Limits of Best Practices in Institutional Reform

A group of earnest Public Financial Management (PFM) professionals from an Asian country visited Ottawa on a study tour a few years ago. A briefing by the Treasury Board Secretariat explained the approach used by the Canadian federal government for consolidating information across departments and agencies. The Asians claimed that this approach wouldn’t work. It is, they said, an acknowledged “best practice” that all government organizations, at every level of government, shares a single common public accounts classification.

Professor Matt Andrews takes on the tyranny of “best practices” in developing country PFM advice in The Limits of Institutional Reform. My previous reviews described the importance of the work in describing solutions to the problem of PFM reform failure, and suggested improvement to the work to address alternative explanations. Curiously, I picked up on the case study approach which can result in anecdotal evidence. Then I started this entry with an anecdote…

The Best Practice Myth

Best practices” has become a buzzword in both public policy and information technology. (That’s a disturbing sign.) My sense is that “best practices” was never meant to be a universal prescription, yet this seems to be the market trend. It has become consultant-speak. And, excellent branding.

And, ERP-speak. (As in: this is what the software does, so it must be a best practice. Eric Kimberling from Panorama Consulting : calls it the “best practices” trap.)

This isn’t the first time that I’ve encountered the notion that country context determines good practices. In 2008, Michael Ruffner of the United States Department of the Treasury made an interesting presentation on the fallacy of PFM best practices. Ruffner pointed out the problems with focusing on process rather than culture and defining instruments such as Medium Term Expenditure Frameworks.

The recent best-seller by Stephen M. Shapiro, Best Practices Are Stupid: 40 Ways to Out-Innovate the Competition , explains the conception handcuffs to innovation of following the myth.

Yet, as I’ve mentioned before, my sense is that the ‘best practice’ myth is unfortunately alive and well in public financial management. There is some movement, I hope, into a more nuanced view thanks to Limits.

Taking on PFM Best Practices Mimicry

Andrews pulls no punches by describing the “tyranny of the experts” who “overspecify reforms” and “oversimplify the content” through “functional mimicry” of practices from other countries.

Despite my comments on my previous post about the limits of anecdotes, the following observation by Andrews rings true:  “International organizations, local policy makers, and private consultants combine to enforce the presumption that the most advanced countries have already discovered the one best institutional blueprint for development and that its applicability transcends national cultures and circumstances…The assumption is that superior externally sourced solutions will eventually prevail if local leaders allow them to.”

I’ve seen this in action many times. Public servants from developing countries come to conferences to learn about the latest “best practices”. Foreign advisors wax poetically about the reform successes in their home country. We see the push to accrual accounting – virtually every RFP we respond to for financial systems maps out a transition from cash to accrual accounting over a period of 2 to 5 years.

Meanwhile, those with real-life experience in many countries, as Andrews has, tend to look at reform in a more pragmattic way. For example, Stephen Symansky, formerly with the IMF, described the focus on “policy” in post-conflict countries as ill conceived. Post-conflict countries have no basis for policy according to Dr. Symansky. “You got to get the nuts and bolts right,” he said at one our customer FreeBalance International Steering Committee (FISC) meetings.

At our recent FISC meeting in Ottawa in January, a discussion ensued about the variability of advice given by PFM experts. We’ve seen situations where one group of experts recommends faster but incremental reforms while others suggest stopping any reforms altogether until a laundry list of diagnostics is completed with years of capacity building.

Positive Signs? From Best to Good Practices…

We are committed to the International Consortium on Governmental Financial Management (ICGFM). Our President and CEO, Manuel Pietra, is the current volunteer ICGFM President. I’m on the Program Steering Committee and have been known to tweet a bit from ICGFM events. The most recent event, late month, was titled Good Public Financial Management Practices in a Period of Global Adjustment.

We were able to include some “polling questions” at the event and used a survey application at our booth to draw out PFM perceptions. As you can see in the presentation below, many of the survey questions were generated based on Limits. (We also gave away 5 signed copies of the book as door prizes – substituting Canadian Ice Wine for winners who did not read English.)

We found mixed views about the “best practices” concept.  76% of respondents thought that there were good practices based on the country context, yet the majority thought that best practices speeds reform. Perhaps the question should have been worded differently. Maybe, as Andrews points out, grant applications using concepts of “best practices” are more likely to be funded.

The politics and incentives of PFM technical assistance is likely my next posting in what is rapidly exceeding a trilogy of reviews.