Focus-Pocus? Thinking Critically about Whether Aid Organizations Should Do Fewer Things in Fewer Countries

Focus-Pocus? Thinking Critically about Whether Aid

Organizations Should Do Fewer Things in Fewer

Countries

Lauchlan T. Munro

ABSTRACT

The OECD Development Assistance Committee and G7 Finance Ministers

have suggested that many bilateral and multilateral aid organizations are too

dispersed, pursuing too many objectives in too many countries and too many

sectors with too many partners. These organizations are accused of lacking

critical mass, failing to follow their comparative advantage, failing to find and

exploit a niche, and having high transactions costs and low effectiveness. Such

aid organizations are being told to ‘focus’, ‘concentrate’, or be more ‘selective’

in order to become more effective. This article analyses the arguments in

favour of greater focus by aid organizations and suggests that, while some

of these arguments are valid, some are not and others need to be more

nuanced. There are many possible dimensions along which an aid organiza-

tion could focus and the link — if any — between focus and aid effectiveness

is complex along each of those dimensions. The debate so far has also ignored

the possibility that less focus may promote more effective aid. There is no

clear, simple link between focus and aid effectiveness, but this finding should

not be interpreted as carte blanche for spreading aid programmes indiscrim-

inately. Dispersion, like focus, needs careful thought and justification.

INTRODUCTION

‘Some systems are extremely difficult to model because they have so many compo-

nents; . . . they are mathematically intractable. As the number of components or ‘‘dimen-

sions’’ in the equations goes up, the length of time it takes to solve the equations rises even

faster. [A] feature of complex systems is the dense web of causal connections . . . [T]heir

components have so many links to each other that they affect each other in many ways.’

Thomas Homer-Dixon (2001: 116)

The author would like to thank John Hardie for suggesting this topic, providing background

materials, suggesting the first part of the title, and providing comments on earlier drafts.

Kathleen Flynn-Dapaah, Martin Kreuser, Rohinton Medhora, Joan O’Donoghue, the editors

of this journal and two anonymous referees also provided useful comments. The views

expressed here are purely personal, and do not reflect the official policy of any organization.

The author accepts full responsibility for all errors of commission and omission.

Development and Change 36(3): 425–447 (2005). # Institute of Social Studies 2005. Publishedby Blackwell Publishing, 9600 Garsington Road, Oxford OX4 2DQ, UK and 350 Main St.,Malden, MA 02148, USA

Money, the philosopher and scientist Francis Bacon once noted, ‘is likemuck: good only that it be spread’. But spread how far? And how thinly? Inthe current debates about aid effectiveness, it is commonly observed thatmany aid organizations are spreading their resources — human, financial,informational — too thinly, that they are pursuing too many objectives,trying to do too many things in too many projects in too many sectors andcountries, and not doing any of them very well. The results, we are told,include higher than necessary transactions costs, small projects withoutcritical mass, policy incoherence, and, ultimately, an aid effort that is lesseffective than it could or should be. This situation analysis having beencompleted, the development organizations in question are almost invariablyadvised — and frequently opt — to ‘focus’ their activities on a smallernumber of objectives, activities, projects, sectors, partners or countries.This analysis and prescription have become particularly common fromofficial sources in donor countries in recent years; official and semi-officialcomments from the organs of donor governments such as the G-7 andOrganization for Economic Co-operation and Development (OECD) acceptthis argument uncritically and repeat it frequently.Having postulated that increased focus or selectivity or concentration

would help aid organizations improve their effectiveness, the question thenarises, ‘but how?’. Here there is less agreement. Perhaps the best knownargument is that of Burnside, Collier and Dollar at the World Bank, whohave argued in two papers that aid has its greatest developmental impact incountries with large numbers of poor people and ‘good’ economic policiesand governance (Burnside and Dollar, 1997; Collier and Dollar, 1999). Theimplication is that, globally, aid effectiveness would be improved if donorsfocused their resources on the poorest countries with the best policies andgovernance.1 This article, however, is not concerned with this macro per-spective on aid effectiveness. Rather, it examines the literature on aideffectiveness at a more micro level, that is, at the level of the donororganization itself. We are told that individual aid organizations would bemore effective if they were more compact, more focused, more selective.What are the strengths and weaknesses of these arguments, and whatevidence is presented to support them?The language used to describe the recommended course of action varies,

but usually includes words like ‘focus’, ‘selectivity’ or ‘concentration’. Theproposed mechanisms or ways through which more focus would lead tobetter developmental impact typically include obeying the law of ‘compara-tive advantage’, the need to ‘stick to the knitting’ or to ‘find your niche’ as a

1. This assertion, though now accepted as gospel by, for example, the G-7 Finance Ministers

(see G-7 Finance Ministers and Central Bank Governors, 2003a, 2003b), is controversial,

and the policy implications which flow from it are less straightforward than Burnside,

Collier and Dollar admit. See OECD-DAC and Development Centre (2001) and

Mavrotas (2002).

426 Lauchlan T. Munro

prerequisite for success, and the need for ‘critical mass’ of effort or resourcesto ensure results or to achieve potential economies of scale. Other argu-ments concern the burden of high transactions costs for aid organizationswith a large number of small projects or transactions.

This article critically analyses language and arguments used to bothdescribe and promote focus by individual aid agencies. The purpose is notto engage in a purely academic exercise of semantics or to advocate indis-criminate spreading of scarce resources. It is, rather, to explore the issues ingreater depth than is usually the case, and to see how the language usedtends to push the debate in one direction or another. It then looks at otherarguments which suggest that focusing, or at least focusing too much, mightbe a bad thing. A more subtle way of summarizing the debate over theappropriate range of organizational activity is proposed. First, however, it isnecessary to understand the scope of the arguments around focus and thentake cognizance of the multiple dimensions in which development organiza-tions work, and hence, the multiple possible dimensions of focus/selectivity/concentration. Only once this is done can one consider the arguments infavour of focusing along any one of those dimensions.

AID EFFECTIVENESS AND FOCUS: THE OFFICIAL VIEW

Let us first try to understand the criticism that so many aid organizationslack focus and are too thinly spread. The Development AssistanceCommittee of the Organization for Economic Co-operation andDevelopment (OECD-DAC) has expressed concern that Germany’s officialdevelopment assistance works in too many countries and in sectors whereGermany lacks comparative advantage. Germany, it has been suggested,will be able ‘to take up a leadership role within the donor community’ ifonly it focuses on ‘sectors and activities where Germany has a comparativeadvantage’ (OECD-DAC, 2001a: 1, 4). In 1998, a Japanese governmentcommittee recommended ‘focusing on priority areas’ in order to ‘enhance(the) efficiency’ of Japan’s official aid (OECD-DAC, 1999: 3).

Similarly, critics have found that Canada’s official development assist-ance programme is ‘scattered . . . all over the place’ (Herfkens, 2003), with‘the widest geographical scattering among all national (aid) programmes’(Wood, 2001: 4). The peer review of Canada’s official development assis-tance conducted by the OECD-DAC concluded that ‘the current widedispersion of Canada’s aid . . . is increasingly problematic’ (OECD-DAC,2002a: 12–14). An author at the conservative C. D. Howe Institute hasgrumbled that Canadian aid is ‘dispersed among a diverse and highlyinclusive set of program priorities’ and countries (Goldfarb, 2001: 2–3).A leading newspaper columnist has warned other donors not to ‘fall intothe trap of the Canadian International Development Agency, which spreadsCanada’s aid money far too thinly around the world’. He advises others to

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‘choose a select number of countries and programs, and stick with them’(Simpson, 2004). A progressive researcher asserts — but, like others writingon Canadian aid policy, does not attempt to prove — that ‘Canada’s aidwould have more impact if concentrated in a small number of countries’(Culpeper, 2004: 5).Nor are the multilateral agencies exempt from the critique. The OECD-

DAC has urged the European Community to ‘promote further its compara-tive advantage’ in reforming its aid programme (OECD-DAC, 2002b: 1).Donor country representatives regularly use the forum of the executiveboards of UN development agencies to voice criticisms of how thinly spreadthose agencies are over various sectors and activities. Officials of UNdevelopment agencies must constantly answer questions from donor gov-ernments as to whether and where their agency has found its niche orfollowed its comparative advantage.2 Similarly, the World Bank underPresident Wolfenson has come under criticism for a lack of focus and formoving into new areas, such as religion and development, where it has littleor no experience. In 2001, the G-7 Finance Ministers and Central BankGovernors said that ‘more can be done’ by the multilateral developmentbanks ‘to focus their action on poverty reduction’; the G-7 ministers urgedthe multilateral development banks to exercise ‘greater selectivity in settingpriorities’ and suggested they should ‘focus on the needs of the poorest’. Theministers linked ‘selectivity in setting priorities’ with ‘improving develop-ment impact’ (G-7 Finance Ministers and Central Bank Governors, 2001).Canada’s Minister of Finance has said that improving the effectiveness ofdevelopment assistance ‘implies greater donor focus on priorities identifiedby developing countries in their Poverty Reduction Strategy Papers’(Goodale, 2004).Having concluded that aid is too widely and thinly spread, the official

response has been to promise more focus or selectivity. The JointDevelopment Centre and Development Assistance Committee Experts’Seminar on Aid Effectiveness, Selectivity and Poor Performers has adviseddonor countries ‘to determine their aid allocations according to their polit-ical priorities and comparative advantage’ (OECD-DAC and DevelopmentCentre, 2001: 1). In a mea culpa in 2003, the G-7 finance ministers com-mitted themselves to ‘increase selectivity in [their] assistance, focusing [their]aid on the poorest and best performing countries’ (G-7 Finance Ministersand Central Bank Governors, 2003b). Canada has begun to accept theadvice that its aid programme ‘clearly needs to be . . . in fewer countriesand sectors’ (Wood, 2001: 3) and has decided to put most of its forthcomingincreases in official development assistance into nine ‘focus countries’(CIDA, 2002). The German Development Cooperation Ministry ‘has

2. The author worked at UNICEF headquarters from 2000 to 2003, and has had to face such

questions many times.


decided to focus on [fewer] countries, and a reduced number of sectors ineach country’ (OECD-DAC, 2001a: 1) and has reduced the number of aidrecipient countries from 116 in the 1990s to 75 today, with 35 ‘focalcountries’ receiving greater levels of attention. The Netherlands has reducedthe number of recipient countries to twenty, with Dutch aid working in onlyone or two sectors in each country. UNICEF reduced its priorities fromtwenty-one in its Medium-Term Plan 1998–2001 to five for its Medium-Term Strategic Plan 2002–2005; these five were selected ‘because UNICEFhas comparative advantage in these areas’ (UNICEF, 2001: 18).

Mutatis mutandis, bilateral and multilateral aid agencies that haverecently come in for praise frequently did so precisely because of theirfocus on a small number of objectives, sectors and/or countries. Britishaid, for example, has recently been commended for its ‘strong focus onleast-developed and other low-income countries’ and ‘on the achievement ofthe international development targets’ (OECD-DAC, 2001b: 3, 4); it is ‘thebest targetted and best managed of the major national [aid] programmes’(Wood, 2001: 2). Where British aid does face challenges, it is to ‘[f]ocus thenext generation of bilateral country programmes on addressing the chal-lenges of greater sector focus’ (OECD-DAC, 2001b: 5). Denmark’s ‘efficientpolicy’ of ‘operational focus on a small number of priority countries and asubstantive concentration on a maximum of four sectors per country’ hasattracted praise from the peer reviewers at the OECD-DAC, who alsoadvised Denmark to ‘pursue past efforts to avoid geographic dispersion’of Danish aid (OECD-DAC, 2003: 1, 3). UNDP, for many years an organ-ization with a distinct lack of focus, has in recent years got kudos for itswithdrawal from the provision of technical assistance in areas such ashealth, education and agriculture (where its efforts overlapped with theUN specialized agencies), so that it could ‘focus . . . [on] DemocraticGovernance, Poverty Reduction, Crisis Prevention and Recovery, Energyand Environment, Information and Communications Technology, andHIV/AIDS’ (UNDP, 2003).

THE DIMENSIONS OF FOCUS

As can be seen by the brief sample above, the first thing to note aboutfocusing an aid organization is that one can have greater focus (or concen-tration, or selectivity) with respect to a number of different variables, ordimensions. An aid organization could focus by reducing the number ofgoals or objectives it pursues, the number of target groups it helps, thenumber of sectors (such as agriculture, health, energy) in which it works, thenumber of countries where it works, the number of partners or aid recipientorganizations that it works with or funds, the number of projects it sup-ports, the number of activities it supports in a project, or the number ofmanagement units it has in order to support a given set of objectives,

Focus-Pocus? 429

sectors, countries, projects, etc. The possible dimensions of focus are many.Focus (or concentration, or selectivity) is a more complex concept than itmight at first appear.The second thing to note is that more of one type of focus does not

necessarily mean more focus in terms of any of the other dimensions.Focusing a country’s bilateral aid on fewer countries will not necessarilyreduce the number of aid projects that donor supports; it may simply shiftthem from one country to another. Similarly, focusing one’s aid on fewerobjectives (for example, on the Millennium Development Goals or onpoverty reduction) will not necessarily lead to fewer sectors, activities,partners or transactions. Indeed, Canada’s decision to embrace theMillennium Development Goals (in part as a way of focusing its objectives)helped lead the Canadian International Development Agency to move backinto agriculture, a sector where its support had been declining for a decadeor so. Development Cooperation Ireland puts most of its bilateral resourcesinto only seven ‘programme countries’ with whom it has a ‘special relation-ship’ (Development Cooperation Ireland, 2004), but it supports no less than404 projects in just one of those countries, Tanzania (Center for GlobalDevelopment, 2004).

FOCUS . . . CONCENTRATE!

Let us now look at the language used in the debate about focusing, and howthat language pushes towards the conclusion that more focus will helpcreate greater impact. The concept of focus comes from optics. ‘Focus’ issharp, defined, neat, clear. No one would dare argue for fuzziness, obscurityor poor definition. The same is true with ‘concentration’, which evokesnotions of thoroughness, thoughtfulness, due consideration, and compact-ness. ‘Selectivity’ suggests careful sifting and well thought-out choice, andcontrasts with ‘dispersion’ or ‘scattering’, which suggest impetuosity, indis-criminate behaviour, even rashness. No one would dare frame their argu-ment about the appropriate range of a donor’s organizational activity interms of its rashness, impetuosity or dispersion.It is also worth noting that the advice to ‘focus’ or ‘concentrate’ is almost

always phrased in a positive tone. The inevitable corollary of ‘focusing’will be to stop doing certain things in order to free up resources for use inthe area of focus. Yet, words like ‘cut’, ‘eliminate’, and ‘stop’ — with alltheir negative connotations — are rarely used. If the debate does movetowards such notions, euphemisms are often used, like ‘streamline’ or‘re-engineer’.Regardless of the words used, the language of focus has a quasi-religious —

or at least faith-based — quality. There seems to have been no systematicempirical study, indeed no evidence whatsoever beyond the impressionisticand purely anecdotal, to back up the claim that an aid organization with


more focus is a more effective one. None of the OECD-DAC peer reviews,perhaps the main source of the advice to focus, has provided documentedevidence of the link between the degree of focus and the developmentalimpact of any aid organization. The link between focus and effectivenesshas become axiomatic, an article of faith. This lack of evidence is troublingenough in an era that prides itself on evidence-based policy making.But what about theoretical arguments in favour of focus? Perhaps theempirical research is just slow to catch up with the strong theoreticalarguments in favour of more focus? Let us take a look. As noted above,in addition to the language used to describe and prescribe more focus, thereis a set of arguments employed to promote that increased focus. The mostwidely-used of these arguments are presented below, and are analysedcritically.

Follow your Comparative Advantage!

Perhaps the most commonly-used argument on why organizations shouldlimit themselves to doing a smaller number of things is that of comparativeadvantage. The notion of comparative advantage comes from the Ricardiantheory of international trade (Ricardo, 1817: Chs VII and XIX). Theeconomist David Ricardo suggested that all countries would benefit andworld production would be maximized if every country specialized in thatline of production where it had an efficiency advantage compared to itscompetitors. For example, while both England and Portugal are capable ofproducing wine and hardwares, Portugal is capable of producing wine morecheaply than England and England produces hardwares more cheaply thanPortugal. Ricardo’s conclusion is that England should specialize (focus) inthe production of hardwares and Portugal in the production of wine, andthe two should then trade, to mutual advantage.

Organization theorists and political scientists have taken Ricardo’s ana-logy and applied it to organizations both public and private. They suggestthat any given organization will be relatively better at a small number oftypes of activities than at others, and that the world would therefore benefitif organizations ceased to undertake those activities where they are at acomparative disadvantage vis a vis other organizations in that sector orindustry. If everyone played to their comparative advantage, then the totalproduction of all organizations in that industry (in this case, the aidindustry) would be maximized.

There is no doubt some strength to this argument. Nobody would arguethat an organization should continue to work in an area where its mandate,governance, structures, lack of capacity or internal policies and procedureshave created manifest inefficiencies and failures in the past, especially ifthere are other organizations doing the same work, only much better.Nonetheless, the analogy of comparative advantage is an imperfect one.

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England and Portugal are producers who may wish to trade with each other.Aid agencies are not direct producers (at least, not in the same sense) and donot want to trade with each other. Rather, they each wish to contribute to agreater good, which is ‘development’.More fundamental, though, is what many consider to be the Achilles heal

of the Ricardian theory of comparative advantage, namely, where doescomparative advantage come from? Ricardian comparative advantage the-ory is basically ahistorical; it does not inquire much into the origins of one’scomparative advantage, or its evolution over time. Ricardo only noted that‘the capital and enterprise of the country will be turned into those depart-ments of industry in which our physical situation, national character, orpolitical institutions fit us to excel’ (Ricardo, 1817: Ch XIX, note 1). Ofthese three sources of comparative advantage, perhaps only the latter isvariable in the medium-run. Amongst later adherents to the Ricardiantheory, there is often an assumption that comparative advantage has to dowith exogenous factor endowments that are highly inflexible in the short- tomedium-run, and even in the long-run too.Clearly, however, the comparative advantage of a country or territory

changes over time. England no longer has a comparative advantage in thehardwares of the sort meant by Ricardo; it lost that comparative advantagedecades ago to other industrial countries, and they in turn have lost it to theso-called newly industrializing countries, and so on. That comparativeadvantage changes over time, indeed that it can be created and destroyedby deliberate acts of policy, has been recognized for over 150 years (Marx,1848/1956: 252). Mainstream economics has, however, begun to give thenotion serious attention only in the last few decades; several branches ofmodern economics, notably the new trade theory and parts of institutionaland evolutionary economics, now seek to explain how and why comparativeadvantage comes and goes (for example, Krugman and Obstfeld, 2002). Keyvariables include technological change, social and demographic change,armed conflicts (which stimulate certain technological changes while alsodestroying productive capacity and altering factor endowments), changes incompetitors’ positions, public policy, institutional change, and the oftenhard to predict inter-play between these and other variables.What is true of comparative advantage at the scale of national and

international trade is also true for individual organizations. The Detroitauto makers of the 1970s had little capability and certainly no comparativeadvantage in small car production; the Japanese and western Europeanshad that. But Detroit was forced to develop that capability quite rapidly inthe late 1970s and early 1980s as higher fuel prices, gasoline shortages andincreased competition from Japan and Germany forced their hand. In thefield of development assistance, UNICEF had very little capacity in immun-ization in the early 1980s, but quickly developed a strong comparativeadvantage in vaccine supply, procurement, distribution and district-basedimmunization planning after a new Executive Director declared in 1982 that


immunization was his number one priority, and that he would use immun-ization to drive his vision for the whole organization. Today, UNICEFpurchases and distributes 60 per cent of the childhood vaccines for thedeveloping world. Organizations can, if pushed by external circumstancesor internal dynamics, dramatically alter their capability set and so changetheir comparative advantage.

The importation of crude Ricardian comparative advantage rhetoric intothe literature on organization theory and public administration is an exam-ple of the ‘cultural lag in political science’ and public administration thatC. B. Macpherson identified four decades ago. According to Macpherson,political scientists and organization theorists, envious of the seeming rigourand scientific nature of economics, sometimes import concepts from neo-classical economics directly into their branches of social science. However,the imports are often crude and outdated versions of what the economistsare using, and are often inappropriate anyway (Macpherson, 1961). Whatresults is neither good economics nor good political or administrativescience.

Stick to the Knitting

A closely related set of theories, summarized here under the label ‘stick tothe knitting’, suggests in essence that an organization’s capability set is notas malleable as the last section suggests, and that most large organizationsare not capable of fundamentally re-inventing themselves. Such organiza-tions — the vast majority, if the literature is to be believed — should ‘stickto the knitting’, in the famous phrase of Tom Peters and Robert Waterman(1995). The ‘knitting’ is the core business of the organization, the area ofwork or line of production in which the organization has worked for yearsand thereby developed expertise, know-how, traditions, institutional mem-ory and a good feel for what clients and customers want. Departing fromthis core business and this core set of customers is highly risky, not leastbecause the organization lacks the knowledge necessary to guide itsdecision-making in the new and largely unfamiliar terrain.

While the research on which Peters and Waterman based their famousbook has since been shown to be flawed, their basic point — sticking to theknitting — has endured, and there is no shortage of case studies in support.The mania for corporate re-invention in the 1980s and 1990s, for example,produced some spectacular failures. After all, Enron was once just a reason-ably successful pipeline company which then decided to adopt a radicallydifferent business model. On the flipside, however, history is full of organ-izations that stuck too closely to their knitting and failed to notice that theworld around them was changing fundamentally. Does anyone rememberthe time when IBM, and not a small start-up called Microsoft, dominatedthe world market for computer operating systems?

Focus-Pocus? 433

The question, it seems, should not be whether to stick to the knitting, butrather, ‘how closely?’ and ‘under what conditions?’. Organizations have toinnovate to survive, but going too far out on a limb is no recipe for salvationeither. The point is to manage the tension between continuity and innova-tion in different (types of) organizations and situations. An importantunresolved issue is to identify what organizations or types of organizationsare capable of what kinds of fundamental re-inventions, and under whatcircumstances.

Cracking a Niche Market

Starting in the ninetheenth century and going on well into the twentieth,production and marketing were geared to mass markets of largely undiffer-entiated products for largely undifferentiated or mass publics. Philosophersand sociologists developed theories about mass society, mass movementsand mass media. Henry Ford summed up the thinking when he said youcould have your Model T in any colour you wanted, as long as it was black.But as incomes rose and tastes became both more sophisticated and morediverse, production and marketing for ‘the general public’ began to reachtheir limits. That ultimate expression of mass production and marketing, thedepartment store, began to lose ground to smaller, more specialized shopstargeting specific socio-economic and/or demographic groups. Rather thantrying to be all things to all people (or even most things to most people),organizations are increasingly being encouraged to find and exploit theirniche, that is, to identify the sub-sector of the market to which they cansuccessfully appeal, and orient their products and services toward thatgroup.The analogy of the niche probably comes from biology. Biologists have

come to realize that the success of a species is not measured so much by thesize of its population as by its ability to live and thrive in a given environ-ment or sub-environment. Many species of plant and animal life live literallyin the cracks, or niches, of rocks, trees and the sea floor, and do so quitesuccessfully. Niche thinking is clearly related to the arguments in favour ofcomparative advantage and, to a lesser extent, to the advice about stickingto the knitting. The message is simple: identify your target group or coreclientele, find the few things you can do best for them, and don’t stray toofar from what your core clientele expect from you. Like its close cousins,niche thinking has at its core some obvious simple truths. But like itscousins, it can be stretched too far, and may be more applicable in someareas than in others.Central to the problems of niche thinking is the question of time. Find

your niche and exploit it, but for how long? In biology, environmentsusually change relatively slowly (with some exceptions, of course!), andspecies have many years to find and adapt to a new niche. Central to


modern economies, however, are the relatively fast-moving phenomena ofdemographic change and socio-technical innovation driving economicgrowth and structural change. These phenomena are core themes in, forexample, demography, marketing theory and evolutionary economics (see,for example, Foot, 1996). Both marketing theory and evolutionary econom-ics emphasize that, whatever market niche a firm manages to identify andexploit, it can be no more than a temporary monopoly, and that thereforethe monopoly rents from exploiting that niche must also be temporary.One’s very success in exploiting a niche will attract others who will try todo the same. Soon, the niche will be overpopulated, containing not only itsoriginal inhabitants, but scores of imitators as well. Returns to exploitingthat niche will fall, and the original innovators will either have to surrendertheir temporary monopoly and share the niche, or move on to find newniches. Such, for example, is the story of most of the IT industry over thelast few decades.

Those who advise development organizations to ‘find their niche’ rarelyhave such a dynamic framework in mind. Development organizations areusually advised to find their niche and stay in it. But while the developmentfield does not evolve as rapidly as, say, the IT sector, it is certainly adynamic and rapidly evolving environment. As in business, there is noguarantee, once one finds one’s niche, that it will be a comfortable placeto stay in for long.

Critical Mass: An Explosive Issue?

A fourth, and somewhat different, reason proposed by advocates of increasedfocus is critical mass. There are several variants of this argument. In thesimplest and most plausible version, which I will call Critical Mass 1, itis suggested that ‘a minimum level of resources must be available fora[n] . . . activity to produce useful results’ (Daniels and Nestel, 1993: vii).This minimum level of resources is called the ‘critical mass’. The CriticalMass 1 argument suggests that donors often put too few resources into aproject, thereby hampering its effectiveness; the corollary is that the donorshould focus on fewer projects, and put more resources into each (Daniels andNestel, 1993: 1). Related to this first critical mass argument is an argumentbased on economies of scale. Based on the neo-classical microeconomics of thefirm, it suggests that the relationship between project inputs and project out-puts is not linear; more specifically, after a certain level of inputs is reached,outputs will rise faster than inputs as economies of scale are achieved.

A second variant, which I will call Critical Mass 2, suggests that a donorshould have a critical mass of (inter-related) projects in a country. Such acritical mass of inter-linked projects would synergistically produce greaterdevelopmental impact than the sum of the individual projects. Followingthis logic, the OECD-DAC says that ‘Canada has almost no partner

Focus-Pocus? 435

countries in which it has critical mass’, and concentrating more resources infewer countries would help in ‘achieving greater impact’ (OECD-DAC,2002a: 14).The notion of critical mass (in both these senses) comes from nuclear

physics, where two pieces of fissile material such as uranium have to besmashed together at a certain velocity in order to create the chain reactionthat is a thermo-nuclear explosion. Without the critical mass of fissilematerial brought together at the right velocity, the chain reaction cannotbegin, and the desired result — a nuclear blast — will not occur.These first two critical mass arguments have obvious strengths and

attractions. Certain things do have minimum resource requirements. Thereis no point in trying to build a car if you only have 50 kg of steel and a singletire. You cannot fully immunize all the children in a district if you don’thave enough doses of each vaccine, a certain amount of cold chain equip-ment, vehicles, fuel, etc. Plenty of development projects have failed — or atleast underachieved — because of an underestimation of the resourcesrequired for completion. Critical Mass 1, the need for sufficient resourcesfor a single project or sufficient resources to achieve economies of scale, isclearly an issue.However, Critical Mass 2 — a donor not having a critical mass of projects

in a given country — is more problematic, both empirically and theoretic-ally. One might ask, for example, about the empirical evidence in support ofthe proposition that a donor agency that concentrates its resources in fewerrecipient countries has ‘greater (developmental) impact’. None is ever given.On the theoretical side, this second critical mass argument depends onsynergies between projects. The argument depends, therefore, not just onthe donor focusing its resources on fewer countries, but also on the donorcreating a pattern of inter-linkages between donor-supported projects in agiven country. This is the only way that a set of projects can have acumulative impact greater than the sum of the individual net present valuescalculated through the conventional cost–benefit analysis part of each pro-ject’s planning cycle. For the donor, the challenge then is not simply tofocus on fewer countries, but to develop inter-linkages between projects aswell. The question then arises, ‘why must the critical mass of inter-linkedprojects in country X all be supported by donor A?’. Could not the samecritical mass of inter-related projects come from projects supported byseveral donors and co-ordinated by the country X government? In an eraof sector-wide approaches and poverty reduction strategies (allegedly) undernational ownership, is there any reason to believe that inter-donor co-ordination is so much more difficult than intra-donor co-ordination? ThisCritical Mass 2 argument focuses too much on the individual donor, andnot enough on the recipient country.Furthermore, the Critical Mass 2 theory assumes that the critical mass

can only be achieved within a country; it does not consider the possibilitythat the critical mass of projects can be achieved transnationally, by a


networked set of projects in different countries. In the era of the internet,cheap long distance phone calls, inexpensive air travel and proliferatingtransboundary issues like epidemic diseases, river basin management,human trafficking and climate change, this possibility should not beexcluded.

These difficulties are troubling enough, but the analogy of critical massitself has important limits. First of all, it is worth asking whether an analogybrought from nuclear physics is entirely appropriate to the realm of man-agement and organizational reform. Development projects do not generallyfollow a predictable, calculable path of chain reaction in the way thatatomic bombs do. The literature on development planning in the lastthirty-five years has highlighted the prominent — sometimes even prepon-derant — role of unintended consequences in the life of projects, the oftenhard to predict political aspects of development work, the inability ofproject planners to predict all requirements and circumstances, and, hence,the need for adaptive administration (see, for example, Hirschman, 1967;Pressman and Wildavsky, 1983; Rondinelli, 1993). Furthermore, it is wellestablished that the best development projects are not necessarily the biggestor the ones where the donor has the deepest pockets. Small to medium-sizedprojects with careful selection of donor inputs may be highly successful. Theengineering model of projects as simple, deterministic input–output systemsapplies poorly to the context of development projects.

Secondly, the Critical Mass 1 argument implicitly views the donor’s roleas predominant. It is one thing to argue that a project must have a criticalmass of resources if it is to have an impact; but the argument quickly slips tothe conclusion that making up that critical mass is the job of the donoralone, and not the recipient. By arguing for more ‘focus’ by the donor inorder to achieve critical mass in each of the donor’s projects, the argumentslides into the conclusion that the donor has not been adequately fulfillingits role of providing the critical mass of resources. But this surely is anempirical question, to be decided in the case of each project, especially in anera when one hears so much talk about ‘national (or local) ownership’ of thedevelopment process, and partnerships and mutual obligations betweendonor and recipient countries.

Thirdly, if a project — even an under-performing project — has beenproducing any results at all, then surely it has in some sense been getting itscritical mass of resources in the first sense of the term. The critical massargument works, then, if and only if the project has been achieving noresults whatsoever. If the project has produced results, then the argumentin favour of focusing on this project and providing it with more resourceshas to rely on the assumption that more resources will necessarily bringmore or better results. This argument in turn requires that the marginalbenefits of a dollar (or other unit of resources) moved out of project 1 besmaller than the marginal benefits of that same dollar if it were moved toproject 2. This again is an empirical question about the extent to which the

Focus-Pocus? 437

project follows the old engineering model of development projects as rela-tively simple input–output systems. No generalizations are possible.The reader should note, however, that there is a third — and even more

donor-centric — critical mass argument that has little to do with aid effect-iveness. I will call this Critical Mass 3. Herfkens, for example, says ‘there isno critical mass of Canadian aid in any country’ and that ‘you need acritical mass to be a player’ (Herfkens, 2003). The recent policy statementfrom the Canadian International Development Agency suggests that ‘[t]oplay a role in the reform of a particular sector, a donor usually needs tobring a certain critical mass of program funds as a precondition for effectiveparticipation in such a sector-wide effort’ (CIDA, 2002). This Critical Mass3 argument assumes that the donor’s role is ‘to be a player’, that is, to be bigenough to have influence on national or sectoral policy in the recipientcountry, rather than just on a few projects.The Critical Mass 3 argument is not an argument for aid effectiveness so

much as an argument in favour of increased geo-political influence byindividual donors. The implicit ‘donor knows best’ paternalism requiresno further comment. But it should also be noted that, for all but the biggestand/or most geographically concentrated donors, ‘if the drive for geo-graphic concentration is about leverage, it is misplaced’ (Smillie, 2004: 24),since most medium-sized donors in most recipient countries do not amountto more than 10 per cent of aid receipts. Since donors are now adoptingsimilar performance criteria for their selection of recipient countries, there isa real danger that donors will focus on the same few countries. If they dothat, then their relative shares of the ODA going to those countries may notchange much, and so none may gain the Critical Mass 3 that it desires.Furthermore, if several like-minded donors shift their money to the samesmall group of recipient countries, the results are not necessarily going to begreat. The development record of the most aid-dependent economies hassometimes been good (such as Cote d’Ivoire and Kenya in the 1970s,Bangladesh in the 1990s) but sometimes been bad (for example, Egypt,Bangladesh in the 1970s and 1980s, Tanzania). The concentration of aidin fewer countries may also set off a process of substitution, rather thansupplementation, of resource flows from international and domestic sources(Hansen and Tarp, 2000: 124n).

The Burden of Transactions Costs

A strong argument in favour of increased focus concerns the burden oftransactions costs. Deriving from micro-economics, this argument statesthat there are certain fixed costs associated with making a grant. Thesmaller the grant, the higher the fixed costs are as a proportion of thegrant. Simply put, bigger grants mean more efficiency in the use of admin-istrative and accounting resources. This is true both for donor and recipient.


However, the transactions costs argument works for effectiveness as wellas efficiency. Consider the following thought experiment. Take an aidagency whose budget is $100 million per year and which distributes $1grants to each of 100 million projects. Not only would the transactionscost per grant be enormous, but it is easy to see that the developmentalimpact of such a thin spreading would be nil, even negative (since transac-tions costs would exceed any possible benefits from such a tiny grant). Anypartner with whom the agency works could find an extra dollar from theirown resources, and so would not need to seek such a tiny grant. For globalwelfare to increase, the value of the grant has to exceed the fixed transac-tions costs. A minimum size for each grant then seems inevitable, but fordifferent reasons from the ‘critical mass’ argument.

Then go to the opposite extreme, and focus the entire $100 million budgeton one single project with one single recipient institution. Transactions costsand fixed costs fall to almost nil as a proportion of total costs. The projectbecomes an extremely efficient user of administrative and accountingresources. But what would happen to the project’s impact? That is hard tosay, and would depend crucially on the selection of the project and on thequality of project management in both donor and recipient institutions.Certainly, as we have seen above, simply throwing money at a problem isnot necessarily the right solution. There is not likely to be a simple relation-ship between the value of inputs and the value of outputs. The relationshipcould be one of constant, increasing or even decreasing returns to scale,depending on a myriad of factors. Returns to scale may be increasing over acertain range, and then become decreasing. A project that looks too rich inresource inputs may start to attract the wrong sorts of people and the wrongsorts of attention, which in turn will affect its effectiveness.

Risk Aversion, Stability, and Austrian Economics

So you concentrate on one project. What if that project fails? Then yourwhole institution fails. Putting all your eggs in one basket can bring highreturns but, since this is just a niche strategy, the high returns are likely to betemporary. While many firms start with a niche-based strategy, few staythere for long due to the high downside risk and the instability it brings.Most new firms quickly adopt the more risk-averse strategy of spreadingthemselves into several projects. If one fails, then the effects may be serious,but rarely catastrophic. The larger the number of projects (at least within acertain range), the higher the likelihood of stability and long-term survival,other things being equal.

The key to understanding the link between the level of focus, the stabilityof the system, and the impact of one’s projects lies in Austrian economics.Austrian economics is a radically pro-market school of economicthought that focuses on information, innovation, entrepreneurship and

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disequilibrium as the driving forces of the capitalist economy (for example,Hayek, 1944, 1976; Schumpeter, 1934). While many aspects of Austrianeconomics are controversial, it has nonetheless provided an insightful inter-pretation of the relative performance of the capitalist and centrally-plannedeconomies, based on information, experimentation, and the resulting streamof innovations. Simply put, the Austrians believe that the reason why thecapitalist economies outperformed the centrally-planned economies in thelong run was the number of experiments (in technologies, in policies, inbasic science, in social and institutional arrangements) the two systems wereable to conduct. To the Austrians, the system that produces the mostexperiments will also tend to produce the largest number of successfulexperiments, due to the law of large numbers. Capitalism, with its highlydecentralized research and innovation system mixed between the private,public and ‘third’ sectors, produced more technical and socio-institutionalexperiments, and therefore innovations, than state socialism did with itsmore centralized approach.3

The implication is clear. Focus on doing fewer things is not always a goodthing. If development projects are, as Rondinelli (1993) has suggested,basically policy experiments, then a more narrow focus may cut off usefullines of inquiry and experimentation. This fear is particularly likely to bewell-founded in an era when donors are using their move away fromproject-based assistance to programme and budgetary support to encouragean ever narrower range of policy options drawn from a neo-liberal agenda.These few options are applied through ‘co-ordination’ mechanisms such assector-wide programmes (SWAPs) and Poverty Reduction Strategy Papers(PRSPs) that are meant to set the tone for all policies and projects.Under SWAPs, donors work together with the local sectoral ministry

(typically agriculture, health, or education) to establish a policy frameworkfor that sector; this policy should be ‘nationally owned’ even if it is notstrictly speaking ‘home grown’. Participating donors are then expected toput their money into a common pool, rather than supporting individualprojects in that sector. The common pool is then used to support imple-mentation of the sectoral policy agenda, under the leadership of the sectoralministry, and the use of the pooled funds should be subject to periodic

3. The Austrians would argue that capitalism had a further advantage. The market also

serves as ‘a mechanism that shuts down experiments which fail’ (Giddens, 2003). State

socialism lacked such a mechanism, and so had a greater tendency to continue pouring

resources into failed experiments. (In fairness, it should be noted that Giddens is not an

Austrian, though elements of Austrian thought do permeate his ‘third way’ thinking.) As

we shall see below, the supply-driven, centralizing and cookie-cutter tendencies inherent in

recent sector-wide approaches and poverty reduction strategy papers also mean that

modern development policy-making lacks an incentive to learn; hence, it too lacks a

mechanism to shut down policy experiments that fail, though this time they are

capitalist-inspired experiments. See Pieper and Taylor (1998: 62).


audits to ensure their proper use. Under the PRSP framework, the recipientgovernment and donors work together to establish poverty reduction pri-orities; donors promise debt relief in exchange for a plan showing that thefunds freed up by debt relief will be applied to poverty reduction projectsand programmes such as primary education, primary health care, or ruraldevelopment.

The logic behind the SWAPs and PRSPs is not altogether faulty. Thetremendous burden placed on aid-dependent countries by the projectizationof aid — which implies having to respond to the differing desires andrequirements of dozens of different donors for hundreds, even thousands,of different projects — has in fact been known for at least twenty years(Morss, 1984). A change of approach was overdue. Similarly, debt relief is agood thing, and donors do have a legitimate interest in knowing whethertheir debt relief goes to pay for swords or ploughshares. At the same time, itmust also be admitted that the logic of SWAPs and PRSPs is not flawless,and that some bad has come in with the good.

The similarities of SWAPs to the Leninist doctrine of democratic central-ism are striking, but not frequently remarked upon. The (sectoral) policy isdebated openly and vigorously at the beginning, but once a decision istaken, all members of the party must rigidly stick to the policy and imple-ment it. In a SWAP, if we are all doing the same thing (that is, implementingthe agreed-upon sectoral policy) and it is the right thing (that is, the policy isa good one), then success is almost guaranteed. But if we are all doing thesame thing, and it is the wrong thing, then we are all in trouble. In Austrianterms, the SWAP suffers from the same failing as centrally-planned eco-nomies did: too few experiments. Moreover, if the sectoral policy is a badone, then it may be hard to change course. The fact that the SWAP makesno room for experimental or exploratory projects beyond the sectoral policyframework reduces the chances of learning something new from outside theframework. The central planning mentality behind SWAP — even when theSWAP encourages liberalization — has neither a provision for punishingfailure nor a mechanism (like exploratory or experimental projects outsidethe SWAP) to encourage innovation and organizational learning. Morefocus, this time within a sector, is not necessarily a good thing.

PRSPs have of course come in for criticism for being little more thanstructural adjustment under a new name. They have also been accused ofbeing mechanisms for perpetuating, even strengthening, the domination ofdonors and international financial institutions (IFIs). The allegation is thatPRSPs simply move the control mechanism from the project level to thenational policy level. Whatever the strengths or weaknesses of these argu-ments, they are not directly related to this article’s preoccupation withfocus. The PRSPs have undoubtedly served as a mechanism for focusingpublic policy in developing countries on a small number of objectives suchas macro-economic stability and human capital formation. But, likeSWAPs, PRSPs lack a built-in learning-compatible incentive system. It is

Focus-Pocus? 441

incontestable that officials from donors and IFIs, especially the WorldBank, have played a predominant role in the construction of the PRSPedifice, both globally and nationally. But the incentives that such peopleface — in terms of their career prospects within their home organization —are not aligned with learning from mistakes and modifying a course ofaction accordingly. Incentive systems involve pleasing a boss inWashington or Paris or the Hague, which frequently means meeting appro-priation and reporting targets, more than learning. The staff rotation cycleis often shorter than the life of programmes and projects, which means thatthose present in the donor or IFI at the start are rarely present to see thefinal result, be it good or bad. Promotion within donor organizations andIFIs is therefore delinked from project and programnme results to a greatextent. Focusing on fewer — even more appropriate — objectives may thenfail to bear sufficient fruit if the learning and experimentation systems arenot in place.Finally, the narrowed set of policy options promoted by modern SWAPs

and PRSPs are (to quote an anonymous reviewer of an earlier version of thispaper) the ‘intellectual equivalent of mono-cropping systems’, with all theattendant dangers that come with a loss of bio-, or intellectual, diversity.They (over-) simplify the complex, they assume the primacy of tidy planningover messy practice, they prefer patterns to details, and they underestimatethe need for adaptation.

Synergies between Projects

A final set of considerations concerns synergies between projects. Again, theargument cuts both ways. Two or more projects may have mutually reinfor-cing effects, such that the impact of the projects taken together is greaterthan the sum of the impacts of the projects individually. Such synergisticeffects can come through several avenues, for example, through increasedlearning by project managers involved in two or more projects, throughinnovations in one project that can be applied in another, through increasedefficiency brought about by the sharing of resources (such as infrastructure,administrative and financial staff) between two or more projects, or throughbackward or forward linkages.While the existence of such synergies argues for a certain amount of

spread of projects, the synergies argument does have its limits. The learningof managers or the application of innovations from other projects can comefrom observing projects run by other organizations, not just one’s ownorganization; building-in extra projects in the hope of gaining such synergiesis probably not a good bet. Furthermore, synergies are often of the unex-pected type, and cannot be planned for; calculating the number and spreadof projects needed to get a certain set or level of synergies is a highlyproblematic exercise. Finally, synergies can be negative as well as positive.


Bad morale and inappropriate lessons can spread from project to project aseasily as can good ones.

One important negative synergy can be the costs associated with thecommunication and co-ordination of increasingly complex organizations.More projects in more sectors and places can pose challenges in terms ofco-ordination and communication. As the number of projects, staff andlocations increases, so too may the difficulties and costs of communicationfor co-ordination and management purposes.

CONCLUSIONS

Where does all this leave us? The foregoing definitely does not constitute acase for indiscriminate spreading of aid resources without any plan or focus.The thought experiment about spreading a $100 million budget among 100million projects alone should be enough to persuade us that some minimumproject size is necessary. But while avoiding Scylla, we must avoidCharybdis as well. Increased ‘focus’ is not an unalloyed good either, andmany of the arguments put forward in favour of increased focus in aidorganizations are either invalid or need to be better thought out and morecarefully nuanced. Furthermore, there will be losses as well as gains in themove to a more focused aid organization.

Clearly, some of the arguments about focus are stronger than others.Among the stronger arguments linking greater focus to improved aid effect-iveness are the following:

* the need for a minimum project size so that transactions costs do notswamp the size of very small grants;

* focusing administrative resources in fewer units or work processes toadminister a given set of grants, and so reduce the ratio of transactionscosts to grants;

* Critical Mass 1, that is, the idea that a project’s resources must besufficient to achieve the project’s objectives, with the proviso that thecritical mass of resources comes from both donor and recipient sides;

* the increasing co-ordination and communication costs of organizationsthat are thinly spread over one or more dimensions (such as, over manycountries, sectors, individual projects).

Among the weaker of the arguments for focus are what we have calledCritical Mass 2 and Critical Mass 3. Both of these look to the donor alone,either to create the necessary developmental synergies among projects or tobecome a player. They are not really arguments about aid effectiveness assuch.

Other arguments in favour of greater focus may have some validity, butneed important qualifications or caveats attached. These include: following

Focus-Pocus? 443

your comparative advantage; sticking to the knitting; and finding yourniche. In particular, these arguments need to be nuanced to take intoaccount the malleability, especially over the medium- to long-run, of one’scomparative advantage, niche and knitting. One’s place in the world has tobe seen in an evolutionary perspective. Rather than criticizing aid agenciesfor working in areas where they allegedly do not have comparative advant-age, critics, observers and peer reviewers would do better to ask what the aidagency thinks its comparative advantage, niche or knitting is, how theagency sees that evolving over time, and what steps are being taken toreinforce the agency’s position or to build capacity to move into newareas, and at what cost to other areas of work.All these arguments in favour of greater focus then need to be counter-

balanced against the arguments against too much focus — the Austrianeconomics argument that more experiments will lead to a greater number ofsuccessful experiments; risk spreading and risk management arguments; andthe arguments on the possibility of building positive synergies betweenprojects, either at national or international level.The relationship between focus along any one dimension and aid effect-

iveness is almost certainly not simple or linear. In fact, along a good manydimensions, the relationship is probably curvilinear, perhaps even parabolic.This is almost certainly the case with, for example, the number of projectssupported by a donor: too few projects makes for too little internal learningand too few synergies between projects, but too many small projects meansthat transactions costs and communication and co-ordination costs get outof control. In a few cases, however, for example on the alleged link betweenaid effectiveness and the number of countries in which a donor operates,there is no evidence to state what the relationship between focus andeffectiveness is.Furthermore, an organization is likely to face different non-linear paths

for each dimension of focus. Focusing on fewer countries, for example, willnot have the same impact on aid effectiveness as focusing on fewer sectors.Too much spread in terms of small projects and large numbers of transac-tions means that fixed costs exceed the possible benefits, and so net socialbenefits are negative. Too much spread, especially in terms of number ofcountries or partners or beneficiaries may also increase variable costs for co-ordination and communication. Increase in the level of focus beyond theminimum grant level may increase organizational impact for a time, asvarious economies of scale kick in. But too much focusing may cut downon synergies and reduce the whole organization’s ability to produce suffi-cient numbers of innovations through successful experimentation, and mayexpose the organization to catastrophe in the event that one of the organi-zation’s very few but large projects results in failure. Calculating the variouspermutations and combinations of focusing to various degrees along var-ious dimensions will lead to a series of equations of intractable complexity,even leaving aside the problems of measuring both focus and effectiveness.


In the end, and within certain limits, it is the strategic selection and goodmanagement of projects — including both technical and political aspects ofmanagement — that may have more impact on an aid agency’s ability togenerate developmental results than the degree of spread or focus per se ofits projects.

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Lauchlan Munro is Director of Policy and Planning at the InternationalDevelopment Research Centre in Ottawa, Canada (PO Box 8500, Ottawa,Ontario, Canada, K1G 3H9; email: [email protected]). From 1989 to 2003,he worked for UNICEF in Uganda, Zimbabwe, DR Congo and at head-quarters in New York, where he was Chief of Strategic Planning. From 1985to 1987, as a member of the Royal Bhutanese Civil Service, he experiencedbeing the recipient of official development assistance from a very unfocuseddonor.

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Focus-Pocus? Thinking Critically about Whether Aid Organizations Should Do Fewer Things in Fewer Countries

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