selectivity and customization from the wide range of sector and global practices that the Bank can offer. There is thus a need to match client and country needs with the products and sector practices that the Bank can produce or mobilize, inevitably leading to some form of a matrix system. As a public institution, the Bank is limited in its ability to implement marketbased practices and processes that are commonly applied, with success, in private firms to implement matrix systems. Yet even as a public institution, the Bank can learn from the experience of the private sector in implementing matrix structures and systems. Research and experience from the private sector (Gottlieb 2007, Galbraith 2009) shows that effectively operating matrix structures requires internal consistency among five key factors: (a) alignment and tracking of goals; (b) clear responsibilities and expectations; (c) a collaborative culture and leadership; (d) mature resource management processes; and (e) a robust performance management framework. The second key lesson from matrix organizations is that organizational design is not just about structure. Incentives and processes have to be aligned with structures, and all three have to be aligned with strategic objectives for matrix organizations to work. These key factors and the need for internal consistency remain fully valid for the Bank, while recognizing the Bank’s unique challenges as a public institution with multiple objectives and global reach. The World Bank moved quickly to revamp its organizational structure. However, as the evidence from this assessment reveals, changes in incentives and processes were inadequate and not fully aligned with the strategic goals of the 1997 reforms. The incentive created by transferring budget authority to country directors increased responsiveness to the client but failed to create the conditions for quality services based on global technical excellence. The quality of Bank knowledge services is viewed by many as having deteriorated since the matrix was introduced. Budgetary processes and individual incentives militated against flows of knowledge and attention to quality. Organizational silos re-emerged along different boundaries. The very strength of the regional matrix undermined the effectiveness of the Bank-wide matrix. And the links between the center and Regions was further weakened by decentralization and the emergence of global and corporate priorities. The absence of alignment among the Bank’s corporate goals and the interests of the Regions and networks did not ring any alarm bells because no metrics were put in place to track or reward achievement of strategic goals other than through lending volume and numeric counts of knowledge products. IFC revised its matrix structure in 2010. IFC has built on its previous systems and includes individual incentives, and performance assessments aligned with the organization’s goals. Its compensation program is aligned with strategic objectives and includes achievement of quantifiable development goals. IFC has also proposed a set of monitoring metrics to track organizational results and identify problem areas more rapidly. While it is far too early to evaluate its implementation, these design features are worth considering as part of subsequent efforts to strengthen the Bank’s organizational effectiveness.
Conclusions and Recommendations
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