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International Review of Public Administration, 2015
Vol. 20, No. 4, 370–385, http://dx.doi.org/10.1080/12294659.2015.1088687
A dynamic performance management approach to support local
strategic planning
Carmine Bianchia* and Salvatore Tomasellib
a
Business and Public Management, Department of European and International Studies,
University of Palermo, Via Maqueda, 324 – 90134 Palermo, Italy; bBusiness Management,
Department of Economic, Business and Financial Sciences, University of Palermo, Viale delle
Scienze, Ed. 13 – 90128 Palermo, Italy
(Received 1 December 2014; revised 21 May 2015; accepted 1 June 2015)
In spite of efforts devoted in the last decades to local strategic planning, such field
of research and practice has been frequently characterized by a lack of implementation. We argue here that this phenomenon is due to the limitations of the static and
linear approach to local strategic planning in fostering the development of common
shared view among policy makers on the relevant system’s structure and behavior.
By means of a case-study, we illustrate how an approach based on system dynamics
modeling applied to Performance Management can be useful to overcome such
weaknesses. The proposed approach enhances a better understanding of the causes
and effects related to adopted policies, undertaken actions and targeted results. This
helps key-players in an area to overcome possible barriers to collaboration, and
therefore to adopt a combined “institutional and inter-institutional” perspective of
performance.
Keywords: dynamic performance management; system dynamics; local strategic
planning; case-study
The path from government to governance towards local strategic planning
This paper discusses the benefits of dynamic performance management (DPM) to support decision makers in designing and implementing local strategic plans.
Local strategic planning is a crucial topic for sustainable development (Haughton &
Counsell, 2004). This field of study and practice underlies a method to enhance an
effective implementation of the ‘metropolitan governance’ principle, i.e. “the process
by which citizens collectively solve their problems and meet society’s needs, using
‘government’ as the instrument” (OECD, 2000, p.1).
The concept of competitiveness, when applied to local government, goes beyond a
mere aggregation of the competitiveness of companies or other single organization
located in a geographic area. In fact, a geographic area can be considered an independent economic agent, competing on a global scale, with its own capability to attract
and retain strategic resources to further improve its competitiveness, to preserve or
increase quality of life and social wellness (Begg, 1999).
Geographic areas may compete to attract and retain strategic resources, such as:
mobile investment, public funds, infrastructures, companies, population, human capital,
tourism, arts, and global events (Jessop & Sum, 2000; Lever, 1999; Porter, 1995,
*Corresponding author. Email: carmine.bianchi@unipa.it
© 2015 The Korean Association for Public Administration
International Review of Public Administration
371
1996). In pursuing local competitiveness, mutually reinforcing relationships between
such resources are fostered by local decision makers. For instance, human capital, companies, infrastructures, knowledge networks and the transparency of public sector
authorization processes, may further attract new companies, projects, and skills.
The capability of a geographic area to attract, retain and deploy such resources may
foster the acquisition of further strategic resources that cannot be gained through ‘market-like’ competition such as: quality of life, social capital, citizen satisfaction, trust in
government, and reputation. Within a geographic area, human, social and relational
capital are crucial strategic resources to pursue competitiveness; they are necessary preconditions to strengthen employment stability and mutuality, and to foster the development of local well-being and wealth (Camagni, 2002).
However, the governance of local areas is not that simple due to a number of factors, including fragmentation of jurisdictions, lack of coordination among them, blurred
decision-making, chronic difficulties in financial management and fiscal policy making,
lack of accountability and of outcome-driven vision (OECD, 2000). Changing attitudes
and developing a culture of governance has been indicated as a pre-requisite to improve
the capability of metropolitan areas and smaller municipalities to pursue local development (OECD, 2001, p. 13). More inclusive and participatory governance approaches
should replace traditional and sectoral “top-down” rule-driven systems (OECD, 2000).
This implies a shift from “government” to “governance” (Cavenago & Trivellato,
2010). In this context, governmental institutions are expected to take an active role as
leaders of a change and learning process, implying a constant interaction, not only with
other public sector organizations, but also with the civil society.
This paper is structured in three parts. In the first part, we explore the logical foundations of local strategic planning as a complex field in performance management; we
argue the need of an interinstitutional approach; we outline DPM as an approach to
enhance sustainable local strategic plans. In the second part, we illustrate a case study
of a local strategic plan that was drawn up through a static and linear approach. In the
third part, we discuss main limitations of such approach to strategic planning in dealing
with dynamic complexity, in relation to the case study. Based on such analysis, we provide insights on how DPM can be applied to overcome such limitations.
Outlining local strategic planning as a complex field in performance management:
the need for an interinstitutional perspective
Though local government is a traditional field of study in performance measurement/management (Ammons, 2001; De Lancer Julnes – Holzer, 2014; Kelly – Rivenbark, 2011), the governance of local areas is a relatively new topic. In fact, the efforts
produced by both researchers and practitioners in the last decades have been mainly
focused on an organizational (i.e. institutional) sphere, with the intent to set performance standards that can be used as a basis to foster coordination among decision makers and the accountability of managers on achieved results. Conversely, the governance
of local areas requires a focus on a multi-organizational (i.e. inter-institutional) sphere,
where performance measurement/management is expected to foster coordination among
different players to pursue a learning oriented strategic planning.
The culture and practice of local strategic planning has evolved since the 1960s
through three main stages (Tanese – Di Filippo – Rennie, 2006, p. 17). A first generation of plans (Structure Plans) was mainly developed in the UK since the ‘60-70s,
according to a systemic – but static – approach. This approach has been used to
372
C. Bianchi and S. Tomaselli
provide a long-term guide for changes to land use, buildings and public spaces. A second generation (City Strategic Plans) was borrowed from the business practice, based
on the pioneering work of Arthur Andersen in 1982 in the city of San Francisco. A
third generation (Local Strategic Plans) started emerging from the early ‘90s to foster
the governance of towns and districts, through the involvement of public and private
stakeholders, according to a pluralistic and participative perspective. Local strategic
planning is an ongoing activity, whose purpose is to guide action. It aims to support an
understanding of the driving forces of a geographic area’s performance, to foster consensus building among different stakeholders, whereas a single player (e.g. a Municipal
administration) takes a leading role to frame the dynamic complexity affecting performance into the strategic planning process.
There is a lack of literature addressing the specific complexity of the field, which
requires a learning oriented approach to local strategic planning. A number of factors
shape such complexity.
First, the planning effort is not primarily focused on a single institution; it is rather
on a geographic area. In this perspective, the sustainable development of organizations
is tightly related to the sustainable development of the local area where they are
located.
Second, this requires a coordination between different institutions and an outcome
view to investigate how adopted policies will impact on the performance of the area.
Therefore, framing delays between causes and effects sharply characterizes the complexity of such field.
Third, a trade-off analysis (in both and time and space) is needed: a strategy might
improve local performance in the short term, but it might also lead to unintended outcomes in the long term. Also, it might improve performance in a given industry to the
detriment of another.
Fourth, the above mentioned complexity factors suggest the need of a feedback perspective. In fact, an input-output view may lead to a bounded identification of the relevant system generating local performance, and therefore to a poor identification of
policy outcomes. This also requires a learning-oriented perspective: a cross fertilization
between different professional profiles participating into the planning process should
contribute to capture the systemic, complex and dynamic structure of the problem context.
We claim that a lack of perception of such complexity is a major cause of the ritual
implementation of the governance principles that has been highlighted in the literature
(Razumeyko, 2011, p. 406-408; Ricz & Salamin, 2010, p. 28).
To design and implement “robust” local strategic plans, a combined institutional
(i.e. organizational) and interinstitutional (i.e. local area) perspective is needed. This is
a quite new research area for performance management (PM), in respect to the assessment of policy outcomes. If framed under an institutional perspective, performance is
primarily assessed in relation to the effects produced by decision-makers on their own
institution (Bouckaert – Halligan, 2008, p. 45-66; Sanger, 2008; Ho – Ni, 2005). Conversely, at the interinstitutional level, performance results from the interaction of different institutions whose policies should converge into positive outcomes for the wider
system (i.e. the local area) to which they belong (Bianchi, 2010; 2012). If we aim to
evaluate policy outcomes in such a context, the interinstitutional system’s performance
would not result from a mere sum of the performance levels produced by each single
institution. It would be, rather, the effect of the net synergies among the different institutions linked to each other.
International Review of Public Administration
373
An interinstitutional perspective identifies a local area as the relevant system within
which the feedback structure (Sterman, 2000, chapter 4) between strategic resources,
policies and performance drivers, generates a dynamic behavior (in terms of endresults) that should be analyzed in the strategic planning process. Both the aggregate
performance of an area and the specific performance of each organization inside it are
significantly affected by the accumulation and depletion processes of social capital
(Putnam, 2000) and other strategic resources such as infrastructures and image.
In the described context, as referred at the beginning of this section, the traditional
paradigms adopted by the performance management movement, focused on an organizational sphere, and implying that achieved results are primarily assessed in relation to
the effects produced by decision makers on their own institutions, seem to have fallen
short of expectations. In fact, setting outcome performance measures in an organizational context (e.g. a Municipality) often entails difficulties in framing the effects of the
activities carried out by a single agency on the outer local system. Managing local performance implies new challenges for the design and implementation of performance
management systems, leading to more “robust” local strategic plans, to deal with the
dynamic complexity factors in local strategic planning that have been commented
before.
System dynamics (SD) modeling can be used to enrich PM in local government,
to foster a common shared view of the relevant system’s structure and behavior among
stakeholders in local strategic planning. SD is a methodology to map system structure
to capture and communicate the behavior driving processes and the quantification of
the relationships to produce a set of equations that form the basis for simulating possible system behaviors over time. Insight (qualitative) modeling focuses on mapping
emphasizing approximate graphical representation of the system1. The principle is that,
if process structure determines system behavior, and system behavior determines performance (Richardson, 1995; Sterman, 2000, pp. 28-29), then the key to developing sustainable strategies to improve performance is acknowledging the relationship between
processes and behaviors and managing the leverage points. The advantage of using this
approach is that it places performance measures within the broader context of the system, responding to the reality that even simple policy and process changes aimed at
having an impact on specific outputs and outcomes are not likely to be that “simple” in
organizations (Bianchi, Winch and Tomaselli, 2008).
The SD method allows us to carry out a structure-and-behaviour analysis based on
which the reinforcing loops underlying growth can be identified and fostered by proper
development policies. Also, reinforcing loops can be associated to corresponding balancing loops, which provide a source of limit to the growth of the investigated system.
By promptly detecting and counteracting balancing loops, decision makers can foster
sustainable development. Insight SD modeling is an established practice that can be
used to inform the understanding of processes and is highly dependent on graphic
demonstration (Wolstenholme, 1999)2.
Though urban studies are a tradition in the SD literature (Forrester, 1969), this
paper outlines a relatively new stream of research and practice to propose ‘dynamic’
Performance Management as an approach applied to local governance. This research
approach is also based on insights from a conceptual modeling on an exemplary case
study to link a local area’s performance drivers and end-result measures in a feedback
systems analysis. It builds on the research of Ghaffarzadegan, Lyneis, and Richardson
(2011) and of Kim et al (2013), where small SD models were used to enhance public
policy and decision-making.
374
C. Bianchi and S. Tomaselli
The next sections of this paper will show how a DPM approach may help keyplayers in an area to overcome possible barriers to collaboration, and therefore to adopt
a combined “institutional and inter-institutional” perspective of performance. In fact, it
may support them to detect how pursuing a sustainable development in the area’s performance will impact on the sustainability of each single institution belonging to the
area itself.
A dynamic performance management approach to enhance sustainable local
strategic plans
A critical tipping point in managing organizational and local area’s performance is
associated to the capability of policy makers to: identify those strategic resources which
most determine success in the environment, insure that the endowment of such
resources is satisfactory over time, and keep a proper balance between the different
relevant strategic resources (Bianchi, 2010; Bianchi & Rivenbark, 2012; Bianchi &
Williams, 2015). SD can then be used to enrich PM in local government, focusing
specifically on how the development of conceptual and simulation models can foster a
common shared view of the relevant system among stakeholders.
According to a DPM perspective, each strategic resource should provide the basis
to sustain and foster others in the same system. For instance, both workers and equipment provide capacity, which affects perceived service quality. This affects a geographic area’s attractiveness, which, in turn, influences population dynamics. A change
in the population that a municipality must serve will affect workload and perhaps the
stock of available financial resources, and eventually capacity and service. The feedback loops underlying the dynamics of the different strategic resources imply that the
flows affecting such resources are measured over a time lag. Therefore, understanding
how delays influence strategic resources and achieved results becomes a key-issue to
manage performance in dynamic complex systems (Forrester, 1969).
Another key issue suggested by a DPM view is the need to adopt a broad enough
perspective in order to understand the driving forces affecting achieved results. This
implies that the number and range of stakeholders involved in making decisions influencing strategic resource dynamics— and, therefore, the relevant system’s performance
— are often located in several agencies in a local area.
Figure 1 illustrates how the end-results provide an endogenous source in an organization to the accumulation and depletion processes affecting strategic resources. In fact,
they can be modeled as in- or out-flows, which change over a given time span the corresponding stocks of strategic resources, as a result of actions implemented by decision
makers. End-results that most synthetically measure the overall organizational performance are flows affecting the accumulation of corresponding strategic resources that
cannot be purchased. These are: 1) resources generated by management routines, and
2) financial resources (Bianchi, 2012).
Figure 1 also highlights that performance drivers are a measure of factors on which
to act in order to affect the final performance. They can be measured in relative terms,
i.e. as a ratio between organizational or a local area’s performance and a benchmark, or
target. Such denominator must be gauged in relation to either the performance perceived by the community or specific groups of service users, or to users’ expectations,
or even to competitors’ (e.g. other geographic areas’) performance. For instance, if
related to an end-result such as the number of new business initiatives undertaken in an
urban area in a given time span, corresponding performance drivers could be associated
International Review of Public Administration
Figure 1.
375
A dynamic performance management view.
to the perceived stability of a local area, and to the perceived transparency and promptness of the public sector (e.g., in terms of authorization protocols or supply of various
services, such as those related to security, transportation, social assistance, housing). In
order to affect such drivers in the desired direction, each decision maker must build up,
preserve and deploy a proper endowment of tangible and intangible strategic resources
systemically linked each other.
The growth of a single organization and of a community (like an urban area)
embracing different institutions can be sustainable if the rate at which end-results
change the endowment of corresponding strategic resources is balanced. This implies
that each institutional decision maker is able to increase the mix of strategic resources
and that this increase is not obtained by reducing the endowment of the wider strategic
resources in the local area.
Such dynamic complexity factors justify the use of SD as an approach to frame
local area’s performance processes, and to improve decision makers’ mental models
and policy design. In the context of this paper, SD provides a supporting methodology
to address the describ …
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