The Matrix System at Work
An Evaluation of the World Bank's Organizational Effectiveness

The World Bank’s ability to deliver effective services to its clients is contingent upon its responsiveness to partner countries and the technical quality of the services it provides. To enhance the quality of its client services and complement its lending with knowledge services, the Bank introduced internal reforms in 1997 and established a matrix system with dual accountability between the regions and networks across the Bank, and between the country and sector units in each region.  The objectives of the matrix system were to enhance client responsiveness through its country delivery model, and the technical quality of its operations and knowledge services through strong technical networks and an internal labor market for staff renewal and global mobility.


IEG's matrix report evaluates the extent to which the dual objectives of the matrix system have been achieved and have enhanced the Bank’s development effectiveness. The evaluation examines the implementation of the matrix system and its relevance and effectiveness from 1997-2010.

 

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Main Findings

Strategic Alignment

Corporate and Sector Strategies vs. Country Based Model. Alignment of client priorities with sector and corporate priorities enhances the Bank’s development effectiveness. The evaluation finds that the country based-model has increased responsiveness to client governments but in many cases is more focused on short term needs than on strategic sector or corporate priorities. Country programs are designed to respond to client demands within three- four year timeframe of a Country Assistance Strategy. Sector and corporate strategies have a longer time horizon and broader scope and are unable to effectively influence country programs. As a result, although country assistance strategies are better aligned with client demands and have the flexibility to adapt to country circumstances when necessary, they lag behind in realism in matching program design to country capacity and achieving broad country ownership.


Corporate and Sector Strategies. The World Bank invests considerable resources in developing sector and corporate sector strategy papers (SSPs). However, SSPs are more generic by design to have global coverage and, thus, need to be complemented by regional sector strategies to be relevant to the work on the ground. The evaluation found that more Recent SSPs are better in reflecting country and regional experiences.


Staff Incentives. The country-based model does not incentivize staff to internalize corporate goals. In many cases the uptake of global and regional programs in countries has been catalyzed by the availability of trust funds or earmarked funds. It is important to create a balance between client demands and the World Bank’s broader perspective on global public goods like climate change and communicable diseases.

Knowledge Bank

Flow of knowledge and expertise. The evaluation finds that the objective of creating a global Knowledge Bank – to enhance the quality of its operations and provide a new stream of global knowledge services to its clients – has not yet been achieved. Rather than functioning as a global organization, the Bank is at risk of evolving into a group of regional banks with fraying ties among them. Knowledge products are not stored in an easily searchable and retrievable format, and are rarely used outside the unit where they are produced. The flow of knowledge is further inhibited by structural boundaries created by the matrix system, with regional and network silos being significant impediments to the flow of knowledge and expertise (see Figure 1).


Figure 1. Cross Support Under the Matrix System in FY10
 Capturing innovation. Innovation from the regions is not well captured and is rarely disseminated Bank-wide. At the same time, Bank’s country operations are unable to access and use global knowledge efficiently to meet client needs.


Impact of knowledge on lending. The Bank’s knowledge products including its analytical studies and technical assistance are vital to the quality of its lending operations.

It is essential to maintain the Bank’s ability to produce high-quality knowledge products and customize global knowledge to maintain the Bank’s relevance to its client countries.

Quality Services

Portfolio outcomes. Portfolio quality improved during the early period after introduction of the matrix system but is under increasing stress in recent years. Comparing outcomes by year of project closure, the peak was in 2005 and by project approval, the peak was achieved in 2001, with significant declines in quality subsequently (see Figures 2 and 3).


There are insufficient incentives to focus on quality and results. Accountability for quality has become more diffused and quality control mechanisms are not being applied consistently or used effectively. Multiplication of quality control layers for lending did not increase efficiency and effectiveness in ensuring quality. At the same time systems for accountability and quality control have been skewed toward fiduciary and safeguard risks with less attention to other aspects of technical quality.


Budgetary incentives. Budget pressures are also adding risks to delivery of quality services. Within the Regions the sector units responsible for delivery of lending and knowledge services are under increasing budget pressure. To fill the budget gap,

Figure 2: Outcomes of Bank-Financed Operations at Exit by Fiscal Year


Figure 3: Outcomes of Bank-Financed Operations by Fiscal Year of Approval
the Bank became more reliant on external financing, which have weaker quality control systems.

 

Recommendations

The Bank needs to make substantial changes to the matrix system to realize its full potential and reduce its downside by addressing three inter-related sets of recommendations on incentives, processes, and structural issues:


- Incentives. To operate the current matrix system effectively, the World Bank needs to enhance incentives and resources to promote sharing of knowledge and revamp the performance management system to reward quality and results.

 

- Processes.  The Bank needs to replace sector strategy papers by more modest “state-of-the-sector” reports and invest more in strategic  economic and sector work and business development. The Bank also needs to enhance the focus on technical quality by strengthening the mechanisms and accountability for quality of lending and knowledge products and simplifying budgetary rules for collaboration across organizational units.

 

- Structure. There is a need to develop and implement a plan to enhance matrix effectiveness that addresses existing constraints in the sector and network architecture, strengthens links among the Regions and anchors, and rebalances the relationship between country and sector units in the Regions. Key organizational constraints in the Sustainable Development Network also need to be addressed.


The Matrix System at Work (eBook)