The Matrix System at Work - Independent Evaluation Group - World ...

APPENDIX A
MATRIX MANAGEMENT AND ORGANIZATION OF THE WORLD BANK
there was a major drying up of private capital flows to developing countries, and a
sudden increase in demand for Bank financing. The sudden increase in demand, and
in the approval of quick disbursement loans, took management attention away from
the support of the new matrix instruments and arrangements.
22. Some of the responses to the crisis were totally contrary to the principles of the
reforms, particularly the leading roles of country directors and CMUs. The most
important of these responses was the establishment of the special financial
operations unit (SFO) which was given budget and, effectively, autonomy from the
CMUs in which it operated. This created considerable resentment between the
affected CMUs and the SFO and, arguably, cast doubt on the support from senior
management for the principles of the new matrix arrangements. At the same time, it
was also criticized by CMUs that did not have access to the SFO resources, as source
of budget misallocation. Thus, it alienated both groups of client teams and
weakened the foundations of the new budgetary principles.
23. The new budgetary system also quickly ran into difficulties because its detailed
functioning principles had been left undefined, and in the first few years, the
transaction costs became very high, and because the uncertainty associated with the
large number of technical staff members (and their managers) who were concerned
about finding effective demand for their services led to a new source of supplydriven
behaviors and to efforts to ensure new tasks (to “fill the dance cards”).
24. During the early 2000s, as the global economy recovered and private capital
flows gradually rematerialized, the external conditions turned again closer to those
that had led to the 1997 reforms: demand for Bank lending decreased, particularly
from upper middle-income countries, including major repayments and reductions in
country exposure. During this period, budgetary mechanisms were improved, as
were some of the coordination mechanisms. Faced with the decline in demand,
however, senior management encouraged lending increases, particularly in
infrastructure, sometimes at the expense of developing cutting edge technical skills
and knowledge generation and dissemination.
25. In 2008, a new change in external conditions, the global financial crisis, led again
to large increases in demand and in lending, mainly through development policy
loans (DPLs), which have required leadership by CMUs, with only limited
involvement of the SMUs (except for the Poverty Reduction and Economic
Management Network, PREM). This may have reduced again the effectiveness of
“matrix behaviors” sought by the 1997 reforms.
26. Organizational culture (including the “loan approval culture”) also played a
major factor in counteracting the incentives to use global knowledge through
increased cooperation among sectors and across Regions. The 1992 Wapenhans
report identified a focus on lending volume rather than implementation and
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