Programs and Organizational Structures in Developing Countries

Nowhere are the difficulties arising from conflicts between program and organizational structure more of a challenge than in developing countries. As discussed in a previous piece, the most serious technical challenge arises from the existence of organizational units which contribute to several programs. Where this is the case, it is necessary to allocate the expenditure of these organizational units between multiple programs in budget preparation and financial reporting. This is a challenge which is beyond the capacity of most developing countries.

“Management” programs resolve much, but not all, of the conflict between program and organizational structure. Even when management programs are employed, there will remain some cases of organizational units which are multi-program, such as regional service units. Conflict can also arise from, for example, the use of old-fashioned organizational structures based on professional functions rather than product lines: for example, an agriculture ministry structured around departments such as agricultural economics, agricultural science, and engineering services.

Developing countries are frequently advised to deal with the problem by simply making the program structure fit the pre-existing organizational structure. As noted previously, the result can be an old-fashioned organizational budget pretending to be a program budget. Proponents of this approach may concede this, but argue that this should be seen merely as a temporary fix. In the medium to longer term, they say, ministries should be encouraged to reform their organizational structures to make them more results-oriented, including by doing away with function-based organizational structures.

It is indeed appropriate to encourage the review of organizational structures following the move to a program budgeting system. However, the great danger of making the program structure fit whatever the organizational structure happens to be is that this ends up being a permanent rather than temporary arrangement. Organizational structures are never reformed, but the program structure remains permanently compromised.

There is an alternative for developing countries. This is—again as a temporary and pragmatic arrangement—to place all multi-product line organizational units under the management program. Such an approach permits the maintenance of the principle that programs should, with very few exceptions (of which the management program is the most important) be output-based programs. It prevents ministries from inventing “programs” which are of absolutely no use to budget decision-makers. Under this approach, administration programs would, in the short to medium term, be used not only to cover ministry support services, but to cover regional, functional and other organizational units not based on the ministry’s outputs. The result of this would certainly be that some ministries would start of with management programs which are larger than they should be and, conversely, “product-line” programs smaller than they should be. However, this would have the effect of putting the spotlight on those ministries with particularly poorly designed organizational structures, thus encouraging organizational restructuring. And where there are sound reasons for the existence of multi-program organizational units, the countries concerned would hopefully in the longer term develop cost allocation capacity.

Comments are closed.