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Boletín de Dinámica de Sistemas

Community and territorial management using direction through processes
A System Dynamics Based Model


Arnaldo Vecchietti
arnaldo_vecchietti@comune.verona.it


The representation of the territory as a system to be managed helps the local community and its government functions to identify the chain of local value. Public decision-makers, in their roles of governing the social and economic systems within territories, must make ongoing appraisals of the situation to identify elements and factors and to select the relevant means to be deployed.(2)

To make this managerial job easier we can start in a profitable way using the matrix “attractiveness-competitiveness”. Following this approach the city management function has to focus its professional attention on a system of elements composed of at least the following : environment, economy, social, costs, differentiation and focusing.

The elements mentioned above are grouped in a way which allows the measurement of the territorial attractiveness and the competitive advantage; this in turn makes it possible to calculate a reasonable rate for different territorial strategies

Strategies matching the two dimensions of attractiveness and competitive advantage, allow the highlighting of the following strategies.

Knowledge of the starting point/situation of a local community, of the condition of wealth and environment of its relevant territory and of the decisional and operational intersections is indispensable for defining what to do and how to reach the desired situation/condition. This operation is possible by identifying a path (strategic local plan) to define the area in terms of points and in such way to allow a modelled representation of subsystems and retroactive operating mechanisms. Substantially, the elements of territorial government can be traced to three states (relevant to today, yesterday and tomorrow) that are determined in terms of a mobile scenario (represented by the relationship between contextual uncertainty and desired states).

For the public decision maker, the concept of processes represents a highly useful tool because it effectively makes it possible to identify the relationship between the elements which need to be acted upon in order to govern and in the process, it generates the information required to make decisions. Market failure, which in a public environment characterises the existing relationship between administrators and those they administrate - a fact that is also due to the total relativity that characterises the satisfaction perceived by the latter for the former - is determined by the substantial impossibility to evaluate the concrete actions of the administrator. This is because the lack of an evaluation grid or fixed field of observation and the resorting to the use of totally “arbitrary” government signals (good vs. bad) mean that any effort towards measurement only leads to an increase in the system’s entropy and to its complete relativisation. Unfortunately, this is the problem of social systems where terms such as “efficiency” and “rational” mean little and, in the absence of agreement in the field of observation, mean nothing if not propaganda. Given what we hope is the convincing nature of this introduction, we can ask ourselves just what are organisational processes and what can we do to recognise and use them?

Processes

Organisational processes within the territory represent a group of activities that are connected by flows of information which are combined inside a territory to supply a material or non-material product that is important and well defined.

When looking at this explanation in greater detail, it is useful to point out the following elements:

1. Group of activities: activities which offer a description, in terms of operating methods, to show that they physically exists in the different local subsystems. Processes are thus not objective models or missions but bodies of concrete activities.

2. Connected by flows of information: processes are not causal chains, nor are they sequences of causes and effects; they are input-output-based flows of material and information with strong physical connotations (3) that can be observed and analysed. Processes, therefore, are logical constructions that show administrators’ abilities to comprehend the complex and dynamic relationship between a territory and its community.

3. To supply a material or non-material product: descriptions made in terms of processes group together and set out activities according to a finalised product logic, which means according to a logic based on clients who are inside and outside the territorial system. Processes differ from other activity-grouping systems currently used, such as:

• local productive and administrative functions (4) which group together similar activities according to the different tasks or competencies they require;
• administrative/productive sectors (5) which bring together activities, entrusted to the same organisational framework independently of their homogeneity.

4. Important and well defined: process logic organises activities according to a logic of value creation, which is able to produce globally vital work/services that can be evaluated in market terms. The evaluation of value and as a result, activities, must always be referred to the needs of the end client, whose satisfaction represents the only true evaluation criterion for the validity of the entire process.

Division of activities into processes makes it possible to build a real chain of value (6) which is a complex network of processes that interact with one another to supply the “products” (services, concepts of services, credit, payment, professional mobility, rules, etc.) which form the value of the service supplied to clients/citizens.

To recover a systemic vision “of services for value,” it is necessary to associate activities according to relevant lines and boundaries and considering the creation of value processes. The integration that derives from management through processes is an integration of institutions and people with different characteristics and results. The problem that arises from the attempt to integrate different qualities is how to guarantee the cultural (7) and temporal (8) co-ordination of activities within the territory, in particular through the optimisation/integration of the resources that a local community is able to produce/obtain/use (9) while guaranteeing their continuity over time.

The impact on a local system of a vision in terms of processes and of sustainable administration practices depends upon a local system that faces up to specific themes that are defined - ex ante and not ex post - on the basis of more or less contractual forms which, in any case, form expectations of results and not on the basis of all possible themes or of themes that are useful to just one party.

Government through processes is a way to place the client/citizen at the centre of territorial management, as if he or she were following the production/delivery of the service that interests him/her step by step. Process management means operating in such a way that every person receives adequate information/education to participate in what happens during the process (10) which he or she is working on or consuming.

The use of processes as a means of territorial government is a strategic choice and as such, it is the fruit of a vision that opts for certain connections while sacrificing others; that is, one interpretation among the many others that are possible.

Such an interpretation allows us to break down the structure of social and economic evidence in a logical manner, qualifying the elements of the decision-making system. A structure that is interpreted through processes is more easily broken down into levels to which it is possible to associate different types of decisions that substantially refer to the classical questions posed by any curious person:

1. Where are we going?
2. How can we get there?
3. How can we control and co-ordinate what we are doing?
4. How can we respond to change?

New Opportunities for Governance by Representing Local Social and Economic Systems in Terms of Processes

The most significant advantage stems from the fact that the non-profit system of local government (public bodies and others) and the local social and economic system (public companies and businesses) find a common denominator in processes that is representative of concrete action. This common denominator allows the generation of effective information to activate market mechanisms (political and economic). This is true for at least two reasons:

1. Describing the local social and economic system in terms of processes means concentrating on its “physical” reality, on its activities, which can be structured according to its greater aims and thus according to its strategies. Processes are a “bridging” concept to link today’s concrete operations with the greater objectives of tomorrow. The development of objectives using processes and activities means being obliged to consider them in terms of action in every operating context. This in turn means being obliged to validate their feasibility and translate them into understandable and “appropriable” forms for those involved as well as to give an operational content to that which could easily remain mere political rhetoric. Implementation of controls through processes contributes to the creation of wide-scale diffusion, through analysis and collective debates, of the greater objectives of the local community.

2. Organising collective action in terms of processes means thinking out the system of local activity beginning with the supplied result and the products obtained .

Any other mode that centres on frameworks in terms of institutional profiles, bodies with juridical duties and bodies of resources is, on the other hand, projected in terms of functional logic and self-referential. Processes take on the role of constructions, which favour connections between activities. By breaking it down into processes, it is possible to attempt to overcome all of the negative effects within the system that are caused by inter-institutional parcelling out and by the loss of contact with the value criterion (12) that only the client/citizen can give. To generate this awareness of value and of the things to be done, decision-makers must neutralise the fragmentation of specialist activities by linking together activities that are important from the viewpoint of value creation (a chain of response to the needs of the client/citizen). Using processes and publicising cost and results information, it is possible for the different actors (citizens and administrators) to rebuild the vocabulary of value that has been lost within the complex sequence of the production/provision of services. In other words, this means bringing the activity, as if it were a word, back into the process, as if this were a phrase, which - thanks to the use of syntax - can re-establish a direct connection with the meaning and value of words in one case and results in the other.

The interactions between the two different reasons we mentioned above highlight the way in which the system will reach its stability. The balance is reached because the cycle: activities – quality – customer satisfaction – administrative stability and cost aspires to balance higher quality and lower costs . Without this negative loop both the remaining two loops: design and management would fall into a reinforcing loop of “growth or decline of the state of the system” ( increasing cost or decreasing quality).

The traditional management of institutions, based on control of resources (accounts management) that are grouped together functionally and limited in terms of extension and orientation to individual or partial results, tends to create a real lack of inter-organisational co-operation. The system of power becomes an end in itself and prevails over the pertinence of intentions, procedures and actions. An activities-based, company-type approach brings operational modes and their effectiveness and relevance with regard to the demands of clients/citizens back to the centre of attention. Using management through activities - process management - it is possible to highlight important elements of direction, organisation and co-ordination, which allow positive management on a local system level of the following: cost per output of the process (or activity) produced; bottlenecks, duplication, reworking, shortcomings; activities that do or do not create value within processes; the relationship between value of the product/resources consumed for each process (and each activity), the cost and value of each single feature of the service-product and of the relevant implementation processes; the main "cost drivers" (factors which determine major or minor consumption of resources).

In this way it is possible to facilitate permanent monitoring, which allows the trends of the key variables of the different processes to be controlled over time without superposing manifold and misaligned control systems, which are instead completely encompassed by the primary company and other management systems.

The performance of the process becomes in that way the real indicator of the effectiveness and the efficiency of the work spent on producing a real result.

From the highlighted example above it is possible to appreciate that if the process is not under control the effectiveness of the effort expended on the different productive phases can be under-optimised.

Seeing this example it becomes clear that it is not enough to put a process under control only by observing the stock ( inventory) and maximising the local productivity. Despite the high production producible in this example in activity 4 (more than 3,5 bit) the real bits which have been produced are only 2,2. This is because the dimension of the flow is limited by the bottlenecks! So to really increase the productivity of any kind of organisation we have to maintain under control the bottlenecks which are always present in any kind of flow.

Management of a local system through processes means implementing the necessary conditions for the client/citizen to be able to verify with ease and according to common parameters, the way in which products/services are created by public administration - extended to non-profit-making organisations - by public companies and local businesses.

If the focalisation on processes becomes an element of territorial management, it becomes more than ever necessary to understand the expectations of citizens (clients, shareholders and administrators). To do this, services must be analysed, pointing out the existing correlation between expectations and the characteristics of the service and the delivery process.

In this way, comparison can be made between the demand for and characteristics of services, from which we obtain:

the requirements which remain unsatisfied
the characteristics of a service which satisfy citizens’ requirements to a greater extent
the value of each single characteristic of a service
the characteristics which do not bring any significant contribution to citizens’ satisfaction
the characteristics which should be chosen at the same cost of implementation.

In short, a vision in terms of processes makes it possible to intervene effectively and economically in the implementation of the Demand-Resource relationship, increasing the professional role of area government.


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