The Global Fund is an international financing institution dedicated to attracting and devoting resources to prevent and treat HIV and AIDS, TB and malaria. Since its creation in 2002, the Global Fund has supported more than 1,000 programs in 151 countries, providing AIDS treatment for 4.2 million people, anti-tuberculosis treatment for 9.7 million and insecticide-treated nets for the prevention of malaria to 310 million. It has helped save 8.7 million lives, more than 100,000 per month.
The Global Fund came under intense criticism in 2010-2011 when an internal audit revealed misuse of funds in certain countries which received grants. In response, it set up a high level independent review panel on fiduciary controls and oversight mechanisms. One of its members was Gabriel Jaramillo, whose 35 years of banking experience had included service as CEO of Sovereign Bank. He had also worked with the UN Secretary General’s Special Envoy for Malaria.
The panel’s report in 2011 recommended wholesale restructuring of the Global Fund, and it asked Jaramillo to lead the transformation. The fund appointed him as general manager in January 2012, with a one-year mandate to lead the transformation. “My priorities at the Global Fund are to achieve maximum efficiency, accountability and concrete results that save lives,” he said at the time of his appointment. “In essence, we will start with a reorganization that emphasizes simplicity, discipline and rigor.”
Wharton management professor Michael Useem interviewed Jaramillo not long before his year as general manager ended. Here is his account of how he spearheaded a wholesale change in one of the world’s largest public health organizations.
Meanwhile, Useem and the Center for Leadership and Change Management are working on a case, to be completed by the end of March, about the Fund’s transformation. Anyone who would like a copy of the case emailed to them as soon as it becomes available should send a message to email@example.com with “The Global Fund Case” in the subject line.
An edited version of Jaramillo’s remarks follows:
In many ways, I have this feeling that I’ve been training for this one year all my life. It’s a very special situation. It’s a different kind of organization. Just the fact that its mission is to save lives — millions of lives — makes it a very different sort of entity. You can’t lose focus of that. It frames a lot of what you do when that is the fundamental purpose of an organization. You take things more seriously, and you can’t fail.
I’ve been part of about eight major restructurings and transformations over the past 20 years. I have learned a few things, and I instinctively used all of them here. One is to move very fast, faster than people may think [is] good. But you might as well get the job done. If it’s well explained, if you’re pretty sure that it’s the right way to go, go very fast.
Banespa is the second largest bank in Brazil. At one time, it was the largest. I took over that institution after a failure and turned it around. Once you initiate a transformation, there’s no going back. All the solutions are forward. None are in the past. None are behind you. You have little opportunity to redo.
Communication Is Key
I decided that with a one-year mandate, normal behavior would be to just listen. We’ll weather this. Let’s just wait it out, wait a year and things will be back to where we want them to be. I had to show that we were serious from day one. I decided to go public with my goals. I had to make it very simple because I had to communicate to many [constituencies]. I actually sent more than 3,000 individual letters to stakeholders indicating the three goals that I was about to deliver and my commitment to deliver them in a year.
That raised the stakes for everybody. There was some confusion in the beginning. Some people tried to negotiate one or two of the three goals. I did not negotiate. I very bluntly, very clearly, said it’s about creating the foundation for the future with rigor and discipline and good management. It’s about investing strategically, attaining high returns, saving more lives for the same amount of money. And third, getting the money that is required to really get the job done, get the decisions out of the way.
Once I had gone public with the goals, we were all in a way committed to having to do something about them. I showed that I was serious. By the seventh working day, three of the top executives of the institution had departed. It indicated to everybody that this was serious.
The second thing I did was to have a conversation with each one of the remaining executives, one by one. I was very clear how this process would go from beginning to end, the obstacles that could hit us along the way, how we should behave as a group and individually to be able to face those obstacles and move forward and get to the final goal. I made it very clear that this was not negotiable, that you were either in or out.
After having had those individual conversations, I had the same conversation with many board members, one on one. I called them on the phone. I said I have sent you a letter. These are my three goals. This is what I’m going to deliver. Then I got the management team together and we discussed and debated the how, not the what. [We discussed] what would come first, the velocity, the intensity, the behavior that we would have to show as a group and individually. The team came together. There was passive resistance. People engaged at different moments. But there was a behavior that was expected of everybody towards the transformation.
Change Causes Fear
Change implies risk and uncertainty, and there’s always fear. We all react to fear in different ways. We can react by being aggressive and going forward and confronting it – whatever the threat. Or we can hide. In between those two, we had all kinds of behaviors, as we do in every change situation. It’s just human nature. What you have to do is make sure that you find those two or three minutes to review with individuals who have anything to do with that specific situation. What did we do wrong? How could we do this better? Let’s move forward. Let’s not make the same mistake again. Let’s do it in a different way. Every time, at the turn of every corner, just review how you’re doing. Be honest about it. Be very humble about it. You’re bound to make huge mistakes along the way. It doesn’t matter. What really matters is that you identify, you learn, you move forward.
Be close to the situation. Make sure that you enchant people, that you seduce people with a dream, that there are green pastures out there, that there’s a reason why you and the organization are in it because you believe in what the organization is out to achieve. In this case, it’s so fantastic because this is an organization with passionate people, people who have decided that they want to save lives. It’s about the nitty-gritty, a lot of detail, management detail, but stopping, having a walk into the future, seeing the green pastures and coming back to the sweaty reality of managing detail.
Having led transformations in banks in Mexico, Colombia, the U.S. and Brazil gave me a multicultural view of transformations, and the Global Fund is about multi-culture. It is truly global. That’s one aspect that clearly prepared me. The other one is the sheer complexity of transformations. I probably have more experience than most people because I’ve been exposed so much to them. I’ve worked on eight transformations, not just worked but actually led aid transformations of huge institutions – troubled institutions — in different places. And [I know] how you can turn them around and come out and have a great future. It’s all about people, and it’s all about managing people. This is what transformations are about. I transform very little. It’s basically the people who work with the organization who do the transformation.
Finance Is Complex
I think anything that is financial is more complex because it hits all sides of the economy and it hits every activity. So the financial sector is probably the most complex of all. We are learning that in this financial crisis.
The Global Fund is a financial institution and has all the complexity of a financial institution. It just didn’t realize it was a financial institution. I recall when I joined, there were all kinds of social media asking: What’s a banker doing in the Fund? And my answer was: We’re the bankers of the world. We are a financial institution. We have to be extremely strong in the management of our finances. What crippled the Fund was poor financial management.
Another aspect new to me — and I was not prepared for this because you’re always learning — was the combination of the public multilateral sector, civil society and the private sector. I had this idea that everything should be private sector and that the private sector is good and the rest is not. I’ve come out with a conviction that that is not the case. I don’t think the Fund should be private sector. The Fund should be a well-balanced combination of civil society, the public multilateral sector and the private sector. That is the best combination for these kinds of institutions. If you look at the composition of our management team, it will reflect that. We were clearly short on private sector. So I emphasized the need to bring in private sector components. But we have to make sure that we do not overpower the civil society component and the multilateral public sector aspect.
Private Sector Values
I think the most important value of the private sector is that the organization is more important than the individual. In the public sector, the individual believes he is going to spend all his life at that institution. The mindset is: How can I spend my lifetime at this institution? How do I get to 65 in this institution? In the private sector, the mindset is: How can I continuously improve so that I can be in this institution for as long as I want to, for as long as I’m interested in being here? How do I constantly gain the right to be here? And those are two very different mindsets.
I’m not too sure if you can say that there are private sector values or public sector values. There probably are, and I’m not too good at differentiating one or the other. But I can tell you that there’s a different mindset. And therefore efficiency means survival in the private sector. Efficiency has little meaning in the public sector. You have to make efficiency real. You have to make a purpose out of efficiency. In our case, it was pretty easy because by gaining efficiency we could save more lives. We just had to translate that into something meaningful. When we did, the conversion rate was very high.
The Starting Point
What do you do first when you have such a challenge in front of you? It is to plan very clearly, to know what you want to do. In my case, before I walked into the building, I had an idea of what I was going to do the first day, the second day, the third day, for the first 20 days. I also had an idea of what I would do the first 12 weeks, and by the end of each one of those weeks, what I should have accomplished. That gives you a lot of clarity. Things don’t turn out the way you expect. You have to have the stomach to know that things will be worse, and therefore your plan might not work smoothly.
The other thing is knowing that it’s people who do things. So it’s a people management exercise. You can transform anything. I could go to a chemical company which I know nothing about. I have to know about people managing. They have to know about chemicals. I don’t. I will learn along the way. Sometimes not knowing can be helpful.
We called our first phase “Organizing to Deliver.” We knew we couldn’t take any shortcuts. We were well organized; people understood what they had to do, even if they didn’t want to do it. The second part was about making sure that our investments were truly of quality, that we would be able to refer to the returns in terms of saving lives. That’s what we call investing strategically — creating internally sufficient control mechanisms and quality conversations so as to be able to ask repeatedly, are we saving as many lives as can be saved by making this grant or that grant.
The third is what comes now, which is getting the money – what we call replenishment, which is not a good word. It’s really seducing investors into giving us money because we obtain with that money so much more than anybody else.
So the transformation was about the three goals. The goals came, each one in its phase, and we did sort of say we have finished this phase, we’re starting this phase. Now everybody be attentive; we’re going into this phase. But the job is never done and transformations are forever.
The stakeholders were a real challenge because the best diagnosis of the situation of our organization is: How settled or unsettled are the stakeholders? The stakeholders here are the donors and, of course, the patients, the people who are suffering from the diseases — and civil society which is close to them and is mobilizing society so that they get treated and they don’t just simply die because they were born in the wrong place at the wrong moment. They’re all stakeholders. And then the implementing countries as they engaged so that combating the diseases was more than just saving lives, that there was a real economic developmental return for having a society where you don’t have more professors and schoolteachers dying than the ones you can train to take over. And that you can reverse those trends or you can empty so many hospital beds that you have extra hospitals in an environment that thought that they had a huge shortage of them.
So where were the stakeholders? The donors were not pleased. They were in disarray. Some had to stop making payments. Others were very close to doing that. They were not seeing results. They were not getting the kind of response they wanted. They didn’t have enough ammunition to go to their legislatures and explain that this was a very good investment, that this was a great investment.
When you look at the implementing countries, all they heard was about audits and being accused of wrongdoing and being put in situations which they considered truly unfair, where they couldn’t really defend themselves. The money didn’t flow at the pace promised. They were just fed up and very disturbed. They were looking for avenues of getting bilateral aid and multilateral aid because they could control that more.
The patients were in the worst of situations. They had high anxiety because they were living with HIV/AIDS and somebody was supplying the medicine. The fear was that they would be cut off. That’s a very unfair situation. They were in that situation because the headlines were talking about the Global Fund disappearing. The disappearance of the Fund would mean their oxygen would be cut off. So their level of anxiety was very high.
The people inside the secretariat — the management — were totally lost. They didn’t know if they had a future. They didn’t have a future. How would they go around doing this? Who was really responsible for what was going on?
Everybody was working so hard that nothing was getting done. I couldn’t think of a more difficult situation of walking into a job, with all stakeholders [unhappy]. So we decided to go in order. We said, let’s work on the donors first. Let’s work on the internal management and people first. Next, the organization. Let’s go to the recipients third. That will take care of the patients if we do it well. We did it in that order, and it worked.
The hardest thing is always the long night before people decisions because the situations that you confront are never black and white. You ruminate, you think, you fight with yourself. Then there’s a moment when you say, this is what should be done. Those are always the loneliest moments in any transformation. In this transformation, the most difficult for me was to understand that the stakeholders had come together with a strategy. They had brought me to implement it. But they weren’t quite committed to it. In fact, I sometimes think that they never thought it would be implemented.
The strategy and the business model change that we implemented had a very fundamental aspect to it. We are a demand-based organization, as we should be. We only provide finance if countries demand financing. We don’t go and convince countries to take our money. The countries come and show us the investment opportunities. And we look at that opportunity, and we see if it’s bankable and if it’s a good use of our money. That’s a good model. But that model was misunderstood, and it was taken to an extreme around something called country ownership, where investment proposals were coming from countries without full information, without the latest information, without the possibilities of cross-fertilizing the learning of a fight that was taking place in 140 countries. In our business model today, we continue being a demand-based organization. Countries bring opportunities to us, but as those opportunities and those proposals are being molded, there’s an intense dialogue of all the communities, international and local, that have something to do with the fight against that disease. That’s a much better proposal.
That is the fundamental change. It was very difficult to break from the purely passionate discussions about country ownership. It turns out that we have not broken the principle of country ownership; we’re truly enriching it because the country owns more information and a better plan. That plan is more likely to get investment support from us or somebody else.
Each transformation is unique, and they’re all the same. I’ve been lucky because all of them turned out to be right. And so there’s a lot at stake. There’s a lot at stake because when you’re talking not about reorganizing but transforming, it’s because there’s failure looking at you. In the case of the Fund, what was different was that failure meant millions of people dying. That’s what really impacted me the most and gave me so much energy and so much positive energy and such capacity to take bad news, digest it and do what leaders do.
Being a leader in a good situation is easy. A bad moment is when you need a leader. You come in smiling and show people a way, with a failure just behind you. You have to recuperate and move forward.
Be humble. And be direct. Being direct is not offensive; it is not disrespectful. Make sure that what has to be said is said and it’s understood and that there’s a healthy debate about things. But the debate has a time. The debate has a moment. The debate has a beginning and an end. Decisions are made, and everybody has to line up and go after them. I think this is very important because it is people who do the transformation. It is not you. What you do is create those moments of debate, of closure, of clarity and move forward. And the lessons are be humble, be ready to accept mistakes, know that you’re not going to be perfect, know that you can correct and move forward, that the world doesn’t stop in a failure or in a mistake. Be very direct. Communicate clearly what has to be said. Make sure that there’s debate, that different points of view are put on the table. Out of those points of view a decision is made. Once there’s a decision, move in that direction. Have confidence in your experience. If your intuition tells you to go one way, go, go.