Effectiveness of Aid to Developing Countries: How to Improve it with Diminishing Resources?

Aid to developing countries - Lean Six Sigma

This was post originally published on SonjaBe.com.

There is an international concern, especially from developed countries, about the efficiency and effectiveness of aid to developing countries. These concerns continue increasing, even more after the economic downturn of the last couple of years. Member States and Donors have been paying more attention to their aid budget, asking for more accountability and proof of impact to the sponsor Intergovernmental (IGOs) and Non-Governmental Organizations (NGOs).

The current scenario is something relatively new for IGOs and NGOs. Since the early 1980s, the budget allocated for these organizations increased exponentially, continuing at the same rate for nearly 30 years. There were few requirements about the quality of the services provided and evaluation of the projects implemented that provided aid to developing countries. Now the picture is completely different. Just this week, the US congress cut $8 billion of international aid assistance. IGOs and NGOs have a new (and enormous) challenge: How to make their systems more efficient and effective with fewer resources?

To have a better idea of the current situation and as a preamble of the Fourth High-Level Forum on Aid Effectiveness held at the beginning of this month, Devex partnered with McKinsey & Co. and conducted a survey to find out how professionals in the development community view the effectiveness of the development sector. Only 36% of participants agreed that most projects providing aid to developing countries achieve their intended purpose. Also, more than 50% of participants think that overhead costs and inefficient contracting and procurement processes contribute to at least 10% of the leakage in the international aid system. A vast majority of the participants agreed that to improve the efficiency and effectiveness of these organizations, a system-wide reform is required. This survey showed the need for different operational approaches and methodologies for IGOs and NGOs.

How can IGOs and NGOs allocate the limited resources available to projects that actually help people escape poverty? How can they implement quicker and cheaper solutions? How can they discover innovative ways to finance those initiatives?

Perhaps NGOs and IGOs should start looking for what other sectors, private and public, have been using to increase their effectiveness. This is not the time to reinvent the wheel; it’s time to apply methodologies that have been proven to work.

For example, one methodology that has been used for the last twenty years in the private and lately, in the public sector is Lean Six Sigma. By the late 1990s more than two-thirds of the Fortune 500 companies had begun using Lean Six Sigma to reduce cost and increase the quality of their products and their services. In almost every industry and public sector these methodologies have served as a promoter for system-wide reforms.

What is Lean Six Sigma?

Lean Six Sigma is a powerful proven method that combines Lean and Six Sigma methodologies. It always focuses on the customer. The Lean approach is based on reducing cost through process optimization. It has helped companies reduce their cycle times and remove non-valued added activities resulting in cost reductions. Six Sigma, a more data oriented approach, focuses on removing unwanted variation in the final product (or service). Even though Lean Six Sigma has traditionally been used for operational improvement, prominent companies have demonstrated its potential for other types of applications.

For NGOs and IGOs, Lean Six Sigma can enable better results with the current resources available by eliminating inefficiencies (and improving the effectiveness) and building a more modernized mobilization capability. To implement this system, it’s important to have everybody associated–from the head of the agency to the workers in the field constructing water pipes– involved in the process. Most importantly, the voice of their “customers”, the people that will benefit from these projects, must be heard and taken into consideration. In terms of budget, the benefits from going through this process should equate to between 20% and 40% increase in donor’s contributions. This process will also help identify projects that are most valuable and needed…The customer (people) is ALWAYS the priority.

By improving the effectiveness of aid to developing countries, we will also improve the lives of millions of people in a sustainable way. Surely, there are more of “out of the box” ideas that can be applied too.

Your turn: Does your organization use a Lean Six Sigma system in place? Do you have any ideas on how to improve the effectiveness of organizations providing aid to developing countries? Please share your insights below in the Comments section!

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