This week, the Independent Evaluation Office at the International Monetary Fund released its report on the relevance and utility of research at the Fund (see also today’s Financial Times article on the report). The report itself echoes an earlier IEO report on the Fund’s performance running up to the 2008 financial crisis, which found that the Fund’s failure to foresee the crisis was in part due to pervasive groupthink within the organization.

The IEO report reveals much about the ideological culture of the Fund. Importantly, it draws from interviews and surveys with academics, national authorities, and staff with the Fund. According to the report, academics and national authorities think that the Fund’s research reached “predetermined conclusions”, driven presumably by biases inherent to the neoliberal orthodox training of most of its economist. That is not the surprising bit. The more shocking tidbit in the report is the finding from the internal survey, which revealed that more than half of the IMF staff interviewed for the report agreed that research findings at the Fund were altered to fit in-house views.

For IFI junkies, this is reminiscent of the World Bank scandal over the World Development Report 2000, when lead author Ravi Kanbur resigned in apparent protest to the internal censorship of the report’s main arguments regarding poverty reduction. Flashback even further to a similar scandal over the drafting of the 1993 World Bank report on the East Asian Miracle, in which a key message regarding the importance of government intervention in spurring the East Asian tigers’ growth was slowly weeded out in favor of a much more market-friendly message.

In IOs, “groupthink” – and the implicit censorship practices that produce it – are pervasive, but not because all IO staff think alike or are cultural dupes. More critically, it is because there is discernible pressure – from within and outside the institutions – to keep to the message, at least when airing views to an increasing critical and skeptical external audience. Deviating from the party line is often akin to admitting the failure of past ideas and practices. Such admissions are risky in environments where the legitimacy and resources of the institutions, and ultimately their survival, is at stake.

Despite quite rational reasons for groupthink, censorship or other forms of paradigm maintenance to develop in such organizations, it is undoubtedly the enemy of organizational learning and change. But how do IOs rid themselves of groupthink? The IEO report is largely silent on this matter, and the Board’s written response to the report only weakly recommends hiring staff with more diverse educational and professional backgrounds (which indeed the Fund has been doing since it’s last round of big layoffs prior to the crisis in 2008). IO scholars will immediately recognize this as a simple Principal-Agent mechanism for engineering change in IOs, aka “screening and selection of staff”. But historical experience with similar attempts to disrupt cultures and mindsets via “people shake-ups” have not worked. World Bank junkies will be reminded of the infamous Conable reforms in 1987 when everyone at the Bank was asked to resign and them reapply for their jobs – a disastrous reform strategy if there ever was one.

What is required to disrupt groupthink is a much deeper transformation of organizational culture and material incentive structures. Recall Paul Blustein’s narrative of IMF training and socialization of staff in his fabulous book, The Chastening: Inside the Crisis that Rocked the Global Financial System and Humbled the IMF. What really matters is not just who you bring into the organization, it’s where you bring them in, how you train them (if brought in young and eager to quickly advance), how you socialize them into the bureaucratic environment, what real resources and authority you give them to push new ideas, and whether those at the top of the food chain will be receptive to those new ideas.

Perhaps the next Managing Director of the Fund will take note. Let’s certainly hope that she does.

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