Governance- individuals or institutions?

There have always been two views about how to bring about change. One talks about how all good institutions are but “lengthened shadows of an individual", while the other argues that any sustainable reform effort will need to get into the nuts and bolts of management. Over the course of the last fifty years, I have seen both alternatives play out and evidence seems to favor the individual theory of greatness at least in the short term. The major successful reform efforts of the public sector in India all stemmed from the appointment of the right individual to the job. This was true in the case of Engineers India Limited ( Manmohan Pathak), Steel industry ( Mantosh Sondhi), State Trading Corporations ( Prakash Tandon), ONGC ( Bhanu Prasad). All of these individuals were brought into public service at the urging of the prime minister and were responsible for the turnaround in these institutions. But it is equally true that once they had left, these very same institutions languished and never quite attained the verve and creativity of the past years under these gifted individuals. They were definitely better off than before but never quite again measured up to the demands of their past leaders.

Today the argument is once again reverting to the past. As economist Atul Shah argues “discussions about governance in India repeatedly turn into discussions about individuals. The Delhi Metro happened because of E Sreedharan; Sebi works well because of CB Bhave; education malfunctioned under UPA owing to Arjun Singh. Why did urban governance in Surat or Nagpur work well? A few key individuals fixed the problems. If this is the core issue, it puts a huge burden on the appointments process.”

The basic question still remains – how should we make say a public utility like drinking water in Bombay work well? An emphasis on personalities would demand finding the right person to run it. The institutional based approach would argue for a top down review and change of the mechanisms and procedures that govern the system.

But how does this happen in advanced economies? The typical small town in an OECD country—and in many developing countries—has 24x7 supply of clean drinking water in the taps. This isn’t done by having a miraculously effective appointments process. There is a fairly humdrum process of recruiting fairly ordinary bureaucrats into water utilities, or contracting out to private utility companies, and the job gets done. In OECD countries, 24x7 clean drinking water in the taps is not exotic rocket science. It happens all the time, because the deeper institutions are structured correctly. This is clearly the scalable path. Of course, the basic assumption is that these institutions have been set up and structured for performance and public service which at least in the developing countries is not always the case. It is true that a few good successes in the appointments process might achieve 24x7 drinking water in a few towns. But the real problem lies in trying to find a solution that creates institutional mechanisms that can be rolled out all across the country, which will deliver 24x7 clean drinking water in all the towns.

Institutional change is hard, and all too often there is a temptation to paper over a dysfunctional institutional mechanism by demanding top quality leadership, which will produce good outcomes despite bad institutions. A good judge will overcome all problems in the legal system, work hard, process a large number of cases per month and deliver good judgments against the odds. A good doctor will rise above the terrible problems of a government hospital and heal patients all the same. These individuals are revered, and rightly so. Each good judge and each good doctor deserves the gratitude of society for being useful against all odds. But these are drops in the ocean. Good governments are not built out of good individuals. They are built out of good laws and good incentive structures. What we need today is the leadership that will change laws and incentives so that we achieve good institutional arrangements.

A useful analogy is TN Seshan’s role in building the election commission, which is now one of India’s great institutions. We respect Seshan today not because he ran one or two elections well, but because he was an important actor in institution building. An equally great contribution was made in recent years with the implementation of electronic voting machines. This field has been successfully depersonalized: the performance in conducting elections has held up despite occasional dubious staffing choices at the election commission.

So do we hire great men or do we build great institutional arrangements?

The answer is that we should hire the great men who will do institutional reform—the institution builders. As long as we are a third world country struggling to get ahead, we will remain vulnerable to the vicissitudes of the appointments process. But the recruiters should not look for the right person to man the system. His job should be to fix it. The interesting candidate is not someone who knows how to deliver on a critical project. He is someone who knows how to build up an institution that will remain long after he is gone.