Institutions must adapt in response to external environmental pressures, including the availability of new technology, the emergence of new challenges, and external competition threat(s). This continuous need for evolution underscores the criticality of change management, shifting attention from leaders’ plans and strategies to recipients’ attitudes and responses.
Public financial management (PFM) reforms require a sound change management strategy to deal with the soft side of the reforms. Resistance may come from within or outside of the government and should be effectively managed. Effective change management requires a combination of: (i) political and administrative leadership for effective decision-making and implementation; (ii) project design and governance, ensuring public servant engagement and delivery of reform(s); (iii) communication regarding ongoing challenges and results; (iv) workforce training; and (v) organizational alignment.
Ensuring sustainable change requires three further actions: (i) tracking and measuring the change benefits; (ii) continued involvement/communication within the government; and (iii) strategies that ensure that changes are implemented as intended.
Change management models for public service organizations should address the specific challenges of the relationships between the administrative and political spheres, as well as the public sector’s institutional culture. In this context, PFM reforms should encompass various aspects at the technical, institutional and political levels, as the following examples illustrate.
The technical level of reform can describe PFM technicalities, such as program budgeting, accrual accounting, information and communication technologies (ICT) initiatives, and so on.
For example, Cambodia introduced a financial management information system (FMIS) aimed at increasing fiscal revenues and improving the timeliness of public service salary payments.[1] The main change management components included:
Leadership to change the lingering perception of the FMIS as an ICT issue rather than as a vehicle for transformational change;
Governance to oversee the project’s activities by the FMIS Steering Group;
Engagement with stakeholders to facilitate the implementation of the change management strategy;
Workforce enablement by providing staff training, as well as information and awareness sessions; and
Organizational alignment to facilitate efficiencies in the finance ministry’s work, including the realignment of work practices, organizational structures and job descriptions.
The institutional level of reform requires new regulations, norms, capacities and processes within public sector organizations, thereby transforming institutional dynamics, cultures and values. The state institutional culture is partly endogenous, maintained by internal working practices/relationships. However, external relationships with international development partners and the broader public can also significantly impact institutions.
Ghana’s successful integration of mobile money is a prime example of a large-scale digital change initiative, managed through a combination of responsive regulation, strategic public-private partnerships, and targeted efforts to overcome social and infrastructural barriers. Mobile Money, a successful private sector initiative in Ghana, has driven a significant digital transformation, fundamentally altering the financial landscape. It introduced several challenges requiring careful change management strategies by government, regulators, and service providers:
Regulatory adaptation: the Bank of Ghana continuously retooled its regulatory framework to manage the evolving payments market.
Agent network management: a vast local agent network is crucial for cash-in/ cash-out services. Challenges involve ensuring agent compliance, preventing vendor misconduct, and addressing agent liquidity and proximity concerns, thus requiring ongoing monitoring and consumer awareness.
User adoption barriers: challenges included digital literacy; inadequate infrastructure coverage in rural areas; and government policies, such as introducing the Electronic Transfer Levy, a new transaction tax requiring public education.
The political level of reform entails how governments and political leaders plan/ lead/ sustain major policy/institutional changes in politically feasible, socially acceptable, and administratively effective ways, as illustrated by the case of Indonesia.
After the 1998–1999 political transition, Indonesia’s PFM reform benefited from:
Clear political leadership and vision that framed PFM reform as essential to restoring macroeconomic stability, fighting corruption. and rebuilding trust with citizens and international partners.
The presence of a strong governmental reform champion in the Minister of Finance and a dedicated PFM Reform Unit. The reform leadership remained stable across political cycles, ensuring continuity.
Sequencing and pacing of reforms.
Managing bureaucratic resistance through civil service training and professionalization, incentivization, as well as a gradual introduction of reforms.
Communication and legitimacy by linking reforms to anti-corruption, improved service delivery, and national recovery.
In summary, using change management in PFM reform offers several important advantages, especially because PFM reforms are complex, political, and may affect many institutions and stakeholders. Effective change management in PFM reforms can lead to greater stakeholder buy-in, reduced resistance, realistic reform pacing, and increased sustainability through embedding reforms into daily practices. By proactively addressing political economy risks and aligning reforms with institutional capacity, deliberate change management significantly enhances the chances of successful and lasting PFM transformation.
[1] World Bank. “Change Management that Works: Lessons from FMIS and PFM Reform in Cambodia and Indonesia” (World Bank, 2017).
