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Institutional development

This page covers the concept of institutional development. This webpage outlines some of the key tools used by those involved in institutional development, and focuses on those that are used or have been used in DFID's own institutional work.

Page contents

Definition of topic and content

Where is a good place to start?

Institutional development process

Institutional change
Organisations in the institutional framework
Interventions, implementation and evaluation
What's new?
What other resources are available on the GRC Exchange?

Definition of topic and content

Institutional development is important because institutions can operate against the poor, and without institutional reform, poverty alleviation programmes and policies can by stymied. Institutional development is therefore a vital tool in structural poverty reduction.

Where is a good place to start?

Institutional development is the process and content of change in institutions, and the starting point for change is to identify existing problems. A good initial source on this is:

Premchand, A. 2000, Institutional Development and Organisational Paradoxes, in Control of Public Money: The Fiscal Machinery in Developing Countries, OUP, New Delhi.
Whenever a government fails to fulfil its self-specified objectives, its institutions and organisations come under scrutiny. Despite the countless approaches formulated and applied over the decades, institutions and organisations are still not serving the public effectively. Why aren't they performing as well as they could?
Full document available through: BLDS document delivery service. Please access full summary and then click on the link for "BLDS Document Delivery Service".

Institutions exist in different country, economic and political contexts, and an understanding of these different contexts, and their impact on institutional development is important.

Djankov, S., La Porta, R., Lopez-de-Silanes, F. and Shleifer, A. 2002, 'Appropriate institutions', paper presented at the World Bank conference on Appropriate Institutions for Growth, Washington, September 13, 2002.
This paper argues that the inevitable lesson from transition from socialism, the Asian financial crisis, and European economic and political integration is that institutions vary significantly among capitalist economies, and that these variations influence the most important economic changes. This raises the question of what institutions are appropriate for what countries. If the observed institutions are not appropriate, what forces have shaped them? Finally, can institutions be reformed?
Full document available online

Burki, S.J. and Perry, G. 1998, 'Beyond the Washington Consensus. Institutions Matter,' World Bank Report no. 18428, The World Bank, Washington, D.C.
Taking the country/regional context a step further, a paper from the World Bank asks how comprehensive institutional reforms should be in Latin America and the Caribbean (LAC). Is too much being asked of reforms? Governments in the LAC region have realised that their competitiveness and economic growth are directly correlated to having good institutions. This paper looks at the precise nature of institutional reforms and provides a framework for their design and implementation in the LAC region.
Full document available online

Institutional development process

The Institutional Development Process is framed around outcomes, institutions and stakeholders. Development outcomes shape the direction and the type of change that is needed. Institutional change is usually slow and difficult because of powerful opposition, and requires an understanding of all the components and the stakeholders. Stakeholders can both influence and be influenced by institutional changes.

Bossuyt, J., 2001, 'Mainstreaming Institutional Development: Why is it Important and How Can it Be Done?', European Centre for Development Policy Management (ECDPM)
A recent paper on mainstreaming institutional development argues that institutional development must rely on support and participation from those at a high political level and also from key actors and stakeholders. Focusing on structural poverty reduction, this paper aims to stimulate debate on whether institutional development should become the central element of the cooperation strategy and asks how it can be mainstreamed.
Full document available online

Institutional change

Institutional change can sometimes occur in leaps and bounds, such as through war, revolution or change of leadership, but more typically, it is a slow and deliberate process. Donors can help at the 'top end' through assistance to improve policy-making capacity, public expenditure management, and new incentive mechanisms, and from the 'bottom up' by promoting the voice and partnership of poor people. The process of institutional change depends on both an understanding of institutional components, and a clear analysis of the various stakeholders and their characteristics.

Schiavo-Campo, S., 1994, Institutional Change and the Public Sector in Transitional Economies, World Bank Discussion Paper 241.
A World Bank Discussion paper comprising eight papers on the subject of institutional change with particular reference to Eastern Europe and the former Soviet Union sets out the issues facing reformers and suggests strategies for managing institutional change. It argues that the best reform is simply the most sustainable route in any given situation.
Full document available online

Organisations in the institutional framework

Institutions and Organisations are not the same thing - the key distinction between institutions and organisations is that between rules and players. Organisations encompass political bodies such as parties or parliaments, economic bodies such as firms or businesses, and social bodies such as churches and schools. Institutional and Organisational development are not terms that can be used interchangeably - reforming the organisation, the 'player' may be ineffective if the rules of the game remain the same.

Moore, M., Stewart, S., & Hudock, A. (eds.), 1994, 'Institution Building as a Development Assistance Method; A Review of Literature and Ideas', IDS, Brighton, UK.
This literature review surveys practice in institution building, and finds that institution building consists of two parts, activities that are 'organisational building' that improve organisational performance, and other activities that are 'intended to change the mechanisms through which societies are regulated'.
Full document available through: BLDS document delivery service. Please access full summary and then click on the link for "BLDS Document Delivery Service".

Interventions, implementation and evaluation

The options for intervention are divided between the institutional and the organisational. Institutional reform usually focuses on policy, or on incentives to improve service delivery. Organisational reform may be structural, systems or human resources. Institutional reforms can be slow and expensive, and often call for the reform of organisations to implement the new measures.

Having agreed on the direction of change, the next step is to decide how to take the changes forward. Implementation of institutional development interventions involves a number of processes, such as Change Management, analysis of the forces that help or obstruct change, linking assessment of the wider institutional context with the nature and process of change within an organisation, and Stakeholder Management, identifying the individuals or groups who will either be affected by the changes or have the ability to impact on the change process, and developing a strategy to manage them.

Evaluation of institutional development interventions assesses the aspects of performance. Monitoring and evaluation need to be built in to the intervention from the outset, by deciding what to monitor and why, how the monitoring will be done, and how information will be collected.

The has been designed to be a generic model and is as applicable to 'non-business' orientated organisations such as government departments and agencies, non profit organisations etc, as private sector organisations. However, a public and voluntary sector version draws out some small differences. The EFQM Excellence Model is a non-prescriptive framework that recognises there are many approaches to achieving sustainable excellence in organisations. There is therefore considerable freedom for interpretation to reflect strategies which are appropriate for an individual public sector entity given where it has come from, the cultural climate, country diversity, modernisation progress, political climate.

EFQM excellence model
The EFQM excellence model has been designed to be a generic model and is as applicable to 'non-business' orientated organisations such as government departments and agencies, non profit organisations etc, as private sector organisations. However, a public and voluntary sector version draws out some small differences. The EFQM Excellence Model is a non-prescriptive framework that recognises there are many approaches to achieving sustainable excellence in organisations. There is therefore considerable freedom for interpretation to reflect strategies which are appropriate for an individual public sector entity given where it has come from, the cultural climate, country diversity, modernisation progress, political climate.

Department for International Development, 2003, 'Promoting Institutional and Organisational Development: A Sourcebook of Tools and Techniques,' DFID, London.
This sourcebook covers each of these steps in more depth.
Full document available online

What's new?

Some of the main issues in institutional development are also issues in Direct Budget support and other aid instruments. The GRC holds new cross-cutting guide pages on some of these issues, such as the topic guide on aid instruments. This topic aims to provide DFID advisers with key sources of information on the governance aspects of design and decision-making choices, impact, assessment and evaluation of aid instruments. This resource is supported by three other GRC topic guides, which cover the specific instruments of budget support, poverty reduction strategy papers (PRSPs) and Sector Wide Approaches (SWAps) (currently under development).

In terms of Direct Budget Support, the GRC also holds a key texts page on this issue, with a number of new texts recently added.

What other resources are available on the GRC Exchange?

Key texts
This resource does not attempt to provide an exhaustive list of documents relevant to 'aid instruments'. For a thorough search of the whole GRC Exchange site please refer to the Information Database.

Training and events
A searchable database of courses and conferences in each of the governance theme areas is available on the GRC Exchange site.

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