Institutions and organizations are considered key elements for the successful management of natural resources. However, much of the work in this field has focused mainly on regulations. This paper identifies other factors, i.e., normative, cultural-cognitive, and psychological, affecting institutional performance, management, and feedback. Using the case of Zanzibar, Tanzania, it is illustrated through the analysis of the Bwana Dikos, which are public officials placed in villages and landing sites for monitoring purposes, how a well-designed organization and clear regulations might be necessary, but not sufficient, to achieve successful management. Through triangulation of interviews, document reviews, and participant observation, it was found that four dilemmas, i.e., kinship, loyalty, poverty, and control, interfered with institutional performance, thereby decreasing efficiency. Poverty was the main driving factor explaining the Bwana Diko’s performance, but loyalty elements crosscut the other dilemmas as well. Psychological aspects were important and deserve further research. The control dilemma refers to the institutional mismatches in spatial and cognitive terms. Lack of institutional replication at the proper spatial scales negatively affected the resilience of the whole institutional setting. Furthermore, the importance of embeddedness, coproduction, and windows of opportunities to improve the institutional setting and the poverty condition of the Bwana Diko is discussed. This paper shows that a broad view of institutions is urgently needed to understand the complexity of social-ecological systems, achieve sustainability goals, tackle development, and meet our fundamental challenge, poverty alleviation.