Integrations, amalgamations and mergers: Lessons from institutional reforms in development co-operation

By Jorge Moreira Da Silva, Director, Development Co-operation Directorate, and Mags Gaynor, Senior Policy Analyst, OECD

Where OECD Development Assistance Committee (DAC) member countries have been through a process of integration, amalgamation or merger, they have shared with us their lessons both in real time and with hindsight. As a result, we have been able to reflect on the integration and merger experiences of a number of members in their recent peer reviews, including Australia, Canada and New Zealand and have a historical perspective on how restructuring and integration processes worked in countries such as France, Ireland, Japan, Korea and the United States. More generally, we do regular peer reviews of the 30 members of the DAC which give us the benefit of seeing strengths, opportunities, risks and challenges that members experience with their institutional arrangements and reform processes. We hear how institutional arrangements are experienced both internally and externally, including by partner country governments. Eight main observations can be drawn from these reviews.

  1. The political motivation for major institutional reform is a key determinant for success. Why a merger is taking place, and how well the rationale and objectives are communicated and understood, will to a large extent determine the impact of the reform on the quality of development co-operation policy, programmes and systems.
  2. It is not sufficient to bring two institutions together, what is important is to create one new institution with its own culture and ways of working. All mergers and integration processes we have observed have encountered challenges with bringing together different working cultures into a shared ethos and shared language. In many cases, development co-operation was seen as a minor partner and development expertise and practices were under-valued. Starting off with one new organisation which retains the strengths of both foreign affairs and development co-operation on an equal footing provides a solid basis for broad ownership of development objectives.
  3. A dedicated development voice at the most senior levels of political leadership can protect the quality and integrity of development co-operation. DAC members have found that fully integrating development co-operation into all branches of foreign affairs can contribute to stronger coherence between their development objectives and their domestic and foreign policy. However, this has been more evident where members have a strong ministerial role, particularly at Cabinet level, dedicated to development co-operation.
  4. Protecting development objectives requires dedicated mechanisms for oversight, accountability and external scrutiny. A merged department with robust oversight can provide an effective single point of accountability for delivering all of a country’s development co-operation objectives. Combined with effective external scrutiny, this allows the public and key partners to see the full picture of how a member contributes to sustainable development and protects its national interests. In addition, in all the mergers and integration processes we have observed, internal governance was key to managing trade-offs, in particular ensuring that development principles and implications for developing countries were given adequate weight in key debates and policy positions.
  5. Where a merger coincides with a reduced budget, it is tempting to shed expertise but this can have an immediate negative impact on quality and take years to rebuild. A deep integration approach requires senior level expertise and programme management skills to be embedded across the thematic and geographic matrix of the new organisation. These skills come under threat where amalgamation coincides with budget reductions and human resources are squeezed. One of the immediate negative impacts of the recent mergers was an exodus of senior-level aid expertise which is taking years to rebuild. Forming a new institution requires an increased investment in skills development in the early stages. Members under-going mergers and integrations have found it useful to retain senior roles – Deputy Secretary, chief development officer, chief economist, etc. – to protect the integrity of development co-operation within the merged department. Ensuring equal opportunities for officials from different backgrounds and career paths to compete for senior roles can help to balance multiple objectives and allow career progression for all staff within the new institution in the short and medium term.
  6. Investing in staff engagement and a phased change-management process with regular status checks can mitigate tension and sustain staff morale. Previous experience has shown the importance of engaging all staff at an early stage and throughout the merger process. Members who introduced regular status checks and reviews – of organisational effectiveness as well as wellbeing, partnerships, perceptions and morale – found that these helped to sustain staff engagement and trust as well as allowing senior leadership to see what was working and what challenges were emerging as they steered the merger over several years. Different human resource policies can be a particular source of tension and early attention to harmonising policies for all staff pays off in the long run.
  7. Building harmonised and appropriate systems and procedures takes time and investment. A number of DAC members experienced practical challenges with merging IT and knowledge systems, procedures and ways of working, which affected team dynamics and staff morale. Mergers can present risks for quality assurance as development co-operation competes with other policy areas for corporate resources and oversight. Building a broad understanding of development issues requires continued investment in data, evidence and learning based on a fluid flow of information, but protecting adequate investment in monitoring, evaluation and engagement can be particularly challenging as systems and procedures are harmonised. In many cases, the rigour and systems associated with development co-operation were found to be relevant and beneficial for other areas of foreign policy.
  8. Finally, strong external communication can protect the quality of development co-operation programmes and partnerships. Mergers can provide an opportunity for a rigorous and thorough consultation and engagement plan to build trust, establish channels for communication, manage key relationships and allow the new institution to benefit from external perspectives, channelled in a constructive way.

The OECD remains agnostic on the relative merits of one model over another and there is no conclusive evidence linking any particular organisational models to donor performance. The overall picture that emerges from DAC members’ experience is that amalgamating development co-operation and broader foreign policy institutions can bring positive outcomes but also presents risks. While there are drawbacks to processes that are too drawn out, experience shows the importance of taking the time to engage all those affected and to address some very practical details.