Parting Words: Stephen Groff on His Tenure at the Asian Development Bank

With Jim Kim’s abrupt departure from the World Bank, there has been a swirl of commentary on questions of legacy, the best of which aim to answer the question, “how is the bank doing?” For large multilateral institutions like the World Bank, that’s a frustratingly difficult question to answer. Seemingly objective measures like volume of financing or sectoral targets are simplistic and bring their own value judgements about what the institution should be doing. Annual reports give us a narrative about institutional performance, but a heavily biased one.

Wrestling with these questions about the World Bank, I was taken with something that came across my desk a few days ago—the valedictory speech of Steve Groff, who just stepped down as an operational vice president at the Asian Development Bank. His tenure at the ADB largely coincided with Jim Kim’s time as World Bank president. Steve is a highly regarded development practitioner, no more so than within the ADB itself. So it was striking to see his detailed stocktaking of the institution he helped to lead for over seven years. He is, of course, a cheerleader for the ADB, but also a frank critic. By measures that resonate with me, the past seven years have been very successful for the institution, as Steve outlines in the opening of his speech. But all the more reason his criticism—from the role of the board to the problems of an overly-“siloed” institution—deserves an audience.

I suspect his commentary on the ADB has wider application across the multilateral development banks, which is why I’m very pleased that Steve has allowed us to post his remarks in full here.

Dear Friends and Colleagues,

In writing a farewell, I am presented with dual obstacles. The first is the mocking tyranny of a blank page and the second is the futile proposition of summarizing my experience at ADB in a few short paragraphs. As I near the end of my tenure, the latter challenge seems nearly insurmountable. How can I possibly capture the incredible dedication, creativity and ingenuity of my colleagues over these last seven and a half years (…not to mention the seven years I spent previously as a member of staff)? Such a reality only serves to intensify the anxiety around the former challenge. With this background, I hope you will forgive the multiple omissions, oversights and lapses that no doubt litter these musings.

Reflecting on the last several years, it is clear that it has been a period of profound change. In this building, we have seen a progression from President Kuroda’s ‘Finance++’ agenda to President Nakao’s Mid-term Review of Strategy 2020 and last year’s approval of Strategy 2030. We have witnessed the successful merger of Ordinary Capital Resources and the Asian Development Fund (ADF), a concomitant increase in programming, and the 50^th Anniversary of our institution. The quality of our work has been recognized by external partners through two successful ADF replenishments, steady improvement in the Aid Transparency Index (topping the list in 2018), and various multilateral reviews. We have also played an important role in supporting the emergence of new institutions such as the Asian Infrastructure Investment Bank, the Green Climate Fund and the New Development Bank.

On the operational side, Operations Group 2 (OG2) successfully managed the intricate process of re-engagement with Myanmar and Fiji and speedy responses to complex disasters in the Philippines, Indonesia and across the Pacific. We’ve innovated with engagement in pollution control and climate change in PRC, disaster risk management in the Pacific and RBLs, policy operations and new financial instruments across Southeast Asia. We’ve increased our country presence and delegated more authority to our colleagues on the ground. We’ve managed difficult country contexts, problem projects and demanding partners. We’ve produced critical knowledge products on an incredible range of topics. This has been undertaken together with a growing program, increasing disbursements, and consistently solid portfolio performance. It is equally important to note that my colleagues have done all this with grace, stoicism and, significantly, without much change in our budget – a clearly unsustainable situation that all of you will play an important role in addressing in the coming years. 

While I feel great pride for what we have achieved, I confess to some apprehension around important business that remains unfinished. High on this list is the issue of gender. In 2016, on top of the corporate target, OG2 agreed on a separate goal of gender parity by 2020 with annual action plans and targets for each regional department. During my tenure, OG2 departments have seen steady improvement in IS women representation; rising from 31% in 2012 to 38% in 2018, collectively compromising the leading operational group in this important indicator. I am also proud of the fact that my management team – at 67% – is majority women. This said, 38% is still far from 50% and much work remains to be done. As I have said to my colleagues, making ADB staff at all levels more reflective of the populations we serve is not simply good practice. Study after study shows that a more diverse and inclusive workplace simply produces better results. We must collectively do better on this across the institution.

Looking to the future, there are also broader organizational and institutional issues that must be addressed. Strategy 2030 does an excellent job at setting the stage for ADB to truly lead and excel – both in the region and as an exemplar of multilateral finance. But to realize the full vision of Strategy 2030, I believe that ADB needs to consider three classes of reform: structural, organizational, and cultural.

On structural reform, the Board-Management relationship and division of responsibilities require urgent attention. I am encouraged by the work undertaken by the Office of the General Counsel and the Strategy and Policy Department on the functional relationship with the Board and information-sharing following our retreat last September, but I worry that we may lose sight of the forest for sake of the trees. I certainly do not mean to impinge on the prerogatives of the Board, but I do note that the amount of staff time devoted to briefings on the ninth floor has been increasing at exponential rates over my seven years and is just not sustainable given the simultaneous increase in program and portfolio. There simply must be a better way and a clearer demarcation between Management’s responsibilities and the Board’s oversight function.

I am equally worried by creeping acrimony, personalization, and petty score-settling that risks eroding the quality of our discourse, together with an occasional tendency to extrapolate or exaggerate isolated instances of shortcomings into institutional deficiencies. I am in no way suggesting that Management can’t (or shouldn’t) do better but rather am asking that you understand that this is a building full of people, people who work extremely hard and are often demoralized when the leaders of the institution don’t seem to appreciate the obstacles and challenges they face on the ground every day. Remember to keep this context front-of-mind, rarely is our work easy or straight-forward.

A couple of years ago, President Nakao declared his love for the Board. I too love the Board but, as with all relationships, decorum, clear roles and division of labor helps avoid unnecessary tension and conflict. While the polite discourse of old may seem, well, old-fashioned and aggressive negotiating tactics are quickly becoming a new lingua franca of diplomacy, we should let trust, respect and dignity define our deliberations. While many bubbles may need to be burst, this is one I think ADB should continue to cultivate.

On organizational reform, I am convinced that pro-active disruptive change will be necessary in the not-too-distant future. Our ability to leverage knowledge, experience, expertise and resources across the entire institution will define our relevance in a region where transformation is the norm. It is imperative that we bring hybrid public, private and knowledge solutions to every intervention. We must step up efforts to work and share experiences across all departments to improve our program, our portfolio and, ultimately, our results and development impact on the ground.

In order to do this, we will need a flatter and a much more adaptable organizational structure that removes silos between regional departments, the Private Sector Operations Department and the Sustainable Development and Climate Change Department. While “One ADB” is a good start, we need change that will enable us to deploy resources much more flexibly, share knowledge more easily, and allow for internal economies of scale. The silos of our present structure atomize our technical expertise across at least seven different departments. Under a less rigid organizational structure, country-focus would be maintained by keeping strong resident missions, a robust regional cooperation function and encouraging non-operational departments to plan with country-specific needs in mind. Under such an arrangement, the structure of projects, programs and deals would be determined not by the department in which they reside but by reality and demand on the ground. This would also allow for ADB to continue the transition to a true project/program developer with less focus on just the deployment of our own funds and more on using these funds to syndicate and leverage even more resources in the service of our Developing Member Countries’ (DMCs) broader development objectives.

A critical element of this would be a true root-and-branch review of all ADB processes, products and services. We’ve made steady improvements in a lot of areas, but we often start from a position that elements of some processes are sacrosanct – a reluctance to change because “we’ve always done it this way”. No interest or faction can be beyond the reach of a true strategic process review.

As part of such organizational renewal, I would also recommend a review of the roles of VPs, DGs and DDGs with an eye towards some rationalization, consolidation and flattening as well as contemplating VP positions as a new class of “level 11” staff. This process might ultimately include the addition of a Managing Director or Chief Operations Officer to whom VPs report. Such a structure would ensure better coordination and would ease the President’s administrative burden.

On cultural change, we need to find more ways to hold ourselves to account. The results framework and the Development Effectiveness Report are important elements – as discussed at length during the 29 January Informal Board Meeting on the Corporate Results Framework – but we need to develop more tools.  In a region that is highly vulnerable to climate change, we need net carbon accounting or scoring so we have a full understanding of our contribution to global GHG reductions. In a region that is water stressed, we need net water accounting or scoring and, while we’re at this, biodiversity accounting/scoring is also important. And, perhaps above all else, how can we quantify our contribution to DMC achievement of the SDGs? I appreciate that these are difficult things to do, but if we don’t do it ourselves some enterprising CSO will start doing it for us. Einstein liked to say: “Not everything that counts can be counted, and not everything that can be counted counts” and this is true, but we have incredible amounts of data in this building and need to deploy these to develop better performance metrics that will more precisely define our value proposition. Digital Agenda 2030 can help but this is far more than just an IT or data issue.

Another element of accountability is modern performance management. While much has happened on this front over my fourteen years – most recently with this year’s implementation of the new performance assessment system – we still struggle with comprehensive and consistent execution. Without truly professional performance management and merit-based advancement throughout the organization, there is little prospect that ADB can deliver Strategy 2030 or function effectively in an increasingly complex and competitive international landscape.

Also, as the ADF XII mid-term review nears we should think creatively around how to manage all of our concessional resources, not just ADF. While a heavy-lift, in ADF XIII I’d like to see us move towards more of an omnibus replenishment cycle – one that covers ADF and all trust funds. This could also be an exercise that rationalizes and organizes the structure of our trust funds and ADF under the SDGs and creates space for the application of grant resources to important regional or global public goods and thematic or sectoral challenges, regardless of country classification.  Such an approach would also help create a “one-stop-shop” for donor engagement with ADB and minimize multiple touch points across the organization.

Separately, we need to make partnerships with NGOs, CSOs, think tanks, and normative institutions far easier. If ADB is to become a true broker of knowledge, we need to know where this knowledge resides and develop the kind of partnerships with these institutions that will allow the deployment of this information in our programs. ADB need not possess all the knowledge but we should know where it is and how to leverage it for our DMCs.

Finally, if we are to make progress in all these areas, we need to develop broader narratives that support the reforms we propose to make. Too often, we engage in isolated-issue zero-sum debate rather than stepping a bit further back and stringing together a series of issues or reforms that may allow for trade-offs, negotiation and compromise – with shareholders seeing elements they don’t like balanced against those they do. The ongoing discussion on differential pricing is a perfect example. Addressing loan pricing could be twinned with discussions on replenishment and access to concessional resources, future capital increases (including the option for special capital increases), technical assistance allocation, new accountability measures, etc. The Office of the General Counsel and the Strategy and Policy Department’s work on the functional relationship with the Board and information-sharing is another example that could lend itself to this approach. This is very hard to do but it may help smooth the differences between shareholders on some critical topics.

Notwithstanding the challenges and possible charter issues, it is vital that work in all these areas begins soon. Our approach and structure are largely based on what we’ve done in the past, rather than designing an organization that can deliver what is needed ten, twenty and thirty years from now. This approach worked for Strategy 2020 and when we had a much smaller program and a less demanding clientele but in the coming years, we will need to be far more agile – we must think about what bank we need, rather than the bank we’ve been.

And we ignore this at our collective peril. MICs and UMICs increasingly demand an entirely different level of services. At one end of the spectrum, we need not look further than the lull in sovereign programming in countries like Malaysia or Thailand to see our future if we don’t change. On the other end, our engagement in PRC is a critical vehicle for global engagement and influence in this important country, particularly at a time when many other avenues are under scrutiny. I have no doubt that scaling back or curtailing our commitment to MICs and UMICs – either willfully or through benign neglect – would be a mistake; one for ADB as an institution as well as for all our DMCs. And such continued engagement need not come at the expense of our key obligation to LICs, FCAS or SIDS. In my mind, sustained commitment across country income levels helps contextualize and ensures that our support is grounded in a deep understanding of challenges through the full spectrum of DMCs.

I very much appreciate that in the background lurks the fact that the record of MDB reform is not one of unqualified success and that such history can inspire a certain level of risk-aversion. Acknowledging this, we should aim to learn from reform efforts at our sister institutions, but not let their challenges limit our ambition. Pro-active, ADB-led disruptive change is necessary to avoid the far less optimal alternatives of degenerative irrelevance or change being forced on the institution by fiat. If I haven’t made myself clear by now, I believe a real sense of urgency must be developed around this agenda and strong leadership up and down the organization is fundamental.

If we can do all this, not only will ADB become the better, stronger and faster institution we aspire to be, we will truly leverage our public and private sector resources – both in terms of money and people – allowing us to tap other sources of finance so that real scale can be achieved in meeting the poverty, climate, environment, gender, urban, water, governance, disaster and other challenges that continue to dampen the region’s potential.

All of this said, the camaraderie I see amongst my colleagues across this institution every day gives me confidence that no challenge is too great. This sense of unity is buttressed by all the lunches, meriendas, birthday parties, staff outings, mission meals, holiday celebrations, and entertaining performances at the SCF Show or other venues around Manila. Many of my fondest memories at ADB revolve around such events – this social capital is the glue that holds the institution together and allows us to do far more than our limited resources might otherwise allow.  

And finally, while our proverbial ADB family is critical to our success, this is built on the strong foundation of extended family members – the partners, parents, children and siblings that give each of us the support necessary to invest long days, nights and weekends in our work. I thank them for their love, patience and perseverance and for sharing their family with our institution.

In closing, I am extremely grateful to President Nakao and President Kuroda and to all of you for giving me the opportunity to work at this incredible institution. There are far too many DGs, DDGs, Directors and staff to thank but I would be remiss if I didn’t express my deep gratitude to an exceptional set of advisors: Vinnie Wicklein, Sona Shrestha, Sunniya Durrani-Jamal and Suchin Teoh. I must also thank the incredible current and former OG2 staff: Marita Sevilla, Angie Balanay, Chickie Custodio, Bianca Samson and Rose Marantal. I would also like to thank Odon Sister who always has an uncanny sense for when you need refreshment and – equally importantly – a nice smile. Finally, I would like to thank Secretary Sonny Dominguez, AED Paul Dominguez, the Philippine Government at lahat ang mga Pilipino [and all the Filipino people] for making this country my second home. Pilipino ang puso ko talaga. [My heart is truly Filipino]

I mentioned previously my affection for all of you on the Board but I also have an abiding love for the institution to which I have dedicated nearly 15 years of my career. I am exceptionally proud of the work we’ve done together and am grateful to you for having given me the opportunity to contribute to a more prosperous, inclusive, resilient, and sustainable Asia and the Pacific.

Maraming salamat po sa inyong lahat. [Many many thanks to you all]

All of you have my deepest gratitude and admiration.

Stephen P. Groff
January 31, 2019