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Achieving Strategic Integration for the FCDO: Is a Portfolio Approach the Answer?

August 26, 2020

The UK Government has a short window of opportunity to make the Foreign and Commonwealth Office-Department for International Development (FCO-DFID) merger work.

But this means learning from one key mistake made by its antipodean cousin (Australia): operational integration does not automatically lead to strategic integration. A single, agreed, integrated strategy for bringing together and prioritising the UK’s ‘four D’s--development, defence, dollars (trade/prosperity), and diplomacy--must be created then implemented with discipline and coherence. Without an integrated strategy, country and regional objectives will not be shaped by a considered analysis of short- and long-term risk and reward for the UK, but by the political interests of those who can lobby hardest.

Why is integrating development and diplomacy so hard?

Evidence from Australia, New Zealand, and Canada tell us that the ‘four D’s’ are not natural bed follows. Each has different modus operandi, measures of “success”, and ways of calculating risk and reward.

Development folk measure success by long-term, transformational change to systems and institutions, whereas diplomats operate in the world of transactional outcomes and individual interests, incentives, and influence. (See diagram). Diplomats see the world as a zero-sum game; whereas in development, both sides win (donor contributes to development, partners have resources to lead it).

Thus there is little incentive to match short-term diplomatic imperatives (flag flying, responding to capital P politics, projecting UK values overseas) to long-term development and strategic aspirations. For example, procuring textbooks and building classrooms are easy to report on and do wonders for UK visibility and reputation overseas – but, by themselves, do little to address systemic issues of access to education and learning outcomes. And why does addressing systemic issues in education matter? Because they contribute to the UK’s strategic objectives in a country: stable, prosperous partners who are willing and able to trade and engage productively with the UK and in the region (we are drawing a long bow here between education and stability – but you get the point).

Importance of integrated country strategies for the FCDO

While most aid programmes have long-term goals, in practice this is often undermined by three- or four-year project and budget cycles. The merger brings about greater possibility of practicing development as it should be thought about: as locally-led political change and reforming institutions. Therefore, the goal of an integrated strategy could, in fact, enhance the ability of aid to be delivered in a more, not less, transformational way in the new merged Foreign and Commonwealth Development Office (FCDO).

What does this require? At the minimum it requires: a single set of UK objectives for that country (within which development cooperation is tightly defined); the identification of potential tensions within these objectives and analysis of trade-offs; an articulation of how each arm of the UK’s engagement in a country will contribute to these objectives; how and where resources and information need to be shared across the UK portfolio; all of which is informed by an analysis of the political, economic, and social trajectory of the country in question.

Can a portfolio approach realise this vision?

Assuming such a strategy can work, what then is needed to incentivise officials to work towards a single set of integrated aid and foreign policy objectives? In our view, a strategic portfolio management approach that sets in place leadership, performance, research, and learning mechanisms at a country portfolio (not programme) level could provide part of the answer.

In practical terms, we think it requires at least three things:

  • Performance incentives and indicators that reward projects, programmes, and diplomats for working beyond their immediate interests and towards a common goal. How? Unequivocal indicators at the portfolio level that cut across different work areas; honest and regular review of performance against these indicators and country strategies; and willingness by senior FCDO leadership to stop or adjust work that isn’t contributing, or reward those which are.
  • Good evidence and strategic review: strategic review processes are needed to bring in evidence at the right time, contest it, and enable Heads of Mission and senior management to make decisions on  the UK’s total country portfolio. Mechanisms and evidence that can (i) weigh up short-term success against long-term risk and reward, and (ii) scale up/down and hedge bets in different parts of the portfolio in response to changes in UK’s diplomatic and defence posture and local politics.
  • Co-located management structures that reflect whole of government perspectives. Experience shows if some parts of Government are left out of the portfolio decision making process, the discontent will be high and expertise will leave. Staff also need to be supported to transition in their roles. Diplomats will not become development experts overnight. Or visa-versa. But both need to understand one another to make a portfolio approach work.

What next: Nepal a test case?

The DFID Nepal office is an ideal test case for a portfolio approach to delivering on an integrated UK vision overseas. Two years ago, Nepal’s decision to adopt a radical model of federalism under its new constitution prompted a complete rethink of how DFID operates in this context. The DFID Nepal office agreed on a new 10-year strategy under a framework of ‘Three Big Changes’ (federalism, inclusion, and inclusive growth) drawing on a Country Development Diagnostic and lessons from the past (which showed a mushrooming of parallel projects).

All programmes are now designed to work in ways that collectively support each ‘big change’. In reality this requires the whole portfolio to work in ways that help build the legitimacy and authority of locally elected provincial and local governments (i.e., working with, not around, politics). As part of this integrated strategy, the office drew on three provincial-level offices to work with local partners in DFID’s priority geographic areas. It has also set up dedicated portfolio strategy, monitoring, and learning functions through a long-term research programme and a Portfolio monitoring, evaluation, and learning prroject.

Watch this space

The DFID Nepal office is set up to implement a portfolio strategy that sits above any one project, programme, or work area; the question is whether the merger can allow for this to be achieved in line with the British Government’s vision. We’ll report back to you in a year’s time, and let you know how we got on...

This blog also appears on the Governance and Development Soapbox.

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