Capacity development remains one of the most slippery concepts in development. It has no agreed definition, it has no formal academic body of knowledge and there are no university courses teaching it. In the private sector it is usually called business management. Because of the lack of conceptual clarity, the term capacity development (or capacity building – some writers even like to argue over this distinction) is often used synonymously with institutional development or even state-building. Discussions of ‘capacity development’ are
– depressingly – frequently limited to calls for more individuals to be trained, or for more technical people from developed countries “to help out”. In fragile and conflict-affected states (FCS) states we all know that capacity is even scarcer than in LICs. There are few, if any trained and / or experienced staff, organisations have collapsed and the institutional rules of the game are informal and geared towards personal and professional survival.
This note is structured in parts. The second section summarises how general thinking on capacity questions has evolved over the last 20 or 30 years. Section three suggests three things that all those striving to build capacity should know. Section four presents seven so-called ‘good practice’ tips for capacity development. And section five presents some explicit dilemmas in capacity development in FCS.
(i) Early attempts at capacity development in the 1960s and 1970s focused on the individual; providing training and skills, tools and equipment for individuals in key positions. Donors funded expatriate staff to fill
“capacity” gaps, awarded scholarships, undertook “manpower” audits and provided “on-the-job” training. By the late 1970s it was recognised that this had not improved capacity very much at all.
(ii) In the 1980s the focus shifted to the role of organisations. Understanding capacity development moved from a focus on individual skills and competences to a focus on getting organisations re-structured and sometimes redesigned. Changes were made to systems for policy-making, systems for human resources and financial management, and changes to the way in which services were delivered. Donors focused on organisational audits, job evaluation and grading and provided advisers rather than officers in line positions.
(iii) But organisations in many parts of the developing world remained stubbornly unreformed - change and improved capacity remained distant objectives. Again the question was asked - why? A decade later it was realised that while a focus on the individual and the organisation were still necessary, by themselves they were not sufficient. Developing capacity requires more than staff to be trained and the organisation to be well structured. In most cases it also requires institutional change and reform. In the early 1990s the importance of the role of institutions began to be acknowledged. It was accepted that even directed organisational change processes may not succeed if the wider “institutional framework” is not supportive. This framework became known as “the rules of the game”.
These rules, or institutions, are both formal and informal. Formal institutions include the legal system, property rights, the relationship of the executive to the legislature etc. Informal institutions are the norms and values that influence individual and collective behaviour.
Thus, in the 1990s there emerged the realisation that it is only when these three sets of elements (the individual, the organisation and the institutional environment) are aligned, that capacity is developed on a sustained basis. In many developing countries these three elements are not in alignment. Where staffs are trained, organisational structures may inhibit performance through top heavy or ineffective management, for example. And where organisations are well structured and well managed, performance may still be poor due to
Notes on capacity development in fragile and conflict-affected states Page 1

poor incentive regimes (low pay, nepotism in promotions, the absence of effective discipline, no commitment to the objective and culture of the organisation etc). We now know that turning individual competence into
organisational capacity requires institutional change. This stylised history is summarised in the following table.
Period Focus
1970s
1980s - mid
1990s
Late
1990s
The Individual
Mode of Capacity Development
Intervention
Degree level training
Skills acquisition
Tools and equipment
The
Organisation
The Institutional
Environment
Reconfiguring organisational structures (“moving the chairs around”…)
Reforming and/or Strengthening:

systems for policy making and analysis
(deciding what it is that should be done, and how
 systems for managing people, information,
cash and assets
 processes and activities that produce goods
and / or deliver services
Incentive structures within formal organisations:
 human resources management (pay, discipline, performance management)
The wider institutional environment:
 the accountability of the executive to the legislature and to citizens
 accessible and responsive government
 the legal and judicial framework
Motif (Dominant
Ideas)
Counterparts
Gap-filling
Business Management
Business Process Reengineering
New Institutional
Economics (“The Rules of the Game”):
 exit
 voice
 loyalty and compliance
Capacity Development /
Technical Assistance Paradigm
Scholarships
Developed country training
Manpower (sic) reviews
Line positions
On-the-job training
Organisational audits
Organisational restructuring
Organisational counterparting
Job evaluation and grading
Job descriptions
Technical cooperation advisers
Consultants
Sector or “whole” budget support
(setting the incentive framework)
Public expenditure management
Performance management
Pooled TA
Let’s reflect for a moment: why is it that the World Bank is a (relatively!) effective organisation? Part of the answer lies in its ability to recruit highly qualified staff graduating from the best universities worldwide.
Appointment and promotion procedures are contested and open to all. It has an ongoing programme of training and staff development. Since the late 1990s the Bank has benefited from the clarity of its overall objectives. This creates a clear sense of direction within the organisation. However, a key part of the answer lies in the institutional context in which the Bank and its staff operate. Formally, staffs are motivated by a sufficiently fair and transparent pay system. Staffs are motivated by the clarity of individual job objectives and the availability of resources to do the job. Individuals are personally held to account for delivering on their forward job plan.
Performance is managed in a positive sense - staffs are encouraged to extend themselves and take responsibility. Informally, the vast majority of Bank staff share a set of values regarding the worth of the work being done. These all contribute to the development of the Bank’s organisational capacity.
(i) There is increasing agreement on terms and definitions: Capacity is now broadly recognised as the ability of organisations (not individuals) to carry out, effectively and efficiently, programmes of coordinated action in pursuit of formal agreed goals. We know that an organisation has capacity when it can:

 identify, plan, prioritise, implement, monitor, and learn from specific courses of action; mobilise, deploy and where necessary motivate resources (assets, people, money and information) consistently and continuously on agreed public priorities; and
 discipline a heavily constrained system to pursue agreed objectives collectively.
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Three elements are important:
 it is organisations that have capacity. Individuals have skills and competencies;
 organisations also have particular and specific capabilities to do things such as manage people, carry out customer research, account for the use of monies etc. Capabilities are thus the building blocks of any organisations overall capacity to perform 1 ; and
 organisations operate in a wider institutional environment that either may support or circumvent the organisation’s ability to carry out its formal collective goals.
(ii) That organisations and institutions are different: Appreciating the difference between organisations and institutions will lead to different interventions and activities. Organisational development can be likened to coaching a soccer team. Which players should play in which position? What should be the team’s tactics? At what point should we bring on a substitute? Should the team play a sweeper? By contrast institutional development would focus on the rules of the game. Should the offside law be changed? Are the goalposts too small? Should we allow 13 players instead of 11? And perhaps most importantly of all, should the team give up playing soccer and take up rugby instead?
(iii) Understand the notion of ‘specificity’: One of the most powerful lessons to have been learned about capacity development over the last 20 years was identified in 1987 by Aruro Israel, an economist working at the
World Bank 2 . He argued that the more specific, the more monitorable and the more limited the task to be performed, the easier will it be to develop organisational capacity to do it. The key idea is ‘specificity’: the ability to monitor an output. The more an output can be monitored the greater the likelihood of ensuring its quality and timeliness. The classic case is a jet engine maintenance engineer for an airline. The work to be done can be easily and quickly monitored, and will have major (visible, immediate) consequences if not done properly. The opposite case is a career’s guidance counsellor. Here the ‘quality’ of guidance provided can hardly be measured at all. It will be years before the impact is known, and probably not then either.
The implication of this is that capacity development will be easier to achieve in organisations where there are a few specific (and clearly monitorable) decisions to make. Conversely, it is much more difficult to achieve in organisations where there are many thousands of unspecific ones. This explains why it is relatively straightforward to improve the capacity of a central bank whose responsibility it is to manage the exchange rate, and why it is much harder to improve the nationwide quality of primary school education: the former relies on the judgement of a handful of highly trained economists (who could be parachuted in on TC contracts for two or three months), while the latter relies on the performance of thousands of (probably) partially trained teachers whose performance is rarely monitored or assessed. By the time any assessment is made, it is too late for the children concerned.
This concept of ‘specificity’ indicates just how ambitious and difficult to achieve are the primary health and education MDGs. System wide improvements in education will require the consistent application of higher standards of teaching, marking, reporting, recording and examining by thousands of individuals, mainly working in systems that have few incentives for performance and quality.
While the following tips will not answer all your questions all of the time, they may improve the relevance of the change process and increase the likelihood of your success.
1 ECDPM. “Study on Capacity, Change and Performance”. Interim report, January 2005
2 Arturo Israel: “Institutional Development: Incentives to Performance”. World Bank, 1987.
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(i) Define precisely the capacity challenge: The most important task in any exercise designed at “building” capacity is to understand precisely the nature of the agency whose capacity is to be ‘developed’. Are you talking of an organisation or a wider institution? If the latter, then you should tread carefully. Be clear also about the nature of the mix of OD and ID activities that will be undertaken in the program (see tip iv below).
(ii) Choose the organisation carefully: The evidence shows that it is easier to design and implement capacity development initiatives in organisations that address issues that are high on the political agenda. In these circumstances, initiatives for individual training, organisational change and institutional reform will be more welcome, or at worst, less opposed.
(iii) Understand the range of interests involved: If you are focusing on an organisation, then you should understand the structure and patterning of political interests and incentives: map the incentives of key stakeholders. Who wins and who loses? Don’t skimp on your political economy analysis.
OD
OD
OD
OD
OD
OD
OD
(iv) Define the capacity task: Surprisingly few program documents that specify ‘capacity development’ as an output (or indeed as a purpose) give much information about what their capacity building activities are. It is important that any initiative that claims to be about capacity development actually specifies not only capacity
for what, but also lists what activities will be undertaken. To do this it is recommended that you articulate clearly the range of possible organisational vis a vis institutional development activities. The table below is indicative. The items towards the top of the list are more traditional OD activities, while those at the bottom are more ID. The list is indicative.
OD or
ID?
OD
Activity
Providing basic tools, machinery and equipment
Degree of
“Specificity”
High
Measurable?
ID
ID
ID
ID
Building or repairing physical facilities High
Technical assistance staff Low
Training and mentoring programmes for individuals High/Medium
Organisational twinning
Improving quality of human resource management and training systems
Strengthening existing systems for organisational management
Business process re-engineering and organisational change (changing procedures for managing people, information, money, assets etc)
Medium/Low
Medium
Medium
Medium
Inter-organisational relations (committees, reporting lines etc)
Legislation
Initiating policy reforms and policy making processes
Low
High
Low/Medium
Adoption of ‘international’ norms and standards for governance and public sector management
Low
Procurement installation and use
Completion
Utilisation
Maintenance
Job plans
Attendance and participation
Numbers attending
Impact evaluation
Exchange visits
Post-holder skills profile
Functioning and timely HR, procurement, accounting systems etc
Recruitment and promotions practice
Staff turnover
Vacancy rates
Clarity of vision and purpose
Organisational structures ‘fit for purpose’
Annual plans produced and implemented
Accountability relations formalised and implemented
Performance bench-marking
Budgeting procedures clear and transparent
Drafted; debated; on the statue book
Policy clear and consistent
Policy review procedures followed
Policy processes transparent and consultative
Responsiveness
Integrity
Accountability
The formal rules of the game apply!
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Although the items at the top of the list (those that are oriented more to organisational development) are likely to be more ‘specific’, this is not always the case. The table shows two interesting examples. The provision of TA remains popular with donors, but there is scant evidence that it works. The table shows one reason why; despite it being an OD instrument, it is highly unspecific. By contrast, passing new legislation is very much an institutional development activity (changing the rules of the game) but it is highly specific and measurable.
Whether the legislation is implemented is another matter.
With that proviso, it is true generally that activities higher up the list are more likely to:
 be defined and precise;
 involve tangible investments and to be relatively well suited to ‘projects’;
 respond to a relative dearth of knowledge, skills and training; and
 be relatively uncontested.
By contrast, activities located toward the end of the list:
 are more diffuse, involving changes to complicated systems;
 require more diverse modes of intervention, including greater use of influence and persuasion;
 often require changes in relationships within, between and among organisations; and
 are more likely to be contested and conflicting, as there is more scope to disagree about what needs to be done, and more interests are at stake.
(vi) Know your sector: Another set of emerging research conclusions suggests that there has been more success in building capacity in some sectors than on others. This sits alongside the more recognised conclusion that country context matters; other things being equal organisational development is more likely to succeed in a state that has a relatively stable and predictable institutional structure than in one which is institutionally
‘chaotic’, such as those emerging from conflict or where governance standards are declining.
The ‘sectors’ in which donors appear to have had greater success in capacity development include:
 banking;
 public financial management; and
 urban utilities.
The sectors where results have been the most disappointing include:
 roads and highways,
 public sector reform; and
 primary health and education provision.
Success in the banking sector could be predicted on the basis of the arguments regarding ‘specificity’. The tasks to be performed are precise and monitorable, with clear ramifications if performed badly. Similar arguments apply to public financial management. In urban utilities, the evidence suggests that where infrastructure was in place and management was weak, institutional change (changing ownership structures, connections and charging policies, bill monitoring and collection etc) could lead to considerably enhanced performance.
By contrast, experience in highways and public sector reform is not as positive, but for different reasons. One report notes that “the paucity of institutional developments in the highways sector can be attributed mainly to the acute difficulties of combating the malign effects of rent-taking activities that tend to drive the actions of
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several of the stakeholders” 3 . The weak results in public sector reform come from the ambition of the proposals
(wholesale change), the intrinsic political difficulty of the task, and often the very unspecific nature of what is being attempted.
Sector-wide education and health reforms are technically difficult; they usually require multiple capacity development activities to be implemented from the list given in the table above, some of which are ‘easier’ to deliver than others. The challenge is compounded by the need to bring about change at many levels in the sector, and within multiple individual organisations (ministry headquarters, curriculum development centres, schools, teacher training colleges, examination boards, hospitals, primary health clinics, nursing schools, etc etc).
(vii) Other factors: There are also a few other things which are likely to influence the chances of success with capacity development initiatives:
 if there is committed and competent political and technical leadership the chances of success are raised.
The existence of one only may be a killer;
 replace best practice with best fit. Don’t import overseas institutional or organisational models wholesale. We need to understand the structure and patterning of accountability and legitimacy in the country. What may to outsiders seem to be an illegitimate organisation or structure may be perceived locally as the opposite. In these circumstances build on the positive and ‘design’ solutions (in so much as these solutions are ever ‘designed’) that fit the circumstances and the context;
 remember that countries do not start with a blank slate. All countries have an institutional structure – a formal one and an informal one. The relative domination of one over the other will have to be judged.
As a rule, we should not believe implicitly in the formal structure – we should try much harder to identify and understand the informal one;
 don’t see capacity development as a linear process. ‘Capacity’ may suddenly appear and equally suddenly disappear in parts of the system. If we see this happening we should study it and try to understand the reasons why;
 at the organisational level, it may pay off to start small – to judge the appetite for development and reform. It is always possible to widen the scope of a programme;
 do focus on accountability. The greater the demand for responsive and effective organisations delivering things that people actually want the greater will be the chances of sustainable change; and
 finally, don’t ‘suck out’ capacity that already exists. Francis Fukuyama takes this to the extreme by arguing that only if donors prioritise capacity development above all else, including the actual delivery of services, will capacity development (and hence state-building) be possible. He argues that any focus by the donors on service delivery will generate the wrong set of incentives and skills within the local bureaucracy; they will become adept at negotiating with donors and reporting to them, rather than negotiating with the citizenry. While this may be an extreme formulation of the principle (no PIUs for example – but see section five below!), it is worth noting.
Conceptually, there are no differences between addressing capacity issues in fragile and conflict-affected states as against addressing them in LICs; the differences are in degree, not in kind. Organisations have crumbled, systems are non-existent, processes are seldom routine, staff are untrained and unmotivated. Everywhere one looks is priority. In extreme cases, there is no recognisable organisational framework at all. The public sector barely exists and hardly functions.
3 Moore et al, 2000.
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In such contexts the project design team face many capacity development trade-offs. Here are four key ones:
 is the purpose of the initiative immediate service delivery or longer-term institution building?
 what is the time-scale for the initiative, short-term or long-term?
 will delivery use country systems or will there be (temporary......) ‘external’ construction?

Is the initiative aimed at policy / process reform or output delivery?
It is here, in answering these questions in FCS, the conventional wisdom breaks down. The conventional wisdom in capacity development is that initiatives should avoid external structures (PIUs), be designed to develop longer-term institutions, take a long-term perspective, and start with getting the broad ‘policy framework’ right as a priority.
It is probable that these are indeed the right basic principles – it’s just that they should not be uncritically applied. In many FCS contexts it may well be appropriate to take a short-term view, use PIUs and focus on service delivery. The only way to answer these dilemmas is by means of a thorough analysis of the context and discussion and negotiation with the hosts.
But one golden rule: if the agreement is to go for delivery and impact through PIUs, don’t pretend it’s a capacity development initiative. It isn’t. If the agreement by contrast is to go for a longer-term institutional approach, don’t expect short-term service delivery outputs, let alone MDG-relevant outcomes.
And there is one further profound issue on which to reflect through the design process. A key feature of FCS is the absence of political legitimacy. Legitimacy is ascribed to organisations, institutions and states by stakeholders – is this organisation doing ok? If so, authority will be conferred upon it. As legitimacy is a core feature of state-building, the design team should consider the impact of the project on legitimacy – both procedural legitimacy (how it performs its business) and output legitimacy (whether it delivers). Often, we forget the former in favour of the latter. Again – another trade-off.
Three specific capacity issues: The literature on capacity development over the last thirty years returns again and again to three specific issues. In many ways these three issues lie at the core of the capacity development debate.
(i) Pay: what should be the approach to pay? How can a resource-poor government pay its (often bloated) civil service a living wage? In short: it cannot. Here, the much vaunted first best solution would be civil-service wide pay reform (but only, of course, after the ghosts have been expunged and the establishment confirmed and the roles and responsibilities of ministries agreed and the management systems put in place........). Given that can’t happen, what are the options? There are two basic choices: i.
agree with the government a list of whole-of-government key priority posts – and if necessary individuals – which will receive top-ups. Pay them through the pay-roll if it exists, not directly by donors (this sets up inappropriate lines of accountability). Insist that other donors do the same (oh how easy this sounds!). Agree time limits; ii.
identify priority ‘ministries’, ‘departments’ or ‘agencies’ (to the extent they exist) and implement them and in them alone. Again – government must make the decisions.
Whichever approach is adopted, the key objectives should be to avoid a proliferation of various schemes funded by a multiplicity of donors, make the payment via the government, and insist that the selection of recipients is done by the government, not by the donors.
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(ii) Technical Assistance: To use or not to use, that is the question. Despite most research showing extremely poor returns to TA, its use has persisted and it thrives especially in FCS. Are there other options? Probably not – especially if the programme objective is short-term service delivery. In these circumstances the question is how TA is used, not if. There are various alternatives to the traditional model of an extendable two year expatriate contract: i.
use TA on a “long-term short-term” basis, where TA comes for (say) one two week visit every two months, leaving nationals in charge at all times. In the interim keep in touch by ‘phone – or by email if such exists in-country; ii.
contract out key service delivery functions, as in the case of Customs in Mozambique in the immediate aftermath of the civil war. This requires huge political bravery; iii.
use ‘southern’ rather than ‘northern’ TA; iv.
investigate organisational twinning; v.
investigate peer-to-peer support networks; vi.
consider funding line positions rather than advisory ones, with the appointee reporting to a national.
(iii) PIUs: PIUs rightly have a very bad name. But they persist for the obvious reason that in many FCS the imperative to deliver outputs in the short-term is given preference over building institutions in the longer-term. There is no easy answer to this. My own answer is to be pragmatic: if it is judged that the benefits of PIU-delivered goods and services in the short-term exceed their costs, then PIUs may well be justified. But: make sure partner governments are aware of the potential tensions PIUs generate, and let’s not pretend that we are building capacity. Call it what it is.
Graham Teskey
Senior Adviser
PRMPS
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