Application of system dynamics methodology in performance management system: a case study of Indian automotive firm

Abstract

The study aims at showcasing the application of system dynamic (SD) methodology for developing 'system dynamics-based performance management model' where one of the Indian automobile manufacturing firms has been chosen as the context. Flexible strategy game-card has been used as a theoretical basis for developing the performance management system (PMS). The model emphasises looking beyond the dynamics of leading and lagging performance indicators and capturing dynamics of strategic interventions and firm's performance. The study adopts SD methodology, and it is tools as causal loop diagrams and feedback loops to capture dynamics of strategic interventions and lagging performance indicators. ISEE systems STELLA 10.0.2 software package has been used to develop the stock-and-flow diagram. The results of SD model simulation portray that introduction of new products in light commercial vehicles segment, and value-addition by training and development of staff lead to an increase in the sales volume, thus supporting formulated hypotheses. This study goes beyond the dynamics of leading-lagging performance indicators and highlights the interaction of strategic interventions/actions with firm's performance that enables managers to visualise systems perspective and feedback on actions taken.