Measuring and Managing the Performance of Territories as a hybrid field of study and practice: a System Dynamics Approach

The purpose of this paper is to illustrate how system dynamics (SD) modeling can be used to enrich performance management in local government and to foster a common shared view of the relevant system’s structure and behavior among stakeholders for territorial strategic planning. This is a quite hybrid field of analysis in performance measurement/management. In fact, in this context, performance is not primarily related to the single institutions in a regional area; it is rather associated to the territory where they operate. We begin by showing how framing dynamic complexity through SD modeling can support consensus building among different stakeholders in a territory. This shifts the attention beyond the traditional view of strategic planning, which is focused on each single jurisdiction. As shown by the case-study in the paper, a Dynamic Performance Management (DPM) approach, may help different institutions to overcome collaboration barriers. In fact, such approach supports players to detect how pursuing a sustainable development of a territory impacts in the long run on the growth sustainability of each institution operating in the territory itself. This implies that territorial public agencies, e.g. municipalities, may understand and communicate to their stakeholders that long-term performance cannot be only assessed in financial terms or bounded to output measures, but also in relation to the outcomes that public services will generate, i.e. in terms of their value transferred to the territory. Likewise, enterprises operating in a given territory can be enabled to detect how their own performance will be sustainable in the long run if they will generate not only financial capital (i.e. profits), but also social capital to the benefit of the other players belonging to the territory. Therefore, a key to implement a DPM approach for each of the players is to combine an institutional (single-player) with an inter-institutional (i.e. multi-players or territory) perspective with a view to enhancing performance and pursuing sustainable development. An inter-institutional perspective frames the territory (rather than a single institution) as the relevant system where to comprise and manage the cause and effect relationships between performance factors and strategic resources. As shown by the case-study in the paper, a DPM approach may help different institutions to overcome collaboration barriers. In fact, such approach supports players to detect the drivers of sustainable development for both the territory and the organizations belonging to it.