Student experience: The second Development Management Workshop encouraged students to share their experiences working for organisations in the field, and to question why the projects they worked on failed or were successful.

Summary of Workshop Series Week 5 with Professor Teddy Brett

For the second session of the DV431 Workshop Series, Prof. E. A. (Teddy) Brett invited students to learn from each other’s experiences working for organisations (i.e. firms, government agencies, NGOs, etc.). Based on a show of hands, most students had already acquired some form of work experience, and a slight majority considered their organisations dysfunctional. Teddy then raised the question of whether what students had learned so far in the programme could help them discern why some of the organisations they worked for failed, while others were successful.

Teddy asked participants to share their experiences first amongst each other in small groups, and then invited some students to speak to the entire workshop.

One student shared her experience working for the military. She argued that much of the organisation’s dysfunctional nature was related to a wasteful use of human resources. Little thought goes into how to most productively use the individual skills of soldiers. The system of pay and promotion does not encourage initiative, performance or self-improvement. Instead, people are told not to question structures and processes, even if they are clearly inefficient. Furthermore, a lot of work is being carried out at the lower echelons of the organisations, but then goes to waste due to top-level political considerations. The student noted a quite stark contrast with her experience in the private sector where she found that people always sought to improve, to think of the best possible ways one can employ the talents of the employees and become more efficient.

Teddy then encouraged students to think about the ways in which incentives work, and about whether accountability mechanisms exist. Generals and the minister of defence are accountable to the political leadership, but not to soldiers, and the soldiers are themselves accountable to nobody but their superiors. This results in incentives for actors that are quite different from the company the student was working for, which is effectively “accountable” to the customers who have the power to not buy the product. In addition, the values of the primacy of seniority, obedience to authority and equality, which have been dominant in military institutions throughout history, also encourage the establishment of pay, promotion and reward systems that will tend to discourage initiative, creative problem-solving and the flexible use of human resources.

A second student shared her story of working to help NGOs in Georgia become more effective, through which she gained insights into some of the problems of development organisations active in the country. One of the key problems she discovered was that large international organisations, such as the World Bank as well as the people funding and managing them, often do not really understand what happens at the local level, while local actors who possess the knowledge often lack the resources to mobilise effectively. She discussed the example of an attempt to improve small-business creation in Georgia. Too few Georgians use remittances or savings to start a business and instead spend it largely on consumption. Confronted with recommendations to address the Georgian government responded by saying that the World Bank had ranked Georgia as the 9th best place in the world to do business based on its “Doing Business” index, so it largely denied the existence of a problem. However, the student pointed out that governments just tick the boxes the World Bank wants them to in order to improve on the index, whether or not they are appropriate for the specific local context or not, and whether or not they yield results on the ground.

Teddy explained that the bigger theoretical underpinning of the “Doing Business” project is influenced by the thinking of Hernando de Soto, who in The Other Path argued that the existence of large informal sectors and the problems of small firms were a consequence of excessive and poor government regulation. The suggested remedy was thus one of simplification of administrative steps required to register and legally operate businesses. However, when de Soto was given a chance to implement his policies in Peru the results were mixed, indicating that economic realities and market failures may also explain the difficulties of small businesses (e.g. competition from cheap imports, unfair advantages of politically well-connected businesses, etc.). According to Teddy, one should therefore question the assumptions that underlie the “boxes that need to be ticked”, as they may rest on experiences from other cases which may or may not be appropriate, as well as on political/ideological perspectives (e.g. the World Bank being in favour of open markets would not recommend tariffs to protect nascent industries).

Teddy closed the session by suggesting two central takeaways for students that are important for understanding organisational failure: perverse incentives, and the lack of accountability mechanisms. Perverse incentives are incentives that encourage people to do inappropriate and dysfunctional things. In Georgia, the perverse incentive is that although the government would like better business creation and more successful small businesses, they get money from the World Bank on the World Bank’s terms. They do not want to jeopardise this support by challenging the World Bank, or lack the capacity to do that. And the absence of accountability mechanisms means that the World Bank does not get criticised if, for example, money does not reach small businesses in Georgia, or for investing a lot of money in projects that continue to fail. The people in Georgia, the small businesses that should benefit from these programmes, or even taxpayers in developed countries, have few or no means to hold the World Bank to account.

This article was written by a student who wishes to remain anonymous.

The views expressed in this post are those of the author and in no way reflect those of the International Development LSE blog or the London School of Economics and Political Science.