were distributed equally among members. The 1997 reform clearly reflects the increased pressure for control exerted by the main donors to fostering access to financial resources (Woods 1999).

In the next paragraph we will explore in further detail the most common decisionmaking mechanisms within IIs and INGOs: unanimity, majority (simple and weighted) and consensus.

10.3.2 Unanimity Unanimity can be defined as “approval by a vote in which no negative votes are cast. In some instances the chair may announce that he assumes that there is unanimous approval for a proposal and, if no one objects, unanimity may be recorded” (Szasz 2001). Unanimity gives every state a veto and sometimes makes it difficult for the organization to move forward. This has caused organizations to progressively abandon this mechanism in favor of other, more efficient ones (Zanghì 2007). The Organization for Economic Co-operation and Development (OECD) is an example of an organization that takes almost all its decisions by unanimity; a member may, however, indicate that it is not interested in a particular decision, in which case it does not vote and is not bound by the decision.6 IOs often adopt unanimity selectively and allow alternative mechanisms for specific decisions. For example, in the Committee of Foreign Ministers of the Council of Europe (CoE) many important decisions require unanimity (conclusion of conventions or agreements). However, other decisions require a qualified majority of voting members

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(for urgent draft recommendations or draft opinions) and at least a simple majority of all the members (for draft resolutions).

10.3.3 Majority The majority mechanism can be operationalized through different requirements: simple majorities (half the members plus one), qualified majorities (support by a specific quota of members), and double majority (majority is reached based on two different criteria or, alternatively, majority is reached in two different bodies of the organization). The general rule of procedure in most IIs and INGOs is that substantive decisions require two-thirds of the members casting votes, while procedural decisions are taken by simple majority. Such combination of voting mechanisms is typical, for instance, in the UN, UNESCO, OAS, UNWTO, UNIDO, ILO, ICAO and IMO. There are many types of qualified majorities, such as three-fifths or four-fifths majority at the IBRD, and two-thirds, three-quarters, or nine-tenths at the WIPO, depending on the specific matter. Double majority systems may vary based on the combination of two criteria used to identify the majority requirement. For example, the European Space Agency (ESA) has a double majority system to approve spatial programs: a qualified majority of two-thirds of member states taking part in the specific program, which must account also for a two-thirds majority of the overall budget of the program (Zanghì 2007). Decisions at The Global Fund to Fight AIDS, Tuberculosis and Malaria are normally taken by consensus but if this cannot be reached the double majority applies, with a seven-tenths majority in each of the two groupings of the board (the donor voting bloc and the implementer voting bloc).7 Another key factor is the parameter in which a majority is calculated. In the statutes of many organizations, there are formulas that explicitly indicate whether majority refers to the overall members of the body (the so-called “absolute majorities”), to the majority of the “members present and voting” or to the majority of the “votes cast”. The first requirement is the most difficult to reach as it includes the members that are absent or have abstained. This requirement is normally used in very important votes, such as the adoption of amendments to the UN Charter by the UN General Assembly (see UN Charter, Article 108). The Economic and Social Council is an example of an organization following the OMOV rule and requiring a simple majority of members that are present and able to cast their votes (see UN Charter, Article 67). In spite of the presence of many majority-based voting systems, it should be noted that more and more decisions are now taken by consensus (Szasz 2001).

10.3.4 Consensus Consensus is intended as a general agreement for the approval of a proposal without the need for voting. The chair may announce that she/he understands that

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there is a consensus, and then call on those wishing to speak; though some may indicate that they would prefer some changes, if none indicate that they oppose adoption, then consensus is attained (Szasz 2001). Consensus is different from unanimity. While the latter requires that every member of an organization votes affirmatively on a proposal (or abstains, where this is defined as a valid vote), consensus, in Joseph Gold’s terms, is about the “avoidance of voting” (Gold 1977). By its very nature, consensus assures that decision-making, as multilateral negotiation is not dominated by the numerical superiority of any group of nations (Movsisyan 2008). As a consequence, consensus is the preferred form of decision-making for many organs of the UN, including the ECOSOC and others (Executive Boards of UNDP, UNFPA, etc.). There are various ways to block a consensus decision. By declaring a “reservation”, a member or a group of members expresses that, while it is willing to let a motion pass, there are important points of concern. The decision-making body may or may not rework the motion to address these concerns. By “standing aside” one or more members express a severe point of disagreement with a motion; although this act does not halt the motion, the decision-making body usually addresses it by rewording the motion. Finally, members can “block” a motion. This is an extreme measure used with caution only in cases where members consider themselves endangered by a given motion. In most models, one block is not sufficient to block a motion (Williams and McLeod 2008). Consensus is dominated by the modus operandi of diplomatic debates; to achieve consensus, parties have to negotiate, make concessions, compromise, and bargain over proposals. This process usually entails one or more members’ initiative to draft motion proposals and to progressively accumulate support around them through bilateral and multilateral informal negotiations that normally lead to re-writing and modifications of the original text. This “consensus-building” phase may take a considerable amount of time and is developed outside of the formal meetings of the decision-making body. It usually involves only a portion of the members through informal (and unrecorded) consultations of “small-groupbased” decision-making (the so-called “coffee-break decision-making”). For this reason, consensus is generally considered less transparent than other methods (Woods 1998, 1999; for a review of criticisms on consensus building see Innes 2004). Usually, whenever the “sponsor” of a given motion feels confident enough to have gathered together a critical mass of support, the topic is put on the agenda for decision. The majority rule is generally more efficient than consensus in reducing the propensity for stalemate, while generally decisions taken by consensus are considered more “inclusive”. The high level of compromise and re-drafting necessary to build consensus and win over member states that express reservations or are “standing aside” can harm the clarity of the wording and, in turn, the implementation level and effectiveness of the resolution. During the 1960s, with the growth in power of developing countries and former colonies, these states could easily attain a simple majority and then quickly a two-thirds

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majority within the General Assembly. In this way, developing countries were eventually able to pass decisions on important issues such as the structure and budget of the UN or the creation of organs and conferences. As a consequence, by the mid-1970s, a compromise was worked out that, in case of serious intentions to develop resolutions or to create new organs, developing states would have to try to find general agreement (the so-called “striving for consensus” process). While never formally included in the Rules of Procedure of the Assembly, this practice was adopted in the Rules of Procedure of several conferences, such as the Conference on Disarmament. In this conference, consensus is the only admissible decision-making mechanism; it may cause a deadlock for several sessions or, as it happens, for years. Other IOs which make use of consensus include the Organization for Security and Cooperation in Europe (OSCE), MERCOSUR, WTO, NATO and African Union. In all these cases, when consensus cannot be reached, majority mechanisms are allowed. In the WTO, a particular mechanism of consensus, called “reverse consensus” is in place (Woods 1998): within its dispute settlement provisions, rulings are automatically accepted unless there is consensus against acceptance.

10.3.5 “Pros” and “cons” of decision-making systems As described, a wide variety of voting systems and decision-making mechanisms co-exist in IOs. This variety reflects differences in the institutional design, membership, scope, objectives, and organizational frameworks of IIs and INGOs. Therefore, each organization needs to leverage the pros and cons of each decision-making mechanism (Table 10.1) based on its own specificities.

10.4 Good governance in IIs and INGOs With the end of the Cold War, the concept of good governance became a priority in the international political agenda. Structural reforms that followed the economic crisis of the 1980s proved to be ineffective in ensuring economic growth and generated growing concerns about democracy and democratization (Woods 1999). At the beginning, the idea of “good” governance was strictly tied to the failures of the intervention of the states in the economy, the lack of representativeness of governments and the inefficiency of non-market systems (Weiss 2000). Good governance was therefore seen as an argument of the proponents of a “minimalist state” to abandon state institutions in favor of a more active and pivotal role of markets and the civil society. During the 1990s good governance shifted towards the notion of reforming and improving the functioning of public institutions (Weiss 2000). Good governance did not necessarily mean “less” government, but “more appropriate” intervention, including improvements of political leadership, integration of social and economic goals and an increased role of civil society in policy-making.

Source: our elaboration

Decision-making requirements

Allocation of voting power

Feature/Factor

Simple/qualified/ double majority

Consensus

Fully respectful of the principles of sovereignty of states and voluntary nature of international treaty law Full explicit agreement among members Transparent: states vote and “play their position” Extensive negotiations resulting in large agreement on draft motions Inclusion of ideas arising from different actors Overall high level of acceptance by members Better chance of widespread compliance Efficient and timely Use of qualified and double majority can improve the inclusiveness of decisions All members can explicitly express their vote

Effectively reflects members’ contributions to organizations May reflect the level of involvement and interest in the mandate of the organization May be an effective way to gain support of top donors

Weighted

Unanimity

Democratic/egalitarian method

OMOV rule

Pros

TABLE 10.1 Pros and cons of the main decision-making mechanisms in IIs

Sometimes very difficult to achieve Hindering decision-making and time consuming Trade-off between agreed decisions and effectiveness Quite unrealistic in large bodies Time consuming and resource intense process Risks of stalemate “Least Common Denominator” principle: documents are watered-down in order to find an agreement, often resulting in non-binding, weak texts Decisions possibly made in situations of open opposition by some members Not consistent with principles of sovereignty and voluntary nature of international treaty law

Does not measure the relative economic, political, military, weight of each member and its contribution capacity Less “egalitarian” Very business-oriented (members associated as “stockholders”) “Paternalistic” approach dominated by developed/ powerful nations

Cons

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In the context of international development and assistance, good governance was increasingly understood as the promotion of democracy and of basic human rights (Woods 1998). In the words of the then UN Secretary-General, Kofi Annan: “Good governance is perhaps the single most important factor in eradicating poverty and promoting development. By good governance is meant creating well-functioning and accountable institutions – political, judicial and administrative – that citizens regard as legitimate, through which they participate in decisions that affect their lives, and by which they are empowered. Good governance also entails a respect for human rights and the rule of law generally.” (UNGA, A/53/1, 1998) Those words clearly reflected IIs’ need to create transparent and functioning public institutions in beneficiary countries in order to effectively support development. On the one hand, “good governance” was invoked as a precondition to be verified before allocating international aid resources to a given country. A number of criteria to assess good governance were set up for this purpose such as: accountability, transparency, the rule of law, participation, responsiveness, equity, efficiency and effectiveness (IFAD 1999). On the other hand, promotion of good governance became one of the prime areas of intervention and capacity building implemented by IIs to support those countries. In those years, there were few attempts to link the debate on good governance to IIs themselves. During the Annan years, this topic became the center of the reform agenda corresponding with the growing member states’ distrust regarding the level of transparency of IIs’ decision-making, the perceived lack of accountability to member states and governing bodies, and world-renowned cases of abuse such as the Oil for Food scandal as well as misconduct in several Peacekeeping Missions. Woods (1999) proposes to focus on IOs’ “good governance” along three main criteria, namely: participation, accountability and fairness.

10.4.1 Participation Participation in IIs and INGOs essentially refers to the involvement and adequate representation of members and stakeholders in the decision-making process. Participation has the advantage of conferring a sense of ownership on the activities of the organization while fostering a greater sense of commitment to the organization. On the other hand, large IOs may see inclusiveness as a limitation on their internal decision-making processes, thus watering down participation to unilateral information on decisions already taken (Piciotto and Weaving 1994). Participation and representation are key-features of democratic institutions because they reflect and implement the consent of those who are governed

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(Woods 1998). By nature, they are difficult to achieve by highly decentralized and complex organizations, also because members largely differ in terms of size, population/ membership and capabilities. Voting powers and decision-making rules are of utmost importance in shaping participation and representation of members within a given organization. With regard to non-member stakeholders, it is fundamental to set up mechanisms that grant access by populations, their representatives and other groups that an organizations’ activities directly affect. In the context of the UN system, the establishment of consultative mechanisms with NGOs through the ECOSOC is one of the milestones to granting participation to civil society organizations (see Chapter 2). IIs have traditionally neglected affected populations’ direct access based on the assumption that the people are represented in the IIs’ governance system through their own governments. IIs made progress, in the last decade, mainly in the area of human rights’ promotion, through the establishment of direct appeals by affected individuals. For INGOs, participation is also related to internal democracy at all levels. In National Member Organizations, participation should be encouraged from local groups/sections up to national bodies, in order for them to become trustworthy and representative members of the international bodies. Seldom does INGOs’ criteria for membership make reference to the quality of internal decision-making processes—i.e., to the practice of democracy—of National Member Organizations. Since INGOs are controlled by members that represent directly or indirectly the interests of INGO affiliates and of the wider communities they serve, the fact that they are run by members and not by “owners” represents a source of trust. Nevertheless, Enjolras (2009) points out that: This compliance mechanism relies, however, on active member participation, and the lack of participation may precipitate oligarchic governance characterized by the lack of leadership turnover, minority control over organizational resources, professionalized leadership, and low level of participation in governance. (Enjolras 2009) For many INGOs that are “donor-member-dominated federations” (Foreman 1999) or “board-managed organizations” (Enjolras 2009), the lack of participation in decision-making processes of the communities they serve, and often even of disadvantaged national member organizations, remains an issue of concern.

10.4.2 Accountability Accountability may be defined as “the process by which an organization holds itself openly responsible for what it believes, what it does and what it does not, in a way which shows it involving all concerned parties and actively responding to what it learns” (Slim 2002).

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An II or INGO might feel accountable to the moral goals embedded in its mission, independent of the demands of members, funding bodies, partners or even served communities. “In this view, primary accountability is given to “the cause” and the expectations of others are important only insofar as they align with this important duty” (Brown and Moore 2001). Being accountable to stakeholders may encompass the adherence to a wide-range of good governance principles (see Box 10.2).

Box 10.2 The INGO Accountability Charter At a workshop hosted by Transparency International in June 2003, participating INGOs* raised the issue of INGOs’ legitimacy and accountability in light of their increasingly influential role in the international arena and their increased access to resources and policy-making circles. Three years later The INGO Accountability Charter was launched. Eleven leading INGOs publicly declared their adoption of the Charter and encouraged other INGOs to join them in their commitment to good governance to set the standard for international NGOs. The Charter outlined the signatories’ common commitment to excellence, transparency and accountability. Complementing and supplementing existing laws, the Charter drew on existing codes, norms, standards and guidelines, and listed the following shared principles:            

Respect for universal principles Independence Responsible advocacy Effective programs Non-discrimination Transparency Reporting Audit Accuracy of information Good governance Ethical fundraising Professional management

* These were: ActionAid International, Amnesty International, CIVICUS World Alliance for Citizen Participation, Consumers International, Greenpeace International, Oxfam International, International Save the Children Alliance, Survival International, International Federation Terre des Hommes, Transparency International and the World YWCA.

Source: www.ingoaccountabilitycharter.org

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More often, however, accountability is thought of as a concrete relationship between two or more parties. For example, IIs or INGOs may be accountable to their members, donors, partners or beneficiaries for aspects such as the proper handling of processes and resources, or the effective delivery of high-quality, responsive services. Thus, the idea of accountability as a moral ideal may also include the requirement for an organization to make it easy for its multiple stakeholders to monitor the extent to which it has lived up to its promises (Brown and Moore 2001). However, there are situations when claims and expectations of those multiple stakeholders are not aligned, and organizations need to decide whose claims should be honored: Should those with the gold make the rules? Or, should those for whose benefit an organization exists call the shots? And, what room should be made for the claims of those comrades in arms with whom one shares the responsibility for the larger cause? (Brown and Moore 2001) For mission-led organizations, such as IIs and INGOs, the decision may not be straightforward. In “prudential” terms the decision could be simply taken on the basis of power relations, honoring the most powerful stakeholder, although running the risk of failing from an ethical perspective. Alternatively, moral and legal issues could be taken into consideration. Brown and More (2001) argue that INGOs—and we add IIs—should align accountability with the strategy that guides the organizations in pursuing its highest values. At its most basic level, accountability requires that organizations inform their members of the decisions and the ground upon which they are taken, providing for adequate procedures to ensure transparency and flows of information (Woods 1999). Regarding the UN system, most of the agencies work on the principle of the so-called “bureaucratic hierarchy and upward accountability” (i.e., the UN Secretariat reports to the General Assembly, whereas Funds and Programs report to their own governing bodies, to which they are accountable for their operations) (Hill and Peter 2007). In the last decade, the United Nations system came under significant pressure for its self-referential notion of accountability and its lack of transparency and underwent a significant reform process that led to a comprehensive re-thinking of the notion of accountability. Under the new paradigms, accountability is a “360 degree process” that requires commitment and proactive participation of all parties involved (A/64/640, Annex 1 for “Components of the accountability system in the United Nations Secretariat”):  Within the Secretariat, flowing both to and from the secretary-general, senior managers, and staff.  From the UN to its member states, by striving to ensure that the UN works and delivers as one to meet the mandates that governments adopt.

Governance models and reforms 231

 From member states to the UN, by building on responsible governance, including support that is commensurate with the mandates given to the organization.  From member states to each other, in carrying out their respective responsibilities to ensure that mandates can be effectively implemented and that necessary institutional changes are undertaken through the intergovernmental process.  From UN bodies and their member states to the global public—especially those most in need. Over the years, the United Nations has tried to strengthen accountability through internal controls and oversight mechanisms as well as tools to promote transparency and integrity. In recent years, a special focus has been given to ensuring the integrity of procurement processes. While much has been done, accountability is by its very nature a work in progress as expectations and demands on the system continue to evolve. Achievements, to date, include the strengthening of the Office of Internal Oversight Services (OIOS); the establishment of the Ethics Office as well as a credible whistle-blower protection policy to protect staff members who report misconduct; the launch of the Internal Justice System to professionalize internal dispute resolution; the implementation of a framework to address conduct issues in peacekeeping missions; the instituting of a “zero tolerance” policy regarding sexual exploitation, abuse, and other misconduct; the implementation of a financial disclosure program for senior officials and relevant procurement officers to ensure that potential conflicts of interest do not occur; and the issuance of guidelines on the cooperation between the United Nations and the business sector to ensure the integrity and independence of the organization while fostering new partnerships.8

10.4.3 Fairness Good governance includes substantive and procedural fairness (Woods 1999). In the former case, fairness refers to the equity of the outcomes of an institution and the distribution of power, influence and resources within an organization. In the latter case, fairness is understood as a more legalistic notion requiring that rules and standards be created and enforced in an impartial and predictable way. In other words, participants should be able at any moment to understand and predict the processes by which an institution will make decisions and apply them.

10.5 International regimes and global governance By definition, international regimes are established among governments through international agreements, conventions, protocols, etc. and are aimed at addressing issues and areas of international cooperation through the “governance without government” model (Rosenau and Czempiel 1992). In that context, regimes can be seen as “systems of governance”, through which collective action problems are handled in an international scenario where national governments are only actors and participate through the roles they play in regimes.

232 Management of IIs and INGOs

Young (1999) has proposed a well-known, fourfold regime taxonomy, which distinguishes regulatory regimes (aimed at framing shared rules and standards, e.g., the Nuclear Non-Proliferation regime or the GATT/WTO); procedural regimes (aimed at framing procedures and practices that enable participants to deal with collective problems, e.g., a regime the sets standard rules for annual fish catches or the use of water resources); programmatic regimes (aimed at pooling resources and setting agreed to frameworks towards the accomplishment of projects); and generative regimes (which are an international response to an issue or a need that does not have a clear institutional embodiment). All actual regimes embed elements of the four different typologies. According to Krasner (1983), it is necessary to think of regimes in terms of inter-organizational networks (IONs) in which labor is divided into different duties to be performed by the network’s constituents in order to achieve a common, collective goal. Ruggie (2002) defines IONs as loosely coupled, non-standardized organizational forms, composed of autonomous organizations, which operate as shared conceptual systems and enjoy different degrees of formalization. IONs’ characteristics are typical of modern governance systems within a specific “umbrella” organization such as the UN system. However, according to Metcalfe (2012), while all regimes are based on IONs, only networks with appropriate management capacities constitute regimes. The effectiveness of regimes depends on successful network management, which requires new capabilities, shared languages among participating organizations and tailored inter-organizational arrangements and settings. In fact, while individual organizations tend to centralize their activity and to perform under strict hierarchical control, the dynamics of IONs are dominated by centrifugal forces. Therefore, IONs tend to decentralize and to “disintegrate” complex tasks into basic components distributed among constituents. As a consequence, coordination in IONs is of utmost importance in order to ensure appropriate levels of performance, especially when the network is under pressure (Metcalfe 2012). With the acceleration of globalization, and a rising number of non-state global actors, room for maneuver of nation states has been constrained, pushing them to share the processes of global governance with those new transnational forces. Thus, while still largely undefined in its mechanisms, the concepts of “global regimes” and “global governance” are emerging. Highly diverse Global Action Networks (GAN) and IONs (Waddell 2011) are suggested as example of this new scenario, and new transnational hybrid organizations increasingly occupy the political space formerly associated only with IIs and pose new managerial challenges to them (see Chapter 3).

10.6 Conclusions From the 1990s onwards the scope of the term “governance” significantly enlarged. Initially, it mainly indicated the internal “rules of the game” which IIs and INGOs established to conduct their own businesses. Thereafter, the term

Governance models and reforms 233

expanded to encompass the notion of “good” governance to address the need for accountability, transparency and ethical conduct of operations. Finally, the growing presence and importance of new actors in the international scenario and the need to coordinate and manage complex inter-organizational networks determined the association of governance with the notion of “global regimes”. The ability of IOs to interpret these various meanings of governance and to adapt to their requirements has become a fundamental part of their overall success.

10.7 Case study: tripartite governance structures at the ILO and the ITU The cases of the International Labor Organization (ILO) and the International Telecommunication Union (ITU) are interesting because, by contrast with most IIs, these organizations fully include non-state actors in their formal decisionmaking processes. It is worth noting that both these organizations pre-dated the United Nations and joined as specialized agencies after its constitution.

10.7.1 International Labor Organization The ILO was founded in 1919 together with the League of Nations and later joined the United Nations system as a special agency. The organization is aimed at achieving two main objectives: the setting of international labor standards and the formulation of policies to improve working conditions and enhance employment opportunities. The ILO’s representative organ is the “International Labor Conference” and its executive organ is the “Governing Body” (ILO 1998). From the beginning, the ILO has included delegates of organized labor and of national employer’s associations in its governing bodies along with representatives of the member states (Alcock 1971). In the International Labor Conference and in the Governing Body, two government delegates (led by the Ministers responsible for labor affairs), one employer delegate, and one worker delegate (Helfer 2006) represent member states. This substantially guarantees an equal voice to governments and civil society (Mei Yin Chang and Strang 1993). In most delegations, the Cabinet Ministers responsible for labor affairs in their respective countries head the delegations and represent their governments’ viewpoints. The employer and worker delegates enjoy also the possibility of expressing themselves without any conditioning, and vote according to instructions that their national organizations indicate. Over time, the ILO’s guiding principles of universality, flexibility, and centralization became increasingly difficult to uphold in the face of a more diverse and politically heterogeneous membership that also included socialist and developing economies following the end of World War II (Alcock 1971). Generally, ILO officials had to resolve a two-fold dilemma: on one hand, the ILO’s agenda had been greatly expanded since the organization’s foundation

234 Management of IIs and INGOs

without requiring member states to formally ratify any of its conventions. On the other hand, the trade unions, the group from which the ILO draws most of its legitimacy and support, were progressively losing their powerful voice and independence (Helfer 2006). As a consequence, at the beginning of the 1990s, officials often referred to the ILO as an ineffective organization, troubled with problems of legitimacy and enforcement (Hassel 2008). In an effort to reform, the ILO narrowed down its mandate to a few fundamental labor rights and improved the general quality of its lawmaking and monitoring activities. In 1998, the ILO adopted the Declaration on Fundamental Principles and Rights at Work, which can be seen as a move back towards the organization’s core competencies (Helfer 2006). Moreover, the organization acted intensely to bring outdated international labor regulations up to modern standards and started campaigning, with eventual success, for a wide ratification of eight fundamental labor rights treaties. The question of legitimacy had to be addressed as well, since the decreased standing of national labor unions made it ever harder for the ILO to claim to actually speak for the entire working class (Helfer 2006). Strengthening its tripartite governance structure and social dialogue came to be seen as paramount goals, as the ILO consistently tried to tie its goals on social dialogue into the substance of the conventions, recommendations, and other policy products and programs. Some critics have mentioned the ILO’s longstanding resistance to reaching out to constituents outside of its tripartite structure—such as civil society organizations and groups directly concerned with labor rights—as one of its greatest shortcomings (Helfer 2006). There is some indication that the ILO is improving in this respect. For example, the International Program on the Elimination of Child Labor, does involve a diversity of organizations representing more viewpoints than those found in the traditional tripartite governance structure.

10.7.2 International Telecommunication Union Founded in 1865 as the International Telegraph Union, the ITU became a UN specialized agency in 1947. The ITU promotes the development of telecommunication networks and access to telecommunication services by fostering cooperation among governments and a range of non-governmental actors that include network operators, service providers, equipment manufacturers, scientific and technical organizations, financial organizations, and development organizations (ITU 2011). The ITU representative body is called “Plenipotentiary Conference” and is responsible for the high-level decisions of the organization, such as the review of fundamental documents and the election of the Secretary-General. The executive board maintains day-to-day political control of the organization and is known as the “Council”. It is composed of 16 member states elected by the Conference (ITU 2011). The program of work of the ITU is divided into three sectors, Radiocommunication (ITU-R), Telecommunication Standardization (ITU-T) and

Governance models and reforms 235

Telecommunication Development (ITU-D). The ITU is further divided into different Study Groups (ITU 2011). Each sector of activity has its own assemblies. ITU members are divided into four categories: Member States (governments), Sector Members (non-governmental members participating in one or more sectors), Associates (non-governmental members focused on specific study groups) and Academia (research centers, universities, etc.), each with different rights and obligations. The ITU’s non-state members do not have the same rights as the state members. In fact, only the latter have the right to vote in the representative and executive bodies of the organizations. Nonetheless, sector members and associate members do take part in the adoption of recommendations and in decisions relating to the working methods and procedures of the sector concerned (ITU 2011). The ITU is structured as a global multi-stakeholder platform dealing with telecommunications on their largest scale. As a consequence, ITU has close relations with numerous IIs and INGOs, regional intergovernmental telecommunications organizations and intergovernmental organizations operating satellite systems that take part in its work as sector members (MacLean 2007). As in the case of the ILO, the ITU’s membership base has been experiencing structural changes as the organization actively seeks to attract more and more corporate members. As corporate entities keep increasing their role in shaping the telecommunication sector and agenda, and powerfully influence the domestic policies of developed states, their inclusion is strictly related to the need of ITU to keep its relevance as an international forum and deliberative body (McCormick 2007). At the same time, the ITU is trying to increase the involvement of developing countries which constitute the majority of ITU member states as well as a large amount of the global population to whom telecommunications services should be

38

169

193

Member States > Sector Members * Associates miAcademia

544

FIGURE 10.1 ITU membership Source: adapted from ITU website (April 2012)

236 Management of IIs and INGOs

provided in order to reduce the digital gap (McCormick 2007). The challenge, in this sense, is related to capacity building, since developing countries suffer from a chronic lack of experienced and knowledgeable staff (McCormick 2007). A more active participation by developing countries could re-balance the traditional dominance of developed countries, that so far have been able to impose their will upon the rest of the members (Lee 1996).

10.8 Case study: UN Security Council—veto power and reform proposals The five permanent members of the UN Security Council (known as the P5) enjoy a double privilege: the so-called “veto power” and the permanent membership. The veto power within the Security Council is a powerful instrument in the hands of the P5 as it confers the ability to impose a member’s will upon the rest of the members on issues of international peace and security. It remains one of the most discussed political topics of the whole UN System. Technically speaking, the veto is exercised when any permanent member casts a “negative” vote on a “substantive” draft resolution. If a P5 member abstains or is absent from the vote, then the draft resolution can be adopted. The Security Council veto system mirrors the world order after World War II and decades-long periods of substantial deadlock during the Cold War have characterized its history. Because of the use or threat of use of veto power by some of the P5, the Security Council’s role has had a limited impact in certain military situations such as in Algeria (1954–62), the Suez Crisis (1956), the Vietnam War (1946–75), the War in Afghanistan (1979–88), and the Invasion of Panama (1989). With the progressive end of the conflict between the two East–West blocks, the Security Council began to regain its capacity to act; the period from 31 May 1990 to 11 May 1993 was the longest without use of the veto in the history of the UN. From the early 2000s onward, new stalemates and blocks began to arise from members holding deeply different views on human rights, intervention in cases of internal popular insurgencies, and the use of force by governments on parts of their own populations. The unfolding of the Arab Spring severely tested the Security Council and produced proactive resolutions in some cases (Lybia in 2011) and long stalemates in others (Syria in 2012–13). Numerous attempts to reform the governance of the Security Council have been made over the years, mirroring the evolving balance of power among nations. Key arguments against the current membership and voting mechanisms include the following considerations:  The P5 members are not appropriate anymore to hold the veto power, since the world balance of power has changed over time.  The veto power and, above all, the threat of the use of it, hinders balanced political decisions since draft resolutions are frequently not even formally presented to the Council, if sponsors are certain that a P5 member would oppose them (the so-called “pocket veto”).

Governance models and reforms 237

 An enlargement of both the permanent and non-permanent members would help to increase the representativeness of the Council. It has appeared clear, for some time, that the current voting rights neither reflect the modern world order nor ensure an effective decision-making system. Agreement on the need for change is widespread. On the other hand, no proposal so far has been strong enough to gain the needed support for approval by the requested qualified majority of the UN General Assembly (Gareis and Varwick 2005). Current reform proposals call for an alteration of the veto power provision, proposing a limited use of the veto to vital national security issues, a compulsory agreement from several member states before any of the P5 members makes use of the veto, or the abolition of the veto powers altogether (Gareis and Varwick 2005). The last option seems the most unlikely to be pursued, since it would require an amendment to the UN Charter which needs to be voted on by the P5 themselves. Reform proposals sponsored by growing regional powers suggest the enlargement of permanent and non-permanent members. Arguments in favor of this proposal include the point that the current permanent membership does not include any representative from the African Continent (South Africa, for example), nor does it adequately reflect a balance of power within distinct regions (Japan, Germany, for example). Moreover, the enlargement of the permanent and nonpermanent members could make more realistic the elimination of the veto power without compromising the need for agreement by the major world powers and world regions on draft resolutions. After years of stalemate within the open working group on the reform of the Security Council, the debate was finally moved to the General Assembly in 2012.

9

127

18

83

■ China —France : USA « USSR/Russia

FIGURE 10.2 Number of vetoes by country; period 1946–2012 Source: our elaboration on Security Council data, UN website

238 Management of IIs and INGOs

50

40

Ό

ω w

ЗО

пз о сл 0 о 20 ф >

ЗІ:

10

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1946-55 1956-65 1966-75 1976-85 1966-95 1996-05 2006-12 USSR/Russia

* ··* υ 8 Α

- - - U K

France

China

FIGURE 10.3 Historical trend of vetoes by country; period 1946–2012 Source: our elaboration based on Security Council data, UN website

Yet various blocks of states remain polarized on important open issues such as which kind of alterations to impose on the veto power (if any), the extension of the veto power to new permanent members, the number of new permanent and non-permanent members, and the choice of the new permanent members.

Notes * By Ivano Bongiovanni, Eduardo Missoni and Daniele Alesani. 1 Organizations that are members of INGOs (a) commit, via a signed partnership agreement, to uphold the global mission and principles of the INGO; (b) demonstrate some degree of national program competence in resource acquisition and/or services delivery; and (c) have a national governing body or at least an advisory committee of local leaders (Foreman 1999). 2 This concept should not be confused with that of “tripartite” structure that in selected IIs, such as the International Labor Organization (ILO), refers to the three social sectors (government, corporate and trade-unions) being jointly represented in the organization (see also Chapter 3). 3 The term “global bumblebee” alludes to the intricate network of influence and interaction between member organizations and with the central organization (Foreman 1999). 4 “Agreements oblige only people who signed them”. As Le Roy-Bennett and Oliver (2002) point out, tenacity of these ideas is witnessed by the UN Charter, where Article 2 states: “The Organization is based on the principle of the sovereign equality of all its members”. 5 Or an equal number of votes. 6 See Article 6 of the Convention on the OECD, www.oecd.org. 7 See Operating Procedures of the Board and Committees, www.theglobalfund.org. 8 Further details at www.un.org/reform.

11 STRATEGIC THINKING AND PLANNING Daniele Alesani and Ivano Bongiovanni

11.1 Introduction Modern international organization managers are confronted with an articulated and fast-changing environment. The competitive environment increasingly challenges them because financial resources are highly volatile, new entrants and sister agencies have become more aggressive and donor expectations for demonstrable value for money have risen and become much more precise. The challenges facing populations in need as well as international cooperation priorities are also highly dynamic and increasingly complicated, requiring organizations to focus on their competitive advantages and to show adaptability and flexibility. In such a context, organizations need to assume a “strategic” approach. In this chapter we will explore the main concepts, systems and tools of International Institutions (II) and International Non-Governmental Organizations (INGO) strategic management. We start this chapter with an exploration of the concept of strategy for IIs and INGOs and of its growing importance in the context of current management reforms. We then identify a tailored definition of strategy both in terms of “positioning” in a competitive arena and “fit” of the organization within the external environment. In the following sections, we explore the process of strategy formulation and its complementary aspects of strategic “thinking” and “planning”, where the first is intended as a moment of discontinuity and creation and the second as one of rationalization and alignment. We conclude with a section on how to assess, manage and monitor strategy. We examine how to distinguish operational from strategic decisions. We utilize the “strategic triangle” framework that Michael Moore (2000) first introduced as conceptual lenses to use when formulating strategic decisions. Finally, we adapt and tailor the competitive forces model (Porter 1985) to the context of IIs and provide a framework for assessment of the relative strength of the positioning of an organization in its competitive arena.

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11.2 The notion of strategy and the need for a tailored approach to public sector organizations and NGOs Chandler (1974) identifies strategy as “the definition of the fundamental long-term objectives of an organization and the adoption of measures (actions) and allocation of resources necessary to pursue such objectives.” This definition of strategy is broad enough to encompass both business and public/non-profit organizations. Yet in order to operationalize it, we need to assume the perspective of one or the other type of organization. In fact, business and non-profit organizations have fundamentally different objectives consistent with their different institutional missions and visions, their respective social groups’ values and interests and their definitions of “value” creation. Mission is intended as the overarching institutional mandate or purpose that an organization is set to achieve. For example, the mission of the World Food Programme (WFP) is to feed the highest possible number of people suffering hunger and to avoid food insecurity and instability. Vision is intended as the “state of the world” (or the context of reference) in which the organization has achieved its institutional mission. For example, funders of the World Trade Organization (WTO) had the vision of a world where trade is free and fair among nations. Business organizations define value creation mainly in “economic” terms, with an emphasis on profit. Their main social group of reference is the community of shareholders, in whose interest it is to focus on economic results. Therefore, for these organizations, strategy consists of establishing the actions that would lead to profit maximization. In this sense, strategy answers questions such as “what position should my organization occupy in the market?”, “what competitive advantages should it have?” (i.e. technological edge? price point?) and “which geographic areas to occupy with its product/services?” On the contrary, public and non-profit organizations define value mainly in non-economic terms, as impacts generated in the external social environment through provision of public and individual goods or services, for example, protection of the natural environment, contribution to people’s well-being, and fulfillment of their aspirations and rights. The reference social group of NGOs is usually a specific and identifiable group of constituencies interested in pursuing an identifiable cause. Public sector organizations, by definition, act on behalf of a whole local, national or international community; the need to compromise on divergent beliefs, interests and stakeholder groups, within the given society, complicates the definition of their goals and strategies. For non-profit organizations the “financial bottom line” is not a result in itself (Bryce 1992). It is a boundary to observe, it identifies the amount of resources that can be consumed to achieve the mission, based on funds availability, without compromising the non-profit’s future financial sustainability and institutional survival.

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Moore (2000) has explained the fundamental “strategic” difference between business and public/non-profit organizations. In business organizations there is a conceptual alignment between revenue (or funding), social values and overall performance. Business organizations stand on a social group of constituencies whose interests are overall homogeneous and aimed at the maximization of financial results. Financial results also represent the main measure of performance and achievement of the institutional mission. Successful businesses have a strong financial bottom line, which represents the main objective of their constituencies (stockholders) and is a good proxy of the company’s performance. This alignment does not exist in public and non-profit organizations. Here, availability of funds is fundamental but is largely not based on revenues from the sale of individual goods and services at market prices, but rather on the level of consensus and legitimacy achieved within the community of donors and constituencies as well as the perceived level of fairness, efficiency and effectiveness of taxes and fees. Contrary to for-profits, non-profit organizations’ ability to satisfy the often diverging aspirations of their reference social groups is not necessarily linked to their ability to raise funds or their financial sustainability. This gives an idea of how much more complicated the strategic environment can be for non-profit organizations. In particular, when compared to the strategic requirements of businesses, public and non-profit organizations face a two-fold challenge. On one hand, they must adapt to an environment that has blurry boundaries and is largely influenced by tensions and external drivers with direct influence on the organization. On the other, they have a certain pressure to abide by their traditional missions or “mandates”, otherwise they would need to re-negotiate their agreement with stakeholders (Fremont-Smith 1965). The “political” decision-making process of public/non-profit organizations makes it difficult to identify a straightforward definition of objectives and goals. Very specific goals foster accountability towards the community and donors, and they are more easily measurable; broader goals help the organizations maintain the flexibility required to attend to changing social needs and the external environment. These varied factors call for a tailored approach to strategy, strategy formulation and strategic management in public and non-profit organizations. In these organizations, strategy needs to start from the analysis of the “social” mission, the identification of a series of measurable objectives and goals that would allow the organization to achieve it, and the formulation of a plan of action and resources to get there (Figure 11.1).

11.3 The growing importance of strategy and strategic management in public and intergovernmental organizations The rise of the concept of “strategy” and “strategic management” in the public sector is linked to the New Public Management (NPM) and its agenda for change (Hood 1991).

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FIGURE 11.1 The notion of strategy in non-profit organizations Source: our elaboration

The economic crisis of the late 1980s prompted a rethinking of the role of government and on how to organize and manage public services and organizations to maximize efficiency and effectiveness. In most developed countries, governments outsourced service provision to companies and established competitive markets for services where possible. Governments asked public organizations to focus on their competitive advantages, to abandon certain functions, to strengthen their ability to control and to regulate (Sulle 2009), and to watch and preserve their long-term financial sustainability. In other words, the NPM agenda constituted in itself a considerable exercise of governmental strategic repositioning, based on the consideration that the old bureaucratic model had proved inadequate to produce expected results and fulfill the government’s institutional mission. Under the NPM, organizations were asked to manage differently and better, to innovate, to find solutions, and to contain costs and improve operations. In order to do so, business-like management tools such as cost controls and quality management were widely introduced (Caiden 1990; Rubin 1990). Strategic management became the umbrella term to identify the mechanisms and tools established to comprehensively identify institutional objectives and results, set plans of action and monitor their achievements. The results of the NPM reforms have been mixed (Groot and Budding 2008; McLaughlin and Osborne 2002; Pollit 1995). In many instances, the strategic re-thinking of government’s role actually turned into an impoverishment of it, rather than an evolution to a lighter and more effective model. In a number of cases, government agencies adopted business-like tools without the necessary changes in organizational culture and technical preparedness. As a result, public sector employees interpreted them in a bureaucratic and static way rather than as enabling tools to better orient their organizations towards the government’s objectives. In the context of IIs (and to a certain extent INGOs), the NPM reforms arrived quite late, under the pressure of the representatives of the same member states which implemented these reforms in their own domestic public sectors. Strategy

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and strategic management are very much on the agenda of the current management reforms; it is very common for organizations, for example, to regularly produce “strategic plans” and to maintain results-based budgets and reports. The recent more aggressive attitude of large donors towards linking their contributions with the results of their own assessments of multilaterals’ performance and ability to achieve their missions has given a considerable push toward strategic thinking and positioning. The increased importance of the “value for money” proposition has made organizations increasingly more aware of the need to clearly occupy a “strategic space” within the technical development competitive arena where their value proposition is clear and visible to the donors, and their results are measurable and verifiable. The fact that 80 percent of the financial resources available to IIs of the UN system is currently “on the market” and related to voluntary rather than mandatory and assessed contributions (UN System Chief Executive Board for Coordination 2010) represents the clearest and most significant incentive in this direction.

11.4 Towards a working definition of strategy for IIs and INGOs In this section, we operationalize the notion of strategy to the specificities of IIs and INGOs. In order to do so, we need to introduce the idea that strategy is about researching a dynamic congruence between an organization and its environment. On the one hand, strategy can be conceptualized as the organization’s efforts to “position” itself within its environment or, in other words, to occupy a distinctive niche based on its competitive advantages, its value proposition and the competitors’ positions. On the other hand, strategy can be interpreted as a search for a “fit” between the internal characteristics and operational capabilities of the organization and the demands/needs of a target “social group”.

11.4.1 Strategy as positioning Strategic positioning means occupying a specific competitive space by delivering a different set of activities than those of rivals or delivering the same set of activities but in a different way. The best known strategic positioning framework in the mainstream business administration literature is Michael Porter’s “generic strategies” model which identifies three basic strategic positions—“segmentation”, “differentiation” and “price leadership”—based on the scope of the targeted demand, the uniqueness of the qualities of produced goods/services and the price proposition (Porter 1980). This framework can be modified and adapted to IIs and INGOs. In this context, the price proposition is not a relevant competitive driver, as the standard assumption is that services are given at a “cost recovery” rate and without consideration for margins. The segmentation strategy, based on the scope of the targeted demand needs to be further broken down as it may refer to the segment of population (e.g. children, refugees, rural population) or the specific needs (e.g. healthcare, human

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rights protection, development) addressed. Differentiation based on the variety of services remains a valid strategic variable because within a given competitive space IIs and INGOs can offer services with different technical characteristics. Based on the above, we can identify three basic strategic positions:  Variety-based. The organization positions itself as being the best or the “specialist” at producing a specific subset (or “variety”) of services. It therefore targets specific needs of a broad population.  Needs-based. The organization targets a specific population and aims to satisfy all its relevant demands or needs through a variety of services.  Access-based. The organization offers a niche of products or services which are tailored to serve the specific needs of a segment of the population. Other segments of the population cannot be served because their needs lead to different products or services. In practice, these three positions are not mutually exclusive and can be combined. An example of an organization adopting the variety-based positioning is the World Intellectual Property Organization (WIPO). WIPO developed its value proposition into being the only global intergovernmental organization to offer an intellectual property patent system recognized world-wide. Patents are exclusive rights granted for an invention which protect the owner from third party use and commercialization. WIPO’s patents grant rights to their holders that are internationally enforceable in courts of law. This required WIPO to establish comprehensive agreements with member states to validate its patents in their domestic judicial systems, develop a comprehensive and common system of recording of inventions and to identify mechanisms for resolution of disputes on patents. A number of standard-setting organizations share the same type of variety based strategic positioning such as the International Telecommunication Union (ITU) through issuance of technical communication protocols or the Universal Postal Union (UPU) through the setting of rules for international mail exchanges. An example of an organization adopting a needs-based positioning approach is the United Nations Office of the High Commissioner for Refugees (UNHCR). UNHCR provides an extremely broad variety of services for refugees including healthcare assistance, protection, sheltering, feeding and advice on asylum applications, education and counseling. UNHCR was established as a global response to individuals and groups under the specific status of refugees or internally displaced people. Holding this position requires of the UNHCR considerable operational efforts in that the organization must have the capacity to intervene quickly and with adequate resources and capabilities on the ground on a number of issues at the same time and, indeed, anywhere in the world. Emergency operations and political advocacy needs to go hand in hand to produce the expected results of a fast return to stable—if not normal—living conditions. The field presence of the organization is ever changing and therefore needs to count on extremely mobile and adequately qualified professional staff.

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An example of the access-based positioning is the World Bank group. The two main organizations of the World Bank—International Bank for Reconstruction and Development (IBRD) and International Development Association (IDA)—each target a specific segment of the population in need of borrowing financial resources for development purposes with a unique mix of products and services. IBRD targets middle income countries with wide access to loans from commercial banks but interested in IBRD’s funding because of more favorable rates and the supply of technical expertise and advice on how to carry on sectorial reforms. IDA targets the least developed countries with no possibility of directly accessing the financial markets and which need long-term repayment terms and low interest loans or grants. A combination of “broad” or “narrow” scope on services to offer, needs, and population to target, characterizes each of the three basic strategic positions (Figure 11.2). In Figure 11.2, we can visually appreciate that there is no viable strategy that allows the targeting, at the same time, of a broad spectrum of services, needs and population. In other words, strategy is about choosing what to focus on and

FIGURE 11.2 Strategic positioning by IIs and INGOs Source: our elaboration

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what “not to do” (Porter 1996). In choosing and maintaining its strategic position, any organization is faced with trade-offs which occur when activities are incompatible or inconsistent among themselves or with the value proposition identified by the organization. Activities can become “incompatible” for three main reasons:  Clash with established image and reputation. Stakeholders perceive beneficiary organizations based on their reputation, on their perceived technical capabilities and on past experience dealing with them. Activities that lead organizations away from their core competency areas, as understood by donors, are usually hard to finance and at a high risk of underperformance.  Clash with consolidated core activities. Most IIs and INGOs base their core business on high levels of specialization, matured during years of international cooperation practice. Extending to new and unrelated areas of intervention can be extremely risky. For example, in the area of hunger and food security, the WFP’s traditional focus is on fighting extreme hunger and starvation in emergency situations, while the Food and Agricultural Organization (FAO) is focused on policy advice and advocacy to promote rural development and food stability. The two activities require skillsets and organizational settings that are very different and cannot be easily internalized. It would therefore become very risky for one organization to try to bridge over into the domain of the other.  Internal coordination and control issues. International cooperation activities are vast and complex. A given combination of activities in the same organization may create internal control and coordination problems. For example, it is common for field-based organizations to be either involved in advocacy, training and service delivery or in procurement and construction of infrastructure and facilities. These activities are not mutually exclusive, but the skillset and program specialist profiles required to follow them tend to differ, so organizations specialize in one or the other of the two areas. It is often environmental factors that put organizations in front of “consistency” choices. The escalation of earmarked voluntary contributions increases the risk for organizations to move away from their core competencies and to tap into new themes or subject areas potentially more appealing to donors. The increasing tendency of the donor community to promote “nationally executed” activities1 generates considerable coordination problems as well as the need for multilaterals to “re-align” their abilities and organizational settings toward planning and monitoring activities.

11.4.2 Strategy as “fit” Under this perspective, strategy means creating a fit between the organization and its external environment to continually produce a unique mix of value for its constituents.

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The concept of strategy as a “fit” revolves around the need for an organization, as a whole, to consistently orient its operational settings, culture, actions and choices towards the realization of its intended social value (adapted from Porter 1996). A strategic organization acts as a “system”, where all components are interconnected. It is sensitive to and reacts in harmony with its external environment. In the case of IIs and INGOs, strategic decision-makers:  assess the social value, result or “change” they intend to generate;  take stock of the main stakeholder categories and the respective resources brought and threats posed to the organization;  analyze the environmental—political, economic, social, technological (PEST)— factors having an impact on the organization and its intended sphere of influence, and the PEST’s evolution;  operate on their organizations to create a “fit” able to produce the expected results by holistically leveraging on the organizational settings, the mix and number of human resources, the financial resources allocation, the consolidated business processes and operational activities. Strategic orientation as “fit” revolves around the idea that the way an organization combines its activities as a whole produces more value than the sum of its individual activities. In particular, Porter (1996) identifies three types of “fit”:  Simple consistency—consistency between an activity (or function) and the overall strategy. For example, UNFPA’s decision to act as a procurement agent for contraceptives on behalf of developing countries to lower their acquisition costs is consistent with its strategy to foster access to reproductive healthcare commodities and encourage family planning.  Reinforcing activities—mutual reinforcement between activities aimed at improving the organization’s ability to produce results. For example, in the International Financial Institutions (IFIs) there is a cross-fertilization between the lending and the technical cooperation activities which produce positive externalities and strengthen borrowers’ ability to achieve the intended development results and successfully repay their loans.  Optimization of effort—efforts aimed to eliminate redundancy, gain efficiency and overall organizational traction. A good example of an optimization effort currently underway is the “Delivery as One” initiative, aimed at strengthening consistency among UN organizations and creating a unique point of entry and one-stop-shopping experience for all UN stakeholders at the field level. The concept of “fit” is necessarily dynamic, as both the external environment and the organization itself evolve over time. In particular, assuming a stable institutional mandate, the “demand” targeted by the organization evolves over time in terms of size and composition of the core population, its needs and the goods and

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services that can satisfy them. In parallel, organizational settings, core skills and capabilities change in response to various external and internal pressures such as changes in management culture, donors’ preferences or evolution of development frameworks and paradigms. Strategic decision-makers need therefore to maintain both consistency and a “healthy tension” between dynamic evolution of the environment and the capabilities of the organization. Whenever this consistency is threatened, managers can either modify the amount or the type of demand targeted by their organization or adapt its core capabilities, key skills and knowledge provided to beneficiaries and/or change the type or the mix of goods and services it provides. Decision-makers may also act on the demand and on the offer/capability side at the same time (see Figure 11.3). A concrete example can help clarify this notion of strategy as ongoing research of the fit between the organization and its environment. Let us imagine being the manager of a small INGO with the mission to provide shelter to Caribbean countries’ populations hit by hurricanes. The organization works under a constrained budget not subject to significant foreseeable increases. The traditional approach has been to provide cloth and wood tents to the population, which accommodates a significant portion of the rural population that these natural events victimize—about 10,000 people. These tents need to be provided every time the disaster occurs, since populations are insisting on re-building their houses too close to the water and in areas too low and near the ocean shore, therefore exposing themselves to seasonal flooding. There is no easy way to convince the population to change their habits and preferences. A possible alternative would be to replace tents with hard-walled shelters made of stone. These shelters have a 10-year lifespan but, because of their higher cost and logistical challenges, with the current organization’s budget it would be possible to serve only 2,000 people a year. In a tense session of the organization’s board, members urge the

FIGURE 11.3 Strategy as fit: strategic re-alignment options Source: our elaboration based on Beattie and Hess (2009)

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organization to transition to the hard-walled shelter approach, considered more appropriate for addressing the root causes of the problem, more durable and potentially successful in making populations understand the advantages of building in areas less prone to natural disasters. This decision is eventually taken, overcoming the resistances of members angered by the significant loss of population coverage as well as the probable criticism by the donor community at large. In this example, the shelter organization is faced with a trade-off between the amount of demand that it is able to address and the fit of the product with the underlying needs of the target population. The organization considered it a priority to improve its impact among the affected population, including the expected behavioral changes in the target group, and was prepared to bear the short-term consequences of a potential tarnishing of its image among both donors and beneficiaries. The case study of the International Fund for Agricultural Development (IFAD) at the end of this chapter provides a good additional example of the strategic “fit” dilemma and illustrates how the organization overcame it.

11.5 Strategy formulation in IIs and INGOs: “thinking” and “planning” Literature and practice have identified two distinctive and complementary aspects of strategic management: strategic “thinking” and strategic “planning”. The former is often described as the moment of “disruptive creation” in which the organization envisions its desired competitive position in the context of a possible future and

FIGURE 11.4 Strategy formulation Source: adapted from Liedtka (1998)

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TABLE 11.1 Strategic thinking and planning

Strategic thinking

Planning

Conceptual perspective

Intuition

Rational design

Purpose

Identify imaginative strategies to change the competitive scenario based on envisioned future

Operationalization of strategies by alignment of processes, business practices and systems

Thought process

Synthetic, divergent, creative, disruptive

Analytical, rational, conventional convergent

Source: our elaboration

identifies the direction to point to. The latter is the moment of “rationalization” and alignment of business processes and operations towards the identified direction (Johnson and Scholes 2002; Lawrence 1999). Organizations that aspire to comprehensively manage their strategy need to both think strategically and plan to execute their strategies. In fact, strategic thinking allows the organization to portray its positioning and fit into the future, while strategic planning allows it to realize and set out the strategic vision for the organization. The first without the second is a “dream book”, the second without the first tends to replicate traditional and consolidated business models, which inevitably would make the organization lose its fit with a rapidly changing environment.

11.5.1 Strategic thinking Strategic thinking is a highly unstructured process, based on soft skills, and it is difficult to translate into formalized analytical tools and techniques. The figure of the “strategic thinker” is central to this process, observing reality and then elaborating new directions for his/her organization, in order to take it as close as possible to the desired future. As a consequence, s/he needs to be “inventive, divergent, inspired and able to manage from the right side of the brain” (Goldsmith 1996). In doing so, the strategic thinker should develop soft skills aimed at developing intuition and creative thought (Mintzberg 1994) along with scientific analytical skills. The logical framework that Liedtka (1998) elaborated is particularly useful for describing the main components of strategic thinking and the key characteristics of the strategic “thinker”. The strategic thinker observes reality (organizational mission) and then elaborates new directions for his/her organization, in order to take it, consequently, as close as possible to the desired future (organizational vision) (Figure 11.5). Theorists often describe “system perspective” as a major component of strategic thinking: the ability to put together a number of contextual and contingent environmental and organizational elements, forming a vision of the future and the organization within it.

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FIGURE 11.5 Strategic thinking Source: adapted from Liedtka (1988)

They identify “purpose drive” as the ability to envisage the competitive scenario of the future and pinpoint a successful vision and position for the organization. Intent focus implies knowledge of the industry or sector, intuition of its evolution and attachment to the values and the mission of the organization (Hamel and Prahalad 1994). “Intelligent opportunism” allows strategic thinkers to see and seize competitive opportunities in environmental developments and dynamics. As Mintzberg (1994) points out, strategic thinkers are not necessarily the directors or HQ analysts, as innovation often comes from practice and from observation of the reality on the ground as well as the emerging needs and trends. Therefore, theorists have often described strategic thinking as residing at the hierarchical and geographical peripheries of the organizations. Literature describes “thinking in time” as the ability to link the past, present and future in relation to the organization and its environment. The strategic thinker is able to perceive the points of discontinuity that will change the competitive scenario. S/he can judge the ability of the organization to change and evolve, also based on his/ her interpretation of its history, culture and business processes. Theorists have also described thinking in time as the ability to identify the gaps between past, present and future in order to address them and project the organization towards its desired position. Finally, strategic thinking is based on hypotheses. At each step of the way the strategic thinker makes assumptions of the most probable future, of the foreseeable evolution of the social needs, technological advancements and political changes. To this extent, strategic thinking is as good as the assumptions on which it is based.

11.5.2 Strategic planning Mintzberg (1994) defines strategic planning as a formalized set of procedures and steps undertaken by an organization to produce an integrated system of decisions which represent the vision of the organization and establish its long-run objectives.

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According to Bryson (2004), strategic planning is a “disciplined effort to produce fundamental decisions and actions that shape and guide what an organization is, what it does and why it does it”.

11.5.2.1 The strategic planning process Strategic planning is articulated in three main phases (Armstrong 1986): “analysis”, “choice” and “action”. The starting point for strategic planning is the “analysis” of institutional, environmental and organizational elements, and can be broken down into the following logical steps.  Investigation of mandates. “Formal” mandates are governing bodies’ deliberations on the mission of the organization and its areas of intervention. Formal documents such as resolutions, treaties, proceedings of international conferences that institute the organizations usually include mandates. Governing bodies recurrently update and clarify mandates to keep up with the evolving needs and the external context. Within the UN system, this is mainly done through the Triennial Comprehensive Policy Review (TCPR). Since the formulation of the Millennium Development Goals (MDGs), organizations’ statements on how they intend to contribute to attaining them are also useful points of reference. Periodic review and investigation of mandates is fundamental to identify and address possible under-developed or neglected areas of activity in comparison with the scope of the mandate.  Stakeholder analysis. This analysis identifies the main classes of stakeholders of the organization and leverages the relationships with them. There are stakeholders who bring resources directly (e.g. state and non-state donors), the ones who influence the resource bearers (e.g. political and opinion groups, scientific communities), the suppliers of knowledge and other inputs for the core activity (e.g. staff, vendors), the ones that the organization’s activities directly or indirectly affect (e.g. individuals and communities of beneficiaries) and the ones that influence the environment (e.g. lobbies, media, scientific communities and opinion groups). This analysis intends to identify the expectations of the various categories of stakeholders and the “value” that the organization can create for them in order to maximize the resources brought to the organization and mitigate possible threats and risks to it. Typical questions addressed in this phase are: What will make us gain stronger legitimacy with our donors? What do our beneficiaries expect from us? What can we do to counteract the opposition of our critics? Theorists have identified a number of tools for stakeholder analysis, making them available to organizations.2  External environment analysis. A variety of techniques and frameworks can be utilized to scan the external environment the organization operates in, its evolution and the implications for the organization, its mission and its core activities. The Political,

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Economic, Social and Technologic (PEST) analysis (Eppink and de Waal 2001) is a popular analytical framework, together with trend analysis and scenario writing (Duncan et al. 1998). These approaches focus on the direct environmental impacts on the organization and on the future directions to be taken.  Internal or organizational analysis. This analysis focuses on the current lines of activity, the organizational settings at headquarters and on the ground, the business processes and systems, the organizational culture, the management style, as well as the types and levels of unique skills in the organization. This analysis identifies all organizational elements that need to be adapted to improve the desired fit with the environment. The Strengths, Weaknesses, Opportunities and Threats (SWOT) approach provides a useful framework that combines the external and internal perspectives (Bryson 2004). Portfolio management tools, which are used by organizations to understand how their product and services contribute to the overall organizational mission and strategy, are also very common in internal analysis.3 The strategic issues arising from the analysis phase are the main areas of work on which the organization needs to focus to improve its fit with the environment. The second phase involves “choice”. For each of the strategic issues previously identified, managers shall elaborate alternative options that the governing body can evaluate. They present the advantages and disadvantages of each option, together with assumptions and resource requirements to pursue them (Eadie 2000). They then bring together proposals and consolidate them to form a consistent picture of the overall strategic direction that the organization intends to take. More generally, in this phase, managers line up the organizational goals and identify concrete lines of action to achieve them. The third and final phase of strategic planning is “action”. This phase consists of a rational and comprehensive operationalization of each strategic objective and goal, including tactics, actions, a specific timeframe and resource requirements. The plan establishes specific performance indicators and targets for managers enabling them to monitor and assess the implementation of the strategic plan. A written plan results from the strategic planning process. Strategic plans can assume different shapes and forms. Figure 11.6 shows a simple format that practitioners can follow.

11.5.2.2 Strategic planning in practice: the WFP example The vast majority of modern IIs and INGOs produce strategic plans on a periodic basis. These documents have become the main tools that organizations use to identify and explain to constituencies their vision for implementing their mandate. Given their international nature and geographical distribution, often “regional” and “country” level programs follow institutional strategic plans. The quality of these plans still varies widely across organizations based on the maturity of their Results Based Management approach, the resources invested on strategic analysis and investigation, the availability of management control information systems and the

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FIGURE 11.6 Strategic Plan: a sample structure Source: adapted from Lega and Cristofoli, 2005

solidity of the monitoring frameworks (for a review of recent experiences see Bester 2012 and Vähämäki, Schmidt and Molander 2011). Every plan should contain some specific features at a minimum. To illustrate them in a simple way, we will use the example of the World Food Programme (WFP), one of the organizations on the forefront of the management reform underway in the UN system. WFP is the largest humanitarian organization fighting hunger worldwide. It is heavily decentralized and focuses on the implementation of humanitarian programs with operations in more than 80 countries. The first essential component of WFP’s strategic plan, for 2008–13, is the identification of the overarching goal of the organization: “to reduce dependency and to support governmental and global efforts to ensure long term solutions to the hunger challenge.” This statement alone is of strategic importance for WFP as results from the investigation of its institutional mandate and its decision to shift from its historic focus on food “aid” to a food “assistance” agency. This change has given it a more nuanced and robust set of tools to respond to critical hunger needs as well as richer policy advocacy and advice functions.

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The second important part of the plan is the clear assertion of the strategic objectives of the organization:  to save lives and protect livelihoods in emergencies;  to prevent acute hunger and invest in disaster preparedness and mitigation measures;  to restore and rebuild lives and livelihoods in post conflict, post-disaster or transition situations;  to reduce chronic hunger and under-nutrition;  to strengthen the capacities of countries to reduce hunger, including the utilization of hand-over strategies and purchasing locally. These objectives are clear, strategic in nature and specific in scope, not overlapping, and focused on the mandate of the organization. A third necessary component of a strategic plan is the breakdown of strategic objectives into more specific goals and the indication of lines of action to be put in place to achieve them. With reference to WFP’s objective to “save lives and protect livelihoods in emergencies” the organization identifies the following goals: 1 to save lives in emergencies and reduce acute malnutrition caused by shocks to below emergency levels; 2 to protect livelihoods and enhance self-reliance in emergencies and early recovery; 3 to reach refugees, internally displaced persons (IDPs), and other vulnerable groups and communities where shocks have adversely affected food and nutrition security. And the main lines of activity to achieve these goals:  general and targeted food assistance and emergency nutrition interventions;  emergency needs assessments;  provision of emergency logistics, special operations, and information and communications technology (ICT) capacity;  provision of United Nations cluster leadership for logistics and emergency ICT. Identified goals are specific, measurable and adequate for developing a set of target indicators around them. Consistent with its character as an emergency organization voluntarily funded by donors, WFP has chosen to include only selective operational activities and initiatives (“main tools”) that distinguish the organization’s approach. The organization has also chosen not to include resource requirements in this document as the scale of emergencies, their evolution and the funding required to face them belong to short-term programming and budgeting work as opposed to long-term planning.

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11.6 Managing strategy in IIs and INGOs Strategy formulation is only the first step of a management cycle that allows an organization to keep to its orientation towards its established objectives. In other words, strategy needs to be constantly and comprehensively managed.

11.6.1 Manage strategically, or the ability to recognize strategic decisions Broadly speaking, any management decision can be positioned on a spectrum between “strategic” and “operational”. Strategic decisions deal with the positioning of the organization as a whole with respect to its environment, its mandate and its intended value proposition. Operational decisions deal with how to practically achieve that positioning through processes and procedures, optimization of resources utilization and leveraging organizational settings. Johnson and Scholes (2002) have elaborated a useful framework to identify strategic decisions. First, strategic decisions have a high degree of uncertainty, since they involve long-term consequences for the organization which are not easily predictable or measurable. Second, these decisions are complex, meaning they have a number of implications at different levels of the organization, often difficult to be evaluated all at once. Third, strategic decisions introduce significant organizational innovation, which usually breaks with the consolidated patterns and “ways of doing

FIGURE 11.7 Strategic versus operational decisions Source: adapted from Johnson and Scholes (2002)

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business”. Finally, these decisions directly involve the positioning of the organization within its environment and have an impact on the organization’s social value proposition and relationship with its main stakeholders. The above framework is particularly important since one of the main managerial issues is the ability to isolate issues that require strategic decisions and effectively address them. This happens because the details of procedures and processes, the legal or institutional consequences of certain actions, the operational impacts of a situation often tend to absorb most of managers’ attention. As a consequence, they often fail to see the “big picture”, the root causes of issues. In other terms, we can say that managers often have the tendency to think and act “tactically” instead of “strategically”. It is therefore important for managers to first identify what impact they expect to create on a specific issue along three dimensions (Johnson and Scholes 2002):  Value creation and stakeholder expectations: strategic decisions are aimed at improving the social value that the organization generates for its stakeholders and the level or kind of stakeholder expectations the organization is able to meet. Operational decisions are aimed at maximizing the organization’s ability to achieve a set of value propositions and stakeholder expectations.  Relationship network: strategic decisions have an impact on the very structure of the organization’s (internal and external) networks, for example by creating new “nodes” or removing existing ones, while operational decisions work within the existing set of relations.  Organizational resources: strategic decisions are made to expand or limit the tangible resources (budget, facilities, etc.) and intangible ones (skills and institutional knowledge, reputation and image etc.), while operational decisions deal with how best to utilize the resources currently available. An example will help to explain the above concepts. Let us imagine being a country manager of an INGO dedicated to the expansion and improvement of education in one of the least developed countries. Based on the consideration that elementary education is a priority for the international community, the INGO has for years run a program that targets children’s education. Notwithstanding the existence of a lunch program included in the education services that the organization provides, teachers have noticed that children do not attend regularly and, when they do, they do not seem to have enough energy and ability to concentrate. The INGO is aware that this situation is severely undermining children’s attendance and the overall performance of the program, measured as children’s ability to read and write and to acquire some essential practical skills in order to gain access, later, to vocational training. Operational decisions to address this situation include, for example, changing the underperforming local business currently providing the meals to the children, evaluating the feasibility of internalizing this service or setting up direct supervision of the meal service. Strategic decisions would, on the contrary, try to address the root causes of the undernourishment, which may be, for example, that

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parents tell their children to keep and bring home the food they receive during the day, or that children are kept for long hours, during the day or after school, in other productive activities. In this scenario, strategic decisions re-formulate the value proposition of the organization through inclusion of the parents, as main stakeholders. Primary education cannot work if parents are not aware of the need of constant attendance and dedicated energy and if they are not sensitized to the need for children to consume their meal during the day for learning to be effective. The problem may be the extreme poverty of the families and their perceived need to keep children around to get some food or essential productive activities during the week. If this is the case, the strategic decision would probably lead to re-balancing the education the organization offers—or to catalyzing attention of other NGOs and institutions providing technical assistance in the country—towards adult and vocational training to create earning and work opportunities, thereby freeing up the children for improved schooling.

11.6.2 A conceptual framework for strategic decisions From a practical perspective, managers often ask for a simple and intuitive framework to use when adopting strategic decisions. The “strategic triangle” (Moore 2000) is a good example. This framework proposes three main dimensions to analyze strategic decisions: 1 legitimacy and support 2 operational capacity 3 public value The first dimension refers to the authorizing environment of the organization and encourages managers to consider whether a certain proposed decision would receive enough support from the governing bodies and main donors of the organization to obtain endorsement. In public and non-profit organizations the institutional legitimacy aspects are extremely important and any decision which does not receive strong support would be blocked or, even worse, indefinitely deferred or reformulated making it ineffective. Therefore, managers should carefully consider the stakeholders directly or indirectly opposing a given decision and weigh their political influence and power. Impacts of a certain decision on reputation and external image also play a relevant role here, since opinion groups and donors hold significant financial and material resources which can enable or paralyze the organization. The second dimension refers to the operational feasibility of a given proposal. An organization’s knowledge and skills, the quality and composition of its human resources, its budget and fundraising capacity, and its business processes in relation to its core business determine its “capacity”. Strategic decisions are per se aimed to change—usually expand—what the organization currently does or knows how to do; however, this change needs to be realistic and feasible for the organization.

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FIGURE 11.8 The Strategic triangle Source: adapted from Moore (2000)

The third dimension refers to the change in the value proposition that a given decision generates and its consistency with the overall mission and goals of the organization. Strategy is about “fit” and decisions to pursue a given course of action should be compatible with the overall social value the organization aims to achieve.

11.6.3 Assessing the organization’s competitive position Porter (1980 and 1985) offers the “five forces” model, another practical framework for managers to assess and “diagnose” their organization’s strategic position at the “industry” level—that is, the main area of need or service that the organization intends to provide. Porter developed this framework for the private sector but one can easily adapt it to the public and non-profit sectors. In the context of IIs and INGOs, the forces defining the competitive environment can be described as follows:  Intensity of rivalry among current competitors—competitors are broadly understood as subjects currently offering similar products and services to address the same needs and populations. The level of volatility of voluntary contributions on a specific development issue, for example, can measure the intensity of competition.  Threat of new entrants and substitutes—new entrants are organizations seeking to address the same target needs and populations through provision of similar goods/services, while substitutes serve the same target market with alternative ones. Current competitors protect their position from entrants and substitutes through “barriers to entry”, which the nature of the industry can impose (e.g. natural monopolies, unique skills, or organizational skills required to compete) or the current competitors can build (e.g. exclusive networks with donors and beneficiaries, regulated access to licensing).

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 Bargaining power of customers and suppliers—in the international cooperation sector institutional and individual donors are the “intermediate” customers while beneficiaries of the organization’s activities are the “final” customers. Suppliers are also broadly understood as providers of critical resources such as knowledge and skills, materials and services. Their bargaining power directly relates to the level of the organization’s dependence on the suppliers’ resources for delivery of core goods and services. This power usually increases in accord with the level of uniqueness, customization and the difficulty of substituting the suppliers’ inputs, as well as the level of competition for the same resources. This power is usually considered lower when suppliers are attached to the organization through intangibles, for example staff and volunteers personally attached to its institutional mission. In order to showcase the applicability of this framework we can, for example, apply it to the protection and sheltering of refugees and internally displaced people in emergency situations. Current competitors in this industry include large IIs and INGOs such as UNHCR and the Red Cross. The competition among current actors is elevated and it involves the following factors: their perceived “neutrality”, the legitimacy to operate by parties in conflict or governments in need, the timing and

FIGURE 11.9 The five competitive forces model for IOs Source: adapted from Porter (1985)

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effectiveness of delivery, the ability to raise adequate funds to execute the intervention, and the level of access to scarce or precarious infrastructures. New entrants may pose high threats, a too high number of competitors can create significant logistic problems and decrease the overall effectiveness of aid, as the infamous case of the uncoordinated response to Sumatra’s tsunami demonstrated (see also the case study on the humanitarian response to the emergency in Haiti, Chapter 8 in this work; see also Van Wassenhoven 2006). Barriers to entry may be high in cases of response to large natural events or humanitarian crises where gatekeepers, usually governments in the affected areas, grant access based on capacity and perceived “reputation” of the competitors. Threats by substitutes are also considerable; for example the army is usually a fundamental source of emergency logistics, security, and provision of shelter. Peacekeeping operations may also be seen as “substitutes” since their mission is to prevent displacement in the event of conflicts targeting civilians. The bargaining power of suppliers is normally high with reference to permission to utilize transportation infrastructures—usually limited and precarious—as well as provision of access to the given population. The same governments which are also intermediate “clients” of the intervention hold this power. They can greatly shape or, unfortunately, limit the scope and modality of humanitarian interventions. A careful assessment of the critical resources available for delivering intervention services as well as the subjects holding access to them is therefore critical for managers. Porter’s framework is a diagnostic tool, it helps managers to think about the main forces and subjects that shape competition and to assess their organizations’ strengths and advantages in order to maintain and reinforce them. It therefore does not give immediate answers but it encourages managers to think and operate strategically.

11.6.4 How to evaluate a strategy Strategy is a “living thing”; it is an organizational attitude and process that needs constant management. In spite of the richness of management studies on strategy, strategy evaluation has frequently been neglected. Yet it is fundamental because it allows managers to assess and re-orient their organizations to achieve their missions. In strategic evaluation, managers need to ask themselves the following questions:  Choices. Does the current strategy embed the necessary choices and trade-offs between what “to do” and what “not to do” to align capability and demand?  Unique value. Will the strategy, if well executed, achieve the “unique” value proposition the organization has chosen?  Consistency. Does the current strategy help to achieve a high level of consistency, or “fit”, between the organization and its environment? Does it enable the organization to achieve and maintain the desired positioning in its competitive arena?  System alignment. Does the current strategy appropriately anticipate the environmental developments which will have a future impact on the organization? Is it flexible enough to adapt to the possible environmental changes?

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 Feasibility. Is the strategy practicable? Are the organization’s operational capabilities and available resources aligned with the intended social value that it wants to generate?  Execution. Is the organization implementing the strategy well? Are the organization’s “tactics” optimized for the coordination of human, financial and physical resources? Strategic management is a holistic process encompassing the analysis and orientation of the entire organization and its systems. The successful strategic manager will therefore be an “integrator” and an “enabler”, above all, able to envision the environmental dynamics and adapt his/her organization to these challenges to successfully achieve the organization’s mission.

11.7 Case study: new strategic decisions made by IFAD

11.7.1 The International Fund for Agricultural Development The International Fund for Agricultural Development (IFAD) is a specialized agency of the United Nations system. Its mission is to eradicate extreme poverty and to empower the poor in developing countries to achieve higher incomes and improved food security. IFAD mainly operates through concession of loans and grants to fund rural and agricultural development projects. The organization manages a portfolio of highly concessional, intermediary and ordinary (= quasicommercial) loans subscribed by developing member states and grants aimed to strengthen the technical and institutional capacities for agricultural and rural development. As of the end of 2011 IFAD was financing a total of 240 projects and programs for an overall investment of 4.6 billion US$ of its own resources. Together with additional resources invested by beneficiary governments the total resources mobilized by these initiatives reached 10.3 billion US$. The scale of IFAD puts the organization at a medium-high end of the UN system but it is still considerably smaller than the other global “International Financial Institutions” (WB group, IMF) and even the regional development banks, by reason of a more focused institutional mandate.

11.7.2 IFAD’s Independent External Evaluation and strategic re-orientation In early 2000 IFAD increasingly came under scrutiny by member states to justify its existence and resource requirements. The organization responded to these pressures by launching a comprehensive Independent External Evaluation (IEE) to take stock of the organization’s performance and to identify its needs for strategic re-orientation and change. IEE’s findings highlighted that IFAD’s agenda had become too broad when compared to its original scope to follow donors’ orientation towards institutional

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building initiatives. This in turn made IFAD lose focus on agricultural and rural development, its core and more measurable area of impact. The organization generally failed to select projects to fund, based on their relevance and likely impact, or on the possibility for IFAD to exploit its competitive advantages. The absence of a sound portfolio analysis restricted the ability of the Executive Board to provide strategic direction to management. The project management approach was ad hoc and too reliant on outsourced monitoring and evaluation; poorly designed projects were leading to inefficiency, scarce quality and absence of monitoring and innovation. Overall, IFAD was drifting away from its traditional beneficiaries (the poorest of the poor). The IEE was a wake-up call for IFAD’s management. Starting with the Strategic Plan 2006–10 the organization embarked on a path intended to demonstrate its distinctive role, based on a clearly defined approach to innovation, targeting, partnership and policy dialogue all directed to delivering results for the rural poor, and particularly the poorest. In terms of project selection, a conscious decision was made to re-gain focus on projects centered on IFAD’s technical niche of rural development and to move away from generic infrastructural/institutional interventions, which IFAD does not have the lending capacity to serve. Renewed attention was given to the project design phase through the adoption of a strong demand-driven approach. The approach to operations on the ground, project management and supervision was also radically revisited to increase efficiency and effectiveness. IFAD abandoned the model of outsourced project supervision in favor of a stronger hands-on approach intended to facilitate innovation and promote capacity building.

11.7.3 Interpreting IFAD’s strategic reorientation in terms of strategic fit IFAD’s case is very useful to illustrate the notion of strategy as “fit” between target (external) demand and (internal) capability. In response to a changing aid environment and a shift in donors’ preferences and funding availability, IFAD expanded its target demand from small rural communities and the agricultural sector into a much broader rural development agenda including institutional building. This generated a shift from specific, agricultural-centered projects to more generalist and large-scale projects. The search for funding and towards donors’ orientation made IFAD lose sight of its main target population, the poorest rural communities, as the new focus of the projects was naturally privileged lowest income countries’ institutions and individuals in middle-income countries. Moreover, the evolution of the target demand was not accompanied by an adaptation of the internal capacities in terms of human, financial resources and business model. IFAD competes against IFIs with much larger lending capacity, capable of serving much larger scale projects. Also IFAD maintained its traditional hands-off, indirect supervision approach in contrast with other IFIs, which traditionally put in place more intense capacity building and knowledge transfer initiatives intended to facilitate success of their projects. This gap was particularly visible in

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the non-systematic approach and lack of normative tools to influence policies and facilitate policy change. The strategic reorientation of IFAD was based on the clarification of its primary role as innovator in policy, institutional and operational terms rather than as a purveyor of fairly routine projects which closely mirror the approaches of larger development organizations. Therefore, under the “strategic fit” paradigm, IFAD reorientation required both a retargeting of demand and an evolution of internal capacity. Target demand was re-oriented towards generally smaller-scale projects, better designed and more technical in nature, directly intended to benefit rural communities and the poorest. This allowed the organization to better select projects, tailor project design on communities’ needs and development goals. Larger lending portfolios also allowed IFAD to better spread risks of default and unsuccessful operations and therefore improve its overall financial risk profile. Internal capacities and business models were also comprehensively revisited. Operational capacity and skills in the technical cooperation area were progressively increased to substitute the model of indirect supervision with a hands-on approach, more effective in overseeing implementation, projecting re-design needs, facilitating diffusion of innovation and replicating lessons learned. This required a significant change of skills available and number of staff in the field, a new approach to knowledge management and innovation, a new attitude towards capacity building, training and technology transfer. An increase in synergies between lending operations and policy/advocacy was also pursued. Lending operations are aimed at increasing target populations’ income, assets and food security while policy advice is intended to create an enabling environment for agricultural development and support of rural populations. While these two components became increasingly intertwined in program documents and plans of actions, to date there seems to be no clear vision on how non lending activities are to be resourced, managed and monitored. To strengthen the dynamic coherence and fit between demand and internal capacities IFAD introduced a more systematic performance-based resource allocation system and portfolio analysis. One of the traditional issues of IFAD was the scarce ability to allocate resources based on economic analysis considerations and return on investments estimates. IFAD strengthened quality assurance, review and evaluation, availability of systematic reliable impact data to substantiate success/failures and learn for future interventions. This allowed the organization to orient funding choices based on likelihood of impact. Finally, greater flexibility was also needed in matching instruments, particularly loans and grants, to specific areas within IFAD’s niche. Acquiring and testing innovative approaches is risky and few countries if any can be persuaded to borrow for these purposes. Moreover, fragile states and the poorest countries need more grant assistance than loans and grant resources are needed for policy dialogue as well. These arguments strongly suggest the need to expand the grant resources available to IFAD, if the organization is to be held to account for performing in its niche areas.

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TABLE 11.2 Evaluation of results of IFAD strategic re-alignment

Evaluation criteria

Independent External Evaluation

IOE 2008–10 evaluations

2012 Targets from the Results Measurement Framework

Relevance Effectiveness Efficiency Rural poverty impact Innovation Gender

100 67 45 55 55 n/a

94 77 57 84 90 90

90 90 75 90 80 80

Source: adapted from IFAD Internal Office for Evaluation (2011)

11.7.4 Was IFAD’s strategic reorientation successful? Table 11.2, adapted from the 2011 performance report of the Internal Office for Evaluation (IOE), shows a snapshot of the results achieved by IFAD by the end of 2011 (center column) in comparison with the situation as assessed by the 2005 IEE (left) and the targets set by senior management for 2012 (right). Targets have been surpassed in three important areas—project relevance, innovation and gender focus. Moreover, extremely encouraging improvement was made on the overall impact of IFAD’s project on rural poverty. Together, these indicators show that IFAD succeeded in its attempt to re-gain its niche and to re-focus on areas where the organization could make an impact with respect to its mandate. Data on efficiency and effectiveness show a less significant percentage improvement and greater gap with set target. This supports the idea that re-alignment of business processes and operational change management is a progressive process which takes significant investments and time. This is understandable in light of the magnitude of the changes made by IFAD to its business model and the transition to a direct supervision and field based model. These are areas for IFAD to work on in the future.

Notes 1 National execution identifies programs executed directly by beneficiary governments or local NGOs rather than multilateral organizations. 2 Some examples are stakeholder mapping, the interest/power matrix (see Scholes 2001), and the power/legitimacy/urgency matrix (Mitchell et al. 1997). 3 See, for example, the Gruber and Mohr (1982) portfolio matrix and the MASLIN (Matching Services Linkages) matrix (Prince and Puffit 2001), evolutions of the Boston Consulting Group matrix (Hedley 1977). See Kearns (2000) for further reference.

12 RESULTS BASED MANAGEMENT Daniele Alesani

12.1 Introduction In this chapter we analyze the efforts of International Organizations to strengthen their orientation towards results and improve their performance-based accountability. To explore these efforts, we adopt the conceptual lenses of “Results Based Management” (RBM). We define RBM and examine the basic concepts that revolve around it as well as its “building blocks”. We then discuss the evolution of RBM in the international cooperation sector, analyzing its specificities for IIs and INGOs. The central part of this chapter identifies key success factors of RBM, discusses some best practices and elaborates on current challenges and ways forward. Here, we mostly concentrate on development organizations. The final part of the chapter discusses the growing interest of donors to assess performance of International Organizations.

12.2 Results Based Management: concepts and definitions

12.2.1 Definitions of Results Based Management in the public and non-profit sectors The OECD/Development Assistance Committee (DAC) defines Results Based Management as “A management strategy focusing on performance and achievement of outputs, outcomes and impact.” A working paper that the Canadian International Development Agency commissioned subsequently expanded this definition: Results Based Management is defined as management strategy aimed at achieving important changes in the way organizations operate, with improving performance in terms of results as central orientation. RBM provides the management framework with tools for strategic planning, risk management,

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performance monitoring and evaluation. Its primary purpose is to improve efficiency and effectiveness through organizational learning, and secondly to fulfill accountability obligations through performance reporting. (Meier 2003) Therefore, RBM is a comprehensive management cycle which serves the purpose of aligning the organization towards the achievement of its results (through learning, improved decision-making and planning) and fulfilling the performance accountability of the organization (Binnedjikt 2000).

12.2.2 The result chain The concept of “result” has been long explored with reference to public and non-profit organizations, which by their nature do not have a financial bottom line. Both national and international public institutions and public interest NGOs have a social mission, aiming at positively changing the context in which they operate, consistent with their mission: for example by improving living standards, ensuring appropriate responses to emergency situations, and providing health services. Literature usually identifies three dimensions of result—“output”, “outcome” and “impact”—based on how controllable they are by the organization, the possibility to directly attribute results to organizations’ projects and activities and the time-frame needed to measure results. This is also often referred to as “result chain” (Meier 2003). Output is the most controllable dimension of an organization’s performance. Outputs are operationalized based on the organization’s core activities and can be measured, for example, as the amount of services or goods provided, the number of beneficiaries served, or the number of policies, agreements, or resolutions issued. Outcome is the short/medium term effect of an organization’s activity measured against a directly affected target population/group/area. Outcomes are directly attributable to an organization’s projects/activities. Outcomes are usually measured as variations against a baseline indicator expressive of the context before the assessed intervention or as an intensity/rate of a newly induced change. Examples of outcomes are how many people avoid starvation thanks to a food distribution program, or how many students did not drop out from an academic program as a result of a higher education development project. Impact is conceptually similar to outcome but is assessed on a larger scale and from a broader perspective. In the examples above, impacts would be the improvement to the long-term food stability of a people inhabiting a region or a country, or the employment rate of former students in the schools of a district. Evidently, a large number of agents and dynamics determine impact and it certainly cannot be attributed to the activity of a single organization or single program. The time-frame to measure impact is usually long and can extend to several years.

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FIGURE 12.1 The results chain: an example Source: our elaboration

The above (Figure 12.1) is an example of a “result chain” in the context of an immunization program that a development organization promoted and implemented.

12.2.3 Result orientation and policy/program effectiveness In broad terms, International Organizations manage to achieve results if:  they are oriented to results at both the organizational and operational levels;  their policies/programs are effective in reaching the expected outcomes and positively contribute to the expected impacts. The result orientation of the organization is the core domain of RBM. In fact, we can primarily understand RBM as a “management cycle” that focuses on the aspects that managers and institutions can control more; on transformation of inputs to outputs and immediate outcomes; and on quality and efficiency of processes. As such, RBM acts mainly in the short-term and aims to orient behaviors to results, taking corrective actions when needed. It can be broken down into two main aspects: organizational effectiveness and operational effectiveness. Organizational effectiveness relies on the following main managerial components (from the Canadian International Development Agency (CIDA) and the UK Multilateral Assessment Review (MAR) assessment frameworks):

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 Strategic management and effective governance—clear identification of the organization’s mandate and of strategies to implement and deliver it; effective decision making by governing bodies and leadership; management’s ability to use evidence of results and evaluation to improve decision making.  Financial resource management—ability to effectively and transparently allocate financial resources to identified priorities; predictability of program funding to ensure continuity and medium term results; proactive management of poorly performing projects; ability to ensure budget holders financial accountability to top management.  Relationship management—attitude of the organization to promote partnership harmonization, collaboration and consistency with other International Organizations, bilateral donors’ agencies and national institutions and other local organizations working in the same countries or sectors; to promote policy dialogue and alignment with national priorities; to properly select and manage implementing partners.  Knowledge management—human resource management alignment with strategic priorities; retention and empowerment of key knowledge and capabilities; lessons learned in project and program implementation are correctly captured and circulated. Operational effectiveness is the result of the ability of the organization to allocate human and financial resources to priority areas, to efficiently transform inputs into activities and outputs, and to rationally design and implement projects and programs. Policy/program effectiveness measures the likelihood that organizations’ activities and outputs will generate the expected long term impacts and is assessed through evaluations. These are defined as “the systematic and objective assessment of a project, program or policy, as well as its design, implementation and results” (OECD/DAC). Evaluations are normally based on macro and micro-socioeconomic models, cost-benefit analysis and impact assessment. They may utilize a range of methodologies, primary and secondary literature reviews, and primary data collection (Bourguignon and Sundberg 2007). Fieldwork is to some extent always included, involving some or all the following: site visits, key informant interviews, focus groups, workshops and mini surveys. Beneficiaries should also be regularly included. Results of policy and program evaluations are important points of reference of any RBM framework because they indicate “what works” and what does not in international cooperation. At the same time, evaluations follow longer time-frames and are usually a medium to long-term feedback to planning. As such, literature usually considers them external to the core RBM. Figure 12.2 represents the different dimensions of effectiveness and their links with results and the actors involved in the international cooperation sector. IOs that are organizationally and operationally effective produce quality results at the project/program level and contribute to partner countries’ reforms

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FIGURE 12.2 Organizational, operational and policy effectiveness Source: our elaboration

and institutional improvement. This in turn creates positive outcomes and, in the longer-term, has an impact on the social and economic context of reference.

12.2.4 The building blocks of RBM systems The “holistic” approach to RBM acknowledges that organizations’ ability to achieve results encompasses broader attitudes related to strategic management, financial resources management, partnership and relationship behavior, human resources and knowledge management. Given this broad interpretation, the international literature has focused on the “backbone” of RBM, i.e. the set-up and management of a comprehensive and satisfactory performance measurement, management and reporting system (OECD/ DAC 2005). The core elements of such a system are: 1 Strategic planning that defines clear and measurable results and indicators at the corporate, regional and country levels, based on a logical model or framework. 2 Results based budgeting that links resource availability and financial responsibility to the achievement of output/outcome rather than the procurement of inputs. 3 Monitoring that tracks progress, according to appropriate indicators, towards results as well as the rate at which the organization consumes resources through the carrying out of its work. 4 Reporting on progress towards results to internal and external stakeholders. 5 Managing by results as a continuous process that informs decision makers in planning, resource allocation and operations.

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12.3 The evolution of RBM in international cooperation

12.3.1 The evolution of RBM and alternative approaches to managing for results In a broad sense, RBM has been in existence for several decades as a management practice in business and in public administration. Peter Drucker’s concept of Management by Objectives (MBO), in the 1960s and 1970s, popularized the concept of thinking through logically what an organization is trying to achieve and how to measure its performance. Rival and alternative systems of orienting management towards results developed soon thereafter. In 1969, USAID commissioned a model for development aid project management. This resulted in the development of the Logical Framework Approach (LFA), which swiftly came into fashion and spread from development aid to public administrations in OECD countries during the 1970s and 1980s (Gasper 2000). RBM as a distinctive practice developed in the 1990s as part of the New Public Management reform agenda. A number of bilateral agencies, IIs and INGOs have since adopted RBM, in large measure as a response to growing pressure to increase and demonstrate the effectiveness of aid. By the end of the 1990s, a number of studies on progress in development countries continuously indicated that a majority of aid had, at best, marginal and short-lived effects (McLoughlin and Forrester 1998). This was also partly due to a project approach to cooperation based on small-scale, unrelated and un-coordinated contributions. As development work began introducing the “program” and “sector wide” approaches, RBM also established itself as framework to manage for results because of its attitude of diverting its attention away from individual operations and projects (the LFA focus) and addressing instead the planning and working processes of an organization as a whole within its environment. RBM also was intended as a response to the traditional criticisms that IIs are undemocratic, lack transparency in their decision-making and are not subject to public accountability mechanisms (Dahl 1999; Held 1995; Zweifel 2006). Given these democratic and procedural deficits, good and demonstrable performance is an important source of improved reputation for IIs and an essential basis of legitimacy for INGOs. As Buchanan and Keohane (2006) note, an international organization receives support based primarily on the extent to which it can “effectively perform the functions invoked to justify its existence.”

12.3.2 RBM as part of the international cooperation reform agenda RBM emerged in IIs and INGOs towards the end of the 1990s, against a backdrop of lessons including difficulties of project oriented aid, low levels of beneficiary government program ownership and unclear and unsatisfactory development results.

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At this point, two extremely important environmental dynamics intervened to shape the context in which RBM would further develop. First, new frameworks and logics for development cooperation emerged which had their culmination in the Paris Declaration. These frameworks introduced a new rationale for international aid, based on beneficiary government programmatic ownership, alignment with national priorities and mutual accountability by both donors and recipients. In this context, IIs and INGOs were asked to change their roles, acting more as facilitators and enablers of programs now driven and implemented directly by governments and civil society in beneficiary countries. This dynamic subverted the “classic” logic of the results chain (from input to outcome) and imposed a view of performance centered on beneficiary level development (outcomes), only thereafter moving to identify what resources, activities and outputs are necessary to get there. This shifted the rationale for results orientation in international aid towards:1  Increasing contextualization and adaptability—national development patterns (outcome/impact) should guide strategy as a means of stimulating national policy-making capacity.  Regular monitoring of national, sector and program performance on outcome levels, so that priorities could adapt, over time, in response to changing conditions and national strategies.  Strengthening of national performance assessment frameworks and systems to support future policy and decision-making.  Promoting a dialogue with national partners and beneficiaries based on performance rather than prescriptions or budget and activities, promoting ownership and joint understanding. The second important driver for RBM is the broad agenda of reforms aimed to achieve system-wide coherence, strengthen accountability and improve impacts on the ground that took hold in most IIs of the UN system from the late 1990s onwards. The UN based its “Delivery as One” initiative on results, aiming to establish a system-wide level of accountability for results at the country level under the leadership of the resident coordinator. These reforms pushed the organizations to come together and confront each other within RBM frameworks and languages; at the same time, they created a tension between the horizontal, field-based accountability for results of the UN system as a whole, and the vertical accountability to organizations’ corporate priorities and strategies. When we examine the development of RBM in the international cooperation sector, it is therefore clear that for RBM efforts to be successful IIs and INGOs must reach out to each other, to implementing partners, and to beneficiary governments. All these stakeholders need to become an integral part of the results orientation efforts and co-own the RBM systems. This means that RBM systems have to cross the borders of single organizations and assume a “system-wide” perspective.

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12.3.3 Reference frameworks for RBM: towards a “system-wide” view A number of system-wide frameworks and internal RBM tools and systems currently guide the identification of results indicators and measures in International Organizations. In the previous chapters of this work, we discussed extensively the Millenium Development Goals (MDGs), the United Nations Development Assistance Framework (UNDAF), the Common Country Assessment (CCA), the Poverty Reduction Strategy Papers (PRSP) as innovative and useful frameworks that bring together a variety of International Organizations to identify a common strategic platform for action. Internal to the organizations, a number of tools are used to structure and orient the RBM systems:  Strategic Plans (SPs): high level plans, usually with a three to five year horizon, identify the main objectives and strategy at the corporate/global level, indicating general plans of action for priority countries and areas of intervention.  Result Based Budgets (RBB) and Programs of Work (PoW): fundamental documents for RBM that link financial resource allocations to programs of activity and expected results with the purpose of strengthening accountability over non-financial performance indicators.  Global, Regional and Country Plans and Programs (GRP, CP): the large majority of IIs leverage on system-wide planning tools such as UNDAF, the CCA and the PRSP but continue issuing separate plans and programs which detail operational activities and objectives.  Project logical frameworks: country programs are usually composed of a number of projects with their own detailed design and planning, following a so-called “logical framework” which details the results chain directly attributable to the project. Alignment and integration between system-wide frameworks and each organization’s RBM tools is essential. In this sense, one of the main principles in international development is that no organization can obtain long lasting results in isolation. As shown by the example in Figure 12.3, we have taken into consideration the objective of achieving safety, wellbeing and development of a community of refugees during a very long period of internal displacement caused by an ethnic conflict. Many actors commit themselves simultaneously to this broad objective: UNHCR, UNICEF and UNIFEM to ensure safety and first assistance to refugees, women and children; WFP to provide food and basic necessity supplies; UNCHR to ensure the respect of human rights within the refugee camp; UNDP to promote basic economic activities within the community; and UNOCHA to coordinate the humanitarian intervention. The number of organizations involved, the partial overlapping of the mandates and the different funding sources for the intervention on the ground may create

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FIGURE 12.3 A system-wide perspective of result orientation Source: our elaboration

fragmentation, duplications and inefficiencies. In this context, the availability of system-wide planning frameworks, a clear division of labor which specifies the contribution and partnering attitude, combined with solid RBM tools, give organizations a greater chance to make a combined, positive impact.

12.4 Specificities of RBM in International Organizations and the attribution issue

12.4.1 Specificities of RBM in International Organizations When setting up an RBM system in International Organizations (IOs) a number of specificities need to be taken into consideration (Mayne 2007; Bester 2012). The Political nature of organizations and constituencies’ behaviors. IIs and INGOs are “political” organizations and a number of potentially conflicting interests and stakeholder groups work inside them. This poses a limitation on RBM. The organization’s overall effectiveness decreases dramatically, despite the collective effort to be results oriented, in situations of conflict among constituencies over the organization’s mandate, strategies, or decisions. For example, the sudden departure of the USA from UNESCO, after the latter’s acceptance of Palestine as a new member, obliged the organization to shrink its program activities, with considerable damage to overall continuity and effectiveness on the ground, to make up for the loss of some 60 million US$, i.e. the United States’ pending contribution. Difficulty of identifying a univocal notion of performance. Various interests converge on those organizations as constituencies try to achieve multiple and sometimes conflicting goals. Stakeholders therefore pull IIs in different directions as they bring to bear various degrees of power and influence (Markus and Pfeffer 1983; Moe 1989;

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Perrow 1986). Many goals are political, broad, or ambiguous in nature, therefore their achievement is difficult to measure objectively. This issue is often referred to as the “eye of the beholder” problem. Moreover, each organization has a number of stakeholder groups interested in assessing different aspects of their performance. The relative importance and composition of these groups influence the design of the RBM system. Implementing partners’ central role in measuring and achieving results. IOs increasingly rely on implementing partners (IPs) for planning and program implementation. Therefore, RBM in IIs and INGOs is unlikely to succeed without a good quality results orientation and measurement capacity in IPs. This creates an incentive for IOs to build their partners’ RBM capacity. Such capacity building is now moving increasingly to the center of International Organizations’ interventions on the ground. The attribution issue. In IIs it is generally difficult to establish solid and short-term causal relations between the outputs and outcomes to be embedded in RBM cycles. This is because of the difficulty associated with attributing responsibilities for changes in complex social or economic scenarios where multiple dynamics are at play. The problem is commonly known as the “attribution” issue. For this reason, RBM systems in IIs and INGOs mainly orient organizations to reach output and immediate outcomes, while the assessment of “what works” in terms of policies and program effectiveness is left to long-term evaluation exercises. The aggregation issue. Performance and results indicators in development organizations are usually collected at the local level where technical activities and projects are implemented; these data then need to be aggregated at country, regional and global level. This requires considerable consistency and alignment of strategies, objectives and performance indicators, at different levels of the organization (global, regional and country level), and between the organizations and the implementing partners. A separate but related challenge is the need to integrate information from different management for results frameworks within the same organization, i.e. the LFA approach prevalent at the project level with the RBM approach at the program and corporate level.

12.4.2 The attribution issue and its impacts on designing performance measurement indicators Some of the main causes of the attribution issue in international development are: a the long-term frame of the development process; b the confluence of a multitude of complex social, political and economic forces that affect the ultimate development impact; c the relatively loose connection between outputs, outcomes and impacts; d the inconsistency between data and accountability systems of different players on the ground; e the practical difficulties in measuring development outcomes and impact.

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A first important challenge has to do with the time lag between actions—technical assistance, policy advising, financing—and the full manifestation of social and economic impacts. During this time lapse, many aspects of the social, political and economic environment, assumed when designing the project or program, can and often do change. In addition, recipient governments may modify their objectives and strategies. More importantly, international development organizations and their partners are not the only actors creating an impact on their external environment. While IIs and INGOs provide assistance, policy advice and implement projects on the field, in most cases they are not the ultimate policy-makers, nor can they control or influence domestic social and political developments. As a result, it is conceptually difficult to measure the actual development impacts of technical assistance, and it is challenging to distinguish to what extent external political and social developments versus factors under control of the organizations—e.g. technical design, managerial arrangements and financial structure of the project—generate the desired impacts. The identification of joint goals among development actors such as the Millennium Development Goals (MDG) is a considerable step forward because it points resources and actors toward common targets. Yet, by themselves, the MDGs do not solve the attribution issue. Common goals in fact do not diminish the main problem of identifying the contribution of each player to achieving the expected development impact. Also, the imprecise understanding of how exactly societies and economies evolve and develop makes it very difficult to make a tight connection between inputs, outputs and impacts beyond the creation of physical goods and services. While it is possible to calculate, with reasonable precision, the physical inputs, the costs and the likely timeframes of building, say, a road or a dam, it is much more difficult to calculate the inputs needed to reform the educational system, reduce poverty or income disparities by half, or double national productivity within an agreed upon timeframe. In light of the attribution issue, development organizations often gear their RBM system indicators towards outputs and outcomes as a proxy for the intended development impacts. The issue of attribution becomes even more challenging as IIs lift their sights from “local” projects to country, regional and global programs (see Table 12.1). In fact, the inclusion of outcomes within the RBM framework is based on the principle that increasing management’s focus on outcomes can improve them. This can work well at the project level and for so-called “hard” outcomes, e.g. direct effects on a target population in terms of mortality, health, or malnutrition. It is much more difficult to apply the same principle at the country, regional, or global levels and to the attainment of “soft” outcomes such as changes in social behavior or the broader effects of an implemented policy. Differences within the sector of activity and the business model both influence the design of RBM systems in IIs and contribute to shaping the attribution issue. The connection between outputs and outcomes in humanitarian and implementation oriented organizations is generally seen as more direct and “causal” than

Results Based Management 277 TABLE 12.1 The attribution issue and the “scale” of intervention

Local and country projects

Country and global programs

Largely self-contained and involve a relatively limited and identifiable range of actors, each of whom has relatively clearly defined, complementary roles and interests.

Are not self-contained and involve a wide network of actors who may have overlapping or conflicting roles and interests.

Produce tangible outputs.

Produce intangible outputs (e.g. influence) for which objective and relevant forms of measurement are not available.

Deal with discrete and well-defined development problems that have a defined physical location.

Deal with systematic country-, region-wide or global development issues.

Progress from inputs to outputs to impacts in a way that is relatively easy to observe and quantify.

Do not always progress in linear fashion from outputs to outcomes to impacts. Progress may be iterative.

Progress from inputs to outcomes or impacts over a relatively confined period of time.

Progress from inputs to outcomes or impacts over a relatively long period of time.

Have immediate cause and effect relationships that are relatively easy to observe and validate. There is a direct link with development outcomes and impacts.

Involve cause and effect relationships that are difficult to observe and validate. Links may be indirect and multi-causal.

Have a design and direction over which the agency has a high degree of control or influence.

Have a design and direction on which the agency, on its own, has a low degree of control or influence.

Source: our elaboration

in development and policy-setting organizations. Consequently, some humanitarian institutions are among the most far-reaching in their RBM outcome measures. A good example is the World Food Programme (WFP), a highly decentralized organization devoted to fighting hunger in the poorest countries. WFP aims at creating focused impacts on a well-defined group of beneficiaries: avoiding starvation and ensuring survival in situations of instability, conflict, or famine. WFP’s intervention is time bounded and gradually phases out following resolution of the situation of emergency or instability. Drawing from Table 12.2, within the strategic priority “save lives in crisis situations” WFP identifies as its desired outcome the reduction or stabilization of malnutrition and mortality among the beneficiaries. This is the “end result” of the intervention against hunger, and WFP is in a good position to attribute it to its action because the increased access to food, among a highly food-insecure population, can be directly associated with the decrease in mortality and malnutrition. The quantity of output should be, to a certain extent, a good proxy regarding the ability of the organization to achieve its outcomes.

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TABLE 12.2 WFP’s outcome definition and indicators

Strategic priority 1—Save lives in crisis situations Outcome 1.1 1.2 Performance indicators 1.2.1 1.3.1

Reduced and/or stabilized prevalence of acute malnutrition among beneficiaries Reduced and/or stabilized crude mortality in an identified population Prevalence of acute malnutrition among children under five years old by gender (assessed using weight-for-height) Crude mortality rate: among the targeted population by the end of the first [planning] period; among children under five by the end of the first [planning] period

Source: excerpt from WFP (2008), Strategic Plan 2008-13

12.5 Success factors, best practices and challenges facing RBM implementation in International Organizations

12.5.1 Key success factors and principles for successful RBM implementation In 2004, the Joint Inspection Unit (JIU) developed a useful framework to assess the effective implementation of RBM initiatives in UN system organizations. This tool identifies preconditions for successful RBM systems that are applicable to all International Organizations:  a clear conceptual framework for RBM exists as the broad management strategy;  the respective responsibilities of the organization’s main parties are clearly defined;  long-term objectives have been clearly formulated for the organization;  the organization’s programs and resources are well aligned with its own long-term objectives;  an effective, relevant and selective performance monitoring system is in place;  a knowledge management strategy is developed to support RBM and results data are used for learning and managing to obtain results;  RBM is adaptive and flexible to the changing environment and priorities on the ground;  evaluation findings are incorporated in BRM and used effectively;  RBM is effectively internalized, throughout the organization, and top managers sponsor and embed it within the organizational culture. With these criteria in mind we review, here, some of the current best practices in RBM in International Organizations.

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12.5.2 Best practices in RBM We selected the cases presented below because of the comprehensiveness of their results measurement systems and their alignment with the organizational strategic framework. These are very important components of successful BRM systems that need to be complemented with consistent implementation as well as a proper incentive structure to effectively orient organizations towards results.

12.5.2.1 World Bank group The World Bank (WB) group’s RBM framework is a best practice in terms of alignment and integration of the strategic planning tools at the various levels of the organization. Figure 12.4 represents the relations among the strategic planning documents that the organization has adopted. In each beneficiary country, the WB acts within a comprehensive Development Framework by operationalizing its intended contribution to the achievement of the MDGs in terms of outcomes, strategies and programs. The WB and recipient governments agree upon the framework and use it to measure results against the Bank’s Country Assistance Strategy. This document contains the WB’s strategic choices in terms of the economic sectors it aims to assist primarily and the social issues it wishes to tackle, drawing from ground-up assessments embedded in the PRSPs. WB’s portfolio of lending projects, technical cooperation activities and grants need to fit in this comprehensive strategic framework.

FIGURE 12.4 WB strategic planning documents Source: our elaboration

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The institution’s performance measurement framework provides us also with an example of excellent practice in terms of inclusion of different dimensions of its “results chain”. The WB performance measurement system is called the “Corporate Score Card” made up of three “tiers”. The first tier is divided in two components (IA and IB). Tier IA consists of four categories of ultimate development outcomes drawn from the MDGs. Tier IB consists of three intermediate development outcomes considered critical in achieving the long-term development outcomes: policy reform, institutional capacity, and resource mobilization. These are considered primary determinants of equitable and sustainable development in the borrowing countries. The Bank includes them in the performance measurement system as “enabling conditions”, instrumental for reaching the desired outcome of the lending activities. The next level in the scorecard, Tier II focuses on the achievement of the objectives set up in the WB’s country assistance and sector strategies’ objectives. Tier III then sets and measures specific performance indicators in five areas related to the WB’s internal processes, products and capacity. The Corporate Score Card shown in Table 12.3 summarizes WB performance along 20 dimensions based on some 50 detailed qualitative and quantitative indicators. The Bank utilizes the same concepts and structure, with some modifications, for the country, sector and project level scorecards. We show below the structure and the major performance indicators included in the corporate scorecard under the above described 20 key dimensions (Table 12.3).

TABLE 12.3 WB Global Corporate Score Card

Tier I: Development outcomes Tier IA: Development outcomes 1 Poverty reduction 2 Equitable income growth 3 Human development 4 Environmental sustainability Tier IB: Intermediate development outcomes 1 Policy reform 2 Institutional capacity 3 Resource mobilization Tier II: Strategic effectiveness 1 Impact on country strategies 2 Impact on sector strategies

Tier III: processes, products and capacity 1 Responsiveness and collaboration 2 Collaboration 3 Responsiveness 4 Strategies 5 Country assistance strategy design and implementation 6 Sector strategy design and implementation 7 Products 8 Deliverable volume 9 Product quality 10 Human and intellectual capital 11 Product innovation 12 Knowledge resources 13 Human resources 14 Financial and cost performance 15 Productivity 16 Financial performance

Source: excerpt from World Bank Strategic Plan 2009

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12.5.2.2 International Fund for Agricultural Development (IFAD) The RBM framework of the International Fund for Agricultural Development (IFAD) draws from the Monterrey Consensus approach known as Management for Developing Results (MfDR). It aims to both strengthen the organizational/ operational results orientation and promote program effectiveness. What makes this framework particularly useful and comprehensive is that it encompasses all levels of the organization, individuals and units alike (Figure 12.5). The objectives set out in the IFAD Strategic Framework are high-level development outcomes that the organization has targeted. These objectives inform the design of the global, regional and country programs and guide the identification of the lending projects to finance. IFAD summarizes the expected results of programs and projects in the Result Measurement Framework (RMF), which includes annual program effectiveness measures and targets agreed upon with the executive board. The RMF promotes integration and consistency between the results set up at both the levels of the individual project and country programs, which is a critical feature of any successful RBM framework. The organizational result orientation is set out through the organization’s Corporate Planning and Performance Management System (CPPMS). The CCPMS intends to ensure coherence between IFAD country level activities and the management of the organization’s budget, human resources, internal processes and policies. This framework emphasizes internal performance management and endeavors to help the organization improve its operations and processes that support programs. At the core of the CCPMS are the so-called Corporate

FIGURE 12.5 IFAD Management for Developing Results Source: adapted from IFAD website

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Management Results (CMRs). “Operational” CMRs include: better country program management, better project design (loans and grants), better implementation support, and more strategic international engagement and partnership. Regarding “institutional support”, CMRs include improved resource mobilization and management, improved human resource management, improved risk management, and improved administrative efficiency. One of the main strengths of IFAD’s approach to RBM is the comprehensiveness of its results measurement system throughout the “results chain”. IFAD pushes this approach inside and outside of the organization’s boundaries by:  tightening links between planning, monitoring and evaluation through the introduction of result-oriented annual work plans and budgets for the projects it finances;  strengthening monitoring and evaluation capacities within client countries’ Ministries of Agriculture (or equivalent) at the project level;  building beneficiary governments’ capacity to produce meaningful statistics to measure short and medium term outcomes. Finally, IFAD approaches the “attribution” issue previously mentioned in this chapter in a realistic and managerial way. Figure 12.6 shows the integration among the five main results chain levels within IFAD’s MfDR, from the strategic to the operational and administrative levels.

FIGURE 12.6 Integration of IFAD’s MfDR levels Source: adapted from IFAD MfDR conceptual framework

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IFAD’s approach explicitly recognizes that outcomes are results over which managers have no control. This is particularly true in development projects that involve national execution. So how can staff be held accountable for managing towards outcomes? Within the IFAD MfDR approach, managers are held accountable for contributing to (or influencing) outcomes, rather than for achieving them and for learning, which involves adjusting activities as a result of performance tracking. MfDR builds up a logical framework and data geared towards understanding whether staff members have done everything possible, through the use of their authority and resources, toward achieving the intended outcomes. In particular, accountability for outcomes involves demonstrating that staff have made a difference through concrete actions and have learned from past experience “what worked”, and identifying specific efforts undertaken towards realizing the outcomes actually achieved.

12.5.3 Common challenges in Results Based Management systems Recent literature widely investigates the status of RBM implementation in the international cooperation sector and International Organizations (Bester 2012; Eyben 2011; Flint 2003; Hatton and Schroeder 2007; Vähämäki, Schmidt and Molander 2011). These authors draw a mixed picture of the current experiences and practices. There are some clear “technical” challenges to RBM such as geographical decentralization, attribution and aggregation issues, and reliance on IPs’ performance measurement systems. More important are the “institutional” challenges that organizations confront:  Lack of a RBM conceptual framework tailored to the specificities of the organization, with comprehensive coverage of the “results chain”, an effective performance measurement and management system in place.  Cultural lack of preparation for RBM and a bureaucratic interpretation of it. Managers still have the tendency to base RBM on what is “controllable” and “technical”, and it is difficult for them to transition from a “process” to a “results” focus. This reflects the detailed measures of activities and project outputs but weak management linkages with program outcomes and impacts. The results chain that RBM represents within the organization is therefore unbalanced, neglects outcomes and lacks strategic relevance.  Lack of integration among results measures at different levels of the organization— corporate, regional and country programs and projects. Objectives and strategies are not “progressively nested” but disconnected. This makes performance reports confusing and fragmented for managers and governing bodies.  Performance measurement systems remain conceptually too complex or contain excessive information and data. Often the search for comprehensiveness within the results framework leads to sacrificing the attention regarding feasibility and cost-effectiveness of the measurement based on the expected benefits of the

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obtained information. This leads to incomplete and cumbersome systems: Too much data, without enough analysis. Lack of necessary investments in developing the information system and IT infrastructure to support results measurement, including support for implementing partners to track outcomes and impacts on the ground. Underdeveloped or non-existent RBM and measurement in program countries. International Organizations are expected to uphold the principle of national ownership and, as far as possible, use the national system. This means that for IIs and INGOs to develop, their results framework must be in synergy with national priorities and based on national performance assessment systems. Unfortunately, capacity and interest in RBM among national partners greatly varies across countries and can represent a serious obstacle to IOs’ results orientation (see the results of the opinion survey of member state countries on UNDAF, UN DESA 2012). Therefore, a further complication for IOs is the need to build performance evaluation capacity in IPs in parallel with their own (Mackay 2007). Tension in aligning the results framework simultaneously to national priorities on the ground and to the organization’s corporate priorities and strategies. In IOs, there is often tension between a horizontal or “ground up” accountability for results and a “vertical” or hierarchical one. While these are not contradictory orientations, the former privileges flexibility, contextualization and a system-wide approach while the latter is based on standardization and an agency-centered view. Country offices face the difficult challenge of reconciling these two orientations. Poorly implemented RBM systems. Having a good architecture of RBM systems is not sufficient; management needs to be motivated and able to work the system and to have the correct incentives to do so. A results oriented budgeting, monitoring and evaluation system needs to be in place, linking financial resources allocation, career development systems and individual appraisals to performance assessment. For example, IIs of the UN system are still too focused on the strategic planning frameworks (UNDAF, strategic plans, country programs) and pay too little attention to their consistency with the resources realistically available for implementation. RBM is mostly intended as a reporting mechanism rather than a holistic management approach. It seems that organizations have not yet tapped into the full potential of RBM as a results oriented management tool. This is mostly due to the lack of adequate incentives and accountability regarding results. To date, for example, budgetary mechanisms mostly do not look at performance data but impose incremental logic across the board. On the contrary, governing boards and top management should start allocating resources and, generally speaking, delegate more authority to programs “that work”, creating concrete incentives to apply RBM and relevance to the information generated. Generally, the managers expected to be accountable for results should be given the authority, power and resources to influence them and the flexibility to reallocate resources.

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12.5.4 Improving RBM relevance by shifting attention from spending to results Traditionally, donors of International Organizations have paid more attention to the approval of expenses through “budgets” and their execution than to the actual delivery and accountability for results. This was partly related to the simplicity and objectivity of the financial indicator, and partly to the weak interest in monitoring and demonstrating results.2 The traditional “spending approval culture” among donors, perhaps also reflects incentive structures geared towards timely disbursement of available resources, since in most cases donor agencies’ ability to spend determines the basis of their budgets. IIs have, for their part, put significant emphasis on budget execution ratios and their ability to spend, since this is the most immediate measure of their contribution to the international development efforts. International Financial Institutions are particularly affected by a “pressure to lend”, i.e. to keep available funds occupied in lending operations (see Chapter 1). Recipient governments have a common interest in spending donor resources, but a much weaker interest in reporting outcomes and the implementation patterns of conditions and reforms. More importantly, one of the drivers of RBM in developed countries—a client focus and democratic accountability for the quality of services delivered—may be weaker in many developing countries. In order to make RBM effective, there remains the need to re-orient attention of internal and external stakeholders towards measuring, reporting and evaluating results. The renewed interest of main donors in guaranteeing the “value for money” of their contributions to IIs and the maximization of their foreign interests through international cooperation facilitates this shift (see the case study at the end of this chapter). The creation of momentum and incentives for management to utilize results information constitutes the other key drivers for increasing the relevance of RBM initiatives. There is little point in reporting results and then not acting upon them except for reasons of maintaining an external image or acquiring marginal increases in funding. Linking results achievement to financial resources allocation remains usually an extremely effective way to introduce RBM. If managed with transparency and fairness and accompanied with comprehensive results monitoring, in the medium-to long-run, this mechanism allows resources to be directed toward individuals, departments, sectors and countries that can make the greatest contributions to outcomes. Avoiding the link between results and financial resources may make RBM approaches more acceptable in the short-term, but it may weaken RBM implementation. Within this line of thought, donors have recently introduced several “results based financing” mechanisms that are currently under study (Pearsons 2011). The rationale for these mechanisms is the linking of aid financing to outputs or outcomes rather than inputs and processes. Some of these approaches—the Poverty Reduction Budget Support, European Commission MDG Contracts, Millennium Challenge Account—link financial resources to “demonstrable” commitments to good governance and satisfactory progress in reduction by beneficiaries and multilateral

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organizations. The analysis of actual results is then used in dialogue between donors and recipients and forms the basis for future funding decisions. Other more groundbreaking mechanisms intend to establish an immediate link between funding and performance. The clearest example is the Cash on Delivery Aid concept, which proposes to tie funding to achievement of specific outcomes. This mechanism has generated much attention and discussion in the UK and US media (Melabeb 2011; Rosenberg 2011), in the academic literature (e.g. Roberson 2011) and has received support from important donors including: DFID, Sida, and the Gates Foundation. While these approaches have the advantage of proposing a hands-off approach which simplifies and re-orients control to “what matters”, relinquishing it from budgetary and procedural aspects, the literature still debates their feasibility (for a review of the main arguments, see Vähämäki, Schmidt and Molander 2011).

12.6 Does performance matter? A donor’s perspective

12.6.1 Why measure International Institutions’ performance? The international literature often points out the need for concrete incentives to make an RBM system successful in public and non-profit organizations. Stimuli to performance measurement and reporting for IOs can come from different stakeholder groups and for different purposes. From the perspective of donor countries’ development cooperation agencies, the performance assessment of IIs has a public management dimension aimed at: 1 achieving allocation efficiency, i.e. to ensure that a rational plan is in place to allocate resources to IIs based on their ability to deliver the highest value for money and within the areas most in need; 2 improving the output efficiency and effectiveness of multilateral cooperation, i.e. the ability to mobilize public resources from taxpayers to realize concrete development results on the ground. TABLE 12.4 International Institutions’ performance assessment

Purposes of performance assessments International Institutions performance assessment as…

Stakeholder group

Public management (a) as allocation efficiency (b) as output efficiency (c) as effectiveness

Bilateral technical cooperation agencies in donor countries

Public accountability Client service Global public value

Internal constituencies in donor countries Partner and beneficiary countries International community

Source: our elaboration

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IIs’ performance assessment also has a public accountability component related to the need to give the general public information on results achieved with public resources through IOs. Performance assessment has a client service dimension whereby IIs are required to demonstrate alignment with the principles of the Paris Declaration towards recipient governments. Finally, there is a global public value perspective related to monitoring the achievement of the MDG as commitments taken by the international community as a whole and the organization’s contribution towards attaining them.

12.6.2 Renewed interest for IIs’ performance assessment and recent initiatives by the donor community The adoption of a “value for money” approach by an increasing number of donors puts effectiveness and results orientation on the international cooperation agenda. In particular, donors have been asking for harmonized and comprehensive performance assessment frameworks with the purpose of operating meaningful comparisons among International Organizations’ multilateral agencies, thereby creating an incentive for results-based competition. Reacting to the lack of such harmonized frameworks, in the last decade, donors started their own assessment initiatives. Donors’ frameworks are mostly targeted at evaluating IIs’ operational and institutional results orientation rather than their aid effectiveness. In particular, these frameworks are mostly oriented to assess to what extent organizations have a clear mission and strategy, efficient cost structure and bureaucracy, sound and enabling human resource management, and transparent and efficient financial controls. Among the first to move in this direction were the UK Department for International Development (DFID), the Canadian International Development Agency (CIDA), the Danish International Development Agency (DANIDA) and the Dutch Technical Cooperation. The main features of these frameworks are represented in Table 12.5. The UK Multilateral Aid Review (MAR) surely is the most sophisticated methodology that this group of donors elaborated. The ten investigated performance assessment dimensions are summarized in two indexes: “organizational strengths” and “contribution to UK development objectives”. Overall results are presented in a matrix, so that the positioning of the assessed organizations along the chart determines four groups—the “poor”, “adequate”, “good” and “very good” performing multilaterals. This approach is visually powerful and simple to understand for readers. It also allows the donor to take funding decisions based on clear synthetic judgments on assessed organizations (Figure 12.7). Other strengths of the MAR approach are the use of multiple qualitative and quantitative sources for the assessment, on site visits by the appraiser in sample countries, use of performance data published by IOs, and deployment of surveys and opinions collected on the ground among beneficiary governments, local and UK NGOs.

2002, annually updated

Most important UN institutions and IFIs at the country level of the 36 Dutch partner countries

Perceptions on performance, relevance and level of “satisfaction” with multilateral organizations

2003, annual review. New Approach started in 2006

3 to 5 multilateral organizations analyzed as part of MOPAN effort. For all other major agencies review is based on multilaterals’ RBM reports under the assumption of reliable information

Identification which RBM tools in place and how effectively they are used in pursuit of improved effectiveness

2010 (assessment period 2004–08)

All 23 organizations regularly funded by CIDA, UN system organizations, multilateral development banks, INGOs— GFATM, GAVI, ICRC—, other IGOs—Organization of American States, Commonwealth Fund for Technical Cooperation

Ability to achieve objectives (based on program evaluation) and sustain effectiveness in the future

All 43 main multilateral organizations funded by the UK Government on a regular basis, UN system organizations (humanitarian and non), multilateral development banks, Global Funds for Health, education and climate change, other humanitarian organizations, European Commission, others

Organization’s orientation to results (progress in RBM). Importance for UK’s foreign interests

Number of organizations analyzed

Main focus

MMS—Multilateral Monitoring System

Netherlands

2011, next edition 2013 (comes from a previous methodology, the MEfF—Multilateral Effectiveness Framework, started in 2003)

Started

Denmark

PMF—Performance Management Framework + “New Approach”

MAR—Multilateral Aid Review

Name

Canada

MERA—Multilateral Evaluation Relevance and Assessment

UK

Assessment Framework

TABLE 12.5 Main features of the assessment initiatives by the donor community

(continued on the next page)





 Multilateral’s performance against objectives, targets and indicators set out in DANIDA and in organization’s vision and strategy  Evaluations are given at organizational (HQ) and country level  The “New Approach” assesses the ability of multilaterals to produce evaluations that are independent, credible, valid (evidence-based), usable and comparable

 Relevance (alignment with national/international development goals, coordination, openness to civil society and relevance for local context)  Ability to achieve development objectives (program evaluation results, capacity development ability)  Cost effectiveness (use of cost/benefit, procurement quality, timely disbursements, etc.)  Sustainability (partnership attitude, knowledge management, ability to support development)

 Critical role in meeting development objectives  Attention to cross-cutting issues  Focus on poor countries  Contribution to results  Strategic and performance  management  Financial resources and management  Cost and value consciousness  Partnership behavior  Transparency and accountability  Likelihood of positive change (full list of criteria in Annex 1)

Dimensions of analysis

Degree of embassy involvement with incountry multilaterals; perceived contribution to poverty reduction; relevance of organizations’ mandates, level of satisfaction with respect to improvement of business climate, good governance and local governments’ responsibilities Alignment with country govts’ programs; level of satisfaction with accountability and management, ability to focus on mandate and ability to cooperate with other donors

Netherlands

Denmark

Canada

UK

Assessment Framework

TABLE 12.5 (CONTINUED)

Questionnaires answered by embassy, permanent representation of mission and constituency office staff. Staff and peers are asked to comment on a number of specific questions encapsulating qualitative indicators (good governance, poverty reduction, accountability and financial management, relevance to Dutch policies and strategies, etc.)

Perception based, qualitative, focused on staff and peers’ analysis with limited stakeholder engagement

Main reliance on multilateral organizations’ documentation (evaluation processes and reports), staff interviews, onsite observations and discussion workshops carried out by Peer Panel

Integration between DANIDA’s performance measurement and multilaterals’ assessment frameworks

Multiple documentary sources—117 evaluation reports published between 2004 and 2008, MOPAN data, organizations’ RBM reports Interviews by the review team with organizations

As result of assessment, development of CIDA’s strategy at organizational level

Multiple documentary sources MOPAN opinion survey, Paris Declaration indicators, data of the Publish What You Fund Transparency Assessment, Heavily Indebted Poor Countries Capacity Building organizations’ public reports, partner country evaluations of multilateral institutions, other voluntary submission by organizations Interviews of officials from 14 developing countries by UK embassy staff; engagement of UK civil society Independent insurance process on quality and rigor of the assessment

Sources/ stakeholder engagement

Source: our elaboration

Other notes

Netherlands

Denmark

Canada

UK

Assessment Framework

TABLE 12.5 (CONTINUED)

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FIGURE 12.7 The UK MAR approach Source: adapted from UK DFID (2011)

There are several common traits and differences among donors’ assessment frameworks in terms of purpose, focus, methodologies and level of stakeholder involvement.  Purpose. The UK MAR is the only framework directly aimed at orienting government funding decisions based on multilaterals’ performances. The other assessment frameworks are more generally intended to improve the donor’s ability to give strategic impulse and exercise control within governing bodies.  Integration with bilateral donor’s own performance assessment. The Danish government’s Performance Management Framework (PMF) explicitly aims to incorporate the results of IIs’ assessment in its own evaluation and to take advantage of the lessons learned from the assessments for its own management learning.  Sources of information. All frameworks usually rely on secondary documentary sources to achieve a critical mass of information for their analysis. IIs’ own performance assessment reports are the main utilized documents, followed by sector/program specific reports and deliberations of governing bodies.  Stakeholder engagement and focus on partnership behavior. Frameworks rely, at least in part, on qualitative perceptions from various stakeholder groups. Different groups are taken into consideration: donors’ representatives at HQ and in the field are usually included since their feedback is easier to gather, while recipient governments and civil society representatives in the field are more difficult to reach and rarely included.

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 Degree of sophistication and adaptation to specific sectors and organizations. Some frameworks classify organizations into separate groups according to their sector/area of activity and include indicators tailored to each group (e.g. UK MAR), while others measure all IIs against a limited set of indicators valid for all assessed organizations (e.g. Canadian MERA).  Number of organizations analyzed and frequency of issuance. Some donors aim to cover in each edition of their multilaterals’ assessment reports the entire group of organizations funded by a given donor (e.g. UK and Canada) while other evaluations consider small groups in each edition. In the former case, reports are usually written on a multi-year basis while in the latter case reports are written on an annual basis. Multi-year, across the board reports allow donors to make comparisons and gain a broader picture while annual evaluations of selected organizations allow more in-depth analyses and allow organizations the time required to improve their RBM systems from one edition of the assessment to the next. The analysis of the current assessment initiatives by the bilateral donors stimulates the following considerations:  Ideally, donors should use their influence in the governing bodies of IIs to stimulate improvement of performance assessment and reporting capabilities from within the organizations, rather than adopting their parallel instruments.  Given the absence of a consistent, harmonized and satisfactory framework adopted by most or all organizations, donors have responded by creating their own assessment frameworks tailored to their specific information, decision-making and reporting needs.  The development of such frameworks by single bilateral donors is a good first step but “inefficient”. It increases transaction costs and incentivizes a proliferation of information requests and data gathering efforts by the organizations.  Given the high reliance on IIs’ own RBM reports and evaluations, donors should dedicate effort to fostering better quality multilateral reports. The Danish “New Approach” goes in this direction by assessing the independence of IIs’ evaluation systems, credibility of the evaluation process and use of evaluation evidence.  Current donors’ approaches are still partial in scope and with methodological limitations. Donors interested in IIs’ evaluation need to pursue common or harmonized approaches that synthesize information from a range of sources. Common standards and possibly frameworks need to be developed throughout the international network.

12.7 Case study: towards a harmonized and efficient IIs’ performance oversight by donors—the “common approach” and MOPAN In response to the above mentioned issue of duplication of efforts and lack of a consistent framework to assess multilaterals’ performance, a group of “like-minded”

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donors joined their efforts together through the Multilateral Organizations Performance Assessment Network (MOPAN). By the end of 2011, 16 donor countries made up MOPAN: Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Ireland, The Netherlands, Norway, Republic of Korea, Spain, Sweden, Switzerland and the United Kingdom. MOPAN conducts a joint annual opinion survey of IIs’ partnership behavior with national stakeholders and other donor organizations at the country level. Each year, the annual survey covers three or four organizations. As a rolling exercise, the annual survey should, over time, be able to cover most of the organizations. Its approach has evolved, over the years, and, since 2010, has been based on a new methodology called the “common approach” (see Figure 12.8) since it was

FIGURE 12.8 The MOPAN Common Approach framework Source: the MOPAN group website

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meant to replace the seven pre-existing bilateral donors’ methodologies described above. Similar to the single donors’ approaches, the common approach focuses on the orientation of organizations to results in terms of organizational and operational effectiveness and provides assessments along four areas: strategic management, operational management, relationship management and knowledge management. For each area, assessment uses key performance indicators (KPIs) and microindicators (MIs). While KPIs are homogeneous across assessed organizations, MIs adapt to organizations’ core business, i.e. the humanitarian vs. development sectors. The assessment is based on two sources: 1 data from a survey of key stakeholders; 2 a review of the documents of multilateral organizations. The common approach is heavily “perception based”; stakeholders’ perception data are gathered from donors at headquarters and respondents in the identified panel countries. These are chosen based on the significance of the field presence of an international organization, the priority assigned by MOPAN members, and geographical representation. Synthetic scores for each KPI are the mean score across all consulted stakeholder groups. To date, donors still maintain their independent multilateral assessment frameworks reports but they increasingly rely on MOPAN data, thus reducing the duplication of information collection efforts. There are several reasons for donors to maintain their independent frameworks. First, donors may want to assess specific aspects that are not included in the common approach methodology. For example, while the MOPAN approach does not compare organizations, one of the main aims of the DFID MAR framework is to express quantitative judgments and synthetic rankings to be linked to the level of funding provided to IIs. Also, the common approach only covers a handful of organizations each year, while few bilateral donors want to be able to assess progress and organizations across the board at each edition of the evaluation. Continuation of bilateral donors’ assessment initiatives is not necessarily negative, as long as it does not create duplications in information gathering and assessments and frameworks give harmonized and consistent input to IIs’ orientation regarding results. MOPAN represents a successful first attempt to pursue such harmonization. Challenges ahead consist in enlarging the donor community’s participation in the network and in managing the possible complexity arising from this development.

Notes 1 See OECD/DAC (2008) for references. 2 For references in the context of International Financial Institutions’ conditional lending see Killick (1997) and Mosley, Harrigan and Toye (1995).

13 THE EVOLUTION OF BUDGETARY, ACCOUNTING AND FINANCIAL REPORTING SYSTEMS Daniele Alesani

13.1 Basics of accounting in public and non-profit organizations In this chapter, we examine the most recent evolution of budgetary, accounting, and financial reporting systems in International Institutions (IIs) and International Non-Governmental Organizations (INGOs). Stemming from private companies’ initiatives, some INGOs have adopted, from the beginning, quite modern and business oriented accounting systems, while others share the same struggles and modernization efforts of public sector organizations. Given the abundance of literature and examples taken from the latter, we will mainly refer to “public sector” accounting as a point of reference for this chapter. In particular, we focus on the transition to full accrual accounting and international accounting standards as an effort to modernize the organizations’ financial accounting and reporting systems. This chapter starts by introducing some basics—functions of accounting in public and non-profit organizations, accounting-cycle phases, and alternative configurations of accounting systems. The second part of the chapter describes the evolution of public sector accounting in the context of the New Public Management (NPM) reform agenda and the controversial co-existence between different bases of accounting, now the norm in many organization. The third part describes the budgeting processes, documents and monitoring tools applied to IIs and INGOs. The final part of the chapter describes the expected benefits of full accrual accounting adoption .

13.1.1 Accounting and accounting cycle The accounting cycle is composed of three main phases: 1 budgeting; 2 book-keeping; 3 management and financial reporting.

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In the budgeting phase, the organization identifies proposals for allocation of financial resources in the next financial period across its areas of intervention and services and by category of input (e.g. salaries, supplies, consultancies). This phase is fundamental to ensure continuity of administrative and programmatic activities and to adequately plan procurement and hiring processes. In the public sector, the budget assumes a particular importance because of its formality as the document that authorizes managers to spend based on the established allocations of resources. Book-keeping happens during the financial period and consists of recording each transaction through a specific basis of accounting. Management reporting is conducted at periodic intervals (e.g. quarters) and entails the production of internal reports aimed at monitoring resource utilization and financial performance. Financial reporting involves the production, at the end of each financial period, of the Financial Statements (FS).

13.1.2 Bases of accounting The “basis” of accounting chosen by an organization determines specific methodology used to measure and record organizations’ transactions. Public sector organizations traditionally used the cash accounting basis, throughout the accounting cycle. This basis of accounting records events based on the amount of financial resources received and disbursed by the organization. It is also called single entry accounting because each event is recorded through an entry expressive of the money in/out. The cash basis of accounting is conceptually opposed to the so called accrual basis, under which transactions are recorded based on their economic impact on the organization regardless of when cash transactions occur. Each transaction is recorded through a double entry system to capture the impact of a given event. Macro-aggregates of accrual accounting are revenue and expenses, assets, liabilities and net assets. The “financial performance” of the organization is calculated as the difference between revenue and expenses and is a surplus (if a positive number) or deficit (if negative). Accrual accounting records revenues based on the value that the organization has earned through the delivered outputs, rather than the cash received in a given period. Similarly, expenses are recorded based on the value of the goods and services consumed by the organization and delivered to beneficiaries, rather than the disbursements made to acquire inputs. The “financial position” of the organization is built upon the fundamental equation: “assets” = “liabilities” + “net assets” (cash accounting ignores all these items). Assets are tangible and intangible items such as buildings, properties and equipment, and software, which will release their value to the organization in the medium-long-term, inventories in hand, and financial assets (cash, credits, investments). Liabilities are outstanding amounts owed to suppliers, staff, banks, and other providers of material and financial resources that are to be paid out. Net assets are expressive of the “public wealth” that remains in the organization at the end of

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each financial period and are composed of the surplus (or deficit) of the period, reserves and equity. In the public sector context, the value of net assets is an important balance measure, since it shows if the organization is consuming more than the current resources given by its constituencies to carry out its activities (negative variations) or if it is not using part of the resources given by the collectivity for future periods (positive variations). Accrual accounting is the basis of accounting used by business organizations and bears, by its nature, a more comprehensive and long-term view of the organization. Accrual accounting is an intrinsically richer, more comprehensive but also more complex accounting system. While cash and accrual accounting are “opposites” in a spectrum of accounting bases, further intermediate methodologies have been developed in practice:  Commitment accounting: under this configuration transactions are recorded based on “obligations”. Expenses are recorded as soon as commitments are made to third party providers through orders, contracts, or other valid legal means. Revenue is recorded as soon as donors1 make written pledges. Disbursements and cash receipts are recorded as separate events, also to keep track of unliquidated obligations and outstanding receipts. Commitment accounting bears the same advantages of cash accounting in terms of simplicity; spending authorization to managers is recorded as the financial resources to be obligated rather than as the amount of cash disbursed.  “Modified” cash/accrual accounting: this is a generic term indicating a form of accounting where the original features of cash accounting have been partially modified with the inclusion of accrual accounting elements.2 Organizations opt for this approach to satisfy specific requests of further financial information from stakeholders without comprehensively adopting accrual accounting. The inclusion of some categories of assets and liabilities in FS is a common feature. In other cases, the delivery principle for recording of expenses has been introduced with the intent to show the amount of services and goods delivered as at the reporting date. The main features of the described bases of accounting are summarized in Figure 13.1; cash and commitment accounting are considered together as they share the same underlying principles.3

13.1.3 Functions of accounting in public sector organizations A lengthy debate developed within the literature and among practitioners regarding the “best form of accounting” for public sector entities. Starting from the 1980s, the New Public Management (NPM) literature revolves around the superiority of the full accrual accounting system, based on the higher information potential and richness of financial disclosure that this basis of accounting can provide when compared to cash accounting.4 Critics of the NPM and a consolidated stream of literature grounded in political sciences and public administration, on the contrary,

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FIGURE 13.1 Main characteristics of alternative bases of accounting Source: our elaboration

point out that cash/commitment accounting is a simpler and more effective language to accomplish the main function of public sector accounting, i.e. the authoritative allocation of financial resources within organizations and control over financial stewardship (Christiaens and Rommel 2006; Guthrie 1998; Monsen 2002; Monsen and Nasi 2000). When trying to address the issue of choice of accounting basis for a system of public sector organizations, we first need to recognize that there is not an “absolute best”, but rather a “more appropriate” system in relation to the specific needs of an organization. In fact, accounting is a language and it potentially responds to a variety of functions and communication needs of organizations with their stakeholders. In principle, an accounting system is just as good as: 1 the level of accountability reachable based on stakeholders’ expectations5 2 the usefulness of information provided based on the decisions that the main stakeholders need to take at different times.6 Therefore, in order to identify the most appropriate form of accounting for a given system of organizations, policy makers need to decide what kind of accountability they wish to primarily address and what are the information needs of the main users of the financial statements. In public sector organizations, accounting has the following main functions (Jones and Pendlebury 2000):  to allow constituencies to quantify financial resources to be allocated to services/ activities and to authorize expenditure limits by nature of input and/or destination;

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 to allow constituencies to hold managers accountable for the way they have spent public money to perform the programmed activities and ultimately achieve the institutional mission of the organization;  to give a fair and comprehensive representation of the amount of public resources spent on the main areas of intervention;  to give a comprehensive picture of the economic impact of management decisions, in the short- and long-term, and allow constituencies to evaluate financial soundness and sustainability of the organization (a going concern);  to support evaluation of results and in particular judgments regarding the reporting organization’s level of efficiency and effectiveness.

13.2 Evolution of public sector accounting under the NPM agenda and progressive adoption of accrual accounting

13.2.1 Consolidated use of cash/commitment accounting Public sector organizations historically adopted a cash/commitment basis of accounting throughout the accounting cycle. This was coherent with the following scenario (Guthrie 1998; Montesinos et al. 1995).  Budgeting had always been considered the most important phase of the accounting cycle; the budget is first of all a “political” document that concludes the process through which public resources are appropriated and allocated. The remaining phases of the accounting cycle were traditionally used to demonstrate stewardship in budget execution.  Management accountability was based on compliance with governing bodies’ detailed and input-based financial allocations rather than the ability to achieve results by using an overall amount of allocated resources.  Main readers of financial information—i.e., politicians and diplomats—looked for self-evident and non-technical reporting to identify organizations’ shortterm financial needs. They were less interested in a more complex and comprehensive reporting able to show long-term sustainability of the organizations, which transcended their immediate political mandate.

13.2.2 The transition to accrual accounting: reasons and benefits This consolidated situation changed starting in the 1980s, when a number of developed countries were involved in the NPM reforms aimed at increasing the efficiency and effectiveness of public organizations, encouraging privatization and outsourcing, and introducing market based mechanisms, de-regulation and competition for public services. The stream of reforms focused on accounting modernization took the name of New Public Financial Management (NPFM) (Guthrie et al. 1999). Under the NPFM, priorities and functions attributed to accounting changed radically. Attention shifted from budgetary and ex ante

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measures to reporting and ex post measures and from the short-term financial allocation to the long-term financial sustainability of the organizations to ensure intergenerational equity. Management evaluation paradigms shifted to results-based accountability, and accounting needed to give meaningful information on the costs of goods and services, both directly issued and outsourced. In the new environment, cash/commitment accounting suddenly showed its limitations,7 while accrual accounting became preferred for its ability to:  measure the economic sustainability of the organization in the medium-longterm;  express judgment on costs of services delivered as well as matching between expenses incurred and revenue earned;  form a sound opinion on intergenerational equity of management choices, holding decision-makers accountable for the use of public assets and finances;  stimulate better financial and management controls, for example, through fixed asset and inventory management systems;  allow more conscious funding decisions by reporting the long-term liabilities which will require financial resources in the future but are incurred as result of present activities.

13.2.3 Co-existence of cash and accrual basis within the accounting cycle: technical and change management aspects In response to the NPM agenda, many national public sector systems started adopting accrual accounting for financial reporting purposes, in substitution of or in parallel with cash accounting statements. More rarely (the only known cases are Australia and New Zealand), organizations chose to substitute cash with accrual accounting in the budgeting phase. There are sound reasons to maintain cash/commitment accounting in the budgeting phase (Anessi 2009):  Cash accounting fits the main purpose of public sector budgeting, i.e. the authorization of limits of obligations or cash disbursements.8  Public managers still perceive a strong accountability on monetary allocations and monitor implementation through the amount of resources available to spend, already committed and not yet disbursed.  The detailed structure of budgetary allocation lines is an advantage, since often revenue is earmarked for specific destinations by nature of inputs.  Donors still interpret transfers and grants as intended to cover short-term disbursement needs of the beneficiary organizations, visible through cash accounting. Transition to accrual budgeting could be confusing in that donors may not necessarily want to cover expenses related to capital purchases and long-term liabilities (e.g. depreciation, employee benefits) through current transfers, and tackle long-term funding decisions separately.

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As Caperchione (2000) and Steccolini (2009) explain, the co-presence of the two bases of accounting may produce varied results in terms of penetration and meaningfulness of the newly introduced basis of accounts. In some organizations, accrual accounting seems to have been confined to a finance unit exercise and limited to the production of necessary data and information for financial disclosure. In other organizations it became an occasion to improve the financial communication with donors and stakeholders and an instrument to strengthen financial control and stewardship. In particular, two main configurations are possible for the co-existence of cash/commitment and accrual accounting, each with specific challenges:9  cash/commitment accounting is used for budgeting and book-keeping, while values and data relevant for accrual accounting are recorded “off the books” and are used to reconcile accounting basis for the production of financial statements;  cash/commitment accounting is used to form budget and a double (or parallel) cash/accrual recording system is put in place for book-keeping purposes. Financial statements under both bases of accounting may be issued at the end of the year with or without reconciliation. The first scenario is usually chosen in contexts where accrual accounting is adopted as a result of external pressures and mainly for “cosmetic” reasons. The expected benefits of accrual accounting on financial management practices are largely lost, while limited improvements could be achieved in financial representations, depending on the quality of the out of the books recording. The applicability and extent of benefits related to the second scenario is heavily debated. For some authors, the double/parallel system could be the way to maximize the benefits of both accounting bases.10 On the contrary, for other authors the co-existence of cash/commitment and accrual accounting in itself does not allow a proper “accounting change” process and prevents the achievement of its benefits.11 Since cash accounting is simpler, more intuitive and embedded in organizations’ culture, substituting it with accrual accounting is the only way to make the transition to the new form of accounting meaningful. This would also allow organizations to: (a) replace the kind of information used by constituencies to analyze financial performance to take funding decisions; (b) change the data used by managers to financially monitor their projects and activities; (c) strengthen the internal financial control systems—e.g. inventory and asset registry systems—and information systems for administration.

13.3 Budgeting processes and budget structure in IIs

13.3.1 Types of budget In public and non-profit sector organizations, budgets have the main function of quantifying the amount of resources to be appropriated from constituencies and

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allocated to the planned programmes/activities of the organization based on a proposed programme of work. Governing bodies collectively evaluate and endorse the regular budgets (or core budgets) of the organizations that the legislative/representative organs then formally approve. Regular budgets normally cover the administrative costs and the ordinary programme of work. Organizations normally also count on extra-budgetary resources (or non-core resources), negotiated and mobilized bilaterally with single or groups of donors interested in specific projects or areas of intervention. Each donor agreement entails the preparation of a separate project budget. To ensure transparency and accountability, resources related to these projects are held and accounted for separately by the organizations through the so-called fund accounting. Resources cannot be transferred between funds and fund balances need to be returned to the donors if not spent within the agreed date of completion. It is increasingly common for organizations to issue integrated budgets that include estimates or target amounts of extra-budgetary resources for information purposes and as part of the financial planning. Approved budgets are also called legislative budgets. These documents are the result of a previous two-tier negotiation process within the secretariat and between top management and governing bodies based on: 1 broad objectives indicated by governing bodies in terms of marginal increase or reduction of available resources; 2 priorities established by approved strategic planning and programming documents; 3 projected cost of inputs and activities. Through this process, detailed resource allocations are concretized in a draft management budget. This ensures that the legislative budget, which is more aggregated, is based on realistic and sustainable projections of funding needs. This mechanism also avoids excessive rigidity in financial management. Variations to the legislative budget need to be approved by the representative organ, where decision-making is normally slower and based on compromise, while governing bodies can approve variations to the management budget allocations with more flexibility.

13.3.2 Budget structure and transition from input to results based budgeting When analyzing the contents of budget documents, it is useful to identify a horizontal structure (budget items in columns) and a vertical structure (in rows). Normally the horizontal structure shows the breakdown of appropriations by nature; cost categories can be more or less detailed depending on the emphasis posed by the governing bodies on expenditures authorization by nature of inputs. Many budget documents also show a resource breakdown by funds that the

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organization intends to make available as financial resources separately managed for specific destinations. IIs and INGOs normally have a “general fund” for their regular resources and a number of “trust funds” for non-core/extra-budgetary projects funded by donors. The vertical structure usually presents the breakdown of appropriations by destination, i.e., the areas of activity and/or programmes of work. Normally, there is general alignment between programs, organizational structure and budget lines so that allocations are given to specific managers. The budget structure defines the scope of the spending authority delegated to managers and the level of flexibility left to them to manage their resources and to implement the work program. Traditionally, public sector organizations and IIs adopted very detailed and input-based budgets, mirroring the organizational structure. Under the NPM paradigm, the input-based budgeting model came under discussion because of its limited meaningfulness and loose alignment with the strategic planning phase, which would make results-based monitoring and control difficult (Pollit and Bouckaert 2000). This triggered a transition towards “resultsbased budgeting” (RBB) model, in which resource allotments, by nature of the inputs, are much more aggregated and allotments by destination mirror the main strategies and outcomes identified in the planning/programming phase. This model allows greater flexibility and enables more meaningful financial control by governing bodies. In this budgeting model, the vertical structure may change over time in correspondence with new planning cycles.

13.3.3 An example: the budget of UNESCO In order to illustrate the above concepts, we refer to the example of the budget of UNESCO. The example illustrates well an organization that, starting from the early 2000s, evolved its budgeting model and leveraged on its budget structure to better communicate its funding needs with its constituencies and support its management reform towards a more decentralized, efficient and effective organization. UNESCO’s budget contains both regular resources and projected extra-budgetary resources, presented for information to the governing bodies. The vertical structure of UNESCO’s budget is organized in “Parts”, “Chapters”, “Sections” and “Items” (Figure 13.2). Part 1 contains costs related to General Policy and Direction, including the top management, the chiefs of headquarters and field units, and the costs of general management and coordination with sister UN agencies. By definition, these costs are funded through regular resources. Part 2 contains costs related to Programs and Program-related services. Chapter a) includes the direct cost of programs—human resources, supplies, services related to implementation, while Chapter c) presents the costs related to program support, which are administrative in nature—recruiting, reporting, auditing and evaluation, communication and information—but directly related to program implementation and funded through overhead cost charges paid by donors on extra-budgetary projects.12

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FIGURE 13.2 Sample structure of the UNESCO budget Source: our elaboration from 2004–05 UNESCO budget

Part 3 contains the other administrative and overhead costs related to the functioning of the organization, such as human resource management, accounting and statutory reporting, legal, oversight, facility management and other main central support units. Part 4 contains the allotments for “contingencies and anticipated cost increase” due to unexpected fluctuations and increases in cost of inputs. UNESCO’s budget structure allows the organization to separate costs based on the funding mechanisms, and to clearly separate the costs of the administration from the costs directly related to program implementation. The horizontal structure of UNESCO’s budget presents only two main cost categories: Posts—further divided between headquarters and field staff—and the residual category Activities. This is to be read as an attempt to move away from an input-based budget and, at the same time, allow control on the number and location of personnel, in response to the widespread criticism by prominent members of being a too centralized and “people-based” organization. In Part 2 of the budget (Figure 13.3) each Macro-program corresponds to one of the main departments of the organization (Education, Natural Science, Social and Human Science, Culture and Communication and Information). Therefore, the budget is functional to the allocation of financial resources to the top managers. The further breakdown into Programs and Sub-programs mirrors the strategic planning and allows constituencies to allot financial resources to meaningful objectives. Allotments to sub-organizational units are detailed in the management budget presented for

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FIGURE 13.3 UNESCO’s Budget: Programs and Sub-programs Source: our elaboration from 2004–05 UNESCO budget

information of the governing body as an Annex to the approved legislative budget document. This allows more flexibility during the budget cycle. Also included in the Annexes are the details on the level of decentralization of financial resources’ allocation and the indicative amounts of the costs by nature and “modality of action”.13

13.3.4 Budget monitoring and execution Budgets establish a “spending authority on appropriated resources” which is restricted in scope and normally time limited. Regular budget resources appropriated by public and non-profit organizations fund the program of work as approved by legislative organs and may be time bounded, depending on the given organization’s financial rules and regulations. For example, the UN Specialized Agencies have precise time limits for utilization of the “assessed” contributions, and un-utilized resources are credited back to donors. UN funds and programs on the contrary can carry forward their fund balances and re-program them. Extra-budgetary resources included in project budgets are clearly earmarked and always time bounded. To ensure transparency and accountability, resources related to these projects are held and accounted for separately by the organizations through the so-called fund accounting. Financial resources cannot be transferred between funds and fund balances need to be returned to the donors if not spent before the given project’s agreed date of completion or reprogrammed to other activities with donors’ permission. Budget execution is supported by systematic recording and reporting of the transactions. Most of the IIs still keep their budgeting in cash or on a commitment basis, which is generally simple to understand and fits the donors’ short-term funding preferences. Under the commitment basis, the most used, budgetary accounting records transactions based on the following events/phases:

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 obligation: commitment to third parties through purchase orders or other contracts for the provision of goods and services;  liquidation: amount of resources paid off to suppliers based on valid orders and contracts. Budget execution is therefore measured in terms of the value of obligations. Allotments are considered utilized for the amount of the obligations raised in each year/ budget period (as long as they are liquidated within a certain delay into the new year), while un-obligated resources are re-programmed or re-funded to donors at the end of the year/budget period. In this sense, resources are either committed or lost by the managers they are allocated to. Figure 13.4 shows a sample budget execution report. Managers have committed 8,000 US$ from 10,000 US$ available resources and have disbursed 7,000 US$ while 1,000 US$ represent the un-liquidated obligations. The balance of resources not committed by the end of the period, 2,000 US$, will be returned to the donor or “re-programmed”. In financial control terms, the commitment basis of budgetary accounting fails to show the value of goods and services committed but not actually delivered and does not create incentives for managers to monitor and maximize the level of implementation on the ground. To respond to this issue, a few organizations started introducing a “modified accrual” basis for their budgets. The example of a New York based UN Fund is interesting in this sense. By policy, obligations for regular resources can be liquidated only if goods and services have been delivered, with the exception of advances to implementing partners that, given capacity constraints, need financial resources up front in order to be able to realize the services they are contracted for. In this context, budgeted amounts (or allocations) are considered utilized only up to the value of goods and services delivered to the organizations (delivery principle). Un-liquidated obligations do not count as spent resources and these resources are taken away from the units and re-programmed in the next period based on organization-wide priorities. As a consequence, units need to find space within the next year’s allocations to fund the obligations raised in the previous year and un-liquidated as at year end. Figure 13.5 shows the budget execution report under this methodology with the same scenario described above.

FIGURE 13.4 Example of budget execution report Source: our elaboration

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FIGURE 13.5 Example of budget execution report - delivery principle Source: our elaboration

This mechanism clearly tightens the financial control on delivery and implementation and punishes units with longer outstanding un-liquidated obligations. This mechanism introduces further complication and needs to be properly communicated to budget holders who, in response, need to adapt their procurement plans. It is worth noting that this methodology is still different from “full accrual” budgeting, since, for example, investments in assets and other capital expenses are normally still budgeted on a cash basis, therefore fully funded at the time of purchase. In a few cases, organizations modified the vertical structure of their budget and created separate budget lines and allotments for the capital expense disbursements to better signal their funding needs to constituencies. Also in these cases, capital expense needs are always represented through the amount of disbursements authorized during the budget year. As more organizations adopt the full accrual accounting basis for financial reporting purposes, it is expected that attempts to modify the commitment basis of budgetary accounting and to establish the delivery principle “inspired” methodologies will also become more common. Yet, on the contrary, there has so far been no interest in radically changing the budgetary basis to full accrual. For example, organizations do not see much value in the inclusion of a budgetary balance sheet. Also, while the disclosure of long-term assets and liabilities is perceived as useful in the reporting phase and for financial control purposes, it is not considered essential in the funding phase, where constituencies remain interested in financing the short-term and commitment/disbursement based needs of the organizations.

13.4 Financial accounting and reporting in IIs

13.4.1 Accounting change and the emergence of the financial harmonization issue Traditionally, accounting and financial reporting in IIs followed a pattern common to most national government entities where tailored internal financial rules and regulations—established with the approval of constituencies rather than by independent set of standards or internationally recognized principles—were determinant.

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The International Financial Institutions (IFIs) that early on adopted full accrual accounting and international standards as more solid and credible methodologies towards the financial markets and for their operational needs are an exception to this trend. Other organizations, such as the European Commission, the OECD and NATO, recently adopted accrual accounting, taking inspiration from the requirements of the International Public Sector Accounting Standards (IPSAS) but without promoting an integral approach to these standards. INGOs have adopted a variety of financial reporting formats and methodologies consistent with their operations and stakeholder groups. Organizations with big and decentralized operations and a private sector culture, such as Foundations, as well as NGOs that need to produce certified accounts for tax exemption purposes tend to use accrual accounting. On the contrary smaller organizations, mainly focused on fundraising and disbursement of grants, tend to use cash accounting. With particular reference to the UN system organizations, all organizations adopted similar forms of commitment accounting but their financial regulations and accounting policies grew apart, over time, reflecting significant differences in the formats of their respective financial statements. In this context, the first significant improvement towards modernization and harmonization of financial management practices was the adoption, in 1993, of a common body of accounting standards, called the United Nations System Accounting Standards (UNSAS). This body of principles, developed by an organ composed of UN senior financial managers, was grounded in commitment accounting and progressively developed to introduce elements typical to accrual accounting—i.e. recognition of some categories of fixed and financial assets in the balance sheet and of long-term liabilities such as pensions and other after-retirement services liabilities (UNSAS VII 2006). However, observers and practitioners pointed out that in their very nature the UNSAS were too loose to achieve UN system harmonization (Alesani and Steccolini 2006; WFP 2005). UNSAS was a “minimum common denominator” among the organizations but lacked prescription and allowed choices for the relatively small set of topics covered, including a general allowance for organizations to diverge from UNSAS where necessary. Observers also pointed out the incompleteness of the transition to accrual accounting. As an example, UNSAS left organizations free to choose if they would recognize expenses based on cash disbursed or the delivery principle. It did not require accounting for asset depreciation, allowed organizations to expense material fixed assets such as machinery, inventories and vehicles, and did not require the recognition of payables and receivables.

13.4.2 Transition to full accrual and IPSAS: implementation strategies In the early 2000s, interest in the harmonization of financial reporting practices increased. Both external auditors and top management called for stronger

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harmonization and the possibility of a move to full accruals and IPSAS adoption was placed on the agenda in 2004. By 2005, UN bodies across the system had agreed to IPSAS adoption, including the High Level Committee on Management, which has delegated authority from the Chief Executives Board to make recommendations on administrative matters (Alesani, Jensen and Steccolini 2011; United Nations Task Force on Accounting Standards 2005). The governing bodies of all United Nations system organizations subsequently ratified IPSAS adoption. General Assembly approval occurred in mid-2006. The standards implementation phase followed; dedicated teams and change management projects were created in most agencies, and the UN maintained a small system-wide team to promote common understanding and harmonized accounting policies. The World Food Programme (WFP) was the pioneer of IPSAS adoption within the UN system in 2008. As of 2012, twenty organizations had successfully implemented IPSAS and all of them obtained clear opinions on their financial statements from the external auditors. It is expected that the remaining organizations will adopt the Standards by 2014. Many drivers led to the decision to implement IPSAS. External auditors saw accrual accounting as enhanced transparency and comprehensiveness of the financial reporting. At the same time, the UN system came under severe pressure to reform due to its role in the Oil for Food scandal. This pressure culminated in September 2005, in the release of the Volcker Report, which called for improvements in governance, transparency and accountability. The resulting package of reforms, Investing in the United Nations, that the General Assembly approved, included the decision that the UN adopt IPSAS (UN 2006a). IPSAS were chosen for their credibility as accounting standards (an independent international external body, the International Federation of Accountants (IFAC) had established them), their international recognition and application by some of the major developed member states’ governments and their alignment with best practices.14 They were also considered the most appropriate tools to allow the achievement of a high level of consistency and comparability across UN system organizations. The adoption of full accrual accounting is a major organizational change which WFP’s Executive Director at the time, Josette Sheeran, described as a move from an “historical accumulation of rules that no one could understand” to “best practice”: WFP’s financial statements used to be a Tower of Babel; an historical accumulation of rules and requirements. Now we have joined the rest of the world and WFP is following best practice. Updating for IPSAS requirements is less work than trying to keep up-to-date with ad hoc detailed requirements that no one understands completely and which have developed over many years for reasons that no one can explain. ( Josette Sheeran)

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13.4.3 Expected impacts of the transition to full accrual accounting The adoption of IPSAS and full accrual accounting is expected to achieve improvements in four main areas (Godfrey et al. 2001; Jaruga and Wojciech 1996; Ouda 2005):    

accountability and comprehensiveness of financial statements; harmonization and comparability among organizations; financial management practices and internal control mechanisms; communication with donors on funding needs and focus on implementation.

Not all those benefits are achievable at the same time. Increased accountability and comprehensiveness of financial statements is a short-term objective mainly dependent on the quality of accounting policy choices and the correctness of the bookkeeping and statements issuance processes. Increased harmonization can be considered a medium-term objective. IPSAS introduce a considerable amount of requirements that by themselves represent a strong push towards harmonization. On the other side, accrual accounting is more open to estimates left to professional judgment, and IPSAS standards encompass options and grey areas which open up space for accounting policy choices. These choices can create diversity among organizations, especially since they constitute a significant break from past practices and bear administrative costs and change management issues. Finally, increased control and better financial management are long-term results. They require proper communication, a cultural shift in readers of financial statements and internal users (managers), and integration of the newly available information in the main decision-making processes.

13.4.4 Enhanced accountability and comprehensiveness of financial statements Accrual accounting financial statements are composed of three main statements: the Statement of Financial Performance (more generically called “Income Statement”), the Statement of Financial Position (also known as “Balance Sheet”), the Cash Flow Statement and the Statement of Changes in Net Assets. The last is particularly important for first time adopter organizations in that it details the items that re-state the value of the organization’s net assets. IPSAS standards include recommended formats for these statements.

13.4.4.1 Impact on statement of financial performance IPSAS allow an enhanced representation of the financial performance of the organization which can be described in the following terms.

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1 More comprehensive measurement and disclosure of revenue based on the earning process and the nature of the transactions. Difference with cash/commitment accounting—revenue is recognized when cash is received (cash) or when a binding title to receive cash is obtained by the organization (commitment). IPSAS lay out different revenue recognition treatments based on the difference between exchange and non-exchange transactions. Exchange transactions are associated with “commercial” operations, i.e. provision of goods and services which have identifiable market prices. In the context of IIs, these can be the procurement of commodities (healthcare, food, etc.) on behalf of recipient governments, the provision of services on behalf of governments or other IIs, the contracting of consultants or other services. In these cases revenue is recognized in parallel with the provision/delivery of goods and services, based on the principle that revenue is recognized when “earned”. Non-exchange transactions involve transfers and grants from donors to implement technical activities and services with no reference to market conditions, for example capacity building and policy/standard setting activities. In these cases, revenue is recognized when the recipient organization is in control of the contributions, for example at the signing of a binding agreement with the donor. In exceptional circumstances, where donor agreements include measurable and precise performance obligations and return of funds obligations, revenue is recognized as services and/or goods are delivered and performance obligations are met, similar to exchange transactions revenue. 2 Expenses are recognized when goods and services are effectively delivered to and used by the organization (adoption of the delivery principle). Difference with cash/commitment basis: expenses are recognized when legal obligations are taken by managers (commitment) or when money is disbursed (cash). This transition enhances the transparency of the financial statements because it allows donors and constituencies to evaluate the actual level of implementation of services and projects on the ground, rather than the value of obligations to third parties. This representational enhancement is extremely important in light of the relevant portion of activities outsourced to implementing partners to which IOs usually transfer resources prior to the delivery of activities. As explained above, in most cases, the budgetary basis of accounting remained based on commitments, which are used to “reserve” resources allocated to units and activities. This creates a misalignment between budgetary and financial reporting. 3 More comprehensive quantification and disclosure of the economic value of resources utilized to deliver services and activities in a given year. For example, fixed assets and inventories are accounted for as expenses only for the portion “depreciated” and “distributed” in a given period. Difference with cash/commitment accounting: all assets are fully expensed in the purchase year.

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Fixed assets (property, plant and equipment) release value to the organization their control along their “useful life”, i.e., the estimated number of years they will be in use. Under accrual accounting the cost of an asset is spread along the useful life through “depreciation charges”. Inventories are supplies and commodities held by the organizations for programmatic purposes. Depending on the organization, these can be medical supplies, food, emergency response kits, components for shelters, etc. Under accrual accounting only the inventory distributed in a given period is considered an expense, while the inventory on hand is an asset of the organization. 4 Disclosure of the in-kind contributions and figurative expenses for resources donated by third parties. Difference with cash/commitment accounting: only inputs for which the organization has paid are recorded as expenditures. IIs and INGOs receive a significant amount of resources for free by donors and constituencies, for example the right to occupy government owned premises in countries where organizations operate, representing contributions in-kind and figurative expenses corresponding to the resources utilized by the organization (e.g. rent that would have been paid if the organization had to occupy commercial premises) enhances the presentation of the financial statements because it allows constituencies to understand the full value of the inputs embedded in the services provided.

13.4.4.2 Impact on the statement of financial position This statement of financial position shows the value of assets, liabilities and net assets. The adoption of full accrual accounting produces the following enhancements: 1 Full disclosure of assets and liabilities Difference with commitment accounting: in the “pure” commitment accounting basis there is no representation of the financial position of the organization. In modified forms as the ones practiced under UNSAS, a statement of financial position was produced with limited information related to financial investments, short-term debts and reserves. The value and composition of the assets is important information necessary for constituencies to evaluate the organization’s ability to carry forward operations and mandates. For example, the accumulated depreciation15 shows the aging of assets and substantiates the case for replacement and new capital expenses. The value of inventory at hand, compared with the value of the annual purchases and distributions, shows the efficiency of the organization to distribute or “rotate” supplies used to implement program activities. Retirement benefits and services to staff represent the most important category of liabilities held by IIs, in particular healthcare insurance and pension benefits. Under the cash/commitment basis, these liabilities were recognized

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according to the “pay as you go” principle, meaning when they were paid to the staff. By contrast, under accrual accounting organizations record them as the benefit is matured by the staff, regardless of the timing of payment. As a result, organizations accumulated significant values of unrecognized and unfunded liabilities which need quantification through actuarial valuation. Recording of these liabilities is fundamental to taking appropriate long-term funding decisions and to controlling the financial sustainability of the organizations. 2 Representation of the economic result (surplus or deficit) and net assets (reserves and equity) of the organization. Difference with cash/commitment accounting—surplus or deficit is intended as cash balance remaining at the end of the year (cash basis) eventually corrected for the amount of obligations contracted (commitment basis). Under accrual accounting, the statement of financial position is built upon the fundamental equation: Assets = Liabilities + Net Assets. Assets are the material and immaterial items that the organization uses to operate (from cash to buildings, from software to financial investments), while liabilities are expressive of the economic rights of third parties—banks, suppliers and implementing partners, employees— on the organization. Net assets are expressive of the rights of the community of donors and member states on the organization, and are composed of the economic result (surplus or deficit), reserves and equity. In financial terms, the surplus (or deficit) is the difference between revenue earned and expenses accrued. In profit organizations, the economic result represents the wealth created by the enterprise through its activities. In a non-profit environment, the economic result is expressive of the amount of public resources retained by the organization for future use after having deducted the cost of the goods and services utilized. In profit organizations, equity is the expression of the value of the company held by the stockholders as bearers of capital. In non-profit organizations, equity represents the long-term value embedded in the organization and held on behalf of the community of constituencies. In other words, equity in a non-profit context is the measure of the “public wealth” embedded in the organization at a certain moment. This is a very important measure and variations of this value, over time, are to be judged in terms of the so-called intergenerational equity.16 Transition from modified cash (i.e., UNSAS like) to accrual accounting generates the need to restate the value of net assets. In the opening statement of financial position, the variance is determined by the first time valuation of assets (property plant and equipment, inventory, buildings, etc.) and on the other side by the quantification of the long-term liabilities, in particular post-service employee benefits. Depending on the relative scale of these two aggregates, the net asset restatement can be a positive or a negative value. In funding terms, negative values highlight that member states will need to provide extra funding, in future years, to cover accumulated liabilities which will have a monetary impact in the future.

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13.4.4.3 Enhanced financial disclosure at WFP through IPSAS adoption In this section we exemplify the enhanced financial disclosure obtained by the World Food Programme (WFP) through IPSAS adoption. IPSAS do not prescribe a mandatory presentation of the main Statements but the transition to the standards allowed WFP and all other organizations to make their Statements leaner, to the benefit of the external readers. First, IPSAS do not allow breakdown by funds on the face of the statements, which makes their horizontal structure less fragmented and more understandable for non-technical readers. Fund accounting is still an important component of IIs’ financial management and it is disclosed in the Notes and Schedules. Under UNSAS, expense presentation had traditionally been a hybrid between breakdown by nature of inputs (e.g. commodities, transportation costs) and by destination (e.g. operational costs, direct support costs, administration). The transition to IPSAS pushed organizations to adopt a consistent and simpler breakdown by nature, while expenses by destination are readable through budget execution reports. Accrual accounting adoption changed the accounting policies for revenue and expense recognition, although the difference is not immediately visible from the statements. Contributions started being recognized based on signed donor agreements rather than based on cash received. Expenses started being recognized based on the delivery principle rather than on commitments. In the Statement of Financial Position, WFP disclosed, for the first time, three main items: Inventories, Property, Plant and Equipment, and Intangible Assets. Inventories are the most material item, since the organization is the largest distributor of food in countries with humanitarian crises. As a result, in the first year of IPSAS adoption the organization reported more than one billion US$ of food commodities in hand. The organization reported property, plant and equipment valued at 19 million US$, mainly related to project assets, such as vehicles, office and premises equipment and fixtures. Internally developed software for administration and logistics amounted to 31 million US$. The main new liability item disclosed through IPSAS adoption is employee benefits amounting to 240 million US$. The overall effect of the recognition of these assets and liabilities (Figure 13.6) was a significant increase in the value of net assets. In the experience of the IIs, the impact of the first year of IPSAS implementation on net assets has been positive or negative based on the size of the previously unrecognized assets and liabilities, directly affected by accounting policy choices, such as extensiveness of capitalized assets and the discount rate applied to future employee liabilities. Some organizations such as WFP, UNESCO, PAHO, UNIDO experienced a positive impact, while others such as ICAO, ITU had a negative impact (Deloitte 2011). In the case of the European Commission, the negative assets value of the first year of adoption reached 50 million Euros.

The evolution of budgetary, accounting and financial reporting systems 315 FIGURE 13.6 Financial disclosure impacts of IPSAS adoption in WFP

UNSAS Assets Inventories Property, Plant and Equipment Intangible Assets Difference Liabilities Employee benefits Difference

IPSAS

Not disclosed Not disclosed Not disclosed

1,022 19 21 1,072 22% increase to reported assets

Not disclosed 240 71% increase to reported liabilities

Source: adapted from Alesani, Jensen, Steccolini, 2012

This gave the organization the occasion to table with donors the important matter of unfunded liabilities for employee benefits and agree on a special funding mechanism to cover them, hence relieving the organization from the burden to fund through forced saving or new payroll charges increasing disbursements for expenses previously accumulated and never recognized.

13.4.5 Strengthening of financial management and internal controls Accrual accounting and reporting requirements may help to improve financial management tools and internal financial controls17 in a number of areas such as:  inventory and fixed asset logistic management, tracking and maintenance;  focus on delivery times and better financial control for goods and services;  monitoring of employee benefits that create financial liabilities, in particular accumulated annual leave. Accrual accounting requirements encourage organizations to keep systematic recording of the inflows and outflows of inventory commodities and accurate registries of assets. This is crucial for IIs that deal with considerable quantities of commodities—from food to medicines, from shelters to clothing—often stored for logistical purposes and handled by implementing partners. Historically, the flows and distribution processes of these commodities have not been efficiently monitored. With regards to fixed assets, international accounting standards go beyond the legalistic notion of ownership and require organizations to disclose the value of the assets under their “control”. International organizations control considerable amounts of project assets, purchased with donors’ funds in the context of execution of technical activities and projects—one example above all: vehicles—for the

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length of the project. At the end of this period, normally these assets are either absorbed by the country offices or donated to the implementing partners or beneficiaries. Accrual accounting requires the organization to “capitalize” and “depreciate” those assets, as well as to keep track and disclose their destination at the end of the project, which can be sensitive information for donors. Under accrual accounting, expenses are recorded when goods are delivered; this ensures that finance staff operate a “three-way” correspondence between the order, the receipted goods/services and the invoice. Resources cannot be considered “spent”—and therefore be counted within the implementation rate of programs— before the point of delivery. This aspect is particularly important in transactions with implementing partners, where organizations usually advance resources for the implementation of projects, and expenses are recorded upon reporting of delivery by the partners. Finally, accrual accounting requires disclosure of the short- and long-term employee benefit liabilities. This encourages a more systematic and centralized recording of accumulated annual and home leave liabilities and a regular and professional valuation of the after service insurance liability.

13.4.6 Renewed accounting language for project management and donor reporting As already mentioned, many IIs deal with the co-presence of accrual and commitment accounting, the former used for statutory financial reporting purposes, the latter for budgeting and (usually) financial project management. In other words, organizations speak two “accounting languages” at the same time with their internal and external constituencies. This situation is certainly challenging to manage, in particular when it comes to financial reports to donors of earmarked resources. Some organizations chose to keep these reports aligned with their budgeting basis, while some organizations aligned them with the statutory reporting basis. The first option has the advantage of keeping an accounting language familiar to donors and non-accountants but is less meaningful since it does not quantify the actual implementation rate of the projects at the reporting date. The second has the advantage of being more meaningful, aligned with the new and improved language adopted for financial statements but requires considerable communication efforts with donors. For example, one of the New York based UN system organizations aligned its donor reporting to full accrual accounting but it also presents a “reconciliation” to the budgetary basis (Figure 13.7). Revenue (column A) and expenses (column B) are shown as per full accrual accounting requirements and consistently with financial statements. The difference between A and B determines the closing balance of the project (or fund), which will be significantly different from what donors have seen in the past consistent with commitment accounting. The columns on the right side of

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FIGURE 13.7 Model Donor Reporting Format Source: our elaboration based on UN system organizations’ donor reporting format

the report show the reconciliation items between full accrual and commitment basis. Column D quantifies advances to implementing partners for activities not yet realized at the reporting date. Column E reports the net book value of fixed assets (historical value/fair value net of depreciation) and inventories held by the organization. These items represent financial resources that have been already disbursed but not yet recorded as expenses under accrual accounting. Finally, column F represents the amount of contributions receivable, i.e. firmly committed by the donors and recorded by the organization as revenue (column A or B) but not yet received. This report attempts to unfold the different information potential of both bases of accounting from the perspective of managers and donors. Managers are interested in knowing the value of cash in hand, and this is visible through column H. On the other side, donors will be reported the “balance” of their project funds based on full accrual accounting—column C—therefore a reconciliation between these two numbers is needed. Columns on the right of the report explain this difference and offer further elements of financial performance control from the donors’ perspective. For example, donors are interested in verifying that organizations minimize values of outstanding advances, as opposed to delivered goods/services and implemented activities (expenses). Donors are also interested in knowing the value of assets purchased with their project funds and in use, and for example, to have a say regarding how to dispose of them. Adopting meaningful reporting formats is a significant support to the correct understanding of the information potential of accrual accounting as a “new language” for managers and donors in combination with budgetary (cash/commitment) accounting. On the other side, reporting alone is not sufficient to ensure that the new accounting language is understood and properly used by stakeholders in taking decisions and managing projects. This can only come through a senior management push and a renewed interest from the donors regarding financial information released by the organizations. In the IIs’ case, the presence of important member

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state donors that also went through the same accounting changes and reforms supports a meaningful transition to accrual accounting.

13.4.7 Financial reporting harmonization: expected and actual results One of the main objectives of adopting international accounting standards in the UN system context is to strengthen comparability among organizations. IPSAS requirements are more prescriptive than UNSAS but they require accounting policy choices and professional judgment that need to be harmonized across organizations. The non-hierarchical nature of the UN system and independence of IIs increases the potential for diversity in accounting policy choices. Diversity in disclosure and accounting policy can arise from a variety of factors, such as wide-ranging core processes and institutional models18 and representational preferences aimed at maximizing the financial outlook of the organization or conveying specific messages to readers, in particular donors. Diversity can arise when international standards leave policy options to organizations, or when grey areas leave space for interpretation and professional judgment that can lead to different treatments. An example of the former case is the choice on the discount rate for long-term employee benefits valuation. Full accrual accounting requires the recording of a liability for the present value of long-term employee benefits such as pensions and after service healthcare benefits. This value is obtained by discounting the value of the future payments at a chosen interest rate. Mathematically, the higher the interest rate chosen to discount, the smaller the amount of the present value of the liability. IPSAS are not conclusive in the choice of the rate between corporate bonds rate (higher rate) and government bonds rate (lower rate). The resulting difference can be a very material over- or under-estimation of the main long-term liability in the II’s books of several millions of dollars. The diversity in this treatment is visible from the panel of UN system organizations that adopted IPSAS by 2010; ICAO, ITU and WIPO adopted rates similar to government state bonds, close to 3 percent, while IMO, PAHO, WMO, UNESCO and UNIDO adopted bond rates similar to corporate rates between 5 and 6 percent (Deloitte 2011) with the first group ending up with a much higher liability compared with the second group in employee equivalent terms. Divergent representational preferences motivate these policy choices. The first group of organizations intended to stress the existence of a very material and unfunded long-term liability, drawing the donors’ attention to the need to identify ways to finance it. The second group, on the contrary, decided to minimize as much as possible the impact of this liability under the assumption that negative net assets of the organization would look bad and raise criticism regarding the organization rather than encourage donors to provide further funding.

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With regard to the “grey areas” in IPSAS, the literature and the professional community (Alesani, Jensen and Steccolini 2011; Bergmann 2010; UNSAS VII 2006) have discussed and raised three main harmonization policy issues (Table 13.1):  recognition of revenue from voluntary contributions, in particular for multi-year agreements with donors;  recognition of expenses in cases of indirect implementation of projects through implementing partners;  recognition and treatment of project assets, i.e. assets employed in technical activities in the field such as vehicles, machines and equipment. Inconsistent choices among organizations in any of the policy areas above have the potential to hamper comparability of IPSAS financial statements.

TABLE 13.1 Main areas of potential accounting diversity

Issue

Treatment 1

Treatment 2

Treatment 3

Recognition of revenue from voluntary contributions— multi-year agreements

Recognize upfront full amount at signing of binding agreement with donor

Recognize revenue in parallel with cash disbursement—as donor withholds control over resources up to this point

Recognize revenue in parallel with expense recognition in coherence with matching approach and “earning” process (“conditions” on transferred resources)

Recognition of expenses in cases of indirect implementation (upfront payment for services)

Recognize an advance at the moment of payment and recognize expenses upon delivery of services by implementing partner

Recognize an advance at the moment of payment and recognize expenses upon recording of expenditure in implementing partner’s accounts (assumed cash basis)

Recognize an expense at the moment of payment based on upfront loss of control over transferred resources

Recognition and treatment of project assets

Capitalize assets controlled by organization regardless of subject having physical custodianship

Capitalize only assets owned and physically operated by the organization

No capitalization of project assets as they are paid for by project funds and deemed to be transferred to implementing partners of donated rather than retained by organization

Source: our elaboration

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Given the complexity of the issues above, we will take into consideration and analyze only the issue related to revenue recognition from multi-year earmarked voluntary contributions, i.e. contributions negotiated bilaterally between organizations and donors and dedicated to funding a specific project or “theme”. Funding agreements usually do not exhibit a hard-headed commercial approach similar to the “purchase” of services. IPSAS 23 presents the requirements for revenue recognition of non-exchange transactions, which is the broad category within which funding agreements belong as “grants” from donors. The standard states that revenue needs to be recognized when resources are under the control of the beneficiary organization. Normally this coincides with the signature of a binding agreement, which happens prior to the implementation of project activities. Only in cases where conditions on transferred assets are included19 or control over transferred assets is withheld by donors, is revenue recognized in parallel with the fullfilment of the stipulated conditions and/or the release of control over resources. This is referred to as “matching” approach, because revenue tends to be recognized in parallel with expenses. Therefore, the assessment of the existence and extent of applicability of conditions to their funding agreements influences revenue recognition. This need for interpretation of IPSAS requirements leaves space for accounting policy choices to implementing organizations. A recent work by Alesani et al. (2011) highlights that UN system organizations, upon IPSAS adoption, may apply three main approaches (Table 13.1): 1 “matching approach”, which embeds an extensive interpretation of “conditions”, and recognizes revenue as the goods and services required by the funding agreement are delivered; 2 “upfront approach”, with a very restrictive interpretation of conditions and immediate upfront recognition of all funding as revenue; 3 “mixed approach” with a case by case analysis of each funding agreement to determine whether or not it includes “conditions”. The evidence gathered by the above mentioned work supports that organizations are in fact using these alternative approaches. In particular organizations with high reliance on multi-year funding agreements mostly adopt the “matching approach” which avoids any risk of showing large surpluses (implying inefficient and ineffective delivery of services), preventing pressure to imprudently use funds that are earmarked for future years. Organizations with low reliance on multi-year agreements will opt for an upfront approach since there are no negative representational consequences of this choice, which on the contrary allows the minimization of administrative costs associated with revenue recognition. To date, the UN system organizations are still at work to achieve the maximum possible financial reporting harmonization through IPSAS. Within the UN system, the issuance of more than 60 policies and guidance papers by the task-force on accounting standards has promoted consistent understanding and interpretation. At

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the same time, important avoidable diversity still remains, mainly due to representational preferences and a context of non-hierarchical relations among organizations. This emergent diversity could potentially obstacle to the full achievement of the expected benefits of financial reporting harmonization but is clearly normal in the “first adoption” phase of IPSAS.

13.4.8 IPSAS implementation in IIs: a project management approach The transition to accrual accounting is a comprehensive change management process that needs to involve a variety of stakeholders internal and external to the entity. The subject has been recently tackled in the professional and academic literature (Aggestam 2010; International Public Sector Accounting Standards Board 2011). Basic prerequisites for a successful initiative are continued support for change from top management and political representatives, availability of technical expertise and proper project infrastructure, adequate financial resources and project support. In the UN system, organizations and member states embraced IPSAS under the accountability reform agenda but with limited awareness of the magnitude of the required changes. This created the need for targeted communication meant to bridge the knowledge gap and to establish realistic expectations on the achievable benefits of IPSAS. Senior management support in the UN system was pivotal in maintaining the momentum for change, which required significant costs in terms of administrative process and information system re-engineering and to win over institutional cultures resistant to changing consolidated practices and introducing new data requirements. An adequate project team and infrastructure are also needed. A “project board” composed of senior management is formed to guarantee continuous support for the project, to escalate issues as they emerge and keep projects on track. A proper project plan needs to be prepared to identify milestones for the various phases of a given project, assign responsibilities to all units involved, including those outside of the finance/accounting units, and to develop a comprehensive risk assessment and management strategy. A preliminary phase in any IPSAS adoption process is the analysis of the current accounting system and the identification of the “gaps” in relation to adoption of full accrual accounting. For each major accounting area the project team needs to coordinate the following activities:  issuance of IPSAS compliant accounting policies and identification of bookkeeping rules and practices;  re-engineering and setting up of administrative processes and procedures to satisfy data requirements;  customizing existing information systems or implementation of new systems to support data requirements.

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Process re-engineering is a fundamental part of the change. Accrual accounting introduces a number of new financial controls and data requirements that the organization needs to incorporate and routinize. “Process owners” need to be identified and management support is essential in breaking possible resistance and ensuring the proper resources. Headquarters departments that are more heavily affected by the accounting change outside accounts units include facility and administrative services (fixed assets policy area), fundraising and resource mobilization (revenue recording), and program units that manage implementing partners’ funding and inventories. Impacts at the country office level depend on the level of decentralization of administrative activities. Asset and inventory management and expense recording are usually managed at least partially in the field. One of the “myths” of transition to accrual accounting is that it will create administrative savings. On the contrary, while it fosters better financial management and control, its implementation requires additional resources to maintain the richer underlying information system. Availability of modern information systems for administration facilitates accrual accounting implementation. In some cases, IIs approached IPSAS implementation in correspondence with their transition to Enterprise Resource Planning (ERP) systems. This offered the relevant opportunity to build the administrative processes from scratch based on IPSAS requirements. Decentralized, operational and relatively smaller organizations are contexts where it is more challenging and cumbersome to implement IPSAS and accrual accounting from a project management perspective in comparison with centralized, policy-making/financial intermediary entities, as well as bigger institutions. The former organizations are also the context where the change can potentially be more useful, given their resource constraints, the importance to understand the cost of their services and the potential for misalignment with cash/commitment accounting. Successful transition to accrual accounting/IPSAS is a matter of accounting soundness as much as it is an issue of communication and training. These activities need to directly involve a large number of staff and external stakeholders with a range of needs. All staff need to be aware of the meaning and main benefits resulting from the accounting change. Field administrative and program staff and managers need to achieve an operational knowledge of the changes introduced to be able to work with the new accounting system and to explain its meaning to donors and adequately use new information provided. The delivery principle and its impact on available resources is perhaps the most important concept for program budget holders to understand; also, because it assists in adequately planning procurement activities. Business Process owners and finance/accounting staff need to achieve a technical knowledge on IPSAS and its impact on administrative processes, bookkeeping and financial statements preparation. This training requires a hands-on approach, which involves concepts as well as information systems and step by step guidance to new tasks. Timing for the training activities is very important: in the early phases training is more conceptual while as the transition

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develops training becomes more focused on process re-engineering and information system changes. Governing bodies need to be aware of the main changes introduced to the contents of the financial statements and donor reports and the new information presented in them, mainly for accountability and decision-making purposes. Information sessions need to be run at various stages of implementation for this category of stakeholder. The most important goal in this sense is to reach an understanding and grow interest in how to use new numbers and data issued by the organization. As in many change management processes, a common pitfall is to lose momentum during the more technical and applicative phases of the transition. This is extremely dangerous since continuous support and understanding of changes is pivotal to win over resistances and to achieve positive results. Accrual accounting and IPSAS adoption is a complex and long process which depends on multiple elements. At the end of the process though, the most important proxy to judge if the transition has been successful is the actual use of the new financial information to improve internal financial management and donors’ decision-making.

Notes 1 The term donor is intentionally generic and mainly referred in this context to member states. 2 For a review of the possible hybrid configurations see Anessi Pessina (2007: 26–29). 3 For a review of the different accounting systems applied to public sector organizations see Steccolini (2009); comprehensive comparative analysis of the different accounting bases and the public accounting reforms in a range of countries is offered by Caperchione (2000). 4 Among other authors see McCulloch and Ball (1992), Lapsley (1999) and Pallot (2001). 5 On the notion of public sector accountability see Mack and Ryan (2006) and Steccolini (2009: 11–17). 6 Anthony (1978) among others offers an example of operationalization of decision usefulness paradigm. 7 See for example Anthony (1985), Anessi Pessina (2000: 32–34). 8 “Cash is the resource appropriated from the community [ … ] and cash is the resource used by governments in delivering services to the community, therefore accrual based budgeting will not fulfill requirements for basic accountability” (Guthrie 1998). In particular, the presence within accrual accounting of estimates and assumptions is not perceived to be coherent with the authorizing nature of budgets, which needs unequivocal values to hold managers accountable to. 9 For a review, see Anessi Pessina and Steccolini (2001) and Caperchione (1996). 10 Monsen and Nasi (1999); Christiaens and Vanhee (2002). 11 In depth arguments on this can be found in Borgonovi (1996 and 1997), Anessi Pessina and Steccolini (2007), Anessi Pessina (2000: 72–78), and Steccolini (2009). 12 The cost classification internal to this part of the budget was introduced in 2004 in light of the growing volume of these projects and the consequent need to better identify the incremental administrative costs drawn by these supplementary activities and recover these costs from project funding. 13 Temporary assistance, delegates/staff travel, contractual services, general operating expenses, supplies and materials, assets and equipment, financial allocation to institutes, contract with NGOs, other contributions, and indirect program costs.

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14 Among other authors, see Lapsley (1999), McCulloch and Ball (1992), Pallot (2001). 15 Assets are normally shown at their historical cost value minus the depreciation accumulated in the previous useful life years. 16 For a review, see Anessi (2009: 181–93). 17 For the recent evolution of the contingency theory, see Jaruga and Wojciech (1996), Godfrey et al. (2001), Ouda (2005). 18 See, for example, Roberts (1992). 19 Under IPSAS, conditions define both performance and return obligations, i.e. either the organization performs the activities exactly as indicated in the agreement or it needs to return funds to the donor. Specific performance measures need to be in place and past relations with the donor should suggest that return obligations are in fact enforced.

14 HUMAN RESOURCES MANAGEMENT Daniele Alesani and Michael Hathorn

14.1 Introduction This chapter is dedicated to the efforts by International Organizations1 (IOs) to transform Human Resources Management (HRM) from a bureaucratic to a “strategic” function, enabling the organizations to better achieve their missions and utilize their talents. The first two sections of this chapter identify the specificities of IOs that require a tailored approach to HRM and analyze the “strategic” approach to this function as applicable to IOs. The remaining sections present some of the more significant current practices and experiences of reforming the HR function and modernizing HR management systems and tools: from job grading to performance appraisal to career development. For each phase of the cycle, we highlight the deficiencies of the bureaucratic model and the expected benefits of these reforms. This will allow us to reflect on the status of the transition towards the strategic model of HRM.

14.2 HRM and reforms in International Organizations In order to understand the challenge of HRM and reforms in IOs, it is first important to take into account some of the main specificities of these types of organizations.

14.2.1 Specificities of International Organizations 14.2.1.1 International nature of the organizations and its impacts on organizational culture IOs are truly “international”, usually with large number of expatriate staff at Headquarters (HQ). This often means the absence of a dominant organizational culture linked to a country or a professional category.

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The geographic spread of offices, with many organizations boasting a strong field presence of regional and country offices staffed by a mixture of expatriates and local staff, makes it more difficult to create and sustain an “organization-wide” culture. There is a further cultural divide between HQ and the field, where the tendency at HQ is to focus on policy and procedures, hierarchy and protocol. The reality of the field is to accomplish the mission under a challenging set of evolving conditions where policy and procedural prescriptions often fall short.

14.2.1.2 Staff motivation and profile IOs’ staff are usually highly educated, cosmopolitan, multi-lingual, and internationally mobile. The motivations for working in these organizations vary and have been the subject of several recent studies (see for example Anderfuhren-Biget et al. 2012). For some, motivation relates to the possibility of “doing good”, “making a difference” and “helping those who most need it”. Others will have joined the organization as specialists in their professional field, for example as scientists or economists. Some may be attracted to the international environment and enjoy the idea of working with people from many different nationalities. Others are mainly attracted to a public sector career. Most often, there is a complex combination of motivators for staff, who are typically looking for a broader set of rewards than their “for profit” counterparts. In terms of staff profiles, modern IOs strongly pursue the principle of gender balance and horizontal and vertical mobility. Nevertheless, to date there still persists an imbalance between men and women at the top positions of the organizations, both in the field and at the HQ. Expatriates normally manage field offices, while locals occupy lower staff positions. The latter usually still have limited career possibilities within the organization. IOs have only recently introduced opportunities for horizontal mobility as a means for career development and with good results. Vertical mobility has been traditionally based on seniority, with a perceived barrier to movement from support or General Service (GS) to professional (P) positions.

14.2.1.3 Politics versus management IOs have a public character. In particular, IIs’ member states act as primary constituencies and exert significant pressures on the governance structure, shaping the stakeholder environment and limiting management options. In the area of HRM, member states’ pressure, and in the case of INGOs member organizations’ pressure, to establish a certain distribution of senior staff is not necessarily compatible with sound management principles and meritocracy. A tension therefore emerges between the potentially conflicting need of IIs to meet member states’ expectations and to shape their workforce to best achieve their institutional mission and goals. In the IO’s environment, external political factors often dictate the timing, type and limits of management reforms (Bauer and Knill 2007). For example, the reforms related to the adoption of international public sector accounting standards

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are the by-product of political dynamics such as the Oil For Food scandal, although they were totally un-related to the deficiencies of the traditional cash-based accounting system.

14.2.1.4 Clashes between political, professional and technical rationales The presence of often conflicting political, managerial and technical rationales, side by side in IOs, complicates strategic and HRM of these organizations. At the top level, IIs and INGOs are respectively run by political personnel that act as representatives of their own countries’ interests and by individuals chosen for their personal prestige or elected within the Executive Boards by the constituent entities. Secretariats are run by managers whose mind-sets are usually grounded in their respective technical areas—e.g. emergency, healthcare, development—and whose mission it is to link the political and the technical sides of the organizations. With respect to technical personnel, a variety of distinctive and sometimes opposite professional cultures needs to be accommodated, managed and controlled such as: a b c d

professionals directly involved in service provision (e.g. medical profiles); professionals associated with fundraising and public relations; policy prescription experts (e.g. development professionals, policy analysts); administrative and general management professionals.

14.2.1.5 Terms of employment A typical government bureaucracy usually has long-term or permanent employment contracts that give staff a high level of job security. Historically, the UN and other large IO’s operating on a bureaucratic model have offered high job security through longer-term or “permanent” contracts. As budgetary pressures have increased, organizations are shifting from this approach to incorporate more flexible, short-term and performance-based contracts to the employment they offer. This requires staff to be willing to change assignments often and to be available to move geographically and functionally as opportunities arise. Older staff tend to enjoy more security and stability. This has created a growing perception of “intergenerational inequality”, which is an important challenge to organizations since it can significantly affect the organization’s ability to motivate and develop talent, professionalize their management and retain the next generation of top contributors.

14.2.2 The need for a tailored approach to HRM and reforms HRM is one of the main areas where the principles of increased efficiency and effectiveness of the New Public Management have introduced policies and practices inspired by private sector companies (Bauer and Knill 2007; Beigbeder 1997; Geri 2001).

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At the same time, the organizational context and specificities of international organizations require HR professionals to design the HR function and to implement HRM systems and tools differently from their counterparts in the business environment. For example, compensation strategies must take into account the limited flexibility and restricted use of pay for performance mechanisms and, more importantly, the lower motivational value of monetary incentives as compared to intangible rewards such as professional training, mobility, fulfilment of personal ideals and professional recognition and prestige. Likewise, career development systems operate within a special context where the focus on seniority, formal promotions and a traditional hierarchy are not always consistent with a meritocratic approach to career advancement and may lead to early plateauing of young talents. This suggests that a specific framework and set of policies are needed for HRM in IOs, since practices and tools developed in the business environment cannot be simply transferred but have to be radically reshaped (Brewster and Lee 2006). In particular, the wave of management reforms designed for IIs, from the 1990s onward, promoted a radical shift in paradigm from the traditional bureaucratic model of personnel management to the “strategic” HRM model (see for example Merlot et al. 2006). The main principle of the new model is the transformation of HRM into a value added function which effectively supports the organization’s orientation to its goals through provision of a cohesive set of policies, processes and tools.

14.3 Strategic HRM

14.3.1 A general framework for strategic HRM For more than two decades the literature has put a strong emphasis on the importance of adopting a strategic approach to HRM for both public and private sector organizations. It is argued that doing so will greatly enhance organizational performance, while also allowing the organization to adapt to its changing environment. In spite of the compelling logic of elevating HR to the strategic level, many organizations continue to focus their HR functions on administrative matters, thus capturing little of its significant value added. Various studies show that up to 85 percent of an organization’s value is based on “intangible assets”, that are driven by staff behaviors, yet senior leaders admit to having little understanding of the strategies for developing the human resources of the organization (Ulrich et al. 2001). A major challenge for modern IOs is to align their HR strategy and organizational strategy and, in turn, enable the organization to fully leverage staff to achieve their strategic goals. In order to do this, the HR function must first understand the organizational strategy and structure. The resulting HR strategy specifies how best to orchestrate the HR policies, procedures, and staff, to ensure that the entire workforce is mobilized and motivated to deliver sustainable results in line with the expectations and goals of the organization. Figure 14.1 identifies the key relationships leading to the outcome of organization performance.

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FIGURE 14.1 Strategic HR management – a conceptual framework Source: adapted from Optimis (2010)

In this model, the HR function places a critical emphasis on creating the right systems, incentives, and cultural contexts for staff to make their best contributions. The main dimensions of Strategic HR for IOs are the following:2  Organizational strategy alignment with the external and operational environment. Only when there is a clear organizational strategy does the HR function have a sound basis for developing a high impact HR strategy. The process of developing an effective strategy requires: 1

2

an in-depth understanding of the factors in the external environment that would support or challenge the accomplishment of the organization’s mission and goals; the adaptation of the internal resources and organizational settings to fit with this environment.

 Alignment between the organizational strategy and the organizational structure. The organizational structure defines the fundamental component of the organization’s overall strategy such as the level of centralization/decentralization, the organizational position of the management and support functions, the interdependencies among functions/departments and the internal structure of the organizational units. This is the “skeleton” of the organization, while the HR strategy represents its “joints” and “muscles”.  Enabling HR systems and processes. HR systems such as job grading, training, performance appraisal and career development can be used to establish incentives to perform, increase staff motivation, place a focus on results, optimize utilization of operational capabilities and encourage innovation and change.  Appropriate HR structure and access to key HR skills. The location and internal structure of the main HR services—e.g. personnel administration, HR

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policies—are fundamental. This theme is of high relevance for IOs given their increasing propensity to regionalize support services and create service centers outside the HQs. The full set of HR skills that an organization’s HR cycle requires is necessary to deliver an effective HR strategy. Organizations need to complement their internal staff with external expertise where necessary. Ulrich, Becker and Huselid (2001) suggest a set of research-based competencies for HR professionals: personal credibility, capacity to manage change, ability to manage culture and the expert delivery of human resource practices.

14.3.2 Main component of strategic HRM There are three main components of an integrated strategic architecture for HR: the HR function, system and behaviors (Ulrich, Becker and Huselid 2001) (Figure 14.2):

FIGURE 14.2 The Strategic HR management model Source: adapted from Ulrich and others (2001)

14.3.2.1 The HR function There are two main aspects of the HR function: 1 the structural aspects and organizational setting; 2 the mix and quality of HR professionals’ skill sets. Figure 14.3 represents the main components of the HR function’s structure. Service centers are normally associated with personnel administration or “downstream” services. They are usually structured around focal points dedicated to specific internal clients, e.g. individual departments. The success of these services stands on the efficient, timely and precise delivery of HR services and homogeneous application of standard HR regulations and rules in areas such as recruitment, contract management, retirement, separation and termination, payroll, leave and employee benefits administration, attestations and certificates. For field-based IOs, some decentralization is necessary, usually at the “regional” level. Global service centers are attractive options, given the possible efficiencies in terms of competitive local workforce markets and economies of specialization and scale.

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FIGURE 14.3 Principal elements of the structure of the HR Function Source: adapted from Cascio (2009)

Centers of expertise are normally associated with the strategic and value added HR services or “upstream” services. These typically include:     

talent management; HR policy design and implementation; performance management process design and implementation; review, update and oversight of the job grading and classification system; monitoring of HR policies implementation.

To be effective, upstream services need HR specialists able to formulate proper HR policies and systems, and adequately empowered by senior management to promote and facilitate implementation of these tools. In the context of the IOs, these services are normally centralized in HQs. Centres of expertise represent the technical platforms for the HR function to play its role of “business partner” to the line and top management. HR department managers are usually involved in the main corporate results-based management processes, from budgeting to program evaluation and operational control. This ensures proper functioning of the HR systems and processes. With respect to the mix of skills held by HR professionals, modern IOs require professionals who can move beyond the traditional bureaucratic orientation in order to transform HRM to a value added function. A landmark study by Huselid, Jackson and Schuler (1997) concluded that HR managers in for-profit companies were significantly higher in technical competency than in strategic competency, and this had an impact on organizational performance across a wide set of indicators. This finding is likely to apply to IO’s in equal measure given their propensity to hire based on technical criteria.

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14.3.2.2 The HR system “HR system” identifies the HR policies and practices adopted by an organization along the HRM cycle as a whole. The HRM cycle in Figure 14.4 represents the life-cycle of the staff member within the organization. Each phase has a strategic and an administrative component. The strategic component establishes policies, processes, and tools that enable an organization to reach its institutional goals. The administrative component executes all “downstream” activities that service centers cover and applies the procedures in a systematic, impartial, efficient and flexible way. Several official documents and the professional literature have revealed the limits and issues with HRM practices and systems in IOs and have analyzed the attempts to reform them over time (Annan 1988; Ban 2008; Bauer 2008; Beigbeder 1997; BothamEdighoffer 2006; Brewster and Croucher 2003; Brewster et al. 1999; Knill and Balint 2008). What follow are some of the main considerations, with particular reference to IIs. In the recruitment phase, the organization formulates its requirements for staff based on its desired mix of professional expertise, experience and values. Recruitment strategies vary widely. Some organizations prefer hiring “generalists” with high potential and excellent professional credentials. These have usually a strong organizational culture and are able to recruit talent and invest resources to transmit organization-specific skills and knowledge through induction and training. Traditionally, IIs have positioned themselves on the other side of the spectrum and

FIGURE 14.4 The HR management cycle Source: adapted from Cascio (2009)

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focused on “specialists”, candidates that come to the organizations with considerable technical knowledge, including that related to specific regulations and procedures of similar organizations. This approach is also the consequence of traditionally weak recruitment and induction practices. This scenario is progressively changing in recognition of the fact that the consolidated approach limits the ability to recruit the best talents and delays the generational renewal of the organizations. That would require, instead, relevant efforts to build corporate training initiatives and to “open up” vacancy requirements. Job grading and compensation policies are fundamental to establishing and maintaining a sense of fairness within the organization. Job grading identifies the level to be attributed to a given post within the organizational hierarchy based on the skills required, the level of autonomy and the amount of supervision duties. Traditionally, the main problem with job grading in IOs is the principle that a staff member cannot be “promoted” within his post but needs to wait for a higher-level position to become vacant and apply for it. Compensation strategies are fundamental to secure motivation and create a sense of equity; in IOs the budget capacity for pay for performance mechanisms is usually limited and the motivational value of monetary compensation is not as high as in the private sector, so organizations are increasingly experimenting with intangible rewards, e.g. training and mobility. These are also the best sources of sustained motivation. Performance evaluation is the main HR tool to orient staff behavior towards organizational goals. Supervisors include the expected contributions of the staff members in work plan outputs, professional development objectives, core values and successful attitudes, all of which are periodically evaluated. One of the major obstacles to the introduction of this tool in IOs is the widespread perception that performance evaluation results are not linked to career progression or the achievement of material or intangible rewards. This can be linked to line managers’ lack of supervisory skill and commitment, a poor set of tools or, more often, by the strong cultural bias to prioritize parameters like seniority over merit. Career development, continuous training and geographical/functional mobility are aimed at ensuring on-going staff motivation and commitment. IOs’ professional staff members are usually highly qualified and seek professional recognition and continuous growth. Intangible rewards such as flexibility of work hours, geographical and functional mobility and varied work are highly valued. Traditionally, IIs have suffered from significant “plateauing” issues because of the rigidity of their compensation and career development systems. Succession and workforce planning policies are essential for an organization that wants to maintain institutional knowledge and create a workforce able to meet the challenges of the future. Unfortunately, recruitment regulations in IOs tend to circumvent common succession planning mechanisms such as a period of handover and mentoring for the new job incumbent that the outgoing senior manager could provide. Workforce planning involves: (a) the identification of the right mix of skills and amount of human resources needed to meet the organization’s strategic objectives;

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(b) the analysis of the gaps in relation to the current workforce and (c) the formulation of a recruitment plan to bridge these gaps. A “reactive” approach to recruitment has traditionally tempered workforce planning, mainly based on replacement of current posts rather than coverage of the key competencies. All phases of the HR cycle are highly interdependent, as decisions in one area inevitably have an impact on others. For example, poor selection decisions will often result in underperformance and lack of staff motivation. Inadequate performance evaluation systems may not direct and motivate performance that is aligned with the goals of the organization, leading to ineffective performance and a number of inefficiencies.

14.3.2.3 Staff behavior The final element of the HR strategic architecture is focused on the impacts of the HR function and system on the behavior of staff. If the policies and practices are well integrated into the HR cycle, then the outcome is the recruitment and continuous development of a highly skilled workforce that understands the organization’s larger goals and how to make the best contributions possible. Staff represent the most significant investment for most IOs, accounting for up to 40 to 60 percent of their regular budget (UN System Chief Executive Board for Coordination 2009). From a productivity perspective, the best way to improve the organizational performance is to increase staff performance. This requires a strategic HR function as well as integrated and functioning HR systems that enhance staff motivation. Motivation theory suggests that the important factors for sustained motivation (“motivator” factors) are different from the key factors for meeting basic needs (“hygiene” factors). The main caveat is that the basic hygiene factors like salary, supervision and working conditions would need to be at an adequate level before the motivator factors would have the desirable impacts. For the most part, IOs are quite strong on the hygiene factors but do recognize the need to evolve their practices in ways that tap into the strong motivators for their staff. The challenge is that they have a more limited set of options in some areas than those that exist in the private sector. TABLE 14.1 Drivers of staff motivation

Hygiene factors (Focus of the Bureaucratic Model)

Motivator factors (Focus of the Managerial Model)

Company policy and recognition Supervision—the technical aspects Salary Interpersonal relations—supervision Working conditions

Achievement Recognition Work itself Responsibility Advancement

Source: adapted from Herzberg (1966)

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14.4 Reforming the HRM function The cases presented in this section illustrate notable initiatives to improve the HR function. The first case covers the World Trade Organization’s (WTO) efforts to evolve and reposition its HR function. In the second case, UNHCR out-posts its HRM services to a service center location in response to donors’ pressure to increase efficiency and to reduce administrative costs.

14.4.1 The creation of the HR Division at the World Trade Organization3 The World Trade Organization is an independent international organization established in 1995, having evolved from the General Agreement on Tariffs and Trade (GATT). It is solely based in Geneva and employs about 800 staff members. The purpose of the WTO is to:    

administer trade agreements between the 150 member states; assist in the settlement of trade disputes arising among the members; promote trade liberalization and free trade flows through negotiations; set rules for international trade.

Over WTO’s life, the HR function grew and progressively stratified without an organic vision. In 2004, WTO embarked on a radical transformation of this function with the creation of a HR Division. This process allowed managers to structure the new division based on the specific needs and required organizational settings of the various HRM services. With regard to the downstream services, the original unit was reorganized around “focal points” to provide the internal clients with a common point of contact, in the HR Division, for all administrative procedures regarding their staff. With regard to the upstream services, the WTO created two new units— “Compensation, Job Design and HR Planning” and “Career and Performance Management and Learning Services”. It also hired HR specialists to provide central advice, supervision and coordination of the newly introduced HR policies in their respective areas, including notably 1 percent of the payroll budget dedicated to performance based compensation. The resulting structure of the HR Division is represented in Figure 14.5. The main cultural shift for HR was to place the focus on client needs rather than administrative compliance and the services offered. This required a deeper understanding of at least three elements: 1 who is the internal client—single staff member, line manager, the department as a whole; 2 how the HR activity impacts the internal clients and how best to meet their needs; 3 which activities, skills and behaviors need to be put in place by the HR Division and its staff to best satisfy the needs of internal clients.

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FIGURE 14.5 WTO HR Management Division structure, 2006 Source: our elaboration based on WTO organization chart

As expected, the main difficulty of this exercise consisted in making the “upstream” services effective centers of expertise able to create and enforce compliance on HR policies. To make this possible, WTO embarked on a comprehensive change management process. It recruited HR specialists in the three newly constituted service areas, comprehensively trained managers on the behavioral and technical aspects of the new policies and earned top management’s trust for advice and counseling on strategic HRM issues.

14.4.2 Administrative out-posting at UNHCR IOs increasingly use out-posting and offshoring of administrative services (for a review of experiences in IIs see UN Joint Inspection Unit 2009). The UNHCR case is interesting because the out-posting exercise also includes the HRM function. UNHCR is a humanitarian aid organization dedicated to the protection and assistance of refugees and Internally Displaced Persons (IDPs). It has a network of more than a hundred field offices, mostly in conflict areas. The demand for UNHCR field deployment varies greatly, depending upon the vagaries of war and conflict. This makes it difficult to manage a staff resource pool for field deployment at optimum levels and requires operational flexibility and extreme geographical mobility of staff. Administrative services at UNHCR had been historically provided through HQ and the five regional offices. The disadvantages of the consolidated model were its relatively costly up-keep, the potential duplication of activities between HQ and

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regional centers and the sub-optimal coordination that the stratification of duties and tasks entails. In response to pressure from donors to operate more efficiently, UNHCR decided to “out-post” its administrative functions. Several options were considered, first of all, for the out-posting: between comprehensive re-location of HQ services into the existing regional hubs (“regional out-posting”) or into a new central hub (“central out-posting”) (Figure 14.6). Based on a specific cost-benefit analysis, commissioned to an external consultant, UNHCR decided for the central out-posting in Budapest. The willingness of the Hungarian Government to host and pay the office costs of UNHCR and the abundant and relatively cheap local labor market of skilled administrative professionals rendered this option the most attractive. The second strategic decision in out-posting concerned where to locate the managers of the support functions (i.e. chief legal advisor, Director of HR, Chief Finance Officer, Chief Procurement Officer). These positions could be in fact maintained at the HQ or relocated to the service center. UNHCR decided for the first option. In this model, accountability still remains at headquarters. Heads of functions at headquarters exercise their responsibility and oversight through electronic work processes, e-mails, memoranda and letters, phone calls and teleconferences. The main expected benefits sought through the out-posting were: 1 reduction of administrative costs by reduction of labor costs and achievement of economies of scale. The expected savings were in the order of 10 million US$ per year; 2 improvement of effectiveness administrative services’ through comprehensively reviewing processes and delivery modalities; 3 promotion of organizational renewal and innovation.

FIGURE 14.6 Regional and central out-posting options Source: adapted from JIU (2009)

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While there are some clear advantages to the Central Service Center approach, there are also some potential issues. With reference to the organization of the HR function, the out-posting creates an occasion to comprehensively review service delivery and to set out in a more efficient way the downstream services. On the contrary, the lack of proximity with either the HQ or the field limits the continuity and effectiveness of the upstream services. To counteract this limitation, the organization decided to keep the departmental management at the HQ; this allowed it to play the role of strategic business partner and enabler of HR policies and processes. However, a certain degree of disconnection between the departmental head and their HR specialists is inevitable.

14.5 Reform of the HR systems and tools In this section we present some of the main efforts that IOs made to modernize their HRM systems and tools, from job grading to performance appraisal to career development.4 We will hence follow the main phases of the HRM cycle earlier described in this chapter.

14.5.1 Workforce and succession planning Workforce planning requires a clear understanding of the staffing and skills needed to implement the strategy of the organization, both in the present and the future. The current workforce situation is analysed to highlight the gaps and over supply of staff and skills. The future workforce plan often suggests a different balance of people and skills as the organization tackles new challenges in the evolving environment. By contrast, many organizations employ a simplistic or reactive approach to workforce planning with a view to preserving the status quo. In the context of the comprehensive HRM reform begun in 2009, the UN Secretariat is experimenting with successful approaches to workforce planning. In particular, the emphasis of the “non-field” entities (i.e. UN Headquarters—UNHQ, UN Conference on Trade and Development—UNCTAD, UN University—UNU) is now on forecasting retirements and starting recruitment in advance to avoid vacuums and facilitate transitions. The field entities (i.e. Department of Peacekeeping Operations—DPKO) focus instead on the identification of the vacancy gaps in advance, and the creation of rosters of candidates to be utilized as shortlists for specific openings at the right time. Their challenge is to find creative ways to fill immediate vacancies, hard-to-fill positions and to prepare for contract expirations. These strategies, though, remain reactive and aimed at being able to operate in today’s configuration rather than becoming proactively oriented to create the staff configuration of the future. This issue is clearly common to most IOs and grounded in factors difficult to eradicate, including the direct link between posts, current activities and funding sources. UNHCR has a particularly flexible and effective approach in managing its workforce globally, requiring field rotations for specific positions based on the needs of the organization. They maintain a buffer of personnel between assignments in preparation for the next major deployment. As with other humanitarian

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organizations, it is very difficult to predict the location or extent of the next crises, yet the organization is expected to respond quickly to the emerging challenges. As the demand pattern for resources varies greatly, periods occur when some staff have either too much or too little to do.

14.5.2 Recruitment, selection and induction The recruitment process is critically important for bringing the right talent into the organization and setting the initial expectations with potential and new staff members. When the recruitment process draws from a strategic workforce-planning context, it becomes forward-looking and proactive in nature. On the contrary, most recruitment activities in IOs are focused on filling existing or new open positions. A criticism of many IO recruitment processes is that they are too long and complex, placing too much emphasis on the specific technical requirements of a post to the neglect of the cultural fit of the candidate and his/her potential. This can prevent organizations from attracting and acquiring the best talent, since many top candidates find demand for their services in other organizations with crisper and more focused processes. Some “best practice” suggestions for recruitment and selection that apply to IOs include:  Remove complex and lengthy barriers to entry for candidates by using IT systems to rapidly collect and distribute key information on the candidate to a dedicated screening team.  Screen candidates on the technical skills and minimum requirements quickly while rapidly identifying desirable candidates so they can move to the next step of the process without delay. This is the first signal to the candidate that the organization is interested in them.  Take the time to screen for cultural adaptability and organization-specific motivation. Most hiring issues occur due to lack of fit in the organization rather than of technical skills.  Train managers in behavior and competency-based interviewing techniques to greatly enhance their skills in making good selection decisions. These techniques increase understanding of how the candidate behaves in work situations they are likely to encounter and the “soft skills” they bring to the table.  Have candidates on the final “short list” go through an internal or external assessment center evaluation, especially candidates for senior posts.  Have candidates of professional posts pass an assessment where they have to deliver a specific output, since the traditional selection processes in the IIs tend to favor those who are more eloquent in talking about their expertise.  Involve the hiring manager and peers of the potential new hire in the interview process.  Do not oversell the job—create the right level of expectations to avoid disappointment of the new hire.

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A multilateral relief organization based in Geneva follows the above protocols and regularly uses an assessment center that external professionals run to provide recommendations on the candidate short lists. The organization combines information from the assessment center with data gathered by internal interviewers to inform the decisionmaking process. As the managers are trained in behavior and competency-based interviewing, the organization can use the insights from the assessment center to confirm (or not) the patterns that were picked up during the interviews. Using a different approach, UNICEF has developed an extensive internal assessment center process with expert support to improve its selection process, reporting positive results on key indicators of cases of new hire success. Also, managers are rigorously trained in effective interviewing techniques to ensure a robust selection outcome. New employee induction is an often overlooked activity. Some organizations have formal induction programs, while others rely on the receiving department to integrate the new staff member. One of the most important sources of motivation and engagement for staff comes from understanding how his/her job fits into the bigger picture of the organization. In a sense, this creates the context and meaning for the job and is best not left to chance. In IOs, induction programs have been traditionally strong in the “programmatic” area of emergency and humanitarian organizations with the aim of creating unity and improving critical ground operations.

14.5.3 Job grading and compensation Organizations utilize job grading to regulate salaries and position levels, rendering these consistent with competencies, skills, and supervisory and management responsibilities. This process implies a clear and updated understanding of the requirements of each position and is extremely important for establishing a fair internal organization and compensation systems across positions. There are a number of potential issues that can arise in the traditional job classification scheme such as:  Job grades are not kept up to date with the current responsibilities. It may happen that new tasks and requirements are added to existing jobs without due recognition for the increase in competencies required and the additional contributions to the organization.  The overall system can become fragmented, and there may be inconsistencies among clusters of jobs, or job families.  The organizations places too much emphasis on formal promotion through the job hierarchy to achieve recognition and increased compensation.

14.5.3.1 Broad-banding compensation approach The Organization for Economic Cooperation and Development (OECD) is a policy-making organization based in Paris. The organization provides a forum

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for governments to promote social, economic and environmental policies as well as being a research center that generates fundamental data on investment flows, economic trends, investments and countries’ productivity. By its very nature, high-level professionals such as PhD graduates, lawyers, economists, and political scientists constitute the organization’s staff. These types of professionals normally require adequate recognition, career growth and compensation. In the context of an organizational and compensation structure inspired by traditional public sector models, these expectations have resulted, over time, in an excessive emphasis on formal promotion as well as tensions regarding the hierarchy. To respond to these issues, as early as 2001, the organization started experimenting with “broad-banding”, a job-grading system aimed at substituting the traditional fragmented grading system with a limited number of “bands”, linked to a few broad professional families. The identified professional families are allowed to overlap, in terms of salary scale, so that, for example, a professional legal support staff member may have a higher salary than staff with entry level managerial positions without needing supervisory responsibility (Figure 14.7). An advantage of this approach is that it allows an overlap of salary ranges for different job families and reduces the incentives for professionals to become managers in order to progress in salary and status. This can be particularly

FIGURE 14.7 Job families and salary scale overlapping at OECD Source: adapted from Poels, 2007

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important to relieve the bottlenecks that occur when the ratio of managerial to professional (technical) jobs is low, which is often the case in IIs. Progression within each professional family is regulated through a system of “broad bands”. Bands are few, unlike the multitude of traditional professional levels (i.e. for the UN system organizations seven General Staff levels, five Professional levels, two Director levels). Formal promotions are needed only for movements between bands, while department managers decide movements within each band with flexibility based on the professional development, the performance level and the evolution of activities and responsibilities attributed to a given staff member (Figure 14.8). The expected advantages of this model are that:  job families are flexible and can be revised and modified over time to reflect the evolution of staff composition and profiles;  movement within a band is related to the personal development of the employee, while movements across bands are controllable in relations to the expected organizational structure;  different career paths are allowed within specific job families, without converging in a unique managerial career. While not widely implemented in IOs to date, HR professionals are giving good reviews to this approach and consider it a viable alternative to the traditional job grading and compensation approaches.

FIGURE 14.8 The broad-banding system at OECD - an example Source: adapted from Poels, 2007

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14.5.3.2 Pay for performance compensation systems Under the traditional approach of compensation, IIs’ staff are paid according to their level (i.e. P2, P3, P4) and their “grade”, based on years of seniority within a given level (i.e. P2/1, P2/2, etc.). Normally, salary schemes do not include a variable component linked to the performance assessment. In IOs, as in the public and non-profit sector in general, the difficulty of including pay for performance mechanisms in IOs is due to the higher subjectivity of performance evaluation and to the lack of direct links between organizational performance and supplementary economic resources available to the organization for distribution and re-investment (see for example Weibel et al. 2010). It is also important to mention IOs’ governing boards and managers’ general cultural adversity to associating tangible rewards with staff members’ performance, also owing to the relatively recent introduction of managerial practices that private sector companies have inspired. The international management literature generally warns against setting hard incentives on newly introduced management tools to avoid distortions and opportunistic behaviors (for a review of the literature see Metawie and Gliman 2005). Results based management is surely a new system for IOs, and its understanding and appreciation among managers is still progressively growing. In this context, the International Financial Institutions (IFIs) can be considered pioneers of pay for performance schemes. Two main reasons facilitate the introduction of these schemes in IFIs: a the quality of their lending portfolio and the repayment ability of the borrowing states and enterprises can be more objectively measured, and they have direct impacts on the amount of financial resources available to the institutions; b the organizations face direct competition for qualified human resources of commercial banks, which generally offer considerable bonuses and bonus schemes linked to staff and corporate performances. The European Bank for Reconstruction and Development (EBRD) is among the most advanced of the IFIs in the introduction of these schemes. EBRD’s mission is to help build market economies and democracies in developing countries from central Europe to central Asia. It provides project financing for both new ventures and investments in existing companies. It also works with publicly owned companies to support privatization, restructuring state-owned firms, and improving municipal services. Public sector shareholders own the EBRD, which mainly invests in private enterprises, usually together with commercial partners. This makes the organization the largest single investor in the region. The bank also uses its close relationship with governments in the region to promote policies that bolster the business environment. The EBRD has agreed with its shareholders to allocate a meaningful percentage of the overall payroll value to the pay for performance scheme, significantly higher than the other few experiences of this king in the IO world. For example, a similar

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mechanism introduced in WTO, in 2005/06, had only 1 percent of the payroll dedicated to performance bonuses. The size of the performance bonus pool every year is linked to the performance level of the organization rather than the overall budget of the organization. A different percentage of the overall bonus is allocated to different departments in order to align the bank’s structure of incentives to external job market conditions, especially taking into account the local market of the city of London where the EBRD has its HQ. Practically, the allocation of the bonus privileges the banking and treasuring departments. Moreover, the internal distribution to the departments responsible for regional lending portfolios is based on clear institutional performance parameters such as the number of loans extended, their average size and the percentage of regular repayments. This is a radically different approach than the one that IOs generally use which allocates bonuses in relation to the number of people and the overall budget of the different divisions. This also allows the EBRD to mitigate the danger of the aptly named “cascade” process, i.e. an excessive fragmentation of the rewards caused by the inability to assess performance differences among different parts of the organization causes. Regarding the design of the system, five different grades have been established for the evaluation exercise: “excellent”, “very good”, “good”, “satisfactory” and “unsatisfactory”. Each rating grade corresponds to a different bonus level. An excellent performer earns performance-related compensation ranging on average four to six times the bonus of a satisfactory grade performer. The number of staff reaching the top performance levels determines the exact bonus within the range. The implementation guidelines are designed to encourage differentiation among employees and encourage managers to be selective in the attribution of the highest rates. As shown in Figure 14.9, managers understood this message, and it resulted in evaluations correctly positioned along a bell curve distribution. In the first year of implementation, two percent of employees obtained the maximum available bonus, a third of the employees earned an average bonus amount and almost twenty percent were positioned on the low end In the EBRD’s competitive context, the pay for performance system proved to be an effective tool to attract and retain talent. This experience should be seen as a success for the organization, even if other organizations cannot so easily replicate it.

14.5.4 Performance evaluation Performance evaluation is the final stage of a comprehensive process of staff performance management (see for example Verbeteen 2008, and for a review of the literature, see Fryer et al. 2009). The performance management system’s objective is to provide ongoing staff management in consonance with a fair, equitable, transparent and measurable set of targets for all staff members. This promotes the continuous development of a results based culture that addresses underperformance and appropriately rewards excellent performance. The fundamental assumption of any

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FIGURE 14.9 EBRD performance-based compensation scheme Source: adapted from Jugand (2007)

performance evaluation is that staff understand the performance expectations for a given period, and are provided the support they need to perform their jobs at the required level. The design and implementation of a performance management system are critical. Well-designed performance management systems are built upon job-grading systems and competency frameworks that create a connection between a given position, its required competencies, and the performance expectations set by supervisors for each staff member. A good performance management system sets out a meaningful work plan to obtain specific output along with appropriate, realistic and measurable performance indicators. Such a system is built on a solid and rigorous process of setting objectives with periodic assessments, and it ought to be perceived as fair, transparent and impartial. Otherwise, it results in demotivation of staff (Lee and Brewster 2004). It is clear therefore that the supervisors and line managers are a fundamental part of any well-executed performance management system. It is also clear that organizational culture plays an important role in facilitating or impeding the correct functioning of performance evaluations. Organizations and senior managers that encourage openness and honesty of judgment will obtain better results. Unfortunately IOs and, in particular, IIs have as a disadvantage their heavy bureaucratic mechanisms associated with any formal evaluation process, as well as cultures

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adverse to evidence of under-performance and a reluctance to give constant and honest feedback (Brewster et al. 1999). Regarding performance management practices in IIs, the UNHCR and the International Labor Organization (ILO), in 2007, conducted a benchmarking study on performance management practices. The purpose was to explore how select UN organizations capture the opportunity to build a fully integrated HR system, with the performance management process as a core element. The study profiled the status of practices in UN system organizations and identified the following “best practices”. 1 Use of an electronic system platform and compliance tracking. The electronic platform replaces inefficient paper-based administration, simplifies compliance and allows management to easily access and use aggregate data. About 70 percent of the organizations maintained an electronic platform. 2 Annual performance management cycle. Best practice is an annual cycle comprised of three distinct phases: Initial “goal setting” phase, Mid-term review and Final Review. The majority of UN system organizations based their systems on these three phases. 3 Strong links with other HR areas and tools, such as a competency framework, job grading, and a promotion system. It is a warning sign that the study graded the link between most UN organizations and other HR areas from “weak” to “variable”. 4 Policy emphasis on dialogue and coaching throughout the performance cycle. Constant engagement of supervisors and line managers in ongoing performance and coaching discussions with staff is needed throughout the performance management cycle. A major issue that the research identified in most performance management processes is the absence of sufficient feedback. Often lack of training and the ability or willingness of managers to provide feedback to staff causes this. 5 Alignment to the organization’s Results Based Management (RBM) framework. Performance management is focused on supporting staff to achieve results. The RBM framework provides a common language to set up work objectives and ensure alignment and effectiveness with the overall organizational strategy. A common challenge here is to ensure that work objectives are flexible and that they adapt to changing conditions. 6 Professional and personal development objectives should be included in the process since they are important staff motivators. Less than a third of the surveyed UN organizations included an assessment of these opportunities and the objectives related to them. 7 A competency framework encompassing all hierarchical levels, necessary to identify the key skills and behaviors needed in the organization. About two thirds of organizations included competences within their assessments. The number and type of competencies varied across organizations as they were tailored to the specific circumstances of that organization.

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8 Separate ratings for work objectives and competencies as well as an overall rating. Work objectives specify the goal to be achieved, while competencies focus more on “how” the goal is achieved through the application of skills and appropriate behaviors. The balance of work objectives and competencies in the final score puts an emphasis on the importance of “how” a staff member achieves his/her goals, placing due emphasis on creating a positive and sustainable work place atmosphere. 9 Inclusion of “multi-rater” feedback, i.e. feedback from internal, and sometimes external, clients or work partners on key performance criteria and competencies. The manager combines this input with their own evaluation and possibly the staff self-evaluation to make a final rating. This process is thought to give a better picture of the staff’s actual performance. About 60 percent of the UN system organizations adopted a multi-rater system, equally divided among the organizations adopting a 180 degree approach (ratings from clients and work partners) and a 360 degree approach (supervisees, in this latter case, are also included as raters of their supervisors). 10 Opportunity for managers and staff members to document their comments on the review. This is often the final step of the review and is a chance for both staff and the manager to make observations or comments on the review. This can provide additional context to the review and is also an early indication of unresolved issues. 11 Incorporation of a rebuttal process, which provides a means to involve the senior management or other key parties in case of disagreement on performance assessments and to possibly reach a conclusion on the matter avoiding complicated, time-consuming legal challenges. The implementation of the evaluation process is as important as its design. It is common for IOs to fall into a “bureaucratic” interpretation of the performance evaluation process by setting easily reachable and process-based targets for their staff rather than challenging and outcome-based ones to avoid dealing with potential unsatisfactory performance. In some cases, supervisors may even be ready to give underperforming staff members high evaluations to avoid further justifications to the HR department, scrutiny of the evaluation process and potential challenges from disgruntled staff seeking union protection. This is a fundamental behavioral issue for IOs to resolve, and it needs to start from the culture at the top of the organizations. Increasingly, top managers of UN system organizations encourage managers to differentiate their ratings and convey the message that excessively high percentages of “excellent” performers are not in the spirit of a transparent evaluation process, making the results meaningless. This is a good starting point but the HR function needs to support it by creating an enabling environment for supervisors to conduct their assessment with flexibility and to express their judgments with fairness. Too often, performance evaluation systems are redundant, overly complicated and tend to put excessive burdens on supervisors to justify underperformance ratings. At a deeper level, it is the organizational culture of the IOs

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that needs to accept the principle of differentiating performances, utilizing evaluation as an essential tool to motivate, reward and orient staff towards proficiency and contributing to organizational objectives.

14.5.5 Career development, training and mobility The professional growth and career development opportunities offered by organizations, in the medium-long-term heavily influences continued motivation of staff and identification with the organization. It is particularly challenging for IOs to address the full set of career development needs if they focus primarily on promotion, as has been the case with many organizations. The key constraint in this respect is the limited number of positions at the more senior levels of the hierarchy, coupled with the focus on promotion by seniority and the tendency for high-level officials to stay in place for long periods (public sector organizations have been traditionally confronted with very similar issues, see for example Della Rocca 2000). Some common issues faced by IOs as they attempt to provide career development opportunities for staff are:5  The senior managers’ limited attention to fostering motivation and retention of staff. Plateauing is almost considered inevitable and managers are increasingly used to high staff turnover which the volatility of financial resources often forces.  Limited funds available to invest in professional development and training and a persistent lack of comprehensive training planning capacity in favor of low impact, fragmented and one-off training initiatives.  Few programs available to support professional growth and career development, coupled with low ability of HR to implement existing processes.  High expectations of staff in terms of opportunities to keep abreast with their professional skills, expand their knowledge, and advance within the organizational hierarchy. In order to succeed in this area, the HR function must reset the expectations of staff and expand the perceived set of opportunities for career development. Staff can develop their skills and knowledge through training, on-the-job learning, special projects and mobility assignments. This requires a professional management approach that is able to both manage ongoing performance and identify suitable opportunities for particular staff. In this way, staff can improve their skills significantly and prepare themselves for consideration for their next assignment which may involve a promotion if the responsibility and contribution levels are higher than their previous post. Following this logic, a promotion is the outcome of a staff member’s demonstrated performance where the responsibility for development is with the staff, and the supervisor has a supporting role. The advantages to this approach are clear:

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 the responsibility for career management rests with the staff, where the supervisor has a role in facilitating development through the identification of opportunities;  the staff members’ skills are developed and challenged through their current job, and any additional projects that are suitable for their skill level;  the supervisor gains contributions from the staff member beyond their current job;  the organization gains an additional contribution from the staff member. In order to realize the full value of this process, a full set of integrated tools and practices for career development, including performance evaluation, training and mobility opportunities is needed to support managers. The application of a balanced model ensures that the staff member is in a position to continue to develop through a set of appropriate challenges that management facilitates (Figure 14.10). National public sector organizations have proposed and recently experimented with such a balanced approach. It has also been discussed within the EU (see, for example, the comparative study by Bossaert (2003)). UNHCR and UNICEF, among others, have integrated approaches to career development that stress the four core elements identified. The challenge is to

FIGURE 14.10 A balanced model for career development Source: our elaboration

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balance these opportunities in a dynamic environment that is possible only when management commits itself to supporting the development of its staff. The performance evaluation process can be a primary means of developing staff skills and preparing them to meet their current and future challenges. This process adds little career development value when too much focus is placed on its formal stages and on the end-of-year rating while neglecting coaching and feedback during the performance period. The link between performance evaluation and career development is largely unresolved in most IOs. Assessments are generally taken into consideration in staff selection processes but are often not very useful to make meaningful differentiation among staff. An interesting experiment was introduced during the 2003 Kinnox reform at the European Commission, when the organization introduced a “pointsystem” performance evaluation linked to promotions. Ban (2008) pointed out a number of challenges and limitations of this system, such as: 1 limited evaluation culture which resulted in low differentiation of performance rates among staff (a 0 to 20 scale rendered scores in the 14 to 17 range only); 2 lack of immediate link between performance and rewards, as promotions are given only once every few years; 3 high subjectivity and perceived un-fairness of the system—for example, extrapoints could be attributed by top managers at their discretion; 4 perceived manipulation of the points given to staff based on promotion choices already made by managers. Therefore, progressivity of incentives, openness and perceived fairness of judgment, and a mature assessment culture by supervisors are pre-requisites for a performance evaluation system that motivates staff and constitutes a pillar of a balanced career development system. Training is most effective when the experience is practical and involves acquisition and application of the skills that the job requires. Some common mistakes made in this area are that the training is not provided in a timely manner, is not relevant to the work or is poorly designed and delivered. A structured corporate level training plan aims to expand both “specialist” and “cross-functional” competencies. Specialist training allows staff to update and/or advance their skills in their own functional or professional area. Cross-functional training allows staff to expand their expertise in areas not directly related to their current job, in which the individuals have a particular interest and which would enable them to qualify for different assignments and move laterally within the organization. For example, for professional administrative and support staff of IOs, it could be very beneficial to gain expertise in the main programmatic issues that their organizations are targeting to qualify for field assignments. UNFPA is a good example since it offers a comprehensive year-long course and certification in reproductive healthcare and population issues to “non specialists” which is taken into consideration when staff members apply for program-related posts. A selection

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process based on performance and personal motivations regulates admission to the course so that the training itself becomes a reward and a career development tool. Mobility is often associated with field assignments, although it is also useful to think about horizontal mobility within and across functions. These different mobility options are important for the development of staff skills and knowledge, preparing them to take on greater responsibilities in their career. (For a review of experiences with mobility in the UN system see UN Joint Inspection Unit 2010.) Field-based IOs have long introduced geographical mobility, mainly in the form of “rotation” between headquarters and field offices. Expected benefits are a better understanding of the different parts of the organizations, sharing of knowledge and expertise, creation of a more homogeneous organizational culture and sharing of the burden of difficult posts. One of the organizations which applied this practice more intensely is UNHCR; in principle all posts are subject to rotation, including those in the administrative area, and participation in the mobility program is mandatory to achieve career progression. Each assignment lasts, on average, between two and four years, and about one-third of the staff rotates every year. This practice is also useful for UNHCR to ensure maximum flexibility of staff deployment to the field and to reward and retain the right profile of staff able to serve in a humanitarian emergency organization. Almost a decade into this practice, UNHCR’s experience can be considered positive overall. Its introduction had to be carefully managed to mitigate the disruption related to the potential loss of continuity to programs and teams in the field and the difficulty for field staff to make an impact in the HQ context. Horizontal mobility is still largely left to the initiative of the single staff members and very rarely can organizations design such mobility paths and guide staff through them with the exception of few cases where ‘talent rosters’ were created to facilitate the identification of profiles willing to move geographically and gain field experience. This is largely due to the fact that IOs are still at the very early stages of setting up career trajectories for their staff.

14.6 The future of HRM reforms in International Organizations In this chapter we have reviewed the efforts of several organizations to embrace a strategic HRM model. These organizations have been inspired by many sources, with a strong influence of the private sector. Nonetheless, IOs must develop their own frameworks and set of policies, since the practices and tools developed in the business environment and elsewhere need to be fundamentally adapted to the non-profit environment and to organizations’ specificities (see Brewster and Lee 2006 and, with reference to management reforms in general, Analoui 2009). Table 14.2 draws from the current reforms and practices analyzed in this chapter, summarizing the main elements of a tailored approach to reform HR tools and systems, including the influencing factors to be explicitly considered when designing possible solutions and ways forward for each phase of the HR cycle.

Definition of critical competencies through workforce planning Recruitment policy and training for recruiters Job classification based on actual job contents Flexible compensation structures linked to performance Alignment of performance evaluation systems with competency framework, mission, individual contribution and teamwork Training of supervisors and ongoing support to HR professionals Clear career development policies Balanced system approach to career development including training, mobility, awards and promotion

Workforce planning tool Succession mentoring (“shadowing”) Talent management policy and information system Mobility policy setting clear expectations

Sense of internal entitlement Lack of selection skills Poor recruitment process management skills Organizational changes Nature of the hierarchy Traditional compensation schemes Absence of evaluation culture and reticence to give feedback Automatic link between technical competence and performance Lack of management skills Lack of performance assestment culture Career development options not well understood and career paths not designed

Poor strategic planning culture Failure to anticipate needs and rigidity of hiring rules Political influences Type of posts—hardship

Internal vs external recruits Long selection procedures Inadequate induction

Job classification not accurate “Blocked” organizational structures Few variable compensation options

Bureaucratic approach to implementation Measures not aligned with organizational goals Evaluation process not performed consistently or skillfully

Unrealistic expectations de-linked from actual systems Over-reliance on academic titles for career development Training as a “right” instead of “reward” Resistance to geographical mobility

No strong basis for planning Reactive approach to succession Seniority privileged for career movements

Recruitment, selection and induction

Job grading, classification and compensation

Performance evaluation

Career development, training, mobility

Workforce and succession planning

Source: elaborated from Borgonovi and Mannucci (2008)

Tailored HR tools and systems

Influencing factors

Potential issues

HR cycle phase

TABLE 14.2 A tailored approach to HRM reforms in IIs

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The main lesson learned from the current experiences and reforms in IOs is that, in order to be effective, the transformation of the HR systems needs to follow a holistic approach. The UN Secretariat offers a good example of movement in this direction. The stated aspiration of the human resource management reforms at the UN Secretariat is “to create a global, dynamic and adaptable workforce to best implement the mandates entrusted to the UN by the member states.” The steps that the UN is committed to are captured in Figure 14.11, which also constitutes a useful roadmap for IOs to modernize their HR functions and systems. The bureaucratic nature and practices of many IOs is thought to be an impediment to progress in the evolution of these organizations in their effort to meet the changing demands of their environment. While it is accurate to cite the limitations of a bureaucratic system, it must be remembered that bureaucracy exists in all organizations to a degree, whether in the private or public sector. In fact, it is no surprise that the modern concept of bureaucracy arose during the industrial revolution and provided a sound basis upon which to build complex, large-scale organizations through the development of structure, policies, guidelines and practices. For a number of reasons, private sector organizations have been able to adapt their structures and approaches more quickly to the challenges they face than have the IOs. The challenge for HRM in IOs is to build upon the existing frameworks and ensure that strategic and administrative HR issues are well addressed and that the HR strategy is fully aligned with the organization. At times, the issue lies with the organization evolving in line with the environment and taking a more strategic approach to identifying and capturing opportunities. The implication of this is that HR has an upper boundary of effectiveness determined by the maturity of the organization it serves.

FIGURE 14.11 The UN Secretariat's vision for reforming HR management Source: adapted from UNGA, A/63/250 and A/65/247

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14.7 Case study: preventing and managing work-related disputes—the UN internal justice system*

14.7.1 Overview This case discusses the steps taken by the United Nations (UN) to implement a modern and effective internal mechanism to prevent and manage work-related disputes as part of its comprehensive HRM reforms. Traditionally, UN system organizations had a reactive approach and lacked transparency over management of work-related disputes. Conflict prevention and management were not conceived as an institutional priority and the lack of a wellfunctioning system of internal justice failed to provide fair mechanisms to promptly resolve staff-management disputes. Since the early 2000s many efforts have been made in the UN wide system to implement internal mechanisms to proactively manage conflicts aimed to: 1 ensure responsible decision-making and strengthen internal accountability; 2 support compliance with internal human resource management rules and procedures; 3 promptly correct unfair behaviours. In particular, in the context of the 2009 HRM reform the administration decided to adopt a more proactive approach by investing resources in mainstream processes of management evaluation and early dispute detection, mediation and resolution. These mechanisms are crucial pillars in developing a sound management culture and in preventing or managing conflict in the most effective way. Although specific aspects of IIs and NGOs, such as a highly bureaucratic system, political pressure and diversity make it more difficult to successfully adopt a dynamic and effective conflict-resolutions approach, the UN, and in particular the UN Secretariat, has taken concrete steps towards this objective. Necessary milestones of this process are the enhancement of internal processes, strengthening of accountability and compliance and fostering change in HRM culture and practices.

14.7.2 The UN internal justice system Under international law the United Nations enjoys full immunity from the domestic jurisdictions of the hosting countries and cannot be sued in a national court. As a consequence, since its establishment in 1945 the organization needed to set up an internal system of administrative justice to resolve staff-management disputes.

14.7.2.1 The original system In 1950 the General Assembly established the UN Administrative Tribunal (UNAT) for the purpose of resolving employment-related disputes between

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United Nations staff and the organization. While the UNAT represented the highest organ of appeal and the only body empowered to issue binding judgments, the system of internal justice was mostly handled within the Department of Management (DM), which was the same body making decisions on HR and disciplinary matters in the first place. In fact, when a staff member had a grievance the first step to formally contest the decision was by requesting an administrative review which was directly conducted by the Office of Human Resource Management (OHRM) within the DM. Moreover, a peer review system—made up of two committees composed of staff members on a voluntary basis6—was in place to make non-binding recommendations on the case to the Secretary-General who was ultimately responsible for deciding whether or not to uphold the contested decision. The Staff members could only then appeal the Secretary-General’s decision to the UNAT. Such a system had been strongly criticized for a number of reasons, such as: 1 the length of time taken for the administrative review process to be completed, as no deadlines were in place to regulate its implementation; 2 lack of transparency; 3 scarce “added value” provided by the process to solve the case; 4 absence of an independent body entitled to review the contested decision before the case was referred to the UNAT; 5 lack of interaction within informal conflict resolution mechanisms; 6 the system was mostly headquarters-based (with the exception of Geneva, Vienna and Nairobi).

14.7.3 A revised and more comprehensive system The UN system of administrative justice was comprehensively reformed in the context of the HRM reform initiated in 2009, since the original system no longer met the needs of the organization (UN 2006c). The intentions of the General Assembly were to establish “a new, independent, transparent, professionalized and decentralized system of internal justice” (UN 2007) aimed to ensure respect for the rights and obligations of staff members and accountability of managers and staff members, while at the same time having a positive impact on staffmanagement relations, improving their performance and reducing the costs for the organization. The UNAT was abolished in 2009 and replaced by a two-tier judicial system comprising a first instance body, the UN Dispute Tribunal, (UNDT) and an appellate body, the UN Appeals Tribunal (UNAT). Moreover, within the new system: a the preliminary administrative review process was strengthened and streamlined and management of this process was attributed to a newly established and independent unit, the Management Evaluation Unit. To ensure timely completion

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of the process strict deadlines were applied for the completion of the review (30 to 45 days); b more attention was given to conflict prevention and early resolution through informal means which have been integrated in the administrative justice system. The Office of the Ombudsman and Mediation Services, established in 2002 and reformed in 2009, has a key role in this respect. Figure 14.12 shows the structure of the system of internal justice and conflict management resulting from the 2009 HR reform.

14.7.3.1 The administrative review process: the Management Evaluation Unit The Management Evaluation Unit (MEU) was established in 2008 as part of the Office of the Under-Secretary-General for Management (UN 2008) and has headquarters and field presence. Assessment of compliance of a contested decision with the organizations’ regulations and rules is conducted by the MEU as an independent unit rather than by line managers. The Under-Secretary-General then issues her/his decision on behalf of the organization based on the MEU recommendation. The purpose of this step is to give management a concrete chance, early in the contestation process, to fairly assess and correct its actions or provide remedies to staff affected by certain decisions, so as to reduce the number of cases that come

FIGURE 14.12 The UN internal justice and conflict management system Source: adapted from the UN OAJ's website

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before the UN Dispute Tribunal. The MEU also assures that proper follow-up action or remedies are taken by management as needed. A key benefit of management evaluation is confidentiality. Both the request for management evaluation and the subsequent decision are not made public. They are confidential and disclosed only to the involved parties. On the other hand, following the formal procedure before the courts (UNDT/UNAT) entails a public procedure.

14.7.3.2 The Office of the UN Ombudsman and Mediation Services The Office of the UN Ombudsman was originally established in 2002 (UN 2002b) with the mandate to assist all United Nations employees7 in resolving employmentrelated concerns and conflicts through informal mechanisms. In 2008, in the context of the broader HRM reform, the mandate of the office was enlarged to include mediation services intended to provide off-the-record assistance to staff and managers to settle workplace disputes (UN 2008). By its very nature, the role of the Ombudsman is thus very different from that of the MEU. The MEU plays a key role in preventing conflicts at the stage of formal resolution by ensuring that administrative decisions are taken in accordance with the UN’s laws and regulations, thus holding managers accountable for their decisions. The evaluation process ultimately results in a decision taken by the organization. On the other hand, the Office of the United Nations Ombudsman and Mediation Services is the informal mechanism that impartially assists employees, who voluntarily present their cases, in discussing their issues and facilitates two-way communication between staff and managers to avoid recourse to formal steps and to reach a settlement. To this extent, it is evident that the two tools are not in competition but are two complementary pillars of the same system. The 2009 reform strengthens the integration between these two mechanisms and the rest of the internal justice system. Cases can be directly referred for mediation by the MEU or, at a later stage, by the UNDT. Moreover, the management evaluation process deadlines may be suspended pending efforts for informal resolution conducted by the Office of the Ombudsman and Mediation Services.

14.7.4 First assessments and future challenges In the past, conflicts between staff and management have caused considerable costs to IIs. Direct litigation costs are caused by complex and lengthy legal challenges which require the organizations to set up and maintain resource-intensive justice systems. Indirect costs are normally the result of lack of productivity, extended sick leave, high staff turnover and can also include harm to the external image and reputation. One of the main causes for the proliferation of conflicts has been the traditionally scarce preparedness of UN system organizations to prevent, repair, or manage them. The progressive implementation of an internal justice system throughout the 2000s found the organization unable to proactively manage conflict and line managers

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unprepared to effectively defend a number of HRM decisions. This in turn resulted in a high number of cases lost before administrative organs. Therefore, one of the pillars of the new system established in 2009 was the establishment of mechanisms to prevent workplace conflict and facilitate their resolution at an early stage. Early experiences show that the new evaluation and mediation mechanisms have so far reached positive results. The management evaluation process has become a point of reference for all stakeholders involved in work-related conflicts. It allowed them to count on an independent and competent review of each case from an administrative and procedural standpoint and provided leadership to the UN in upholding or modifying its management decisions based on solid factual analysis and regulatory review. The activity of the MEU is particularly beneficial for staff members who typically prefer the contested decision to be reviewed internally and confidentially by the UN itself rather than other offices or the courts. It is also very useful for managers, as the MEU is able to clarify, by means of directives, their obligations and the staff’s rights by shedding light on some of the ambiguities of a complicated system of rules and procedures. The tight timeline imposed on the evaluation increases the attractiveness of this mechanisms and helps in the early resolution of cases that otherwise would have surely ended up in the courts. In recent years the Office of the Ombudsman has substantially advanced its effectiveness and accessibility and achieved positive results (UN 2011, UN 2012) through:  increased awareness among staff of the office functions and services. There is a growing trend for the parties themselves to initiate mediation processes and the caseload of the Office has progressively increased;  increased accessibility to in-person conflict resolution resources and services thanks to the decentralization process of the Office and the establishment of seven regional branches;8  issuance of a strategic analysis of the root causes of conflict that allowed the identification of systemic and cross-cutting issues which is a starting point to implement positive organizational change. While the mechanisms established in 2009 mark significant progress towards a more modern, proactive and strategic HR model, effective prevention and resolution of workplace conflicts mainly depend on shifting the organizational culture towards mutual accountability, two-way communication and direct engagement at the lowest possible level. On the contrary, the prevalent organizational culture still tends to avoid direct confrontation and to shift responsibility for the resolution of conflict upwards in the organizational hierarchy (UN 2012). To this end, improving management awareness of HR systematic issues and conflict resolution mechanisms as well as improving managerial practices by enhancing procedural fairness and communication represent crucial factors.

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A good performance indicator to monitor the status of organizational culture in this respect is represented by the number of cases that proceed before the UN Dispute Tribunal after the intervention of the MEU. When the great majority of cases do not proceed after the management evaluation process is completed, the shift in the organizational culture will be far advanced. With regards to the root causes of conflicts, significant efforts remain to be made to develop: a supervisors’ HRM skills, including for example the awareness of misconduct and the ability to set fair and meaningful objectives for staff and to periodically evaluate their achievement; b substantive acceptance by staff of a “managerial”, rather than purely bureaucratic, style of supervision which is a prerequisite for modern IIs to excel and which involves higher performance expectations and flexibility. To this extent, IIs should keep investing resources to promote and develop the positive shift in the organizational culture. This will enable them to detect and better manage work-related issues, thus allowing the organization to better manage its resources. And indeed, as the Secretary-General stated in 2012 “investing in good conflict management means investing in the Organization” (UN 2012).

Notes * Case study by Giulia Ferrari. 1 This term encompasses both International Institutions (IIs) and International NGOs (INGOs). 2 We adapted our considerations from Truss (2008), which considers the generality of public sector organizations. 3 The authors wish to thank Mr Miguel Figuerola, WTO HR Director at the time, for sharing his impressions on this experience. 4 Borgonovi and Mannucci (2008) first published original materials related to some of the case studies. Thanks to both authors for making these materials available. 5 These are personal elaborations of the authors from multiple presentations and discussions held by the Association of Human Resource Management in International Organizations (AHRMIO) conferences. 6 Namely the Joint Appeals Boards (JABs) and the Joint Disciplinary Committees (JDCs), the latter in charge to deal specifically with disciplinary actions. 7 The Office of the United Nations Ombudsman and Mediation Services provides conflict resolution services to its three main constituencies: (a) staff of the United Nations Secretariat, including those in field operations; (b) the staff of UNHCR; and (c) the staff of the funds and programmes (UNDP, UNFPA, UNICEF, UNOPS, UN-Women). 8 Between 2009 and 2010, seven regional branches of the Office were established in Bangkok, Geneva, Khartoum, Kinshasa, Nairobi, Santiago and Vienna. Each branch is headed by a regional ombudsman and the Office continued to work on a partnership project with the World Bank to create a roster of on-call international mediators to support the work of the regional ombudsmen.

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SECTION 4

Building and managing the organization’s profile

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15 BUILDING AND MANAGING THE ORGANIZATION’S PROFILE Eduardo Missoni

15.1 Introduction Communication, external relations and resource mobilization are three closely inter-related areas that play a crucial role in contributing to the success of organizations in terms of social positioning (legitimacy, credibility, visibility) and capacity to sustainably pursue institutional objectives. The result of these three interconnected fields of activity make up what can be defined as the public profile of an organization. Effective communication is vital to all aspects of an organization’s life. From interpersonal communication to mass communication, effective communication is indispensable to comprehensively managing its relations, including attracting and retaining members, attracting and motivating volunteer and professional leaders, and obtaining the social support and financial resources that it needs to successfully pursue its mission. Organizations do not exist in isolation; they are part of a wider environment and need to establish and manage relationships with internal and external stakeholders at multiple levels, ranging from individuals to other organizations and institutions. In addition, interactions and partnerships with others create synergies and may provide important benefits. Well-designed external relations guidelines and an organization-wide strategy contribute to strengthening the consistency and capacity of organizations to play constructive roles in society. Also, to be effective, communications and a strategy to create or sustain an inspiring and trusted brand need to appropriately support the mobilization of human, financial and material resources. In other words, in addition to doing their job well, organizations need to properly communicate what they do and how they do it. Creating a good public image cannot just be left to chance; it needs a professional approach and well-structured strategy.

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In the following sections, we provide a theoretical basis and some essential elements of profile management, including communication and branding, stakeholders management and resources mobilization, with specific reference to International Institutions (IIs) and International Non-Governmental Organizations (INGOs).

15.2 Communication and branding A well-developed communication strategy is critical for the success of organizations, and fundamental to engage and build trust among members and stakeholders. Such a strategy needs an integrated approach, linking internal and external communication, and their multiple objectives, including increasing trust, credibility and social legitimacy; obtaining support from stakeholders and the public; mobilizing resources and establishing a recognizable brand. According to Watzlawick, Bavelas and Jackson (2012): “One cannot not communicate”. Every behavior is a kind of communication and even if communication is being avoided, that is a way to communicate. Therefore, it is not an option for an organization not to communicate; the issue is whether communication and relationships are well managed or not and whether the message that is passed responds to what the organization is and how it wants to be perceived. Indeed, organizations exist with their identity, their values, their mission, their activity and their history “before” communicating them. Nonetheless, in the absence of a consistent, wellplanned and transmitted message, the public image of the organization may be distorted. Consistency of the messages is paramount. Conscious and unconscious signals coming from all levels and all components of the organization influence the public’s opinion of an organization: leaders, members and volunteers everywhere, from headquarters to local groups (Citarella et al. 2010). There is a difference between what an organization truly is and how it is perceived by the outside world, and this depends significantly on its ability to communicate. On the other hand, communication cannot create a positive image of an organization in the absence of a concrete basis for that image and verifiable facts. While IIs are primarily legitimated through their formal mandates based on intergovernmental agreements, the legitimacy of INGOs is fundamentally established through the social acceptability of their values and the consistency of their behavior. Unfortunately in Hume’s (2010) experience, “NGOs frequently espouse certain values externally that they are not able to live up to internally.” Internal behavior, at all levels, must reflect the external brand promise. If the leadership gives the example, then employees will be encouraged to reflect that brand in their own activities and interactions with external stakeholders (Hume 2010). Thus internal or organizational communications have a fundamental role to play.

15.2.1 Organizational communication In a broad sense internal communication includes interpersonal relations and the interchange of information among groups within the organization.

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An organization can be described as a social community that is built, reproduced and transformed through daily communication practices among its members. The discourse of the organization is largely built on the discourse in the organization, reflecting how members perceive their identity. There are clear links between the daily discourse and the production of meanings, the wider social structures and power relations. Openness and quality, i.e. ethics of organizational communication, are fundamental determinants of democracy in organizations (and society) (Mumby and Clair 1997). Despite the importance of managers dealing with those more or less informal channels, we are here more concerned with the communication directed at promoting involvement and participation of officers, volunteers, and all those who support the organization’s functioning and development. In this sense, organizational communication is strategically important for the promotion of organizational cohesion to ensure a coherent image and brand and to build a solid organizational culture. Just because your organization has what you believe to be a clear mission, based on basic values of human dignity and human rights, does not mean that all members of your organization interpret that mission and those values in the same manner (Hume 2012). Effective internal communication can facilitate a shared knowledge and interpretation of organizational values, objectives and procedures. It is essential to initiating and supporting the participatory processes that should accompany the development of the strategy of the organization, ensuring internal stakeholders’ sense of ownership (see Chapter 16). Among other benefits, internal communication helps to motivate and keep people updated, increase organizational efficiency, develop a common knowledge base, reduce conflicts, and provide important feed-back for management. To that end, information should appropriately flow along three dimensions upwards, downwards and across (peer-to-peer) the organization. Nevertheless, a survey among CEOs of IIs (UNICEF 2007) showed that organizations mostly focus on the top-down dimension, with the main objective of getting staff engaged with organizational change, and empowered to adopt new ways of working and “living” the organization. Peer-to-peer communication is fostered mainly to help produce content of general internal interest, and in some cases for online forums on work-related issues. According to the survey, a common mistake in designing internal communication is an excessively tool-focused approach. This renders it difficult to identify and prioritize outcomes and may result in the introduction of more and more technological applications that could add confusion rather that fostering the communication goals. On the contrary, as a first step the organizational priorities must be defined, as well as the needs and preferences of the staff and other users within the communication system (through user-oriented processes including usability testing, focus groups and surveys). Content should then be molded accordingly, with the choice of communications tools following.

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These tools are used in a variety of ways: broadcast emails, intranets, blogs, newsletters, moderated and un-moderated online communities, virtual meetings/ video conferencing, webcasts, videos, audio/podcasts, CD/DVD, in-person meetings, informal channels and surveys. Nowadays, as a general rule among all surveyed IIs, no internal communication materials appear only in paper form (UNICEF 2007). Management should be adequately involved beginning with the planning phase and take ownership of the communications program. Top executives’ messages are often of greatest interest to staff. Management’s commitment and support of communication programs are essential to helping raise staff interest levels, otherwise internal communications may be perceived as mere bureaucratic exercises with limited responsibility. In general, internal communication teams in IIs are relatively small and are placed in separate units, but their ability to connect with other departments such as human resources, administration, knowledge management is critical to ensure their effectiveness. The existence of regional and peripheral offices is a challenge commonly posed to most International Organizations. Internal communication needs to work as transparently as possible across all the organization’s geographical locations, as well as throughout the organizational hierarchy, in order to promote a shared institutional mission and build trust. Internal communication influences the external image of the organization. An organization that communicates “as a whole” through a well-structured, interactive, transparent internal communication system will also contribute to ensuring alignment to its core values and consistency of the messages transmitted to the external environment. It is a common pitfall of IIs and INGOs to promote certain values externally that they are not able to live up to internally. To be credible, the “external brand promise” (see below) must be reflected in internal behavior. It is only when the values are lived inside the organization, at all levels and in all locations, that these values will be reflected outside (Hume 2010).

15.2.2 Services-related communication A separate issue has to do with communicating the specific services that the organization may offer. In public administrations and NGOs at the national level this function is vital to adapt the provision of public interest services to the needs and demands of citizens and users (Borgonovi 2002). In International Organizations, this function is more complex. On one side, if we consider IIs and federated INGOs, their members (i.e. member states and member organizations) are the primary “users” of their services, and the function can be assimilated to one of internal communication. For example, the World Health Organization (WHO) provides information and publishes and promotes a variety of documents to assist National Health Authorities (i.e. the members of WHO) in the implementation of their own health policies. Nevertheless, the wide circle of organizations’ external stakeholders are also important users of information regarding available services; in the case of WHO, these include academia, NGOs, the private sector, health

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professionals and many others who are engaged in the implementation of health activities. From a broader perspective, International Organizations “serve” the world community by advancing certain issues to the global agenda, promoting action and change in those areas (children’s rights in the case of UNICEF, sustainable environmental policies in the case of UNEP, human rights in the case of Amnesty International, etc.). For these purposes, effective communication relies on the synergic use of three of the following strategic components (UNICEF 2005).  Advocacy: formulating information into arguments to be communicated to decision-makers with the goal of raising financial resources or increasing political and social leaders’ acceptance or awareness of the same.  Social mobilization: bringing together all appropriate social partners and allies to raise awareness of and demand for a particular objective.  Behavior change: communication addressing knowledge, attitudes and practices, involving dialogue with individuals or groups—informing, motivating, problemsolving or planning: the goal being to promote and sustain certain desired patterns of behavior. International organizations normally develop their communication strategies addressing societal change and development issues at the global level. However, to be meaningful and effective, strategies need to be contextualized at the national and local/community levels. Organizations do this through their peripheral offices and/or their local partners. The same applies for communications related to direct services. In this case, communications will aim at improving awareness among citizens and final beneficiaries regarding available services as well as opportunities to make the best use of them (Borgonovi 2002).

15.2.3 Technical, economic and financial communication To increase the credibility of the organization and stakeholders’ trust, regular, comprehensive and transparent information about implemented activities and related results is fundamental. This is provided mainly through periodic reports. These respond to different needs and can be very different in nature, frequency (quarterly, annual, etc.) and distribution (management reports to the board, periodical bulletins to members, public annual reports, etc.). Some reports may be of restricted circulation, but full transparency and open access is strategically salient for demonstrating accountability and increasing trust in the organization.

15.2.3.1 Social reporting Over the last decade, International Organizations have increasingly adopted Social (or sustainability) Reporting (SR) as a tool to increase their accountability. Many companies worldwide have also adopted SR to promote their corporate social

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responsibility. Social reporting presents the economic, environmental and social performance of an organization, intending to be an integral part of organizations’ performance reporting. Sustainability reporting is considered to be a vital step for managing change towards a sustainable global economy—one that combines long-term profitability with social justice and environmental care. A sustainability report is the key platform for communicating positive and negative sustainability impacts. To produce such a report, a reporting cycle needs to be established, planning for regular data collection, communication, and responses; allowing sustainability performance to be monitored on an ongoing basis. Also, governments have promoted the adoption of social reporting in Public Administration, and, in some cases, they have developed specific guidelines for the non-profit sector (Agenzia per il Terzo Settore 2011). At the international level, the most well-known effort to promote social reporting is the Global Reporting Initiative (GRI), established with the goal of providing guidelines and standards to organizations wishing to engage in social/sustainability reporting. The GRI has developed specific guidelines for NGOs.1

15.2.4 Institutional communication Institutional communication aims at strengthening or preserving a favorable opinion on the organization among key audiences to support the achievement of its goals. This communication promotes the organization’s identity, its mission, vision and values. Institutional communication is intended to build trust, credibility and social consensus around the organization. This highlights the strategic importance of institutional communication and the need to make communication activities directly accountable to the management of the organization and not to a “marketing” department (Amalvy 2008). More and more institutional communication tends to associate meanings, values, emotions, even life styles, to the identity and image of the organization. This approach, which represents the evolution of the concept of integrated communication, is known as branding (Santomartino 2012).

15.2.5 Branding Often people assume that a brand only consists of a logo (a symbol, a mark or signature, with some distinctive design): the colors and the other elements of the organization’s visual identity. Instead, the brand is the organization’s perceived emotional image. Branding is about building the association between a visual identity and specific emotions. Branding practices in the corporate sector have been associated with consumerism and have increasingly come under attack, especially as transnational corporations implement them globally (Klein 2002). The extension of these marketing practices

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to International Institutions and NGOs may elicit suspicion and criticism. Yet branding and, by extension, understanding of what drives brand equity (i.e. the material and immaterial value of a brand with high reputation), is crucial for all International Organizations which are highly dependent on external contributions. Nevertheless their managers still appear reluctant to actively embrace existing brand equity building activities (Laidler-Kylander and Simonin 2009). Signs and symbols such as emblems, flags, coats of arms and other heraldic insignia, have been historically associated with the function of conveying recognition and a sense of belonging. Most of this history is linked with human groups, families, communities and institutions. Marketing techniques have revitalized and rationalized this millenary tradition for the purpose of better placing products on the market and reaching wider publics. However, the definition of one’s identity and the practice of making it recognizable to others are common to every form of human communication, to every organization and collective imagery. For mission driven organizations, such as IIs and INGOs, the correct management of their identity, and the correct communication of their founding values is strategic to the advancement of their social cause (Binotto 2012). Branding affects organizations’ ability to raise money, and it increases their desirability and reputation with present and prospective partners as well as with all its stakeholders. The successful brand enshrines the ensemble of an organization’s values. It communicates its essence, its way of life, its world vision, the synthesis of its fundamental principles and the promise of its commitment to a well-defined cause. The brand should generate an emotional response; it should tell a story. We may not know what WWF stands for but in association with a stylish black and white representation of a panda bear, that image is immediately linked to a life-long story of engagement with the conservation of wildlife. UNICEF’s acronym is so evocative that we do not even need an image to make a mental association with the protection of children’s rights. An organization that wants to create a great brand needs to proclaim its usefulness and clarify and its strategic social positioning. The keys for a successful brand are a strong institutional identity with a recognized cause and a globally consistent image.

15.2.5.1 Institutional identity versus image Institutional identity is what is central, distinctive and enduring about an organization and what members and employees perceive as its enduring values and fundamental attributes (Albert and Whetten 1985). The institutional identity is the result of its history, its mission and strategy. Identity should not be confused with image. Identity is who you are (or believe you are, i.e. internal perception); image is how you are perceived (i.e. external perception). While identity tends to be permanent, the image can vary because it is interactive and because it is subject to representations. The image of an organization is also the result of its activities and the behavior of those who represent it as well as of its

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members or of those that are somehow associated with the organization in the public perception (e.g. employees or volunteers). A negative image of the organization will be generated if their attitudes and behavior are not coherent with the values and aims that the organization declares. The organization’s communication strategy must be built on its institutional identity in order to enable prospective members and partners to identify with its real and symbolic elements. In the development of the communication strategy, the institutional identity should be clearly defined, and the answer should be found to a number of questions such as: “What are the essential characteristics of the organization and its mission? What are its values, social positioning, expertise, and qualities? What are the internal and external representations of the organization? Which are the elements that make the organization and its activity unique? Does the organization’s identity correspond to the externally perceived image?” Internal and external stakeholders should be engaged in this exercise. If actions are inconsistent with the declared values and mission, this will result in a negative image in the long run. It is because an organization is recognized as being able to respond to certain social needs that other institutions select it as a partner. It is because somebody recognizes that the organization symbolizes his/her social belonging and responds to his/her needs and aspirations that he/she will decide to join or to support it (Amalvy 2008). Thus, it is not enough to have a clear institutional identity to be credible. Its cause, commitment, and consistent action need to be made recognizable and thus adequately communicated.

15.2.5.2 A globally consistent image For International Organizations, the projected image may be different in the different cultural and social contexts, and at the different levels at which the organization operates (local, national and international). The collective identity of an organization is, to a degree, a mixture of each of its members’ identities. In the case of federated INGOs, one negative report in the media about a member organization may affect the image of the whole international organization (Amalvy 2008). The interdependence between the different levels of IIs (from the headquarters to local level) and the non-hierarchical relationship between INGOs and their national member organizations, make it difficult to manage the institutional images of International Organizations as a whole. Managing this image at a global level requires appealing to everyone’s sense of responsibility through the collective understanding that this asset is common to all and that diversity—while enriching— must not constitute a contradiction. The image at the national/local level should reflect the organization identity as a whole, while taking into account context and culturally specific characteristics (Amalvy 2008).

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15.2.5.3 The visual identity Visibility is an important dimension in building the reputation of an organization together with distinctiveness, transparency, authenticity and consistency (Van den Bosch, De Jong and Elving 2005). The visual identity of an organization is the visible part of its identity. It consists of a name, a symbol and/or logo, typography, color, a tag-line and additional graphical elements. It should allow immediate recognition and convey the symbolic meanings linked to its reputation. The essential elements of the visual identity should be built into a coordinated image and form a visual system which includes all the tools, stationery, publications, web-site, packaging, but also the design and furniture of the offices, clothing and any other vehicle conveying the image of the organization. (Ceretta 2010; Santomartino 2012). The visual identity symbolizes an organization both for external and internal stakeholders. On one hand, a well coordinated, world-wide and systematically applied visual identity contributes to the organization’s image and reputation and expresses its structure to its external stakeholders, making its coherence visible throughout its organizational and geographical levels. On the other hand, visual identity relates to internal stakeholders’ identification with the organization as a whole, just like the fans of a football club identify with the colors and the insignia of the club. Basic steps in the development of the visual system are the identification of the graphic representation of the brand, i.e. the brand logo, the social colors and font system. Brand guidelines will orient the use of those elements in multiple applications. The brand logo can be:  figurative, made of an ideogram or emblem embodying an organization and normally reproduced on its flag;  denominative, using just the name or acronym of the organization; or  mixed, when emblem and verbal elements are associated in a fixed combination. Finally, the brand logo may include a tag line, a so-called payoff, recalling the organization’s mission or social positioning (such as UNICEF’s “unite for children”, or the World Scout Movement’s “Creating a Better World”) (Santomartino 2012). To be effective a brand logo should be (Ceretta 2010):    

original and unique; easily visible in all possible application; simple and easy to be memorized; morally correct, carefully thought not to offend anybody in whatever sociocultural environment;  easily replicable and flexible enough to be reproduced on different surfaces and to be used in a great variety of applications;  appealing and of a high graphic quality;

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 long lasting to avoid the need for frequent restyling;  legally protected. The brand guidelines can be provided as a tool-kit to ensure the correct and consistent use of the organization’s brand identity in all possible applications and cultural or linguistic contexts. Such a manual provides practical illustrations of the use of the various elements aiming at keeping all communications “on brand”. The guidelines would usually consider elements such as: the graphic of the name (font and appearance); the positioning and relative size of the image, emblem or logo; examples of the logo in color, black and white, and in greyscale; examples of how it should be used on publications and documents; the organization’s color code; the typography and writing styles to be used in documents and publications; examples of how to use the logo and the color code on products; example of how to use it on sign panels; the use of photography, websites, presentations, video and other applications (Amalvy 2008; UNICEF 2011).

15.2.6 Designing a communication plan As already discussed, communication is strategic for any organization. This is why we believe that the communication plan should be prepared with the full support and participation of the organization’s top management, especially when the plan is part of a more comprehensive process of change and modernization of the organization. A plan that the communication department issues in isolation would fail to obtain the commitment of the organization or would be rejected. A participatory process can enrich both the planning and the implementation phases. It implies an inclusive and adequate representation of the different components of the organization. Such a process can generate an exceptional level of creativity, offer a training opportunity, foster individual and collective awareness of the need to change, and support mobilization. The communication plan is an integral part of the overall strategy of the organization and should reflect the strategic thinking behind it (see Chapter 10). Designing and implementing a communication plan is a complex exercise and requires specific expertise. Here we will only outline some of the most relevant steps in the development of such a plan. A situation analysis is the first step in preparing a communication plan. Such an analysis provides a snapshot of the context in which the organization operates and serves as a reference when defining priorities and writing objectives. The situation analysis includes an “environmental scan” of the context (social, economic, political, cultural, environmental, etc.), the identification of existing trends, and the strengths and weaknesses of the organization in that context. In parallel, a review of the organization’s experience with communication and its current image should be conducted. This review would answer questions such as: does the organization’s current image align with its identity and its activities? How well known is the organization, and what is its reputation among stakeholders?

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A good situation analysis helps identify communication objectives. These are normally related to the strategic objectives and priorities defined in the global organizational strategy. The identification of target audiences follows. Depending on the priorities, audiences will be authorities and governments, civil society, corporate leaders, internal stakeholders, and so on. Key messages, then, are identified and used to effectively and synthetically convey the mission, vision, values and other main characteristics of the organization’s identity, translated into communication themes. The communication tools (i.e. the specific device or product that carries a communication message, such as printed material, audiovisual and digital media, spokespersons, etc.) and channels (i.e. the modes of transmission that enable messages to be disseminated such as press, radio, TV, the e-mailing, social networks, SMS2 and MMS,3 events, etc.) are then chosen to best convey the messages based on the strategic goals, the objectives of the communication program, the profile of the target audience and the available budget. For example, a policy brief attached to an e-mail may be appropriate for an institutional stakeholder, while radio spots are still essential tools to involve rural communities. The timing of communications is equally important. Besides establishing the deadlines in the building and dissemination of the messages, the timeline should be designed considering and taking advantage of public events and other opportunities that may arise (ministerial meetings, dedicated “world days”, international conferences, etc.). Human, material and financial resources are then budgeted according to available resources, but also taking into account the need for constant monitoring and evaluation of the plan’s implementation (Amalvy 2008; Citarella et al. 2010).

15.3 Stakeholder management According to stakeholder theory, organizations should give due regard to the interests of any group or individual, beyond membership and their own governing bodies, “who can affect or is affected by the achievement of the organization’s objectives” (Freeman 1984). The identification of the stakeholders and their salience for an organization may be based on interrelated characteristics of power,4 legitimacy,5 and urgency6 associated with those groups (Mitchell et al. 1997). Stakeholder management supports an organization’s strategic objectives by creating positive relationships with both internal and external stakeholders.

15.3.1 External relations and partnerships External relations and partnerships are valuable to International Organizations as they contribute to their recognition and legitimacy, offer the opportunity to increase organizations visibility and contribute to increasing their effectiveness in achieving their mission.

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The objective of external relations is to enhance communications, foster relationships and establish synergies between organizations and their stakeholders. They can be focused on policy dialogue, advocacy, funds mobilization, information sharing and learning or operational delivery (UN 2001a). Through engagement in joint initiatives and bilateral or multilateral interactions, or participation in global action networks with governments and other international and national organizations (Waddell 2011), public and private, corporate or non-profit IIs and INGOs may increase their social impact. While partnerships bring many opportunities, they also imply some risks, including for the reputation of International Organizations. External relations can lead to joint initiatives of varying levels of intensity, too often all equally identified as partnerships. As we have seen (see Chapter 3), the concept and practice of partnership have evolved over the years, especially in the context of the development sector. However, the translation of the notion of partnership into practice may be problematic and has caused much relational difficulty, disappointment and mistrust, revealing a substantial gap between the rhetoric and reality of mutual respect, equitable sharing and balanced power which partnership between different organizations implies. To prevent frustration, equitable working relationships must be negotiated by exploring, defining and reaching agreement on the type and content of interactions between prospective partners. It would be advisable to employ the term partnership only for a particular quality of strong relationship implying joint responsibility and mutual recognition (Fowler 2000). The growing importance of global networks and the increasing role and sophistication in information technology suggest the need for effective management beyond the boundaries of the organization and the environment the organization can directly control (such as staffing, budgeting, planning activities, setting objectives). Effective International Organizations need to prioritize strategies based on opportunities and constraints. Such an approach may suggest focusing on elements of the external environment that they can influence or even change through processes of persuasion, lobbying, patronage, cooptation and collaboration (such as activities of transnational actors, the agenda of an international meeting, or global policies in their field of competence) (Lewis 2007).

15.3.2 A strategic approach For that purpose, International Organizations need to develop appropriate strategies and policies that may orient their external relations. Transparency and public accountability are especially relevant for organizations whose mission is linked to the public interest, and clear guidelines and ethical codes should orient their relations with the corporate sector where conflicts of interest may easily arise. From this perspective, it is also important to remember that the world of INGOs is far from being uniform and—as has been highlighted in Chapter 2—there are INGOs which are associations of companies (also known as Business Interest NGOs or BINGOs) which do in fact represent the interests of the corporate sector (such as

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the International Chamber of Commerce—ICC or the International Federation of Pharmaceutical Manufacturers and Associations—IFPMA). INGOs play a growing role in the global scenario and governance (Willets 2011), and appropriate global management of their external relations may enhance their effectiveness. The starting point is the design and adoption of a policy that may orient the organization’s external relations and partnerships and specifically the related operations of all regional and national offices, as well as, when applicable, of volunteer representatives. Some general rules may apply. The priorities of this policy must be consistent with the overall strategy of the organization and its values. In that sense, interactions with other actors at all levels should be oriented towards appropriateness and consistency. Especially when entering formal partnerships, IIs and INGOs should apply criteria that may ensure “compatibility” with the partner—to avoid associations that may have a negative influence on their profile—and ensure reciprocity. For example, organizations may want to check the prospective partner against criteria such as: commonality of goals; legitimacy and credibility; accountability and transparency; effectiveness and efficiency; sustainability; respect of cultural and ideological diversity; and approach to human rights.

15.3.3 Guidelines, due diligence and codes of conduct When establishing formal relationships and especially when entering into a partnership agreement it is also important to establish common understandings, such as:  clarifying the expectations and obligations on both sides;  ensuring that both partners receive the recognition they deserve and that their priorities are articulated within the partnership;  defining a common work plan and joint decision-making processes;  encouraging the monitoring and evaluation of the partnership and the overall performance of working together. As mentioned above, for both IIs and public interest INGOs (i.e. PINGOs) the interaction with the corporate sector may be especially challenging and specific internal guidelines may help to build correct and fruitful relations. During a wide consultation with UN stakeholders about cooperation between the United Nations and the private sector (UN 2001a), the need for guidelines and due diligence procedures that provide clarity of definitions, principles and criteria, without undermining flexibility and innovation was highlighted. Such guidelines should ensure alignment on common goals; clear delineation of responsibilities and roles; accountability; transparency; no unfair advantage or exclusivity; and a commitment to maintaining the independence, integrity and impartiality of the United Nations. Almost all United Nations organizations introduced guidelines for their engagement with business, complementing the overarching guidelines on cooperation between the United Nations and the business community issued in 2001.

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However, confusion remains with regard to the consistent application of these guidelines among UN entities. Among other issues, UN-private sector partnerships raised legal questions, including usage of the United Nations’ logo and emblem and issues of liability and indemnity (UN 2005). Over the years interactions have taken many forms, ranging from bilateral, time bound cooperation agreements that follow clear legal rules (see the best practice represented by the World Food Programme—TNT partnership; Samii and Van Wassenhove 2004) to global awareness-raising campaigns with no defined governance structures. “Partnerships” have been implemented with an increasing variety of models differing in scope and design—for example, the composition of partners, the financing mechanism, the time-frame or legal structures (see Chapter 3). Public interest INGOs have also often adopted guidelines and “ethical codes” to regulate their interaction with the corporate sector, especially when businesses provide them with resources. Self-regulation mechanisms are essential to ensure public accountability of INGOs and, for this purpose, most organizations have introduced monitoring requirements for donor-funded projects (e.g. Annual Impact Reporting, Global Impact Monitoring, performance assessments and strategic evaluations, reports, disclosure statements, etc.). A number of sector-wide, peer accountability mechanisms have also been proposed, including certification schemes, audited standards and codes of conduct (Cavill and Sohail 2007).

15.3.4 Organizing the external relations function Establishing and maintaining relations with institutional and other public or private stakeholders is normally among the functions of the International Organizations’ secretariats. The Secretary-General (or the equivalent chief officer) leads these, and staff with representative functions (for example country representatives) report directly to him/her. Depending on constitutional provisions and organizations’ governance, elected representatives, such as the president of the representative or executive body and their members, may hold similar external relations functions. In IIs, the role and status of country representatives and national delegates is equivalent to those of ambassadors and respond to well-established international rules and procedures. However, the increasing complexity of international relations and the diversity of actors interacting on the global scene at multiple levels require International Institutions to clearly define their relations with the corporate sector, the global philanthropic community, INGOs and other, civil society organizations. Similarly, INGOs must be able to effectively interact with that wide range of global actors. For INGOs in a consultative status with the UN Economic and Social Council (ECOSOC) (see Chapter 2), the external relations strategy should also consider how to better articulate that collaboration, and make best use of the opportunities it offers. For example, as part of its constitutional mandate the World Organization of the Scout Movement (WOSM) should “maintain relations with International

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Organizations whose activities are concerned, inter alia, with youth” (art. XVIII.7 of WOSM’s Constitution). The World Scout Bureau (WSB)—WOSM’s secretariat— both at central and regional level is assisted in this task by a team of representatives, and logistical support is provided by National Scout Organizations (NSOs) in the concerned cities. The UN Team is coordinated from Geneva and has more than 25 representatives—a great majority of whom are under thirty—around the world ensuring an effective and real representation of WOSM in the cities where the United Nations organizes meetings, conferences, workshops or activities. All of the volunteers of the UN Team receive appropriate training from the World Scout Bureau and the direct mandate of the Secretary-General to represent WOSM in relations with other entities. All appointments have to be approved by the International Commissioner of the representative’s NSO. The role of the Regional Offices is also very important, mainly in the relationship with the regional commissions of the UN, the locations of which in many cases coincide with those of the WSB Regional Offices (WOSM 2005). In formulating their external relations strategy, INGOs should also consider the possibility of organizing into some sort of coalition or network, with the goal of exchanging information, mobilizing support, coordinating strategy, sharing costs, and increasing the weight of their advocacy. These networks can be more or less structured and often bring together INGOs and national NGOs. Examples given by Willets (2011) are:  information networks, that enable members to communicate without undertaking any form of joint political action;  transnational advocacy networks, bringing together NGOs that share principled ideas or values and that identify with the network by being listed on its webpages and endorsing joint campaigns and policy statements issued by the network (e.g. the People’s Health Movement, The International Campaign to Ban Landmines);  governance networks, promoting the participation of their members in particular policy-making forums and increasing the level and quality of their participation in the policy-making process (e.g. the Conference of Non-Governmental Organizations in Consultative Relationship with the United Nations (CONGO) that we described in Chapter 2).

15.4 Resources mobilization To carry out their mission, organizations need resources. Most IIs and many membership-based INGOs—especially those whose members are federated organizations—build their budgets on “core” resources: assessed contributions or voluntary unearmarked contributions (RB) and “non core” or “extra-budgetary” earmarked resources (XB). The former category of funding is commingled, untied and allocated by the organizations through their regular budgeting processes. The latter is earmarked for specific themes, activities and beneficiaries and is negotiated bilaterally between donors and beneficiary organizations (see Chapter 12).

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International organizations that depend excessively on XB resources are highly exposed to the risk of the most influential donors driving their strategic choices. A highly differentiated portfolio of sources of funding keeps the risk of external influence and interference with the democratic decision-making processes at the lowest level. However, a strategic approach to resource mobilization is vital. In that sense, resource mobilization should aim at increasing XB resources that are not “earmarked” and, in any case, respond to priority areas and interventions that the international organization itself defines, not the donors. With these prerequisites, resource mobilization is imperative to maintain independence. Over recent years, for both IIs and INGOs, difficulties in mobilizing resources have grown due to an increasingly competitive environment and, more recently, to financial recession. This highlights the need to develop and implement sound and effective resource mobilization (RM) strategies. Multiple sources of funding can increase independence and flexibility to implement programs and reduce reliance on external funding. RM, however, is more than just fundraising. It implies a clear understanding of the value of non-financial resources, including non-material resources (such as services and volunteers) that are equally important. A well-conceived RM strategy which, as we pointed out, is intimately related to communications and external relations and planned for targeting a wide variety of potential public and private donors and partners should leave space for a certain degree of flexibility and creativity: allowing the perception of and taking advantage of unforeseen opportunities.

15.4.1 Services, commercial revenues and interactions with corporations Since the 1990s, there has been a social push for non-profits to become financially self-sufficient. Increasing income from sale of goods and services was aggressively promoted as a means of improving financial sustainability (Foster and Bradach 2005). As a consequence, NGOs have extensively adopted commercial undertakings, including the collection of market fees from services delivered, products sold or assets leased, sometimes at the risk of losing sight of their primary mission, and are facing an “accountability crisis” (Yang et al. 2011). It has been argued that such an approach could erode the very fundamental “public” principles of NGOs, creating a predicament of “misplaced mission and objective” between the nonprofit endeavor itself and profit-making (Weisbrod 1998). To reduce the risk of mission drift and of funds being diverted from organizations’ institutional priorities, Foster and Bradach (2005) propose applying a rigorous “mission-first” assessment of earned-income opportunities and argue that executives of non-profit organizations should not be encouraged to search for the “holy grail” of income earned in the marketplace: “sending social service agencies down that path jeopardizes those who benefit from their programs” (Foster and Bradach 2005).

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Nevertheless, in different local and national contexts, the Third Sector has progressively complemented public institutions in providing services of public interest (education, health and social services), with non-profits often competing for public subsidies. Related to the local provision of services, in the wider context of social economy (see Chapter 2), the idea of social enterprise also emerged, to a certain extent blurring the difference between profits and non-profits (Defourny and Nyssens 2008). These dimensions mostly refer to national non-profits. However, local non-profits are often part of a wider national and international NGO network, a link that may play a relevant role in INGOs’ resource mobilization strategy, both in terms of brand equity and of the provision of global services at the local level. Other literature introduced the notion of Synergic Model of Self-Reliance (SMSR), where INGOs pursue synergies between their mission, global advocacy action and economically viable operations at the national level, taking advantage of the opportunities offered by their network of locally rooted domestic civil society partners (Yang et al. 2011). An example of SMSR is the Japan-based INGO Peace Boat, whose independent operation and advocacy action is sustained through the promotion of tourism, i.e. selling Global Peace Trips, which in turn reinforces the legitimacy and “uniqueness” of the organization. International Cultural Youth Exchange (ICYE) follows a similar approach, globally promoting youth mobility, intercultural learning and voluntary service. ICYE works through affiliates in more than 40 countries.7 Finally, over the last decades, international (and national) organizations have been looking at the market with different eyes. IIs and INGOs are more entrepreneurial in their interactions with the corporate sector and participate in global public-private partnerships. Partnering with the corporate sector may have its advantages but it also has risks. To avoid possible deviations from their mission, prevent conflicts of interest, and the forging of partnerships that may interfere with their values, IIs and INGOs may adopt self-regulatory approaches. These include developing mechanisms and initiatives of accountability that are organizationspecific to ensure quality assurance, expertise and competence in their activities8 (Cavill and Sohail 2007).

15.4.2 Mobilizing external resources Effective resource mobilization needs some entrepreneurial spirit which makes full use of the comparative advantage that the peculiar characteristics of the international organization, its membership, specific stakeholders and its wider network offer. It should be kept in mind that resource mobilization is more than just fundraising. It implies a clear understanding of the value of non-financial resources, including non-material resources, which are equally vital for International Organizations. IIs and INGOs can mobilize different kinds of resources: human and material as well as financial.

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15.4.2.1 Prerequisites Before thinking of mobilizing resources, there are a number of general prerequisites that need to be fulfilled. Budgetary and investment priorities, including projects and initiatives, should be identified based on the organization’s overall strategy and operational plan. The budget should include the financing needed for resource mobilization activities. A communication plan, including a transparent reporting system, should be in place. The cause that the organization wants stakeholders to support as well as the projects (or their components) needing support should be clearly identified and effectively communicated, taking into account the need to adapt the communication style and language to the different categories of prospective supporters. A careful stakeholder analysis, including the characteristic interests and expectations of prospective supporters, is paramount to a successful resource mobilization strategy. Such a study allows a targeted action, eventually leading to a solid long-term relationship of trust between the international organization and the donor/supporter, constituting a true capital relation: support that is more reliable than occasional donations and support (Opisso 2010). To encourage support of the organization and its initiatives, many authors highlight the importance of issuing a “good cause statement”, a communication tool, convincingly presenting the history of the organization, its beneficiaries, its response to needs and challenges, its reputation, its future objectives, the use of resources and the possible involvement of donors (Melandri and Masacci 2004).

15.4.2.2 Human resources While the main issues related to the management of human resources are discussed in Chapter 14, we will here refer to the administration of volunteers and human resources who are members of neither the governing bodies, staff nor consultants hired at market rates. Volunteers often represent a core resource of INGOs, mostly at the national level where they operate through member organizations and affiliated groups. At the national level, NGOs may be established in support of IIs and their cause. UNICEF, for example, receives substantial support from national committees— which are local non-profits working in agreement with UNICEF and using its brand—whose marketing and advocacy activity is based, in large measure, on the work of hundreds of volunteers. Volunteers should not be underestimated or frustrated in their expectations. The fact that they are not paid is not a good reason to minimize demands upon them. Precisely because they are not paid, “volunteers must get far greater satisfaction from their accomplishments and make a greater contribution”. If volunteers are to be attracted and held onto, their competence and knowledge must be put to work (Drucker 1989). Both IIs and INGOs involve “goodwill ambassadors” to promote their activities, an approach that many UN funds, programs and specialized agencies have adopted since the 1950s (e.g., UNICEF, UNHCR, UNESCO) (Black 1996). Graduate and

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post-graduate students spending some time as interns with IIs and INGOs may be another precious human resource. However, they must be correctly managed, respecting the educational purpose of that experience.

15.4.2.3 In-kind resources: goods and services In-kind resources include a wide variety of goods (office equipment, training and promotional materials, furniture, food and beverages, raw goods, pharmaceuticals, vehicles, etc.) and services (consultancies, communications, transportation, provision of office space, etc.) that national and local administrations, academia, private companies, and often individuals may provide. When engaging in what has been called corporate philanthropy, corporations are usually more willing to donate products and services than hard cash because the cost of in-kind gifts to the donor is only the product’s marginal production cost. Also, in-kind donations can easily and more creatively be communicated externally for public relations’ purposes. IIs and INGOs are not always too keen on receiving in-kind support because they fear obtaining the wrong products and/or services at the wrong time; for example, from companies using donations to dump inadequate or second-rate products. This risk may be reduced if donations are part of a long-term relationship between the non-profit organization and the company, and mutual benefits of in-kind donations are clearly identified. In any case, to make best use of in-kind donations, recipient organizations should integrate this option in their operational planning. Programmatic and fundraising units together should proceed to break down the budget into categories of resources suitable for in-kind donations and rank potential target companies to be approached with a business proposal clearly spelling out benefits for the donor (Ragnar and Rudbeck 2003). The reputational risk for IIs and INGOs must also be carefully considered. Associating their image to a contradictory or socially contested commercial brand may have serious consequences in terms of their social profile and public image.

15.4.2.4 Financial resources IIs still derive the greatest part of their XB resources from donor member states. In some cases, such as the World Health Organization, an extremely high percentage of contributions is provided by a single global philanthropy organization, the Bill and Melinda Gates Foundation, which is the second largest provider of XB resources to the organization after the USA (WHO 2011). However, organizations such as UNICEF and other funds and programs of the United Nations that rely only on voluntary contributions have a long history of fundraising activities. For INGOs, even for those which may count on mechanisms of assessed contributions from member organizations, raising funds from external sources represents an essential component of their resource mobilization strategy. IIs and INGOs need funds both for their core programmatic and administrative activities and for specific/earmarked program activities. The latter are definitely

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easier to raise. To obtain a grant, projects can be submitted to national governments and supra-governmental entities (such as the European Union), as well as to global philanthropic organizations (including corporate and family foundations), and transnational companies. For the corporate sector, financing a project is seen as an opportunity to both “do good” and to promote the corporation’s image. However, corporations tend to see more value in supporting projects within strictly defined geographical areas, typically including the communities in which they have plants or factories or where they have major markets for their products (Council of Europe 2004). IIs and INGOs usually apply an overhead, i.e. general administrative costs that cannot be immediately associated with the services and products delivered through the projects, representing a limited but essential contribution to their core functioning (see Chapter 12). To fund core programs and activities, most classic fundraising tools (such as mailings, telephone solicitations, seasonal bazaars, auctions, street collections, special events, sports competitions, lotteries, etc.) are not available to IIs and INGOs. Nevertheless, national organizations that are members of INGOs or linked to IIs by some agreement (such as in the case of the UNICEF National Committees), can fundraise in favor of, and in agreement with, their international umbrella organization. Through their national affiliates, INGOs can also take advantage of national law provisions that promote donations of individual and corporate donors to locally registered non-profits through tax reductions or exemptions. In the case of organizations offering a long-term program to their members—as in the case of large youth organizations—a well organized and managed loyalty program may allow them to secure significant support also from alumni, i.e. former members (Chow et al. 2004). Transnational companies may be interested in contributing to International Organizations if they can somehow increase their value; for example, in terms of improvement of image and enhanced reputation. Also, there can be geographical areas of activity and issues that can interest some companies more than others. Each company has its own philosophy and priorities for corporate giving, as well its own management style and organization (decentralized, centralized, and mixed models), which must be explored before approaching them (Logan 1993). Companies, however, may be more interested in some kind of Cause Related Marketing (CRM) “a commercial activity by which business and charities or causes form a partnership with each other to market an image, product or service for mutual benefit” (BITC/Research International 2004). In other words, in CRM, the corporation and the international organization use their combined assets to create both shareholder and social value, and communicate the shared values of both organizations. In practice, CRM is based on the association of the brand of the international organization to a product or service provided by a company. The case of UNICEF’s association with FC Barcelona is well known worldwide. UNICEF and FC Barcelona kicked off a five-year partnership, in September 2006, to raise awareness and funds to benefit children affected by HIV and AIDS. Every

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year for five years, the club will donate 1.5 million € to help fund projects aimed at combating HIV and AIDS in Africa and Latin America. Along with the funding, the football club is featuring the UNICEF logo on its jersey. FC Barcelona will also contribute 500,000 € in publicity assets to promote the partnership each year, reminding football fans everywhere of the importance of putting children first.9 Good brand management is a prerequisite to creating economic value (brand equity) through the engagement in partnerships of this kind but also through merchandising activities—based on the sale of products bearing the brand of the organization— that may represent another considerable source of unearmarked funds. International legal protection of the organization’s brand, through the World Intellectual Property Organization (WIPO), is paramount. It needs to be prepared very carefully, integrating the registration of all possible variations of the trademark and requires considering all possible ways in which it could be imitated or used for illicit purposes (WIPO 2006). Merchandising needs to respect both visual identity of the organization and, of course, its values. Thus, merchandising needs to be in line with a code of ethics. For example, one would avoid associating the brand with harmful products, such as tobacco, or products involving the use of child labor, or those made from banned materials, such as ivory (Amalvy 2008). A specific brand equity model for INGOs has been proposed for the first time by Laidler-Kylander and Simonin (2009) highlighting four key variables:  consistency of the message throughout the organization and in external messaging;  focus, striving for operational focus and sticking to the mission, despite pressures of growth and fundraising;  trust, to be built through strong brand positioning, raising visibility in the field, promoting organizational integrity, and implementing standards and best practices;  partnerships, selecting partners providing the best fit with organizational values, proactively managing relationships, promoting the brand to internal audiences and encouraging brand ambassadors. Finally, international organization should extensively explore the new online social fundraising opportunities offered by the internet and online social networks (such as Facebook or Twitter). This is a dynamic and growing area of interest for fundraising. Because technological innovation has been moving so quickly over the past years, books and peer reviewed journal articles on the subjects can often be outdated even before they are published. The presence of a “donation” banner linked to convenient online payment systems (such as PayPal) has become a common feature on both II and INGO websites, although this direct fundraising option is a passive and not very effective mechanism. A large and, since 1996, continuously growing number of fundraising advocates and third-party fundraising online services10 are available for fundraising campaigns and galvanizing supporters, increasingly leveraging the possibilities of the Web 2.0, such as the inclusion of donation/petition widgets in most popular online social networks, and the development of cause-oriented social networks,

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allowing the funding of a project by raising many small amounts of money from a large number of people, i.e. crowd funding. One of the latest breakthroughs in mobile giving has been the development of an iPhone application, which allows the user to donate to the charity of his or her choice. However, funding through these platforms may not be as easy at it seems and will work only if the traditional basics of fundraising are put in place beforehand, including a well-conceived plan, mailing lists, and social media communications (Goecks et al. 2008; Miller 2010).

15.4.2.5 Nurturing relationships A final word in relation to international mobilization of resources is related to another classic rule: nurturing the relationship with the supporters. Whether contributing with their time, donations in-kind, or funds, donors expect feedback concerning their contribution. A classic rule is “people donate to people for causes” and properly thanking volunteers and donors, reporting the use of gifts, and demonstrating appropriate use of their contributions, makes renewal of their commitment possible. Once again, resource mobilization is strictly linked to communications and stakeholder management.

15.5 Case study: the management of strategic partnerships with civil society organizations at UNICEF* UNICEF is one of the UN agencies with the longest track record of collaboration with civil society organizations (CSOs). Since its establishment in 1946, the Fund has been collaborating with CSOs in support of program delivery at the country level as well as advocating for policies benefiting children. For example, following the 1979 International Year of the Child, CSOs actively supported the “Child Survival and Development Revolution”, a massive global social mobilization campaign which helped to save about 12 million children from death, and demonstrated the importance of promoting a human-centered approach to development.11 Civil society representatives contributed largely to the drafting of the Convention on the Rights of the Child (CRC), which the UN General Assembly adopted in 1989.12 Since then, many civil society partnerships continue to be implemented to help make the CRC a reality throughout the world. A number of CRC-related networks exist today to provide technical expertise, share information, and implement advocacy campaigns, as well as develop joint programming and emergency response. These include the Child Rights International Network (CRIN), the NGO Group for the Convention on the Rights of the Child, the NGO Committee on UNICEF, the NGO Group on Girls, and the Global Network of Religions for Children (GNRC).

15.5.1 UNICEF’s partnership framework and collaborative modalities UNICEF’s approach to partnerships is defined in its Strategic Framework for Partnerships and Collaborative Relationships (ECOSOC 2009). The framework is

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intended to enhance the quality and performance of UNICEF’s partnerships with a broad range of actors in order to achieve equitable and sustainable results for children. For example, the multi-stakeholder Global Polio Eradication Initiative has contributed to decrease the number of polio cases in the world by over 99 percent since 1988 (ECOSOC 2012). Partnerships with CSOs are established and implemented at a global, regional and country level to advocate for policy change and to deliver services for children. In 2011, UNICEF and Special Olympics International (SOI) signed a formal global alliance to strengthen their joint commitment to uphold the rights, dignity and inclusion of children with disabilities. This has helped to promote collaboration at the country level. In Azerbaijan, the two organizations are collaborating to create, through sports for development, an inclusive environment bringing together children with intellectual disabilities and their non-disabled peers. CSOs are very diverse in nature, role and capacity. Therefore, it is important that partners agree to work together within the framework of a rights-based approach, guided by the CRC principles of non-discrimination; the best interests of the child; the right to life, survival and development; and respect for the views of the child. Strategic partnerships must aim to foster a child-centered development agenda to delivering the best possible results for the most marginalized, disadvantaged and vulnerable children. When agreeing to enter into a strategic partnership, all the concerned parties must realize that these include mutual benefits but also shared risks. Joint activities may include advocacy for children’s rights, programming, service delivery, awarenessraising, knowledge-sharing, humanitarian response, research, capacity development and fundraising. Depending on the nature and role of the partnership, UNICEF uses three formal agreements or modalities to formalize the collaboration (UNICEF 2012):  A memorandum of understanding (MoU) to pursue common objectives at the global, regional or country levels. This includes a formalized agreement on intent, areas of common interest, spheres of cooperation and operational engagements.  A program cooperation agreement (PCA) that is legally binding that involves a transfer of UNICEF resources to the CSO. The parties are responsible for contributing intellectual resources to the initiative and are jointly responsible for the associated risks and successes.  A small-scale funding agreement (SSFA), similar to a PCA, is legally binding and identifies a program initiative jointly developed and implemented by UNICEF and a CSO partner with UNICEF funds. The SSFA and the PCA differ on two key points: the financial value of UNICEF resources contributed to the initiative, in cash or in-kind, and the complexity of the agreements. In addition, when agreeing to enter into a formal alliance, CSO partners commit themselves to respect and apply UN standards, including human rights; good governance, especially transparency, integrity and accountability; capacity to implement

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the goals, strategies and operational principles of the partnership; and the commitment and potential for contributing to results (UNICEF 2012).

15.5.2 Lessons learned from UNICEF’s experience Partnerships of an ad hoc nature which are based on a generic desire of the organizations to collaborate, but without a clear strategic purpose, with no agreed-upon joint activity plan and with an absence of monitoring and evaluation mechanisms, tend to remain at the level of a good intentions and, in many cases, become inactive soon after being signed. It is important for partners wishing to enter into a formal collaboration to identify a mutual focus for achieving results, ensuring respect for each other’s mandates and obligations. From its inception, the partnership must have in place a transparent and participatory planning, implementing and monitoring process. The partnership must be committed to reach realistic and achievable results. It must have sound financial management. For example, UNICEF will not partner with organizations found to be in breach of core UN norms or with any other entities that pose a reputational risk to UNICEF. All partners are treated equally by UNICEF and there are no “big” or “small” partners. Partners must be aware of and committed to sharing mutual accountabilities and mutual contributions as well as shared risks and benefits. Partners should agree to implement activities only when they have the means, competencies and skills needed to deliver on those commitments. UNICEF is a field-oriented organization and its supported-country programs are developed in the context of UNDAF. It is therefore important for CSOs wishing to explore potential partnerships with UNICEF to become familiarized with the UNICEF country program cycle (UNICEF 2012) in order to establish a productive partnership embedded in the strategic and operational settings of the organization. ***

15.6 Case study: social media strategy for IIs** International institutions are now almost uniformly deploying social media alongside email marketing, contact relationship management, and donor management as part of their core communications toolkit. Organizations of all sizes and resource levels have a presence on the predominant social media platforms (Facebook, Twitter, Google+, YouTube) as well as the growing list of emerging tools (Pinterest, Quora) because of social media’s low barrier to entry, ease of use, and potential for widespread reach. However, many organizations have hastily adopted many of these tools without first addressing important strategic, operational, and political questions; as a result, many social media efforts fail to return sufficient value to the organization and its stakeholders, or worse, create a host of new problems.

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15.6.1 Why are we doing this? It is the first question organizations should be asking themselves, and it should also be the easiest one to answer. Are we trying to raise funds? Educate the public? Prompt direct action or policy change? Establish our brand identity? Each social media platform has a different user base, mission, feature set, and user experience, and comes with different trade-offs, risks, and rewards. Organizations must have a clear idea of which specific strategic goals they want to use these tools to accomplish, so that they can apply their resources effectively to those tools that will achieve the best results:  Stakeholder outreach and awareness raising. Most International Institutions use social media to broaden awareness of their activities, to educate the public on important issues or events, and to establish their brand identity and expertise within their given subject area.13 Almost all of the major International Organizations and NGOs use some combination of Facebook, Twitter, and Google+ for marketing and outreach campaigns, as each of these platforms have slightly non-overlapping user groups. Facebook and Google+ are well-designed for posting multimedia content and measuring the user activity (sharing, “Likes”, etc.) surrounding that content, making each of them particularly useful for distributing content.  Resource mobilization. With the effects of the global financial crisis fully and painfully realized by the UN and other institutions that have traditionally relied on member dues or institutional donations, organizations are increasingly looking to social platforms as a way of soliciting donations from supporters among Facebook’s one billion, Twitter’s 200 million, and Google+’s 343 million active users.14 Thanks to the rapid uptake of social media and mobile web development, abundance of online payment processors like Paypal, and the ability to accept donations via text messaging, online fundraising has seen huge growth in the past few years.  Stakeholder engagement. The magic word that can be found in almost every book or blog post about social media is “engagement”, the notion that social media can be used to form a relationship between an organization and its stakeholders which deepens stakeholder commitment to the organization, increases participation, and makes stakeholders feel that they are a member of a community that returns tangible value for their time and attention. Twitter and Google+ are, at present, low-engagement platforms, while Facebook is currently the most dominant battleground for organizations’ attentions. Facebook allows organizations to easily plan and promote events, respond to comments left by followers, send out calls to action, and launch targeted, ad-driven campaigns.15 However, some kinds of engagement come more cheaply than others. The most superficial kind of engagement is the one most easy to attain, most easy for users to give, and the most easy to measure—those embodied by Facebook’s “Like”,

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Twitter’s “retweet”, and Google+’s “+1”. It is very easy to craft content that earns this kind of cheap affirmation from users, but the fact that a user clicked on “Share,” “Like,” “Retweet,” or “+1” tells an organization absolutely nothing about whether or not that user has internalized a message, taken a desired action, made a donation, or even really viewed the content at all. Those types of feedback mechanisms and metrics provide very little value when attempting to measure engagement or impact. True engagement is more difficult to attain and far more difficult to measure—it is the result of effort, responsiveness, authentic communications, transparency, and persuasive content.

15.6.2 Are we able to do this? This second question is a more difficult one for organizations to answer but it is no less important, since successful social media campaigns require a significant commitment in terms of time, risk, and resources, from every level of the organization. There are several factors that organizations must evaluate to determine whether they are able to run a sustainable and successful social media campaign:  Capacity. It’s an issue that faces every international institution. Social media is usually handled by the communications, marketing, or external relations departments of an organization, which are already overworked and under-resourced yet may be expected to adopt this new responsibility in addition to their existing duties without increasing capacity. In these cases organizations often do not have the time to produce quality content for their various social media channels, spend little or no time authentically interacting with their user base or responding to comments, and are so stuck responding to the demands of the moment that they are unable to measure and evaluate the progress and performance of their efforts. Worse yet, the frantic pace required for small teams to keep up with the flow of daily events in an international institution can lead to embarrassing missteps—missteps which are very hard to undo in front of an audience of thousands.  Audience. Social media has shifted the nature of communications between International Institutions and their stakeholders from a broadcast model, where organizations bombard their audience with a one-way flood of marketing messages, calls to action, and fundraising appeals, to a service model in which organizations must compete more fiercely to hold the attention of stakeholders who now expect to receive value in return for their loyalty and action. This means that organizations must constantly listen to and learn more about their stakeholders. Who are they? What do they care about? What devices, or platforms do they use to interact with you the most—be it iPad, desktop PC, mobile phone, or email? How well do they respond to your content and your campaigns? These questions can be answered through a combination of opinion research, qualitative study, and campaign measurement tools such as Tweetdeck or Google Analytics. An organization may have a completely distorted view of what types of interactions and content its stakeholders want, and this type of

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audience research—which must be done periodically, not just once—can help break organizations out of the insider’s bubble and provide fresh insights.  Risk. Social media has a far different risk profile than traditional communications, there’s no way around it; and with the potential for increased engagement that social platforms have over traditional media comes a relinquishing of control that many organizations are not fully ready to accept. Some organizations ignore the risks and plunge headlong into social media, only to eventually feel the pain of having to do damage control for an ill-advised campaign, post, or comment. Others, like many UN organizations, are completely risk-averse, and refuse to publish, share, or repost any content that did not originate with their organization or network—a strategy that, like the banning of comment fields, shuts down interaction and nullifies the very social features that promote engagement to begin with. The solution is somewhere in the middle. Organizations embarking on social media campaigns must take the time to examine their internal processes and structures, and make sure that they are risk-tolerant. Just some of the important questions include: Who is responsible for preparing and vetting content? What is the editorial schedule? What is the comments policy? Who, if anyone, is responsible for moderating comments and making sure that abusive respondents are banned? What is the procedure in the event of a communications crisis? Which are “trusted” sources for content, and which are to be avoided? Are there approved talking points for responding to sensitive or controversial questions?

15.6.3 Conclusion: some encouraging signs Thankfully, as organizations are beginning to critically dissect failed campaigns and learn from unsuccessful early efforts, the quality and impact of social media campaigns for International Institutions are steadily improving. The year 2013 has already seen a decrease in the number of online campaigns that bumble towards “increasing engagement” through the pointless pursuit of “Likes” and “Followers,” and has seen an increase in smart, focused, efforts aimed at achieving realistic, achievable goals that meet the needs of both the organization and its stakeholders. UNICEF Sweden brilliantly made this point in a recent campaign poster:16 Like us on Facebook, and we will vaccinate zero children against polio. This encouraging trend owes much to the rise of organizations like the Nonprofit Technology Network17 (NTEN) and other local networks which promote the sharing of best practices and help resource-strapped organizations get access to vital advice through events, training, and educational content. But it is also due to the work of smart communications professionals who are resisting the pressure to chase shiny objects or leap without looking, and who are asking the kinds of questions that lead to a smart, strategic, and effective use of social media tools.

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Notes * ** 1 2 3 4 5 6 7 8

9 10 11

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Case study by Andres Guerrero. Case study by Marshall Sitten. www.globalreporting.org/reporting/sector-guidance/ngo/Pages/default.aspx Short Message Service Multimedia Messaging Service A party to a relationship has power to the extent it has or can gain access to coercive, utilitarian, or normative means to impose its will in the relationship (Mitchell et al. 1997). Legitimacy may be defined as “a generalized perception or assumption that the actions of an entity are desirable, proper, or appropriate within some socially constructed system of norms, values, beliefs, and definitions” (Suchman 1995). Urgency may be defined as the degree to which stakeholder claims call for immediate attention (Mitchell et al. 1997). www.icye.org For example Islamic Relief has developed a Quality Assurance System (IRQAS) that covers a number of areas (security, staffing, volunteers, training, partnerships, monitoring and evaluation, complaints and suggestions, emergency preparedness, service provision, administering projects and programs, management, user-centered service) and promotes continuous improvement through self-assessment. Transparency International has a Register of Interests for financial and other interests that are open to the public; national chapters also have a code of conduct (Cavill and Sohail 2007). www.unicef.org/sports/index_40934.html Some examples are: www.guidestar.org; www.charitynavigator.org; www.justgiving. com; www.firstgiving.com; www.globalgiving.org; www.causes.com; www.crowdrise. com; www.indiegogo.com The Campaign is also known by its acronym GOBI which encapsulates four vertical interventions which were meant to establish entry points for primary health care, namely: growth monitoring to detect early signs of child malnutrition and keep a regular check on child well-being; oral rehydration therapy to treat childhood diarrhoea; breastfeeding as the best nutritional start in life and a means to stop the frequent deadly effects of infant formula in poor communities; and immunization against six vaccinepreventable diseases (polio, measles, tuberculosis, whooping cough, tetanus, and diphtheria). The Convention on the Rights of the Child is the first legally binding international instrument to incorporate the full range of human rights—civil, cultural, economic, political and social rights. In 1989, world leaders decided that children needed a special convention just for them because people under 18 years of age often need special care and protection that adults do not. www.unicef.org/crc See the Human Rights Campaign’s Facebook page, for example. http://expandedramblings.com/index.php/resource-how-many-people-use-the-top-socialmedia The Humane Society is a good example of a high-engagement strategy for Facebook pages. http://m.theatlantic.com/international/archive/2013/04/unicef-sweden-to-slacktivists-dontlike-give-money/275429 www.nten.org

16 ETHICS AND INTERNATIONAL ORGANIZATIONS Eduardo Missoni and Gabriela Lupu

16.1 Introduction Since wars begin in the minds of men, it is in the minds of men that the defences of peace must be constructed. (UNESCO 1945)

With the growing complexity of the moral global environment and an increased demand for public accountability, managerial ethics experienced a considerable growth of interest over the last decade. Global political, social, and environmental issues call upon international managers and policy-makers to solve new and difficult ethical dilemmas, which have made the traditional codes of conduct inadequate (Petrick and Quinn 1997). There is, however, a tendency, especially in relation to ethics applied to management in the corporate sector, to refer to “business ethics” and circumscribe it to individual behavior in the workplace, losing sight of the ethical relevance of the behavior of the organization as a whole and the impact of its actions on society. The idea of Corporate Social Responsibility (CSR) is often associated with a wider understanding of ethical management of a business, enabling companies to become more socially active, without abandoning profit-making which remains their primary objective. Whether “business ethics is an oxymoron” remains an open debate (Watkins and Hill 2011). For professionals with executive responsibilities in International Institutions (IIs) and International Non-Governmental Organizations (INGOs), ethics should be a mainstream concern. IIs as well as “public interest” INGOs (see Chapter 2) play a fundamental role in addressing international and increasingly transnational issues that affect the daily life of millions of the world’s citizens. Thus, their scope and aims are mostly related to the common good and issues of public interest such as

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peace and security, education, health, social and economic development, environmental protection, human rights, and humanitarian responses. Ethics concerns the concept of “the life worth living” or the “good life” as determined by choices inspired by defined moral principles and values. Do organizations, and specifically IIs and INGOs have values and live according to them? Or is ethics a category that applies only to individuals, and in our case to individual members and officers of those organizations? In other words can we define what “ethical organizations” are? From debates over IIs hiding information related to their interaction with corporations with vested interests, to discriminatory practices in non-profits, ethics in organizations has received increasing attention. Two approaches have been identified in discussing the subject. The “individualistic approach” assumes that every person in an organization is morally responsible for his or her own behavior and that any efforts to change that behavior should focus on the individual. The second, called the “communal approach” considers individuals as members of communities that are partially responsible for the behavior of their members and argues that behavioral changes are also consequent to the transformation of the communities to which individuals belong. The communal approach, focuses on the common good, and on ways in which actions or policies promote or prohibit social justice or ways in which they bring harm or benefits to the entire community. Each approach incorporates a different view of moral responsibility and of the kinds of ethical principles that should be used to resolve ethical problems (Brown 1989). In this chapter we integrate and extend those two approaches into two different categories, distinguishing between ethics of International Organizations, and ethics in International Organizations. The first focuses on strategies and operations of the organization, in relation to its declared principles, and the overall impact of its choices. Thus, it mainly concerns the behavior of the governing bodies and the leadership of the organization. The second looks mainly into individual and group behaviours and choices in relation both to their own systems of values and to those of the organization they belong. In both of our categories, the individualistic and the communal approaches have roles to play in the attempt to face managerial challenges. Finally, we propose the concept of an “ethical organization” and identify the parameters of such an organization. In a separate section below we propose some basic elements about studying the field of ethics.

16.2 Defining ethics Since ancient times, people have tried to discern between good and bad. Thus, over the centuries societies have developed principles and values that, once consolidated and widely shared, became the benchmark against which human behaviour could be judged, distinguishing between good and bad, right and wrong. The most common way people define “ethics” is as norms for conduct that

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distinguish between acceptable and unacceptable behavior, also referring to it as “moral” or “immoral”; “ethical” or “unethical”. In fact, ethics and morality are often used as synonyms. The etymology of the two words does not help to differentiate among them. The word ethics originates from the Greek Ethos (ήθος) originally meaning the place to live. Aristotle was the first to develop the term ethics with the meaning of character, behaviour, or custom; with the most valuable of his works on the subject being the Nicomachean Ethics (Ήθικά Νικομάχεια). The term morality instead is of Latin origin. The word moralis, rooted in the word mos (plural mores), is also related to custom but later developed into the sense of acting in accord with an established custom, norm or standard. With later developments, ethics became associated with philosophical studies of customs and behaviour. Thus, the field of ethics involves systematizing, criticizing, defending, justifying, and recommending moral concepts of right and wrong behavior (i.e. morality). In turn, morality is the judgment about the right or wrong of an action, a way of life or a decision according to acquired standards or norms that are used or proposed to judge such things. As a result, ethics is sometimes called moral philosophy. Ethics—as the philosophy of morality—is the reflection about the validity of such standards or norms. It describes and compares the attitudes and beliefs of individuals or groups of people about right and wrong (descriptive ethics); explores the origin of morality in different contexts, among different individuals or societies, in search of its foundations and legitimacy (metaethics); is a quest for general or universal principles that may inspire behaviour; and it looks for theories that help to define and justify what makes life worth living (normative ethics). Although distinguishable, morality and ethics are complementary, like theory and practice. On occasions when we have to take decisions, we face the conflict between moral norms. This pushes us to an ethical reflection. We use ethics to answer questions of morality such as: How should we live and treat one another? What are right and wrong? How can we know or decide? Where do our ethical ideas come from? What are rights? Who or what has them? Should we coerce one another? Can we find an ethical system that applies to everyone? What do we mean by duty, justice and other similar concepts? Another term related with ethics is values. As well as ethics, this term is difficult to define. At the individual level, a value is somebody’s belief, the mental way the individual reports to the facts or ideas he/she faces. Further, values become the driving forces that determine his/her actions. Values can be based on moral principles or not and, at this point, they cross the morality and ethics field. For example, the values of a person can be honesty, equity, transparency, impartiality, while another individual may guide his actions by opposite values or follow these only partially, depending on how favorable the circumstances are. For our purposes, in the following paragraphs, we will explore in more detail the relevance of ethics as applied to the governance and management of organizations (the organizational level) and specifically of international IIs and INGOs. However,

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we must be aware of the absence of clear lines of demarcation between different levels of analysis and approaches (i.e. descriptive ethics, metaethics, normative ethics).1 In that sense, any issue can equally interest a variety of perspectives (Fieser 2009). Whatever the perspective, morality and ethics define “the surrounding climate of ideas about how to live. It determines what we find acceptable or unacceptable, admirable or contemptible. It determines our conception of when things are going well and when they are going badly. It determines our conception of what is due to us, and what is due from us, as we relate to others.” (Blackburn 2001) Whatever the approach, ethics concerns conscious and free actions and behaviours that try to differentiate between good and bad in search of the good.

16.3 Ethics of International Organizations Ethics is further challenged by the acceleration of globalization. Increased awareness of global issues calls for higher responsibility. Interconnectedness has enormously increased the encounter and merging, but also contrasts and conflicts, among multiple cultural identities. International and transnational organizations and relations are somehow at the crossroad of that diversity, and are a fundamental benchmark for modern ethics.2 Organizations (including those federating member states or organizations) are made of individuals who have the responsibility to determine the strategies and operations of the organization in relation to its declared principles, and may influence the overall impact of its choices. Thus, the ethics of oganizations mainly relates to the behavior of the governing bodies and the leadership of the organization. Organizations face an ethical challenge on at least at three levels:  The theoretical framework. The formulation of a framework of ethical principles— in search of the “good”—expressed in the mission and vision of the organization which all of its members share.  Members’ compliance with formal commitments. The adherence and compliance of members to those shared principles.3  Compliance of leadership. The action and behavior of the decision-making bodies of the organization (Assembly, Board) and of the managerial structure (the Management/the Secretariat).

16.3.1 Theoretical frame The ethical principles of the organization usually inspire the organization and are included in its founding documents, such as the statute or constitution, and reflect statements such as the mission and vision. Possibly the highest example of such an inspirational document is the Universal Declaration of Human Rights. Most

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reference documents of organizations in the UN system invoke the declaration. By deciding on the organization’s mission and values system, the founders establish the theoretical framework for the ethical aspirations that members are called upon to share.

16.3.2 Members’ compliance with a formal commitment In joining an organization, members formally commit to comply with its theoretical framework. In IIs, states establish membership through a ratified agreement. Similarly, national member organizations of federated INGOs adhere to the statute/constitution through a formal act. This may also be the case for individual members in the case of INGOs that include individual memberships. Also International Organizations’ employees and, obviously, leadership (see below) are commonly requested to solemnly commit to serve the interests of the organization, thereby adhering to its values. As, for example, in the UN system: If the impartiality of the international civil service is to be maintained, international civil servants must remain independent of any authority outside their organization; their conduct must reflect that independence. In keeping with their oath of office, they should not seek nor should they accept instructions from any Government, person or entity external to the organization. (UN 2001b) Members’ and individuals’ compliance with that formal, written commitment and the capacity of the organization’s constituency to compel respect of that commitment speaks to the ethics of the organization as a whole.

16.3.3 Compliance of leadership Formulating a code of conduct or a policy or conducting a training cannot alone realize the ethical culture of an organization. The leadership (including governing bodies and top management) plays an essential role. An organization moves toward an ethical culture only if it understands the full range of values and behaviors needed, at all levels, to meet its ethical goals (Gebler 2006). Only if the leadership is compliant will it be able to create, through its example, a positive sense of engagement and purpose that drives ethical behavior. Leadership’s behaviour and capacity to embody the values of the organization is especially scrutinized when the organization comes under pressure. This may be the case—for example—when certain powers and interests challenge an organization’s values. The challenge may be external to the organization as, for example, in the case of the tobacco industry trying to undermine the World Health Organization (WHO) which led a process attempting to establish the Framework Convention on Tobacco Control (FCTC) (Zeltner et al. 2000). In other cases, the

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menace can be internal, as in the case of the USA repeatedly using its financial leverage (suspension of contributions) to counter the results of democratically made decisions leading to UN resolutions with which the US did not agree (Laurenti 2009). Under such circumstances, leaders may be put under pressure and tempted to adopt behaviors which contrast with the organization’s stated values and ethical standards. In this context, it is vital to have leaders with strong character and ethical decision-making skills, capable of maintaining ethical organizational conduct while facing the challenge. Under certain conditions, to be ethically compliant requires extraordinary strength but will inevitably lead to significant benefits for the organization. Such benefits include a desirable organizational order; new, more and loyal members/contributors/supporters, attracted by the good reputation and growing trust in the institution; higher employee morale; respect and better support from stakeholders; and a good reputation for the organization and its leaders (Petrick and Quinn 1997). The top management should build or shape a solid organizational philosophy. It should exercise this philosophy in practice in order to show its soundness to stakeholders. But this is not enough. The managers and supervisors at all levels must build a strong organizational philosophy and connect it to the current problems that the institution faces. Then, with their subordinates, they must analyze whether or not their practices fit in with the organization’s values and ethical principles (Bower 2003). The goal is to create a “full-spectrum” organization with a diffuse positive sense of engagement and purpose that drives ethical behavior (Gebler 2006). Generating the ability to act with integrity implies also that managers are aware of, and review critically, the practices that give rise to ethical issues, and that they engage themselves only in deeds/practices that a previous ethical analysis has filtered. Managers should not ignore, avoid, postpone or condone unethical behaviour in their organizations—an inappropriate attitude toward misconduct will weaken the managers’ ability to act with integrity and will lead to deeper ethical confrontations within organizations (Petrick and Quinn 1997). The ethics of leaders is the most tangible and vital component of the ethics of organizations.

16.4 Ethics in international organizations Especially in International Organizations, individual value-systems and behaviors may differ widely among personnel because of varying personal histories and cultural backgrounds. These pose a considerable challenge to organizational life. By joining an organization, individuals implicitly (and sometimes formally, as in the case of UN system staff members) recognize that their values mostly, if not entirely, must coincide with those that the organization formally espouses. This is indispensable to secure their loyalty. But different interpretations of stated values and/or informal unwritten rules of conduct may challenge the relations between the individual and the organization, as well as the interaction with colleagues who embody different cultural backgrounds and sets of values.

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Within organizations, there are at least three levels of ethical challenges:  Compliance to a formal code of conduct. Ethics is expressed by the written formal rules that determine the accepted behavior and actions within the organization.  Compliance to informal rules. Ethics is expressed by the unwritten informal rules that determine the accepted behavior and actions within the organization.  Respect for diversity. Ethics is expressed in the action and behavior of each individual in relation to other people in the organization who refer to a different value-system. For example, relations among the individual members of the governing bodies, management, representatives of member states/organizations, professionals, volunteers, other employees, cross-hierarchical layers. This is common in international-intercultural environments, where multiple and diverse cultures, religions and ideologies meet, although theoretically sharing the ethical framework of the organization they joined.

16.4.1 Compliance with a formal code of conduct In addition to the founding documents of an organization (statute/constitution), and the reflected statements, such as the mission and vision, many organizations adopt documents named “Code of Ethics”, “Code of Conduct”, “Our Values” or others with similar titles, which formally define and regulate the ethical conduct within the organization. They normally refer to general principles expressed in the constitution/statute, regulations, procedures and organizational by-laws. The formal compliance of personnel is related to the respect for some sort of signed agreement in their work contract, which often includes a clause concerning respect for the stated organizational principles. One would assume and expect, from an ethical point of view, that each individual entering the organization (officers, staff, volunteers) has intimately tested his/her own values and Weltanschauung against the values/principles of the organization that he/she has joined and is thus sincere in committing his/her loyalty. In reality, this may not be the case. For example, individuals may join an international organization just because it offers an attractive salary, and ethical rules formally imposed within an organization may only function in the short-term, while in the longer run, corrupt and/or immoral individuals will find their way to dribble through these rules or simply break them (Gilman 2002). Managing values should thus be an integral part of management. For that purpose it is not sufficient to exhort employees to act ethically or just to require compliance to norms that law or organizational codes of conduct have established. Rather, leadership needs to put in place a strategy to educate, model and reward behaviors consistent with values. The value system and organizational code of ethics should be made known to all staff and every single person working in or relating to a given organization with the expectation that they be respected. Leaders should design systems to support and

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reward virtuous behavior. Incentives do not independently develop the ethical behavior of people. Nor are people insensitive to incentives. People with good ethical principles may be corrupted to do immoral deeds, or they can be motivated to continue acting correctly if they are rewarded for their good behavior. We do not know how strong their motivation is to do good and to what extent they may be vulnerable to negative temptations. That is why it is advisable to constantly reward ethical behavior. Organizations should also be aware of and analyze carefully the type of work context they create for their personnel—an increased or constant pressure exerted on the employees toward competitiveness, for example, may be wrongly translated or determine unethical behavior—cheating, stealing, etc. (Gilman 2002). An “open door” should be maintained for the discussion of challenging cases that may arise. An audit system should be in place, and communication about values should be renewed frequently, making (established or updated) ethical principles accessible to personnel through regular training.4 Training on organizational ethics and values may have limited effect, in the short-term, but in a context of decentralization and frequent personnel migration from one organization to another, such training becomes essential and fruitful (Gilman 2002).

16.4.2 Compliance to informal rules One of the ways in which values can be considered inside the organization is that of “the basic beliefs”, those that the people in the organization “are expected to hold and be guided by … informal, unwritten guidelines on how people should perform and conduct themselves”. These are the beliefs which form the philosophy of the organization, that personnel in the organization understand as “the way we do things around here” (Bower 2003: 112), and come into existence through trials or through initial senior leaders in the process of establishing the organization. They are then carried forward throughout the existence of the organization. They may also become inconsistent with the organization’s theoretical framework, putting at risk its ethics. As examples of ethical beliefs inside the organizational philosophy, we can mention: sustaining the external and internal relationships of the organization on high ethical principles; taking decisions based on facts analyzed objectively; continually adapting the organization to the internal and external environment; judging employees according to their performance not on other subjective or biased criteria, etc. (Bower 2003). However, the ethical—and also non-ethical—principles are only a part of the organizational philosophy. An organization can anchor its ethical culture by understanding the entire spectrum of values and practices necessary to meet its ethical targets and by creating a positive sense of engagement and purpose toward ethical conduct. The commitment of the organization to ethics should be made clear to personnel, not as a simple slogan but as the force driving the practical daily activity of its leaders who lead by example (Gilman 2002). The organization should create a climate without fear but with trust and transparency in which workers are accountable for their actions and feel they are a significant part of the organization’s success (Gebler 2006).

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16.4.3 Respecting diversity In the context of International Organizations, people from multiple and very diverse backgrounds interact, each adding a “fresh set” of values influenced by their own cultures and personal histories, to the common, collective organizational culture. From the perspective of universality that characterizes virtually all IIs and that most INGOs claim also, the diversity of values and ethical concepts should be accepted and supported through facilitation of the encounter and the building of bridges for sharing values and encouraging mutual learning. Rather than representing a threat, diversity of values offers an important, valuable tool for the organizational learning process (Griseri 1998). Managers and staff of International Organizations should relate first to their own cultural identity—their language, literature, history and cultural heritage. They must then develop the capacity to identify with the corresponding traditions of others, being exposed to them and encouraged to respond intelligently, welcoming manifestations of diversity within an international framework of tolerant respect (Hill 2001). Imposing uniformity may instead cut people’s creativity, lead to a formal, artificial compliance to a formal set of organizational values, and even establish a totalitarian atmosphere that would negatively affect the organization’s success. Shared values are the basis for effective teamwork and a sine qua non for the institutional success of the organization (Griseri 1998). In other words, “shared values” are the result of a constructive process where diversity is seen as an asset of the organization, and diversities meet around the shared values of the organization, together building on them.

16.5 The ethical versus unethical organization If we integrate the aspects we have dealt with above, we can try to build the definition of an ethical organization. Besides being driven by an ethical mission, high human values and ethical principles,5 which are formally and publicly stated in the organization’s theoretical frame—as it is most often the case in International Institutions and INGOs—the truly ethical organization shows consistency between those principles and practice, as well as in the daily behaviors, actions and decisions of its members at every level of the hierarchy. In the organization, the commitment to the promotion of ethics—the constant search for the “good”—in the field of action defined by its mission, is consistently found in the present beliefs and behaviors of each and every one of the individuals in the organization—personnel, managers and leaders. When accumulated, these beliefs and behaviors crystalize the ethical culture of the organization. The founders and first leaders of the organization do not generate the organizational culture, however, to be then followed immutably through time. From this perspective, the culture can remain (or become) ethical only if the members of the organization maintain the motivation for and commitment to ethical behavior (Gebler 2006). Truly ethical organizations continuously renew and practice the commitment to being ethical institutions. Indeed, the risk always remains present that the original idea—the inspiration of the founders, which eventually gave birth to a movement

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later embodied in an organization—will become empty, soon undergirding just an organization (Sica 2001).6 At this point the link with the original idea and values may be lost or merely kept in formal discourse. This also reflects the known phenomenon of “institutional inertia”, whereby organizations become an end in themselves. Feeding on themselves and perpetuating and growing their structures becomes an obstacle to the attainment of their own objectives and mission. A British Member of Parliament expressed this beautifully in 1943: The idea having given birth to the organization, the organization develops a self-interest which has no connection with and becomes inimical to, the idea with which it began. Now, the thing which permits this process of diversion to take place, so that the organization comes to stand for the opposite of the idea which originally inspired it, is the tendency in men and women to become Prisoners of the Organization, instead of being Servants of the Spirit. (Brown 1947) An organization losing sight of its founding ethical inspiration may thus become, an unethical organization. An unethical organization is one that violates its formally formulated ethical principles, by overt misconduct or tacit condoning of it; one that omits the exercise of its influence by acting ethically in circumstances under its theoretical field or practical power of action. Unethical conduct of a singular member, or of a group of its members (whether states, organizations, or individuals), does not define the entire organization as unethical unless the organization covers up or tacitly condones it, failing to fix it by corrective measures. To defend their ethical standards, organizations should envision rules and procedures enabling individual members or groups in the organization to react to unethical deviations while being granted protection. For individual members of an ethical organization, the diversion of the organization they belong to from its original ideals and/or its condoning of unethical behaviours poses important questions about loyalty, voice and exit (Hirschman 1970). Loyalty to the original values, the ones, which made him/her adhere and commit, may first push him/her to discard the idea of leaving the organization, i.e. taking the exit option. Instead, especially for influential persons in the organization, to strongly voice their dissatisfaction could represent a first attempt to negotiate and eventually activate a process for the restoration of ethical behavior in the organization. However, as disagreement widens further, that person may entertain thoughts of exit and threaten it if that action can be at all expected to enhance the effectiveness of voice. Finally, loyalty reaches its breaking point and exit becomes unavoidable but it may also represent an ethical option. Exit may in fact mean, “Resign under protest” and, in general, to denounce the organization from without instead of working for change from within. At that point, the alternative “is not so much between voice and exit but between voice from within and voice from without (after exit)” (Hirschman 1970: 104). Being “Servant to the Spirit” (Brown 1947) is remaining loyal to values rather than “prisoner” of an unethical organization.

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16.6 Conclusions Thinking of future generations of executives and decision-makers in IIs and INGOs who will deal with increasingly challenging global issues, possibly linked to the destiny of all humanity, a chapter dedicated to ethics cannot conclude without emphasizing the ideals of international understanding and responsible global citizenship. The world needs “critical and compassionate thinkers, lifelong learners and informed participants in local and world affairs, conscious of the shared humanity that binds all people together while respecting the variety of cultures and attitudes that makes for the richness of life” (Hill 2001). We propose ethics as an attitude for life, a responsible life, open to the problems of our world, with commitment to bringing about change toward the common good. Nevertheless, when facing managerial dilemmas, the weights we assign to certain values will sometimes lead us to choose those organizational policies or actions that will promote the common good, while other times our reflection will lead us to protect the interests and rights of the individual. Perhaps the greatest challenge for ethics in organizations is to find ways in which they can be designed and decisions made to promote the interests of both (Brown 1989). Finally, ethics does not offer definite, final answers about what is right and wrong when facing a dilemma. Ethics is about the decision-making process, offering us inspiration and guidance in taking the most difficult decisions and assuming the responsibility for our choices.

16.7 Appendix: main fields of study in ethics Today ethical studies can be divided into the following general subject areas: descriptive ethics, metaethics, normative ethics, and applied ethics.

16.7.1 Descriptive ethics Descriptive (or comparative) ethics is simply about describing (and comparing) how people behave and/or what sorts of moral standards they claim to follow. It incorporates research from the fields of anthropology, psychology, sociology and history as part of the process of understanding what people do or have believed about moral norms.

16.7.2 Metaethics Metaethics is the study of the origin and meaning of ethical concepts. In particular, metaethics explores whether there is an ethical system independent of our own opinions that could be applied to any situation at any time or place. Are ethical principles merely social inventions? Do they involve more than expressions of our individual emotions? Metaethical answers to these questions focus on the issues of universal truths, the will of God, the role of reason in ethical judgments, and the meaning of ethical terms themselves.

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The most important aspects it covers are: (a) metaphysical issues, studying whether morality exists independently of humans, and (b) psychological issues, exploring the mental basis founding our moral judgments and conduct. Metaphysics studies the types of things existing in the universe, of both physical and nonphysical nature, and tries to determine whether moral values are eternal truths that exist in a transcendental, spiritual realm, or only conventions established by humans. There are two main orientations deriving from this conceptualization: objectivism (other-worldly) and relativism (this-worldly). Theories belonging to objectivism consider that moral values are objective, (existing in a spirit-like realm beyond subjective human conventions), unchangeable and absolute/eternal, and universally valid for all humans from all the times. Relativism denies the objective status of moral values and the universal and absolute nature of morality. According to this view moral values change from a society and culture to another. The second branch of metaethics investigates psychological issues, trying to understand what determines the human attempts for being and acting morally, investigating the psychological foundation of moral judgments and conduct.

16.7.3 Normative ethics Normative ethics takes on a more practical task, which is to arrive at moral standards that regulate right and wrong conduct. This may involve articulating the good habits that we should acquire, the duties that we should follow, or the consequences of our behavior for others. A norm is just another way of saying “standard” or rule, so normative ethics is the attempt to find a single test or criterion for what constitutes moral behavior and what does not. An example of a normative statement is the so-called golden rule: “Do to others what you would want others to do to you.” This is an example of a normative theory summed up in only one principle, applied as valid for all actions. Other normative theories are centered on a set of fundamental principles or of good character features. Whether expressed as a single principle or a set of rules, the main idea in normative ethics is that there is only one final criterion of moral conduct. Theories in the realm of normative ethics can be subdivided in three groups: (1) virtue theories, (2) duty theories, and (3) consequentialist theories.

16.7.3.1 Virtue theories Virtue theories are rooted in ancient Greek philosophy and are based on the premise that morality is given by predefined rules of conduct, which must be learnt and precisely followed in every action we do. They emphasise the importance of developing good habits of character. Plato, for example, considered four virtues as the most important, the so-called cardinal virtues: prudence, justice, temperance and fortitude (or courage). Opposed to the good habits of character that persons should acquire, virtue theorists advocate against bad character traits, or vices, such as cowardice, insensibility, injustice, vanity. The virtues must be propagated and

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developed through moral education from an early age, and adults carry on the responsibility of this educational process. Aristotle supported the idea that virtues are good habits that we acquire as a response to our emotions (e.g. courage is developed as a response to fear). He analyzed eleven virtues and concluded that the majority of virtues can fall into vices (e.g. courage can be turned into cowardice when courage is lacking or, on the other extreme, into rashness), so it is difficult to balance the character traits. The Christian medieval theologians included between virtues the theological virtues: faith, hope, love.7 Philosophers of the mid-twentieth century were against an emphasis on rules and actions, in the favor of good character traits.

16.7.3.2 Duty theories Duty theories, also called deontological theories (from the Greek word deon, or duty), consider that morality is based on the application of fundamental principles of obligation or duty, independent from the consequences of our actions (duty theories are also called non-consequentialist). Among deontological theories the so-called Rights Theory of John Locke8 holds that people have natural rights, given by God, that consist in not harming anyone’s life, health, liberty and possessions. These ideas inspired the United States Declaration of Independence and its three fundamental rights: for life, liberty, and pursuit of happiness, with other rights derived from these, such as property, movement, speech, and religious expression. The German philosopher Immanuel Kant, supported a single foundational principle of duty, including all the other duties, that he called the “categorical imperative”: to treat people as an end, and never as a means to an end. According to Kant, the categorical imperative should regulate the morality of all our actions. As a consequence of applying this principle, for example, suicide is wrong since the life of the individual becomes a means to the alleviation of his own misery.

16.7.3.3 Consequentialist theories Consequentialism stipulates that an action is morally right if the consequences of it are more positive than negative. Three competing consequentialist approaches are described: (1) ethical egoism, stipulating that an action is morally right if the consequences of that action are more favorable than unfavorable only to the agent performing the action; (2) ethical altruism, considering that an action is morally right if the consequences of that action are more favorable than unfavorable to everyone except the agent; and (3) utilitarianism, supporting the idea that an action is morally right if the consequences of that action are more favorable than unfavorable to everyone.

16.7.4 Applied ethics Applied ethics involves examining specific controversial issues (such as abortion, infanticide, animal rights, environmental concerns, homosexuality, capital

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punishment, or nuclear war) with the use or application of moral ideas investigated in normative ethics and based on the lessons of metaethics. Applied ethics may sometimes coincide with political or social questions but always involve a moral dimension. According to the field of application, it may be categorized into subgroups such as business ethics, developmental ethics, environmental ethics, medical ethics, sexual ethics, and others. In order to be considered as an “applied ethical issue”, the issue must be simultaneously, a relevant moral issue and a controversial one. The answer to an applied ethical issue is found in consulting several significant normative principles on that specific issue and weighing the evidence. Among the most used principles considered in applied ethics disputes are the following (Fieser 2009):          

personal benefit: it reveals the benefits produced by an action to the individual; social benefit: the benefits to society produced by an action; principle of benevolence: helping the people in need; principle of paternalism: guiding/supporting others who lack the capacity to act in their own best interest; principle of harm: do not do harm to other people; principle of honesty: do not deceive other people; principle of lawfulness: keeping/respecting the law; principle of autonomy: respecting the freedom of a person upon his/her body and actions; principle of justice: acknowledging the rights of a person to be treated fairly; rights: acknowledging the various rights of a person to life, property, information, privacy, freedom of expression, safety, and others.

The study of ethics can be also distinguished in relation to the level of application (Petrick and Quinn 1997): 1 Macro-global level, emphasising ethical problems in the world arena, in economic, political, social and other contexts. 2 Organizational level, studying ethical issues between/within organizations. 3 Micro-individual level, analysing the ethical behaviour of the individual.

Notes 1 See also the section “Main fields of study in ethics” in this chapter. 2 Regarding diversity, an interesting insight into the conflicts that development has engendered between the surrounding world and indigenous peoples is provided by Levi and Maibury-Levis (2012). 3 Depending on the type of membership of the international organization: member states in IIs, member associations or national/local chapters in the case of INGOs. 4 See K.O. Hanson at www.scu.edu/ethics/practicing/focusareas/business/introduction. html.

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5 These criteria define “values-based organizations”. 6 “First I had an idea. Then I saw an ideal. Now we have a Movement, and if some of you don’t watch out we shall end up with just an organisation” is a famous sentence reportedly of Lord Baden-Powell of Gilwell, founder of the Scout Movement in 1907. 7 First Epistle of Saint Paul to the Corinthians (13, 13). 8 British philosopher from the seventeenth century.

17 CONCLUSIONS Eduardo Missoni and Daniele Alesani

Interconnectedness is the most remarkable characteristic of the acceleration of the globalization process, with deep changes in societal perception and experience along the spatial, temporal and cognitive dimensions. Movement of people, information, capital, goods and services has intensified across national borders, challenging the capacity of governments to effectively regulate them, and sometimes making formal borders irrelevant. Through modern communication and transportation technologies, social interaction has enormously accelerated and global mass media cultures, perceived needs, values, beliefs, knowledge and aspirations are being changed (Lee 2004). Globalization has also determined greater integration of the world political and economic space, leading global conditions to increasingly influence decisionmaking. Neoliberal ideas and practices at the root of the constant increase in social and economical inequalities and the establishment of the development model leading to global environmental disruption have undoubtedly dominated, in turn, decision-making patterns. New global problems requiring collective action have risen to the top of the international agenda, including food, health, energy, and environmental crises, as well as natural and man-made disasters. Also, the recent global financial meltdown illustrates that, in an interconnected world, misguided policy choices, in one major country, can penalize the system as a whole. Clearly, new global social and environmental policies will need to accompany global trade and financial ties, while conflict resolution, prevention and management will continue to be at the forefront of the international community’s focus. Together with the ever-expanding range of global concerns, the number of stakeholders tasked with confronting these challenges is steadily increasing. International and transnational private or hybrid organizations have flourished as never before. The United Nations, alone, now includes close to 70 entities. Behind each of those entities lies a respectable international concern, but

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often tasks and costs are duplicated, with old lobbies resisting restructuring and streamlining: “new global organizations are born every year, yet they seldom die” (Severino and Ray 2009), and the complexity of the multilateral systems increases. The international community established last century’s international institutions to respond to common global concerns through institutionalized collective action by sovereign national states, with publicly known rules. Institutions were built as “associations” of peer subjects—the constituent sovereign states—and based on the generally accepted rule of reciprocity among constituents, although some discrimination was introduced through various governance mechanisms according to power, wealth or other characteristics (Keohane 2006). Indeed, according to Keohane (2006) one of the most striking features of effective multilateralism in the twentieth century is that the unilateral actions of powerful states have often precipitated it. The legitimacy of international organizations was derived from the sovereignty of their member states, and nation states remained both the ultimate decisionmakers and basic units of the world political system. However, the contemporary world is increasingly characterised by powerful corporate influences, on one hand, and socially mobilized populations, on the other. The former want to avoid any public regulatory power (whether national or international), while the latter demand more representative, democratic, open and accountable International Institutions (IIs) committed to the common good. On that basis, to defend the public mission of IIs and to preserve their legitimacy, according to Keohane (2006), their advocates and leaders should begin to put more emphasis on effective representation and accountability than on sovereignty. New hybrid, multilateral, organizations are reshaping the global organizational architecture, posing new and ever more compelling questions in terms of legitimacy, representation and accountability. Through interconnectedness, global governance and policy-making are inevitably linked to domestic policies and local action, making the task of both international and national managers even more complex and inevitably “g-local” (i.e. both global and local), with the weakest countries and populations paying the highest price for the fragmentation and inconsistency of the global system. According to Severino and Ray (2009), the era of globalization’s coherence will be built through multi-actor coalitions, with global public policies managed through what they call “hypercollective action”: with collective thinking, discussion and negotiation being the only way forward. “The world of the future will require more common action, not less” (Severino and Ray 2009), with increased promotion of public goods, an intensified fight against global public evils, and a strengthened international and increasingly transnational solidarity. To that purpose all those organizations concerned with the common good need to be prepared to play their roles, whether IIs, INGOs, global philanthropy or other transnational organizations. What is therefore expected from today’s International Organizations to successfully tackle the challenges ahead of them?

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First of all, a radical shift in attitude and behaviors by leaders, to be able to transform organizations, from self-referential, bureaucratic, closed systems to dynamic, results- and partnership-oriented organizations. The time when IIs managed the planning and implementation phases of an international cooperation system dominated by a few powerful donors is past. Institutions are now requested to operate in a scenario where the influence and stakes of the North and South of the world, donor and beneficiary countries, are considerably re-equilibrated. They are expected to align with strategic priorities that beneficiary countries identify, to play the role of the facilitators, building the capacity of implementing partners on the ground and to leverage the participation of civil society in beneficiary territories. International NGOs (INGOs) are, for their part, requested to play on a par with IIs, to grow in scale and capacity, to work hand in hand with local NGOs to increase operational effectiveness on the ground, and to provide additional financial and human resources to IIs. This requires a radical change in mindset of both IIs and INGOs, as well as the courage to let go of consolidated schemes of work and established practices. The ability to re-affirm IOs’ own credibility and legitimacy based on bottom-up coordination, management of larger networks and inter-organizational partnerships. There are obstacles along the way and a considerable risk of falling back into old practices. IOs need to overcome their differences at the policy level—organizations are based on different philosophies and have different approaches to human rights, economic and social development, etc.—surpassing the consolidated sub-cultures and allegiances, harmonizing, strengthening and streamlining their operational procedures to be able to work together on the ground. Efforts are required of member states and member organizations, donors and representatives too. For example, funding policies by the main donors ought to evolve, abandoning the short-term, project-oriented perspective, embracing a system-wide, long-term programmatic approach which would better allow beneficiary organizations to more flexibly plan their interventions, channeling competition for resources to their competitive advantages rather than basing their plans on mere political affiliation, donor preferences, or defense of consolidated ground. Creation of incentives and the right mechanisms for interagency cooperation and consistency on the ground is a real challenge, so far only marginally addressed. The One UN, Multi-Donor Trust Funds (MDTFs) and sector-wide approaches are early experiments in this direction that need further support and investment from donors and partner organizations. A difficult reality to face is that, while on the surface harmonization, streamlining of field intervention and elimination of duplications are key words in the political agenda, influential donors still impose a strong bilateral tone while country representatives still desire a certain level of redundancy to allow negotiations and compromise. For example, the proposal to consolidate all operational activities of the United Nations system in a handful of entities (e.g. one for development, one for health matters and one for humanitarian intervention), is not new or

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particularly bold (it was most recently voiced in the context of the High Level Panel on UN System-wide Coherence); it simply has not yet received enough support. It is undeniable that IOs are, by their very nature, “political” organizations and that the ability of secretariats’ executives to manage organizations efficiently, effectively and as open systems depends on the quality of the “political” action developed within the representative system and on the scope and conditions of the mandate given to management. The “managerial” paradigm implies the accountability of managers for results and concession of adequate flexibility to reach them. This makes it necessary to re-configure the “agency” relation between political representatives and secretariat’s executives in broader and more strategic terms. In this work, we have especially concentrated on management tools and systems that executives can use if they are adequately empowered to guide their organizations towards results. We started from frameworks developed in the context of private and public organizations, and we analyzed how to tailor them to the specificities of IOs. We have done so based on the practical experience of actual organizations. We tackled subjects such as how to analyze organizations’ strategic positioning and manage it to better achieve their missions; how to orient resources towards objectives and results; how to leverage human resources to achieve organizational priorities and, at the same time, ensure professional and personal development; how to improve financial management and transparency; how to read and navigate IOs’ governance systems; and how to shape the institutional profile of an organization and guide it toward maximizing communication and stakeholder management. We have focused on the ethics appropriate for IOs and what it means to manage such organizations ethically. It is important that executives approach management systems with a holistic and realistic approach and with the aim of introducing meaningful, sustainable tools to support them in orienting their organizations towards results. This is a key message for IOs’ leaders who find themselves pressured between political representatives, donors and other external stakeholders, often pushing them to adopt specific tools or approaches just because they are “in fashion”, and bureaucratic secretariats which often resist change, at the grass roots level, and distort the meaning of reforms. Chronologically, the “management” paradigm spread to IOs as they reached maturity in the domestic public and non-profit sector organizations, often with the same sponsors pushing for change in the domestic and in the international civil service. This represents an opportunity for IO leaders to look critically at the national experiences and learn from them by taking stock of the drivers of success and the causes of failure. Executives need to bear in mind that the transition from the “administration” to the “management” approach, as a whole, requires cultural preparedness within and outside of organizations. Extensive support needs to be obtained and granted throughout, a sometimes lengthy, period of time. Expectations need to be set at the right levels to avoid sudden disillusionment and unexpected resistance during the

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difficult period of change. Tools and systems themselves are never to be regarded as the solution to management problems, but as supports for more informed decision-making, as well as better human, financial and physical resource management. Professionals and executives are the real protagonists and the ultimate subjects responsible for leading successful change and positive results.

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INDEX

Accra: Agenda for Action (AAA) 117, 148; High level Forum on Aid Effectiveness 118, 203 accountability 228–31; asymmetric 147; mutual 116, 118, 203–4 accounting basis: accrual 295–98 budgetary 297–301; cash 296–98; commitment 297, 299 accounting 295–300, 307–24; cycle 300–301; functions 297–99; fund accounting 302, 305, 314; standards 308–9; policies 318–22; reserves 312–13 accounting concepts: assets 311–12; economic result 313; employee benefits 313–14; expenses 311–12; fund balance 302–5; inventory 312–13; liabilities 312–13; net assets 313–14; revenue 311 administrative review process 355–57 African Development Bank (AfDB) 29–30, 35, 47 African Union (AU) 39–40, 225 Agency for International Cooperation and Development—Spain (AECID) 197 aid 105–7; development 112–14, 118–21; effectiveness 115–17; humanitarian 181–14; statistics 203–10 AidData 208 Aid Information Management System (AIMS) 209 Amnesty International 100, 217, 221, 229, 367 Annan, Kofi 3, 53, 88, 92, 94, 115, 182, 184, 216, 227

Aristotle, 393, 403 Arusha Declaration 108 Asian Development Bank (ADB) 29,

47–48

Assessments see mandatory contributions Association of Southeast Asian Nations (ASEAN) 39 associations 51–52 Berkshire Hathaway 72 Bill and Melinda Gates 71–72, 74, 93 Bill and Melinda Gates Foundation (BMGF) 62–63, 71–75, 116, 138, 204, 209, 286, 381 board 23, 218–19; executive 23, 218; national 219; of governors 30; of directors 30–31, of THOs 86–87 Bobbio, Norberto 52 Body: representative 218–19; executive 217–18; administrative 219–20 Boutros-Ghali Boutros 47 branding 364, 368–72 Bretton Wood system 34, 109 Budget: execution 305–7; input-based 303; institutional 120–21, 166, 206; integrated 177, 302; legislative 302, 305; management 302, 304; regular 25, 27, 166, 302, 305; results-based 302–3; structure 301–4; support see institutional Buffett, Warren 71–72 Busan: Agenda 119; Partnership 122, 148 Bush, George W 113

Index 437

Canadian International Development Agency (CIDA) 198, 266, 268, 287 Cardoso, Henrique Fernando 64, 108 career development 325–29, 332–34, 348–53 Carnegie, Andrew 52 cause-related marketing 382 Central Emergency Response Fund (CERF) 184, 187–89 Chief Executive Board for Coordination (CEB) 22, 124, 126; High Level Committee on Management (HLCM) 22, 124; High Level Committee on Programs (HLCP) 22, 124 civil society 52–54 civil society organizations (CSO) 49, 53–54 cluster system 192–93 Coca-Cola 73 Commission on International Development 107 Common Country Assessment (CCA) 126–29, 153–54 common good 392, 401 Common Humanitarian: Action Plan (CHAP) 190; Humanitarian Funds (CHFs) 189 communication 364–73; institutional 368; organizational/internal 364–66, plan 372–73; service-related 366–67; technical 367–68 community based organizations (CBO) 53 compensation 333; broad-banding approach 340–42; performance related 343–44 competition: for funds 25, 172, 259–60; for human resources 343; results based 287 Competitive forces model 259–61 Conference of Non-Governmental Organizations in Consultative Relationships with the United Nations (CONGO) 70–71 conditionality 35–36, 110 Conference on Disarmament 225 coordination: challenges 135–37, 179, 199–201; in emergency 181–87; INGOs 49–51, 59–63; policy 123–24; THOs 78–90; UN system wide Coherence 125–26 consensus 23, 223–26 Consolidated Appeal Process (CAP) 184, 190–91, 198 contributions 165–67, 311; assessed 174, 179, 305; earmarked 25, 136, 166–67, 170–74, 187–89; 246, 377–78; 382–83;

extra-budgetary 170–74; 177; 305; 377; in-kind 312, 381; mandatory 25, 166–67 see also core resources; un-earmarked 25, 166–67; voluntary 25, 166–74, 187, 246, 381see also extra-budgetary resources Convention on the Rights of the Child (CRC) 384, 390 corporate philanthropy 381 Corporate Social Responsibility (CSR) 63, 99, 119, 391 cost: categorization 303–4; programme support (PSC) 173, 175–76; structure 174–76 Council of Europe (CoE) 219, 222 country program 153–56 crowd funding 384 Danish International Development Agency (DANIDA) 287, 290 decision-making mechanisms 23, 220–26 Declaration on Fundamental Principles and Rights at Work 234 Delivery as One (DaO) 129–33 dependency theory 108 Development Banks see International Financial Institutions development cooperation 105–20; classical development theory 108; data 203–10; evolution 105–8; funding patterns 111, 168–70 Dutch Technical Cooperation 287 Egeland, Jan 191 Emergency Relief Coordinator (ERC) 184–85 Emergency Response Funds (ERFs) 187 equity: brand 369, 383; intergenerational 300, 313, 327 ethical organizations 399–400 ethics 391; in business 391–404; code 383, 397; managerial 391; office 231; of communication 365 Etzioni, Amitai 17, 55 European Bank for Reconstruction and Development (EBRD) 48, 343–45 European Civil Protection Mechanism (EU-MIC) 196 European Commission (EC) 169, 350 European Investment Bank (EIB) 29, 48 European Space Agency (ESA) 223 European Union (EU) 13, 39 external relations 373–74, 376–77

438 Index

Feachem, Richard 85 financial management: implementing partners 148, 155–58; international organizations 299–302, 310, 315–16 financial statements 310–13 Flash Appeal (FA) 191, 198 Foege, William 86 Food and Agriculture Organization (FAO) 44–45 Ford, Henry 52 foundations 52, 63–64 Framework Convention on Tobacco Control (FCTC) 395 Frank, André Gunder 108 funding patterns 25, 168, 176–77 fundraising 136, 229, 381–87; direct 383; ethical 229; interagency 136; online 383, 387; social 383; third-party 383 Gates, William H. 71 Global Action Networks (GANs) 54, 78–85 Global Alliance for Vaccination and Immunization (GAVI) 93–94 Global Fund to Fight AIDS, Tuberculosis and Malaria (GFATM) 83–84, 87–90, 94 Global Partnership for Effective Development Cooperation (GPEDC) 117–18 Global Private Philanthropy 63–64, 77 see also Foundations Global Public-Private Partnerships (GPPPs) 77–94 Global Reporting Initiative (GRI) 368 globalization 90–92, 115 Gold, Joseph 224 governance 215, 225–31; global 215, 231–32; organizational 215–20 Gramsci, Antonio 52 Greenpeace 101 Haiti 194–201 Harmonization: of business practices 124, 132, 144, 177; of financial reporting 318–21 Harmonized Approach to Cash Transfers (HACT) 156–57 Hegel, Georg Wilhelm Friedrich 52 High Level Panel on System Wide Coherence (HLPC) 122, 126 Hobbes, Thomas 52 Holmes, John 200 Human Development Index (HDI) 112

Human Resources (HR): cycle 332; function 335–38; strategic HR management model 328–34 Humanitarian: agencies/organizations 24, 182–83; Coordinator (HC) 186–87, 197–98; Country Team (HCT) 190–92, 197; intervention 182, 192, 194–201 Identity: collective 370; institutional 369–70; visual 369, 371–72 Implementing Partners (IPs) 26, 127, 147, 152–62, 275 InterAction 186 Inter-Agency Standing Committee (IASC) 184–87 Inter-American Development Bank (IADB) 29, 48 internally displaced persons (IDPs) 183, 255, 336 International Aid Transparency Initiative (IATI) 118, 203 International Atomic Energy Agency (IAEA) 46 International Bank for Reconstruction and Development (IBRD) 29, 31–32 International Centre for the Settlement of Investment Disputes (ICSID) 31, 33–34 International Chamber of Commerce (ICC) 51, 94–95, 375 International Civil Aviation Organization (ICAO) 22 International Civil Service Commission (ICSC) 22 International Committee of the Red Cross (ICRC) 77, 216 International Council for Science (ICSU) 79 International Council of Voluntary Agencies (ICVA) 186 International Court of Justice (ICJ) 18, 217 International Development Association (IDA) 31–32 International Federation of Accountants (IFAC) 309 International Federation of Pharmaceutical Manufacturers and Associations (IFPMA) 51, 375 International Federation of Red Cross and Red Crescent Societies (IFRC) 77 International Finance Corporation (IFC) 31, 33 International Financial Institutions (IFIs) 17, 24, 28–37, 47, 147

Index 439

International Fund for Agricultural Development (IFAD) 29, 46, 221–22, 262–65 International Institutions (IIs) 13–47; classifications 16–18; formal IIs 13–15; history 13–14 International Labor Organization (ILO) 44, 233–34 international legal personality 14, 78 International Maritime Organization (IMO) 46, 221 International Monetary Fund (IMF) 29, 34, 47 International Non Governmental Organizations (INGOs) see Non-Governmental Organizations International Organization for Migration (IOM) 182, 186, 188, 191–92 International Organization for Standardization (ISO) 79 International Program on the Elimination of Child Labor 234 International Public Sector Accounting Standards (IPSAS) 308–23 international regimes 215, 231–32 International Telecommunication Union (ITU) 24, 45, 234–36 International Trade Centre (ITC) 42 International Union for Conservation of Nature (IUCN) 79, 85 International Urban Search and Rescue (USAR) teams 196 inter-organizational networks (IONs) 81, 84, 215, 232–33 Islamic Development Bank (IDB) 29, 35 job grading 340–44 Johns Hopkins University 57–59 Joint Inspection Unit (JIU) 22 Joint UN Programme on HIV/AIDS (UNAIDS) 138–45 Kant, Immanuel 52, 403 Kassar, Adnan 95 knowledge management 269, 295–96, 364–66 Kraft 73 League of Nations 13, 21, 78, 105, 220 Letter of Understanding (LoU) 153, 155 Levitt Theodore 55 Locke, John 403 majority 24, 31, 41, 223 Marshall Plan 31, 106

Marx, Karl 52 Médicins Sans Frontières (MSF) 51 Mercado Comun del Sur (Mercosur) 39 Merck 73 Microsoft Company 72 Millennium Declaration 112–13 Millennium Development Goals (MDGs) 113–14 mission 240 Monterrey Consensus 115 Mozambique 133–35 Multilateral Investment Guarantee Agency (MIGA) 31, 33 Multilateral Organizations Performance Assessment Network (MOPAN) 292–94 Multi-year funding frameworks (MYFFs) 177 National Execution paradigm (NEX) 149–52 neoliberal response 109–12 Nestlé 100 networks 78–90 New International Economic Order (NIEO) 91, 109 New Public Management (NPM) 2–3, 146, 241–42, 295, 297, 299–300, 303 NGO consultative status (with the ECOSOC) 65–71 Nixon, Richard 109 Non Profit Organizations (NPO) 51–52 see also Non-Governmental Organizations Non-Governmental Organizations (NGOs) 49–51; Business Interest NGOs (BINGOs) 54; coordination 193–94; federations 76, 216, 219, 221; Public Interest NGOs (PINGOs) 54 Nonprofit Technology Network (NTEN) 389 North American Free Trade Association (NAFTA) 39 North Atlantic Treaty Organization (NATO) 40–41 Nyerere, Julius Kambarage 108 OCSE Development Assistance Committee (DAC) 106; DAC reporting system 203–9 Office for Coordination on Human Affairs (OCHA) 22, 184–86 Office of the United Nations High Commissioner for Refugees (UNHCR) 42, 244, 336–38, 351 Official Development Aid (ODA) 62, 91, 107–8, 204–6

440 Index

‘One United Nations’ 126, 130–37, 179 see also Delivery as One (DaO) Organization for the Economic Cooperation and Development (OECD) 106, 203–9, 222

340–42

Organizations for the Security and Cooperation in Europe (OSCE) 40–42 Organization of African Unity (OAU) 220 Organizations of American States (OAS) 217, 220 Organization of Islamic Cooperation 35 organizations of mutual interest 55–56 out-posting 336–38 outsourcing 146, 152, 156, 299 Pan American Health Organization (PAHO) 197, 314, 318 Paris Club 110, 120 Paris Declaration on Aid Effectiveness 116–17 PEST analysis 247, 252–53 philanthropic organizations see Foundations planning: country 126–29, 147–48, 153; joint 128, 190; participatory 386; strategic 249–55 Poverty Reduction Strategy Papers (PRSPs) 112, 273 Prebish, Raùl 108 privatization 35, 111, 146 profile 363–89 Program Cooperation Agreement (PCA) 385 Program: areas of intervention 17; coordination 124, 129–30, 134; cycle 147, 152–53; 162; delivery modalities 147–53; evaluation 159–60, 269–70 Project Implementation Units (PIU) 148 Raikes, Jeff 71 Reagan, Ronald 109 recovery and reconstruction funds 189 recruitment 332, 339–40 Red Cross and Red Crescent 77 Reporting: creditor 204; donor 316–17; financial 295–96, 308, 320; social 367–68; sustainability 367–68 reserves 13 Resident Coordinator (RC) 24, 125, 132, 186–87 resource mobilization 363, 377–84 resources (see also contributions): core 25, 27, 166–67, 170; extra-budgetary 18,

25, 27, 166–67, 170–71, 302–3; non-core see extra-budgetary; regular see core Results: chain 267–68; orientation 268–70 Results Based Management (RBM) 266–94 Rockefeller Foundation 63 Rockefeller, John 52 Roll Back Malaria (RBM) 89 Rome Declaration on Harmonization 116, 125 Rousseau, Jean Jacques 52 Ruggiero, Renato 47 Santos, Theotonio dos 108 Sector Wide Approach (SWAp) 112 Sheeran, Josette 309 Shock doctrine 109–12 small-scale funding agreement (SSFA) 385 social: business 56; economy 54–56; enterprise 56; movements 53–54, 59; reporting 367–68 Special Rapporteur of the Human Rights of IDPs 186 staff: behavior 330, 334; mobility 348–51; motivation 326; performance evaluation 344–48; profile 27, 326, 328, 333–34, 340, 348–51; training 348–51 stakeholder management 373–77 strategy 240–41 Strategic: decisions 258–62; evaluation 261; fit 246–48; management 249, 262, 269; planning 250–53, 270, 279, 303; positioning 243–45; thinking 250–51 Stop TB 87, 89 Structural Adjustment Programs (SAPs) 109, 111 Sunkel, Osvaldo 108 Supra-national Institutions 13 sustainability reporting see social reporting Strengths, Weaknesses, Opportunities and Threats (SWOT) analysis 253 technical cooperation see development cooperation Tocqueville, Alexis de 51 Transnational Hybrid Organizations (THOs) 77–94 Triennial Comprehensive Policy Review (TCPR) 124–25, 252 Truman, Harry 106 trust funds 177–79 Trygve Lie 47

Index 441

UK Department for International Development (UK DFID) 168, 198, 287 UK Multilateral Assessment Review (MAR) 287–92 unanimity 23, 222–23 Unilever 100 Union of South American Nations (UNASUR) 40 United Nations (‘core’): Administrative Tribunal (UNAT) 354–55; Appeal Tribunal (UNAT) 355; Department for Humanitarian Affairs (DHA) 184; Committee on Programme Coordination (CPC) 22, 123; Country Teams (UNCTs) 125, 129–32; Democracy Fund (UNDEF) 70; Department of Economic and Social Affairs (DESA) 20, 70, 124; Department of Management (DM) 355; Department of Peacekeeping Operations (DPKO) 20; Department of Public Information (DPI) 65, 69; Development Assistance Framework (UNDAF) 126–29; Development Group (UNDG) 22; Disaster Assessment and Coordination (UNDAC) 196; Dispute Tribunal (UNDT) 355–57; Economic and Social Council (ECOSOC) 20, 50, 64–70, 123; General Assembly (UNGA) 18–19; Global Compact (UNGC) 94–101; Internal Justice System 231, 354–59; Management Evaluation Unit (MEU) 356–59; Non-Governmental Liaison Service (NGLS) 70; Office of Internal Oversight Services (OIOS) 231; Office of the Ombudsman and Mediation Services 357; Secretariat 20; Secretary General (UNSG) 20; Security Council (UNSC) 19–20, 236–38; Stabilization Mission in Haiti (MINUSTAH) 196–97; University (UNU) 217, 338 United Nations Capital Development Fund (UNCDF) 43 United Nations Children’s Fund (UNICEF) 42, 384–86 United Nations Conference on Trade and Development (UNCTAD) 42–43; UNCTAD Centre on Transnational Corporations (UNCTC) 91–92 United Nations Development Group (UNDG) 22, 117, 125 United Nations Development Programme (UNDP) 43

United Nations Disaster Relief Organization (UNDRO) see United Nations Department for Humanitarian Affairs United Nations Educational, Scientific and Cultural Organization (UNESCO) 45, 303–5 United Nations Environment Programme (UNEP) 43–44 United Nations Human Settlement Programme (UN-HABITAT) 44 United Nations Industrial Development Organization (UNIDO) 46 United Nations Office on Drug and Crime (UNODC) 43 United Nations Population Fund (UNFPA) 44 United Nations Relief and Works Agency for Palestine Refugees in the Near East (UNRWA) 44 United Nations System 21–22 United Nations System Accounting Standards (UNSAS) 308 United Nations Volunteers (UNV) 43 United States: Agency for International Development (USAID) 197, 271; Centers for Disease and Control (CDC) 196 Universal Declaration of Human Rights 95, 135, 394 Universal Postal Union (UPU) 45 value: for money (VfM) 2–3, 7, 25, 172, 176, 221, 285–87; public 4–6, 285–87 veto power 218, 222, 236–38 vision 240 Volcker, Paul 110 Volcker Report 309 voluntary funding see voluntary contributions volunteers 380 voting powers 220–22 Washington Consensus 111, 135 White, Eric Wyndham 47 William H. Gates Foundation 72 workforce planning 338–39 Working Party of Aid Effectiveness 116 World Bank (WB) group 29, 31–34, 47, 280 World Fair Trade Organization (WFTO) 51 World Food Programme (WFP) 44, 253–56, 314–15 World Health Organization (WHO) 45

442 Index

World Intellectual Property Organization (WIPO) 46, 244 World Meteorological Organization (WMO) 46–47 World Organization of the Scout Movement (WOSM) 376–77

World Tourism Organization (WTO) 46 World Trade Organization (WTO) 47, 335–36 World Wildlife Fund (WWF) 216, 369