DEVELOPMENT, FOREIGN AID, STRATEGIC PLANNING,
AND THE GOVERNMENT PERFORMANCE AND RESULTS ACT (GPRA)
Michael Crosswell
Bureau for Policy and Program Coordination
U.S. Agency for International Development
1300 Pennsylvania Ave., N.W.
Washington D.C. 20523-8200
ABSTRACT
This paper analyzes options and issues surrounding
strategic planning and management in the context of
developmental foreign aid. We derive a definition of
ÒstrategyÓ specific to developmental foreign aid and then
present a simplified model for strategic management. We
then consider various complications and constraints and
discuss implications for the model and for conforming to
GPRA. Finally, we discuss a popular alternative model
based on clusters of similar programs (in health, family
planning, etc.) and point out the shortcomings of such a
model.
INTRODUCTION/SUMMARY
1
The Government Performance and Results Act (GPRA)
directs U.S. Government agencies to manage strategically
for results, utilizing a Strategic Plan (SP); a forward-
looking Annual Performance Plan (APP) that outlines
performance goals and expected results and serves as the
basis for budget requests; and a backward looking Annual
Performance Report (APR) that compares actual
performance with expected results. This led to USAIDÕs
first strategic plan in 1997, as well as a series of annual
performance plans and annual performance reports. It also
led to considerable debate about how best to go about
strategic management and budgeting.
This paper was originally written to facilitate discussions
with the Office of Management and Budget (OMB) about
the 2000 revision and update of the 1997 USAID Strategic
PlanÑparticularly the issue whether USAID should have a
strategy and strategic plan based on a limited number of
Òprogram clustersÓ (groups of similar programs such as
family planning or micro-enterprise finance), with
performance goals and targets based on common indicators
for each group of programs. The updated version of the
paper was intended to inform subsequent debate about
strategic planning and strategic management for USAID.
1
The views expressed in this paper are those of the author. They
do not represent official policy of the U.S. Agency for
International Development (USAID).
The paper analyzes options and issues surrounding
strategic planning and management in the context of
developmental foreign aid. It begins with a brief discussion
of Òstrategy,Ó starting from dictionary definitions and
arriving at a definition specific to foreign aid and
development.
It then presents a basic, Òbest practiceÓ model of
development aid provided to a limited number of
countries. This includes both basic assumptions about the
challenge of development and the role of foreign aid; and a
process for resource allocation that is arguably strategic
and aims to maximize results. This model provided the
conceptual foundation for the revision and update of
USAIDÕs 1997 Strategic Plan.
The paper then gradually introduces complications and
constraints. These include:
• GPRA (The Government Performance and Results
Act);
• operating in many rather than only a few countries;
• broad foreign policy concerns other than development,
including transition from Communism and crisis
prevention and recovery;
• distinguishing among countries and regions based on
general foreign policy importance;
• specific foreign policy concerns;
• and finally, functional earmarks.
Along the way we look at how to approach GPRA
requirements and the pros and cons of program clusters as
a management and reporting tool, including common
indicators and targets for each cluster.
To briefly summarize the implications of the various
complications and constraints,
• The introduction of GPRA is straightforward. GPRA
affects only reporting and not Òhow we manageÓ. The
products mandated by GPRA (Agency Strategic Plan,
Annual Performance Plan; and Annual Performance
Report) are easily generated from the information
flows that are already part of the resource allocation
process.
• Operating in many rather than few countries calls
for establishing regional bureaus, but does not
otherwise affect the basic model. However, where
GPRA reporting is concerned, we now face a
problem of ÒcompactnessÓ in our reporting. This
is only a reporting problem, and not a
management problem. Indeed, it is only a
presentational problem. We can still report
expected and actual results and link results to
resourcesÑbut not compactly.
• Similarly, adding other broad foreign policy
goals (not only development, but also transition
from Communism and crisis prevention and
recovery) calls for several straightforward
adjustments, but does not otherwise affect the
basic model. It is important to have a separate
funding account for each goal. Otherwise, the key
assumptions still hold for the most part, and the
basic approach to resource allocation remains
appropriate. GPRA reporting is still
straightforward, though not compact.
• Discriminating among countries and regions
according to general foreign policy importance is
readily accommodated, without significant impact
on the basic model or on GPRA reporting.
• Introducing specific foreign policy concerns (e.g.
mid-East Peace, transition from apartheid in
South Africa, infectious diseases, climate change,
a fresh start in Nigeria or Bosnia) raises basic
issues for the model, because this complicates the
structure of goals. More specifically, goals
become not only numerous but also dissimilar,
calling for separate and different strategic
approaches. However, if these specific foreign
policy concerns can be funded from a
separate/special account, then the basic model
still holds for other broad goals and accounts.
GPRA reporting would remain straightforward
for the other accounts, and for the special account
would depend on the nature of the specific foreign
policy goals.
• The impact of functional earmarks for the
development account depends crucially on the
breadth, size, and number of earmarks. A few
broad earmarks along the lines of ÒfunctionalÓ
accounts (agriculture, education, basic health,
etc.) have relatively little impact on the model,
except for some reduction (of uncertain
magnitude) in the capacity of the Agency to
maximize results. However, the more numerous,
large, and narrowly defined the earmarks, the
more disruptive to strategic planning and
management. As with specific foreign policy
concerns, such earmarks call into question the
goals the Agency is supposed to achieve.
Finally, we discuss an alternative modelÑstrategic
planning based on clusters of similar programs. To clarify
the issues, we assume that program clusters reflect a
number of fairly narrow and large earmarks. The paper
briefly presents a model for strategic management based
on such program clusters. It then discusses the main issues
surrounding such an approach. Assuming that the initial
basic assumptions hold, managing by large and narrowly
defined program clusters significantly diminishes aid
effectiveness and results. It thereby significantly weakens
the links between foreign aid and the national interests,
and also substantially undermines U.S. leadership in the
development community and more generally. The paper
concludes with observations about the importance of
accurately and precisely identifying goals before debating
approaches to strategic planning and management.
WHAT IS MEANT BY ÒSTRATEGYÓ?
My dictionary defines strategy as Òa plan, method or series
of maneuvers...for obtaining a specific goal or resultÓ. It
provides a specific definition for the militaryÑÓin military
usage, strategy is the utilization of all of a nationÕs forces
through large-scale, long-range planning and development,
to ensure security or victory.Ó [1,p.1298]
These two definitions suggest several key features. First
thereÕs a specific goal, which may nonetheless be broad
and multifaceted (ÒsecurityÓ). Second, the strategy
includes a set of actions that deploy resources to achieve
the goal. This hints at the idea of some kind of
Òtransformation functionÓ that relates ends and means, and
translates resources into results. This in turn suggests an
efficiency criterionÑthat maximizing results and/or
minimizing costs ought to be important.
In applying either definition to an agency that provides
foreign aid, we need to make allowance for our particular
goal or resultÑdevelopment. This goal is relatively well
defined, and also fairly broad. More importantly, it results
primarily from the actions of othersÑit is recipient
countries that achieve or fail to achieve these goals, and
our goal is to help and support their positive efforts. If the
goal is couched as development, it is clearly beyond our
manageable interests. If the goal is couched as make the
greatest possible contribution to development progress
(given available resources), that is more specific and
controllable.
Building on the definitions from the dictionary, consider
the following hypothetical definition for strategy in the
context of foreign aid and development:
Òa comprehensive, long-range plan or method for
using available foreign aid to make the greatest
possible contribution [and/or provide the greatest
possible support] to development progress.Ó
This definition incorporates many of the elements of the
other two. Like the military definition, it refers to
resources; to comprehensive (or global) planning; and to
long-range planning. The biggest distinction is in the goal,
and it is not simply the difference between security and
development. First, we talk about contribution to
development acknowledging that development progress is
mainly a function of what recipient countries do and not of
foreign aid. Second, we explicitly introduce the idea of
optimizing, or achieving the Ògreatest possibleÓ results.
The basic model set forth below arguably fits this
definition.
THE BASIC MODEL
Assume our mission is ÒdevelopmentÓ. Assume the
developing world is made up of only a few (e.g. four)
relatively poor countries. We provide development
assistance to these four countries from one funding
account (Òdevelopment assistanceÓ) with no earmarks or
directives.
Other important assumptions that underlie the model
include the following:
• Development progress in poor countries is in the
national interest and supports broad U.S. economic,
political, and security goals. Countries that make
development progress are better economic partners;
less likely to cause security or stability problems; and
more able and willing to cooperate on international
issues of concern to the U.S. and others.
• Countries are the fundamental unit of analysis.
Development progress is mainly Òby, for, and aboutÓ
countries and the people within those countries.
Further, the focus on countries fits best with the story
we tell about why and how development progress is in
our national interestsÑit is countries that are good
economic partners, less likely to cause security
problems, more likely to cooperate, etc.
• Development progress is first and foremost the result
of country self-help efforts. The role of foreign aid is
supportive, perhaps catalytic, but not basically causal.
• Progress in one country is largely separate and
independent from progress in another, in the sense
that (as seen at the end of the 1990Õs) Chile, India, and
Uganda can make substantial progress while
neighboring Argentina, Pakistan, and Kenya flounder.
• We are guided by a Ògeneral development strategyÓ
(GDS)Ña broad analysis or set of propositions about
the nature of the development challenge; what
countries need to do to make progress; and how
donors can help. Policy analysis, evaluation, and other
analysis of experience inform the ÒGDSÓ. (For broad
examples see [2], [3], and [4].) From the GDS can be
derived a Òstrategic frameworkÓ with (say) four Ògoal
areasÓ reflecting four dimensions of development
(without loss of generality, call them Economic
Growth, Democracy/Governance, Human Resource
Development, and Environment); and broad policy
that explains best practice and best approaches within
each goal area based on evaluation and lessons
learned. Policy would define a framework of
objectives and approaches for each goal area as in
USAIDÕs current strategic plan and framework.
• There are important linkages and interdependencies
between the various goal areas. Progress in one area
tends to reinforce progress in another.
• Country context really matters. The Ògeneral
development strategyÓ will be applied and
implemented quite differently in different countries,
depending on the country circumstances, needs, and
opportunities. Thus, the Ògeneral development
strategyÓ by itself is largely a frameworkÑa set of
general statements about ends and means. It is not a
blueprint and it does not determine how resources
should be allocated.
• USAID resident missions can manage for results. For
a given resource level they can devise and implement
country assistance strategies to achieve results that
contribute to development progress, all within the
framework of the GDS. They can link resources to
these results.
• Partnership, participation, and ownership matter. For
aid to be effective and achieve results it is important
for country assistance strategies to be worked out in
genuine collaboration with the recipient country.
The Òstrategic challengeÓ for the agency is to allocate
resources both among countries and within countries so as
to maximize USAIDÕs contribution to development
progress.
How are resources allocated to maximize results? How do
we manage strategically?
• The first task is to allocate among countries. We make
a preliminary or indicative allocation to each country,
based on need (i.e. level of development, as indicated
by per capita income and various social indicators),
commitment (as evidenced by actual self-help efforts,
particularly economic, political, and social policy
performance), and population size. This approach
reflects accumulated wisdom on how to maximize aid
effectiveness (e.g. see Assessing Aid.) In particular it
reflects the finding that the main determinants of aid
effectiveness are recipient policies and other self-help
efforts. It also reflects the value that (other things
equal) aid should be focused on relatively needy
countries. (In fact, country need and commitment have
long been emphasized as allocation criteria in the
Foreign Assistance Act.) Population is essentially a
scaling factor.
• On the basis of this preliminary allocation, each
mission devises a country assistance strategy. The
strategy is based on the Ògeneral development
strategyÓ and related policy guidance (about when,
whether, and how various interventions can yield
results). It aims to maximize results in developmental
terms, taking into account specific country
circumstances, needs, and opportunities; activities of
other donors; linkages and interdependencies among
the goal areas; and past programmatic experience
and results in the country. The strategy tailors
interventions to local circumstances and is developed
in a participatory fashion that aims to promote
partnership and local ownership.
• We can assume that each country assistance strategy
has the mission operating in each of the goal areas.
Looking at a given goal area (such as economic
growth), the four country programs might feature
widely varying resource levels (reflecting different
country situations, needs, and opportunities) and
somewhat different activities (say an emphasis on
agriculture in one country, trade and investment in
another, financial sector in another, within EG). For
each goal area, each mission sets up one or more
strategic objectives (SOÕs), with targets, indicators
and resource levels.
• AID/W reviews the strategies and targets and makes
some adjustments among the country and SO funding
levels based on the quality and soundness of the
strategies and expected performance and results.
• Assuming none of the basic allocation factors
(particularly commitment, since need and population
[compared to other countries] are relatively stable) or
other country circumstances change radically, and
assuming stability in overall budget availability,
country budget levels continue to be adjusted from
year to year based on analysis of performance and
results. This analysis of performance takes into
account that results are easier to achieve in advanced
countries than in very poor countries, and does not
Òover-rewardÓ good program performance in
advanced countries. More generally, the links between
results and adjustments in resource allocation should
be based on analysis rather than on simple rules such
as the better (worse) the results, the more (less)
resources.
• When ÒneedÓ reaches a certain thresholdÑwhen a
country reaches ÒadvancedÓ status as signaled by
economic and social indicatorsÑa country is to
graduate from foreign aid.
• If ÒcommitmentÓ in one or more countries shifts
significantly, some reallocation of aid (among
countries) would be in order and a country strategy
might need reexamination.
Salient Features
• In this model resources are allocated both across
countries and within countries so as to maximize
results, defined in terms of the contributions of aid to
development progress. In that sense, resources are
allocated ÒstrategicallyÓ.
• The center plays the lead role in deciding the
allocation of assistance across countries.
• For each country, the mission plays the lead role in
determining the allocation of resources among goal
areas and activities, with strategies subject to review
and approval by AID/W.
• The allocation of assistance across goal areas is
basically determined by summing over (approved)
country strategies rather than by some central
allocation process. Similarly, strategic planning
targets (or performance goals) are proposed by
operating units and reviewed and approved by the
center.
• The center influences these strategies ex ante by
policy (based partly on evaluations) that provides
guidance about how most effectively to achieve
development results and what sorts of programs and
approaches are most important. The center also
reviews the strategies for conformance with policy
and makes adjustments in funding based on analysis
of the strategies and review of expected and actual
program performance and results. The center approves
targets (results) sought by the operating unit.
An approach whereby resource allocation within countries
is decided in a decentralized way (i.e. by resident field
missions) is justified by assuming that the Òtransformation
functionÓ that translates resources into results is complex
and varies from country to country, so that the field has a
much better understanding of that function than the center.
In contrast, if the center had perfect (or equal) knowledge,
then all resource allocation could be done from the center.
The more complex and different the country-specific
transformation functions, the less likely the center knows
as much as the field. The more similar and simple are the
transformation functions, the more likely that the center
can efficiently determine the best allocation patterns within
countries.
Reporting
In this context we can readily explain to Congress, OMB,
and others:
• the allocation of resources across countries, including
the role of need, commitment, population, and
program performance and results in determining these
allocations;
• the allocation of resources across goal areas (based on
country strategies);
• the results we aim to achieve, disaggregated by
country, goal area, and strategic objective;
• the links between resources and results (insofar as
these are established in the country assistance
strategies, and more generally in the GDS and
associated policy).
Over time, for each operating unit strategic objective we
can report actual outcomes against targeted results.
Performance reporting would be organized by country
(given that the country is the natural unit of analysis and
there are only four countries), and could also look at the
pattern of performance by goal area.
What about program clusters? Policy (beginning with the
GDS) that defines a framework of goals, objectives, and
approaches in principle starts to give rise to broad program
clusters, i.e. groupings of programs that are more or less
similar from the standpoint of the results they are trying to
achieve. However, with only four countries; with both goal
areas and potential programs within goal areas defined
broadly; and with programs tailored to country
circumstances, needs, and opportunities, program clusters
would not emerge in this basic model.
Similarly, the program accomplishments in a particular
goal area almost certainly could not be added up across the
four countries. Results could be added up only if it
happened that programs within a goal area were virtually
identical.
Conclusion/Claim
This approach to resource allocation conforms to best
development practice. It is an efficient and transparent
results-oriented management system. It is ÒstrategicÓ in
that it allocates resources with the aim of maximizing
results in terms of our development goals. It takes into
account both program performance and country policy
performance (commitment). Results reporting is
straightforward and results can be linked to resources. It is
completely in the spirit of GPRA. It balances central
policy direction and review with decentralized
responsiveness to local conditions, needs, and
opportunities.
THE BASIC MODEL WITH THE INTRODUCTION
OF GPRA
Suppose that we are now asked to do a strategic plan, an
annual performance plan, and an annual performance
report. Compliance would be straightforward:
• The Agency Strategic Plan would be built up from and
organized around the four country strategies. Our
overall mission is development. At the next level
down our four strategic goals are development
progress in country A, in country B, in country C, and
in country D. For each of these countries/goals our
strategic objectives and performance goals would be
those from the country strategies.
• The annual performance plan and annual
performance report would have a chapter or section
for each country. (Recall that the four strategic goals
are development progress in each of four countries,
reflecting the conviction that development happens at
the country level, and that the individual country is the
key unit for analysis). Within each chapter, the
performance goals, targets, indicators, and resources
for the strategy would be discussed.
• There is no reason to expect that performance results
could or should be aggregated or rolled up by goal
area. Instead, the links between our program results
and development progress at the country level would
be documented (but not measured or quantified) in
each Country Assistance Strategy and more generally
in the GDS and associated policy.
• Results and resources would be clearly linked.
Salient Features/Reporting
The GPRA products (ASP, APP, and APR) do not change
the underlying approach to management and resource
allocation. Instead, the GPRA products are simply
reporting tools, for a management system that was already
strategic and results-oriented. With or without the GPRA
products, program performance is taken into account
appropriately, both in formulating country strategies and in
adjusting allocations. At the same time, other important
factors that influence results (need, commitment, and
population) play a major role in allocations across
countries.
Conclusion/Claim
This management system conforms well both to best
development practice and to GPRA requirements.
OPERATING IN MANY RATHER THAN FEWER
COUNTRIES
What if we operate in many rather than only a few
developing countries (with correspondingly more money)?
Suppose that instead of four countries we provide aid to
(say) seventy-two developing countries, eighteen per
geographic region. We assume that the Ògeneral
development strategyÓ remains valid and that the other key
assumptions continue to hold.
• The agency arguably needs to make only ONE
adjustment to its management and operating
procedures. It creates four appropriately staffed
regional bureaus, to facilitate the task of strategy
review, performance monitoring, and adjustment of
budgets. The underlying rationale is twofold. First, we
assume that one bureau can readily oversee eighteen
strategies but not (say) 36 or 72. Second, we assume
that countries in a given region bear some similarities
to one another and dissimilarities to countries in other
regions so that there are efficiencies to managing by
region where learning and comparison are concerned.
• Otherwise there is no need to change the management
and operating procedures described above. The budget
allocations to each region would be based on the
indicative budget allocations to countries, reflecting
allocation criteria (need, commitment, and population)
that are commonly applied across countries and
regions. Adjustments to these allocations on the basis
of program performance would be carried out within
regions, but not across regions. The underlying
reasoning is that program performance on an annual
basis will not vary systematically across regions in
ways that would dictate regional adjustments.
2
Country strategies in each region would still be guided
by agency-wide policy.
• What about program clusters? With seventy-two
country strategies formulated within a common
strategic framework and (say) at least one activity in
each goal area per country, broad program clusters
should start to emerge. These would correspond to the
agency objectives and approaches in the strategic
framework and related policy guidance; and to
mission decisions (within that framework) about the
best possibilities for achieving important results and
associated funding requests. For instance, for
economic growth there would likely be numerous
programs in agriculture, in trade and investment, and
in financial markets. However, Òbest practiceÓ (as
reflected in the basic assumptions) still dictates that
these programs would be tailored to individual
country circumstances (including activities of other
donors), particularly where policies and institutions
are concerned (which are themselves diverse).
Therefore program activities within a cluster would
probably be far from identical, especially across
regions.
• Accordingly, at this broad level of program clusters, it
is extremely unlikely that common indicators of
program performance and results would emerge.
Similarly, it is unlikely that a meaningful aggregate
target for a program cluster would be feasible.
• Nonetheless, the Agency (or regional bureaus) would
still manage across program clusters in several
important respects. The volume of activity in each
cluster would guide technical staffing decisions.
Activities within goal areas and clusters would
continue to be guided by Agency policy. Regional
bureau technical staff would be expected to be able to
monitor and evaluate program performance in their
areas of expertise, even without common indicators,
and make recommendations about resource allocation
based on judgments about program performance.
2
Program performance might well be systematically better in a
developing region with many advanced developing countries (say
Latin America) compared with a region with many least
developed countries (say Africa), since ÒadvancedÓ developing
countries (by definition) have better institutions, human
resources, financial resources, etc. These factors make it easier to
achieve results in advanced countries than in poorer ones.
However, to favor such countries in resource allocation would be
to undermine ÒneedÓ as an allocation criterion. For similarly
needy countriesÑcountries at similar levels of
developmentÑprogram results should be mainly a function of
recipient self-help efforts, which are taken into account by
ÒcommitmentÓ.
Periodically, impact evaluations would focus on
program clusters (e.g. ÒGirls EducationÓ) and examine
experience, lessons learned and best practice. Across
regions, one would expect less commonality in
programs. For instance, agricultural challenges can
vary considerably from region to region. The
exception to this tendency might be programs based
on human biology (health, population) which is
universal.
Salient Features
• This is still a results-oriented management
systemÑbased on best practiceÑthat is completely in
the spirit of GPRA.
• However, where GPRA reports are concerned we now
face a major problemÑhow to write a compact
strategic plan, annual performance plan, and annual
performance report. Instead of four goals
(development progress in countries 1-4) we now have
72 goals (development progress in countries 1-72).
These are truly separate and distinct goals insofar as
there is not much interdependence between
development progress in one country and development
progress in another, especially since development
progress is seen as mainly a function of recipient
policies and self-help efforts. (Recall the basic
assumptions.)
• The problem here is not a management problem, nor a
strategic problem, but essentially a communications
problem. The agency can readily manage 72 country
programs strategically and efficiently (in the sense of
allocating resources to maximize development results)
along the lines described above.
• Where reporting is concerned the agency can readily
report on program performance across seventy-two
countries and four goal areas. ButÑwith diverse
programs tailored to country circumstancesÑit cannot
do so compactly. The main issue raised by operating
in many rather than few countries is essentially the
presentational issue of how to report results in a
ÒdigestibleÓ way.
• The basic options are to organize reporting by region
or by goal area. In 1997 USAID opted to organize the
GPRA products (ASP, APP, APR) around goal areas
and agency objectives rather than around countries
and regions. Partly this was because the 1994
ÒStrategies for Sustainable DevelopmentÓ [2] and the
associated ÒStrategic FrameworkÓ were on hand when
it came time to write the 1997 Agency Strategic Plan.
But, these were always fundamentally policy
documents, and not programming, planning, or
management documents (except in the sense that we
manage in part by policy). They were never meant to
dictate resource allocation, except insofar as policy
(e.g. Òwithin basic education, investments in primary
education tend to yield the highest returns. Therefore
USAID will focus first and foremost on universal
access to quality primary educationÓ) dictates resource
allocation.
• Further, USAID believed that reporting by goal area
(and by objective and program cluster within goal
areas) better conveyed a sense of what our programs
aim to accomplish and howÑit has been seen as a
better way of Òtelling USAIDÕs storyÓ and
communicating USAIDÕs value-added to larger
development goals. The high scores that USAID has
received on its past several performance reports (first
and third among government agencies the past two
years) tend to validate this judgment.
Conclusions/Claims
In this expanded model resources are still being managed
strategically to maximize the contribution of foreign aid to
development progress. The agency can still carry out
essential reporting tasks. However, it faces a challenge of
communicating results in a compact fashion.
More generally, this extension of the model reinforces the
distinction between managing and reporting. Further, it
introduces a distinction between fundamental reporting
issues (do we have results to report) and presentational
issues (can we report them compactly).
INTRODUCING FOREIGN POLICY
CONSIDERATIONS BESIDES DEVELOPMENT
Foreign policy concerns vary widely. They range from
broad goals that are somewhat distinct from development
(such as transition from Communism and crisis prevention
and recovery) to the relative importance of particular
countries to specific foreign policy concerns that may be
more or less related to development. These are discussed
in turn.
Broad foreign policy goals such as transition from
Communism (ÒTransitionÓ) and crisis prevention and
recovery (ÒCrisisÓ)
Broad foreign policy concerns such as transition and crisis
arguably constitute large, separate and distinct goals for
USAID (alongside development). Though recipient
institutions and institutional development are central to
each of these challenges, in many respects they are
different. With different goals, it becomes important to
have separate accounts (as we have for countries making
the transition from Communism) to fund programs under
each goal.
Apart from this, introducing crisis and transition calls for
only modest departures from the Òbest practiceÓ model
described above. Countries are still the basic unit of
analysis where crisis and transition are concerned. More
generally, the key assumptions (listed earlier) continue to
hold in large measure. Initially allocating resources
according to need, commitment, and population is still
appropriate, except that need and commitment should be
defined and gauged somewhat differently. Regional
bureaus, country strategies and results frameworks are still
called for.
Transition from Communism mainly concerns the
countries of Eastern Europe and the former Soviet Union,
which are geographically distinct from Òthe third worldÓ of
developing countries. Further, the challenge is largely one
of transforming economic and political institutions from
those associated with Communism to those associated with
markets and democracy, while maintaining already
impressive social indicators (e.g. basic health, basic
education, and fertility). Admittedly, some formerly
Communist countries are low-income countries (for 2003,
Georgia, Azerbaijan, Moldova, Uzbekistan, Kyrgyz
Republic, and Tajikistan) and a few others are lower-
middle income.
It remains important to allocate funds for transition on the
basis of need, commitment, and population. But ÒneedÓ in
formerly Communist countries is not well measured by the
usual development indicators for health and education, and
indicators such as per capita income can be misleading.
Need is more a matter of how deeply embedded are/were
Communist institutionsÑa function more of history and
location than per capita income. Similarly, the most
important indicators of commitment (policy and
institutional self-help efforts) might well be different.
Crisis usually pertains to developing countries (especially
relatively poor developing countries) and countries making
the transition from Communism. The salient problem is
not simply the existence of forces for conflict (which are
present in many if not most countries), but more
importantly the limited capacity of national institutions to
manage and contain conflict. The goal is typically to get
such countries back onto a steadier development or
transition track. The sorts of activities and interventions
that are appropriate in more stable settings often donÕt
make sense in these countries. Again, some sense of need
and commitment to self-help efforts is important to guide
resource allocation. But need and commitment would be
gauged using different indicators than for developing or
formerly communist countries. Judgment would surely
play a much heavier role relative to objective indicators.
While most of the important assumptions hold, two
become somewhat ÒiffyÓ. First, it may be less true that
ÒperformanceÓ in one country is independent of
performance in other (neighboring) countries. Spillover
effects may be significant. Second, there is so far much
less of a general strategy for crisis prevention and
recoveryÑto guide country-specific effortsÑthan for
development. We have much less in the way of a general
ÒcrisisÓ model based on robust lessons learned. This does
not invalidate the basic model for strategic planning and
management. For instance, it is still important to have an
assistance strategy for each country that aims to achieve
results. But, it will be more difficult to formulate and
appraise country assistance strategies in the absence of a
general model/framework for crisis prevention and
recovery.
USAIDÕs current strategic framework of six goal areas
(economic growth, democracy/governance, health, human
capacity development, environment, and humanitarian
response) is broad enough to cover all three concerns
(development, transition, crisis) since it includes a goal for
humanitarian assistance, as well as democracy/governance
and economic growth goals that encompass the main
concerns of transition. However, it would make more
sense to have a general strategy and strategic framework
specific to each broad goal (i.e. one for development, one
for transition and one for crisis). Similarly, it would make
more sense to report results separately for these separate
goals.
In principle it is important to have separate funding
accounts for development, for transition from communism,
and for countries in crisis. Where the same funding
account (Development Assistance) is used for two goals
(for development, and for countries in crisis) it is difficult
to determine and justify the allocation of aid among
countries, since there are few common criteria. For
instance, increased assistance for Zimbabwe (a relatively
small, relatively less needy [by African standards],
relatively uncommitted country that is crisis-prone) comes
at the expense of assistance to larger, needier, and more
committed developing countries where lasting
development results can be more surely achieved.
It arguably makes sense for a ÒtraditionalÓ development
agency that is ÒnewlyÓ concerned with transition from
communism and with crisis to continue to operate on a
regional basis (as described above). First, most of the
countries making the transition from Communism are in
one (large) region. Second, the goal where crisis and
conflict are concerned is to get countries back on a more
stable development track (or transition track), so that an
African country that emerged from crisis and conflict (e.g.
Rwanda, Ethiopia) would rejoin its African peers. Finally,
institutions loom large in each of the three challenges, and
there is arguably significant commonality among
institutions within regions and significantly less
commonality across regions.
Introducing transition and crisis as goals separate from
development tends to further call into question the issue of
program clusters, and certainly the idea of common
indicators and targets. For a given program cluster, the
range of activities within the cluster will tend to become
wider, the greater the difference in broad objectives. For
instance, privatization has turned out to be a very different
challenge in formerly Communist countries compared with
developing countries. More generally, concerns such as
economic growth or democracy and governance are
approached quite differently depending on whether the
challenge is development, transition, or crisis.
Foreign Policy Importance of Particular Countries
Another kind of foreign policy concern is thatÑwhere
broad goals such as development, transition, and crisis are
concernedÑsome countries matter more to the United
States than others do. For instance, development in small
Central American countries is a greater priority than in a
number of comparably small African countries,
Where the general foreign policy importance of countries
is concerned, there are classifications for core staffing
purposes that reflect the range and intensity of foreign
policy interests, and thus (to an approximation) the relative
importance of various countries. It is straightforward to use
these classifications in the initial allocation process, along
with need, commitment and population.
In principle, this would be at some cost in terms of the
simple objective of maximizing purely development
results. Alternatively it could be reasonably be seen as
indicating that development results in some countries are
valued more highly by the USG than the same
development results in others.
An empirical analysis indicated that using these ratings did
not introduce large distortions compared with a pure
development model, insofar as many of the countries that
rank high on development criteria (need, population,
commitment) also rank high in foreign policy importance.
If these results continue to hold, it would indicate that
introducing considerations of the foreign policy
importance of countries would call for a relatively small
adjustment in the allocations of the ÒbasicÓ model, and
would therefore generally not cost much in terms of pure
development results.
Country-specific earmarks and regional earmarks are
another way of incorporating considerations of general
foreign policy importance. As long as the goals for
countries and regions remain the broad ones discussed
above, the basic model still works. It is when the goals
start to vary that the model starts to break down.
Special foreign policy concerns related to particular
dimensions of development
Foreign aid is often used to address a range of specific
foreign policy concerns that bear some relation to
development, but are important in their own right.
Examples include peace in the Middle East and the
Balkans, transition from apartheid in South Africa; a Òfresh
startÓ in countries like Nigeria, Democratic Republic of the
Congo and Serbia; and global issues such as global
warming, biodiversity, and infectious diseases. All the
while assuming that development is an important foreign
policy concern, we have often seen special priority
attached to one or another dimension or aspect of
development.
Introducing these sorts of concerns causes some basic
problems for the model and for strategic management
more generally. The fundamental issue is one of
goalsÑthese concerns represent distinct goals. Distinct
goals call for distinct strategies and strategic approaches;
different allocation criteria; and different approaches to
achieving results. The basic assumptions of the general
model no longer necessarily hold.
Does this invalidate the basic model for strategic
management developed so far? Not necessarily. There is
one simple adjustmentÑalready somewhat evident in
practiceÑthat ÒrescuesÓ the model. Simply create a
separate special accountÑlike the current ÒEconomic
Support FundsÓÑand manage it separately. This would
call for subdividing that account according to the specific
foreign policy concern, and then managing each portion as
befits the particular concern. For instance, funding for
ÒcountryÓ problems (Mid-East Peace, transition from
apartheid, fresh start in Serbia) would be associated with a
set of country strategies reviewed by the relevant regional
bureau, whereas funding for biodiversity or infectious
diseases would be managed in a more centralized way.
As long as we can separate Òspecial foreign policy
concernsÓ (and the associated funding, management, and
reporting) from our broad goals, we can still operate
strategically and manage for results. This example
illustrates a more general pointÑto manage strategically it
is important to ÒisolateÓ goals and ÒisolateÓ funding for
each goal. We cannot ÒstrategicallyÓ or efficiently pursue
multiple goals with the same dollar.
INTERIM SUMMARY
Up to this point the basic best practice model still works
fairly well. Adding GPRA and incorporating many rather
than few countries calls for only minor adjustments for
strategic management, although reporting in a compact
way becomes problematic with many countries.
The basic model continues to hold up well if we expand
the foreign aid mandate to include the broad objectives of
Crisis and Transition. It still makes sense to operate on the
basis of regional bureaus and country strategies. But it
becomes important to have a separate funding account for
each of the three broad objectives, and to approach Òneed
and commitmentÓ somewhat differently in allocating funds
across countries. For the allocation of resources within
countries, it helps to have a distinct general strategy and
strategic framework for each of the three broad foreign
policy goalsÑdevelopment, transition, and crisis. (For
transition, see [5].) Allocations within countries would still
primarily depend on strategies formulated by resident
missions that are sensitive to country-specific needs,
opportunities, and circumstances.
Considerations of the general foreign policy importance of
specific countries and regions can readily be incorporated.
Adding additional, specific foreign policy concerns starts
to create significant problems for strategic management,
because this essentially means adding goals that call for
their own, often different strategic approaches. However, if
a separate funding account can be established for these
concerns, then the basic model for strategic management
still works for the remaining goals and accounts.
FUNCTIONAL EARMARKS
Functional earmarks dictate that a certain amount or
percentage of available funding (e.g. Development
Assistance) be spent on a specific kind of program (e.g.
family planning). In principle functional earmarks have
costs in terms of foregone development results to the
extent that they lead to different allocations to functional
program areas (and to countries) than would result from
country strategies aimed at maximizing results based on
unrestricted funds. In other words, if we make an
allocation based on maximizing development results, and
then have to adjust the allocation (across activities and
countries) to accommodate one or more functional
earmarks, the cost in terms of foregone results would be
greater or less depending on the size of the change in
allocation patterns.
The cost in terms of foregone development results is partly
a function of the breadth or narrowness of the earmark, and
partly a function of the size of the earmark relative to what
would be unconstrained funding for the earmarked
activity. For example, a broad earmark for financial sector
development or agricultural development would call for a
smaller change in allocations than the same sized earmark
for microenterprise lending (a part of financial sector
development) or agricultural research (a part of
agricultural development). On the second point, an
earmark that simply maintains unconstrained expenditure
levels for a particular activity would have much less
impact than an earmark that doubles or triples
unconstrained expenditure levels.
Functional earmarks can impair development results
through several channels. First, country strategies and
strategic objectives must increasingly take into account the
need to absorb earmarks, with correspondingly less
emphasis on country commitment and country-specific
needs and opportunities. More generally, earmarks (to the
extent they are both narrow and large enough to
substantially alter resource allocation) fundamentally
undermine the idea of a country assistance strategy tailored
to local circumstances with substantial local ownership and
participation.
Even with functional earmarks, as long as the aid agency
has some significant degrees of freedom in resource
allocation among activities, it is still best practice to try to
maximize results (subject to the constraint of meeting the
earmarks) by encouraging resource allocation across
countries according to need, commitment, and country
performance, and resource allocation within countries
based on country strategies and program performance.
The implications of functional earmarks for program
clusters depend on the size and narrowness of the earmark.
A small earmark will not yield much in the way of a
program cluster. A large but broad earmark (e.g.
agriculture, basic education) could generate a large, broad
program cluster or perhaps a series of more specific
program clusters. A large earmark for a relatively narrow
range of services or commodities generates a
correspondingly specific program cluster. Indeed the
interest in managing by program clusters has been largely
generated by experience with relatively large, relatively
narrow earmarks in family planning and health assistance.
In theory, the more narrowly defined the program
clusterÑin particular the more it involves delivery of a
homogeneous good or serviceÑthe more feasible are
common indicators that can be aggregated, and can serve
as the basis for a target for the program cluster. In reality,
the complexity of achieving results in country specific
circumstances could result in an unduly narrow earmark
becoming simply a commodity or service drop that
provides short-term benefits with little lasting impact.
As with specific foreign policy concerns, introducing a
number of large and narrow earmarks calls into question
the goals that foreign aid is supposed to achieve. Instead of
aiming to make the greatest contribution to development
progress, the implied goal is to support progress in selected
aspects of development. (e.g. child survival and family
planning.) The next section discusses strategic planning for
this quite different goal.
AN ALTERNATIVE MODEL: STRATEGIC
PLANNING AND MANAGEMENT BASED ON
PROGRAM CLUSTERS
The popular alternative model for strategic planning and
management is to plan and manage around program
clusters rather than by countries as in the basic model. This
view is encouraged by the basic structure of Òstrategic
goalsÓ and objectives contained in USAIDÕs strategic plan,
not to mention by the earmarks and directives that
characterize development resources.
The following provides a brief sketch of what this model
might look like. USAID would define clusters of
programs, presumably bearing a close correspondence to
existing large earmarks and directives. With guidance from
the Administration and Congress, USAID would define
resource levels for each cluster, within an overall budget.
The technical group associated with each cluster would
make recommendations about resource allocation on the
basis of perceptions and judgments about where the
resources could be most productively used. Such
allocations might be ÒindicativeÓ in the sense that missions
could respond and request different mixes of funding.
However, the very nature of earmarks and directives
suggests that supply exceeds demand, and missions must
absorb more funding for earmarked activities than they
would request if they were maximizing results without
constraints. Over time, the allocations of earmarked funds
could be adjusted to reflect program performance and
results, with more funds going to countries that could best
absorb and utilize the particular resources.
Appraising the model
This model certainly appears to be ÒstrategicÓ in that it
allocates resources to achieve goals. The main issue has to
do with the goals that are being pursued and achieved. The
overarching goal of the Agency would be more precisely
expressed as progress in selected aspects of development.
Under fairly reasonable and well-accepted postulates about
aid effectiveness it is pretty clear that this model does not
maximize the contribution of foreign aid to development.
The postulates are those underlying the basic model.
a. First, for allocations of aid among countries the key
criteria for maximizing aid effectiveness are need,
overall commitment, and population. (Commitment
has to do with policies and institutions, based on an
understanding that these are fundamental determinants
of development progress)
b. Second, within a given country the optimal allocation
of aid among activities depends on a host of factors
that are specific to the country and are much better
evaluated on the ground than from the center. These
include country specific needs, circumstances, and
opportunities, synergies among different activities,
and efforts of other donors.
c. Third, to be effective aid programs and strategies need
to be formulated based on participation and ownership
by the aid recipient.
d. Fourth, in taking account of program performance in
allocating resources, it is important to remember that
program results are more easily achieved in more
advanced countries, because they have better
institutions and human resources. This, however,
tends to conflict with need criteria.
How does the model of planning and managing by
program cluster (of predetermined resource availability)
stack up against these ÒpostulatesÓ? Much depends on how
broadly or narrowly the program clusters are defined, e.g.
a program cluster for financial development versus a
program cluster for microenterprise lending; or a program
cluster for agricultural development versus one focused on
agricultural research. The more broadly the program
cluster is defined, i.e. the greater the flexibility for
tailoring programs within a country to local conditions and
circumstances, the closer the model gets to maximizing aid
effectiveness.
To highlight the issues assume that the program clusters
are microenterprise lending, family planning services, a
narrow range of ÒChild SurvivalÓ health interventions, and
food aid for humanitarian purposes. We assume further
that all are intended to satisfy unmet need for the specific
services and for food.
Allocation of assistance among countries:
• In all cases population size would be important as an
allocation criterion.
• In most cases country need would also be an
important criterion, insofar as the goods and services
are mainly poverty oriented. Holding population size
constant, need would be greater in poorer countries
(with the possible exception of family planning, where
unmet need is not necessarily correlated with level of
development).
• However, program performance might militate
against need, insofar as absorbing many of these
goods and services might happen more easily and
efficiently in less needy countries, with stronger,
better established delivery systems.
• Where commitment is concerned, there is little
evidence (e.g. from efforts by technical groups to
allocate resources associated with program clusters) to
suggest that overall country commitment (policy and
institutional self-help efforts) would play an important
role in allocations across countries. At best, self-help
efforts in the specific activity might be considered,
and these might correlate with overall self-help
efforts.
Allocation of assistance within countries
• There is little reason to believe that an assistance
program based on these four program clusters would
be optimal from the standpoint of specific country
needs and opportunities, other donor activities, etc. As
a general proposition, narrowly defined program
clusters determined in the donor capital would stand
only a small chance of matching the top foreign aid
priorities in a given country. This is all the more
apparent if the criteria for choosing the program
clusters are political.
• As a more specific proposition, neither these nor other
plausible program clusters (as defined by typical
earmarks and directives) tend to address the policy
and institutional issues that are generally considered
most important for development progress.
Participation and Ownership
With country programs essentially comprising a narrow
range of activities determined on an a priori basis from the
donor capital, there is correspondingly little scope for
recipient participation and ownership.
Program Performance as an Allocation Criterion
As mentioned above, pressure to program these goods and
services at earmarked levels might well lead to an undue
focus of aid resources on relatively advanced countries
with better delivery systems. Possible examples include
family planning services in Brazil, Mexico, Colombia, and
Turkey; and microenterprise lending in more advanced
LAC countries.
It is perhaps worthwhile reiterating that all of these
problems become less acute, the more broadly the program
cluster is defined. Program clusters defined broadly to
cover a wide range of possible interventions in financial
markets, health, population (including the various
determinants of fertility such as girlsÕ education), and food
security could readily overcome most of the problems
cited above.
What is getting maximized?
The program cluster model described above clearly does
not maximize the contribution of foreign aid to
development progress, especially if the program clusters
are defined narrowly. Nonetheless it could still be regarded
as ÒstrategicÓ with a different goal or objective, e.g.
Òmaximize the contribution of foreign aid in selected
aspects of developmentÓ (e.g. satisfying unmet need for
contraceptives or food). If this were the goal of the agency,
then the program cluster model arguably represents a
reasonably strategic way of managing.
WhatÕs the problem?
The basic problem with the modified statement of our goal
(maximizing the contribution of foreign aid in selected
aspects of development) is that it undermines the links
between foreign aid and the national interests, especially if
the Òselected aspectsÓ of development are narrowly
defined. The argument about development and the national
interests is that general development progress by poor
countries serves our broad economic, security, and
political interests. The argument is not that increased
delivery of selected services and goods in a developing
country serves our broad national interests. With narrowly
defined program clusters it is hard to make a convincing
and honest case that foreign aid effectively promotes
development and therefore serves the national interests. It
is also difficult for a donor with such an aid program to
have a legitimate claim to leadership within the donor
community.
CONCLUDING COMMENTS
This paper presents two models for strategic management
and planning in the context of foreign aid for development.
The ÒbasicÓ model corresponds to a goal of maximizing
the contribution of foreign aid to development progress.
The ÒalternativeÓ modelÑbased on program clustersÑfits
with a goal of maximizing the contribution of foreign aid
to selected aspects of development. If the Òaspects of
developmentÓ and the associated program clusters are
narrowly defined, then the two goals diverge sharply in
terms of the results they achieve, and their links to broad
national interests including U.S. leadership in the
development community.
More generally, the discussion suggests that underlying
different approaches to strategic planning and management
are important differences in goals. To have a productive
discussion about what approach to strategic planning and
management makes the most sense, it is critically
important to be clear and precise about the goal or goals to
be achieved. While some goals (development, transition
from communism, crisis prevention and recovery) may call
for broadly similar strategic approaches, other goals may
not.
REFERENCES
[1] The Random House College Dictionary, Random
House, Inc., New York, N.Y. 1982
[2] ÒStrategies for Sustainable Development,Ó U.S.
Agency for International Development, Washington, D.C.
March 1994
[3] World Development Report 1990: Poverty, World
Bank, Washington D.C. 1990
[4] World Development Report 1991: The Challenge of
Development, World Bank, Washington, D.C. 1991
[5] World Development Report 1996: From Plan to
Market, World Bank, Washington D.C. 1996
