What Does It Mean for Bilateral Development Agencies to Be Effective in a Changing Development Landscape?

In a world defined by insecurity, uncertainty, and geopolitical fragmentation, the environment for development cooperation has never been more challenging. The development landscape—characterised by more actors, more motives, and more fragmentation—demands more from development agencies:  more strategic focus, more agility, and more resilience to current and future shocks. This shifting context requires a re-evaluation of what it means for development agencies to be “effective.” How can agencies continue to deliver measurable results today while preparing for an uncertain future, in a world marked by multiple, protracted, and converging crises? 

In this blog we introduce the findings from our new policy paper, in which we examine the mounting pressures on development agencies and outline five key dimensions of agency effectiveness. This paper marks the first piece of our new research series on “agency effectiveness” and lays the groundwork for a deeper understanding of how agencies can remain accountable, deliver meaningful results, and prepare for an uncertain future. 

Pressures facing development agencies

Faced with deepening geopolitical tensions, complex global and local challenges, fiscal constraints, and growing political pressures to align spending with national interests, bilateral development agencies must revisit their motivations for engagement (why), areas of focus (what), and operational approaches (how):

1. Pressures on why development agencies act: The competitive geopolitical landscape increasingly influences the priorities pursued through development cooperation, raising questions about how agencies define and measure their effectiveness when their development goals are interwoven with both their domestic and geopolitical considerations.

2. Pressures on what development agencies do:  Agencies face growing demands to tackle both global and local challenges with limited budgets, raising questions about how they can ensure effective priority setting, optimal resource allocation, and the use of appropriate cooperation instruments. The need to deliver on a broadened development agenda is leading agencies to consider whether they should be adjusting their structures or investing in developing more specialised capacities to tackle new or emerging programme areas. 

3. Pressures on how development agencies can deliver: Rapid and unpredictable global changes require agencies to operate with greater flexibility and risk tolerance, raising questions about how to optimize operational models and re-prioritize budgets in response to emerging crises—a need underscored by the COVID-19 pandemic. 

Five ways to look at agency effectiveness

We identify five dimensions of effectiveness that agencies have historically grappled with:

• Effectiveness as resource allocation: agencies’ effectiveness has often been assessed based on whether their resources are being directed towards the areas, geographies, or sectors where the greatest impacts can be made. 

• Effectiveness as compliance with global principles: agencies’ effectiveness has often been understood in terms of their alignment and adherence with global effectiveness norms and principles, such as the 2005 Paris Principles on aid effectiveness, or, more recently, the 2011 Busan Partnership Principles on development effectiveness. Alignment with these frameworks has often been seen as an input toward the achievement of better development outcomes. 

• Effectiveness as cost-efficiency: some agencies have historically focused on benchmarking the cost-effectiveness, or “value-for-money” of their interventions as a key factor in demonstrating their wider organisational effectiveness. 

• Effectiveness as organisational design: many agencies have been assessed on the efficiency of their organisational design or bureaucratic structure. Questions around whether the division of responsibilities between different units, offices, departments, or ministries involved in development cooperation is fit-for-purpose have previously led to re-organisations, including through mergers, the setting up of new units, or decentralising management to field offices. 

• Effectiveness as adaptability: many agencies are increasingly seeing their effectiveness through the prism of their ability to effectively adapt to the increasing magnitude and frequency of shocks they are being asked to respond to. In this context, agencies are assessing whether they have the capacities, skills, and adaptive management practices in place to pivot swiftly and efficiently when needed and manage risk in an unpredictable global environment. 

While these five dimensions provide a starting point for discussions around agency effectiveness today, their application will necessarily vary depending on each agency’s unique context, including factors like its size, mandate, budget, mandate, or operational model. This makes it difficult to provide any “one-size-fits-all” understanding of agency effectiveness. Our future work will delve deeper into how agency-level factors contribute to different understandings and operationalisations of their effectiveness. 

Implications for development agencies: priorities, structures, and capabilities

Ultimately, all agencies will have to decide on priorities and trade-offs; adopt innovative practices; and implement reforms that align their structures, capabilities, and priorities with the demands of a rapidly evolving development landscape. We identify three overarching implications:

Priorities 

On a technical level, agencies will need to optimise the use of development resources, including concessional finance. They are confronted with questions of how to address urgent global challenges, like climate change, and maintain their focus on traditional development goals with the reality of limited resources worsening the trade-offs. Politically, growing preferences to instrumentalise development budgets at the expense of focus on development outcomes raise questions on whether the changing nature of the development challenges is redefining their role and purpose.

Structures 

Agencies face external and internal structural challenges. Externally, they will need to evaluate whether single-mandate development bodies remain fit-for-purpose, or if broader sustainable development mandates are needed to address interconnected challenges. Internally, agencies will need to rethink their structures to better meet evolving demands, including by establishing new units to manage climate-related programs, integrating humanitarian and development spending, or adopting “whole-of-government” approaches to leverage interdepartmental expertise.

Capabilities  

With future demands likely exceeding current capacities, agencies will need to develop new skills in areas like climate change, flexible financing, and local partnerships. They will need to either develop in-house capacities or leverage external expertise through innovative partnerships while supporting more adaptable and locally driven approaches, which may require greater financial agility and risk tolerance. 

Charting the path toward future-fit development agencies

The challenges facing development agencies today are redefining what it means to be effective. Agencies must embrace changes in their structures, capacities, and approaches to cooperation to navigate the accelerating pace of global change, or risk losing the trust of stakeholders and their ability to achieve meaningful impact. 

Future-fit agencies will look and work differently than those of the past, requiring new operational models, innovative partnerships, and a sharper focus on balancing global and local priorities. While there is no single solution, ongoing exploration of emerging practices and evidence will be critical to inform the development agency of the future. Our new paper marks the beginning of a series that will delve deeper into these issues, providing insights to help agencies adapt and thrive in a changing world.