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We explain why international development organizations have had so little success building and reforming public sector institutions in developing countries. They often fail despite their apparently strong commitment to achieving measurable results and extraordinary amounts of time, money, and effort. We demonstrate that, when donors and lenders make access to financing contingent upon achievement of performance targets, recipient countries tend to choose easy and shallow institutional targets. These targets measure the organization of public sector institutions, rather than their effectiveness at addressing public problems. Such targets provide countries with low-cost opportunities to signal commitment to institution-building to international development organizations. We demonstrate the explanatory and predictive power of our argument in the context of a sector of World Bank lending—environment and natural resource management—that focuses heavily on improving public sector institutions.