The primacy of relevance and trust
‘Circling’ into UNDP’s business model dilemma
By Gerd Trogemann, Manager, UNDP Istanbul Regional Hub
UNDP’s Strategic Plan 2022–2025 seeks to respond to the complexity, uncertainty and urgency of today’s development challenges with systemic and transformative responses at scale, adaptive and agile. If the Strategic Plan had not made this ambition clear already, we would have to rewrite it in face of the layers of interconnected and simultaneous development crises and disruptions the world is facing today.
UNDP’s breadth of mandate, global presence, broad access to governments and its targeted investments over the past years potentially position our organization to lead and integrate the UN development system, international financial institutions and bilateral partners in this direction. Yet, these established attributes of UNDP’s value proposition alone no longer suffice. Systemic and transformative responses require a leap in value proposition, business and financing model and in our convening and partnering ambition.
Perhaps the biggest rock on the road still ahead of us is our prevailing business model of project delivery. As the preferred and dominant way for donors and funders to invest in multilateral development cooperation over decades, it is no surprise that project-funding rather than regular (core) funding is determining the scope and financial sustainability of voluntarily-funded organizations like UNDP and, over time, has been shaping our business models. In the absence of sufficient core resources, our organizational culture, systems and capabilities have aligned with a world of projects, striving to succeed in a competitive yet dispersed funding environment.
The pitfalls we have been observing as project-funding continues to replace core resources are multiple: delivery overrides relevance, utility subdues strategy, short-termism beats long-term perspectives, control replaces trust and competition wins over the radical collaboration needed to achieve scale in development solutions. ‘You become what you value’, ‘you are what you measure’ no matter what your strategy aspires to. As Peter Drucker put it ‘culture eats strategy for breakfast’ (Peter Drucker, 2006). This is one of the reasons why the moonshots in our Strategic Plan are so important.
Development projects the way we know them are certainly a much easier and more common pitch than ‘system transformation’. Yet, system transformation cannot be achieved with myriads of individual projects. No matter how well conceived and relevant in their own right, projects tend to pursue single point rather than systemic solutions, limit strategic space and the ability to adapt continuously and to connect the dots systemically. Systemic solutions need adaptive ways of working, strategic space, iterative learning and radical collaboration (Kirsten Dunlop, Innovation as if the Future mattered, Tedx Talk, December 2021).
To remain relevant in a world of tectonic shifts, we need to think differently and bigger, work differently, partner radically and the work of organizations like UNDP needs to be funded differently. This is not only about new tools and innovative approaches. It is a matter of organizational strategy, of a forward-leaning business and funding model and ultimately about relevance and trust.
Relevance and trust
Relevance and trust are arguably the most important currencies public organizations are trading, today more than ever. As hard as relevance and trust may be to quantify and calculate objectively, they are centre stage in public sector strategy. Bruce Jenks demonstrates this using Mark Moore’s strategic triangle, developed to explore public sector strategy and leadership. Moore’s strategic triangle consists of three interdependent, dynamic variables/circles, representing an organization’s legitimacy or authorizing environment; its value or mission; and its capacity and capability to deliver.
The strategic challenge is to align the value/mission with what is possible under the existing authorizing environment and with the capacity to deliver results. The more the three variables align, the more political space an organization has and the greater its perceived and actual relevance: What is possible (legitimacy/authorizing environment), what is valuable (mission/values) and what is doable (capability/capacity) come together and converge (Bruce Jenks, Dag Hammarskjöld Foundation, 2019). The three circles are inherently dynamic and unlikely to fully overlap, temporarily at most. Full overlap may actually be counterproductive and lead to stagnation.
On the other hand, when authorizing environment, mission and capability/capacity drift apart, an organization loses political space and loses relevance and trust. Any distance between the circles, real or perceived, represents a potentially widening relevance gap. Strong alignment unleashes an organization’s potential; weak or no alignment yields the contrary. Without alignment, strategy gets reduced to operational effectiveness. In the history of UN reform, the focus often shifted to operational effectiveness and coordination at the expense of actual strategic choices, for which a broad-based consensus was often out of reach. Operational effectiveness is important, but it does not replace strategy (Bruce Jenks, Devex 2011).
UNDP’s ‘legitimacy circle’ is as complex and fragmented as the multilateral development system has become over time. Multiple authorizing environments direct and influence the organization, including both the UN internal governance structures as well as the UN’s funding environment. This already complicated authorizing environment may be even more complicated for UNDP than for other UN entities. With its broad and integrative mandate, UNDP doesn’t really have a distinct constituency in member states like the World Bank has national Finance Ministers or other UN agencies, funds and programmes have their sectoral partner ministries. The UN’s fragmented authorizing environment now appears additionally fractured and potentially threatened in relevance and legitimacy in the wake of the war in Ukraine and its geopolitical and socio-economic ripple effects. In addition, development funding in general and ODA in particular is falling increasingly short at a time when the world needs it more than ever and at unprecedented scale.
For a voluntarily-, mostly ODA-funded organization like UNDP, the absence of a critical mass of core resources and of a funding model commensurate to its evolving role limits the space for strategic choice and reinforces a projectized way of working. As one of UNDP’s funding partners put it: “[…] The fact that UNDP is largely geared towards and dependent on project-based financing is a challenge, one that is perceived to disincentivize long-term vision and strategic choice […].”
Due to the fragmented, traditional multilateral order in which UNDP is embedded and due to the way the organization is funded, we tend to punch below the weight we ought to have as the UN’s central development organization.
In Moore’s value circle, UNDP actually stresses the weight it ought to have. Again, the value we seek to create is “systemic, transformative change”, an ambition that UNDP’s Administrator, Strategic Plan and Human Development Report capture credibly. Yet, our heavy dependence on project-funding leaves a credibility dilemma. When the value UNDP aspires to is about systemic and transformative change, while the organization is forced (and accustomed) to engage in myriads of individual projects targeting single-point solutions, then the value we seek and the value we actually create are hard to reconcile.
A big part of the reconciliation needed can be achieved by focusing on the capacity/capability circle. Any change requires capacity and capability first. UNDP is making significant investments in its capacity and capability to work systemically, not least by investing in a shift from projects to portfolios. Yet, we are mostly relying on bottom-up approaches, first movers, pilots and experiments, leaving the heavy-lifting to our innovation teams while most of the organization remains untouched. Incremental change through demonstration effects, new tools, staff training and through gradually adjusting the pool of expertise available to the organization is important, but it will take time we do not have. It will be key to access external capabilities more radically and work in an even more networked way. Systemic change needs convening power, radical collaboration and shared capabilities to achieve impact and scale. We need to partner differently.
Virtuous or vicious circle?
Aligning legitimacy, value and capabilities is the basis for strategy and needs to be foundational for UNDP’s business model. Ultimately, all three variables are interconnected and need to be considered and addressed in parallel. The value UNDP seeks to — and ought to — create needs to find reflection in how UNDP and the wider UN development system is funded and in the capabilities it builds. The organization’s funding structure enables its value creation and determines its capabilities. Vice versa, our capabilities are central to the value we create and reinforce the funding flows. Mark Moore’s three circles become a virtuous circle when they converge; a vicious circle when they drift apart.
To use the words of our Administrator at the UNDP Executive Board in June “[…] we can make more short-term decisions and take limited stands by funding single-issue projects. Or we can invest together in shifting the systems that underpin development. […]” Whichever model we choose, organizational culture and mindsets will adapt and follow suit. You become what you value, you are what you measure. Culture may eventually meet strategy for breakfast?
With thanks and appreciation to Jennifer Topping and Giulio Quaggiotto for their ideas, advice and review