Enhancing Public Sector Performance Management in Indonesia: The Role of Soft Systems Methodology in Addressing Local Government Challenges

ABSTRACT This study addresses the need for improved public sector performance management in Indonesia, where reforms often face systemic issues like poor integration of planning and budgeting and a focus on compliance over performance. Using Soft Systems Methodology (SSM), the research aims to create a performance management framework tailored for Indonesian local governments to enhance strategic planning, measurement accuracy and effective use of performance data for continuous improvement. Two rounds of semi‐structured interviews with nine key stakeholders yielded a total of 18 interviews, allowing for refinement and expansion of the input gathered in the first round. The second round provided deeper insights into the social and cultural dimensions of the performance management system, revealing significant gaps such as inadequate performance indicators and ineffective system integration. To address these challenges, this study introduces the IMPACT Framework, a newly developed framework that integrates six key principles: Integrative, Multi‐participatory, Productive, Adaptive, Contextual and Transformative. This framework provides a comprehensive and adaptable foundation for sustaining long‐term organizational effectiveness, enhancing strategic alignment, operational efficiency and stakeholder engagement while allowing for flexibility in response to evolving policy and administrative needs. The IMPACT Framework fosters long‐term organizational transformation, contributing to better governance and public service delivery. The findings have significant implications for strategic alignment and operational efficiency in Indonesian local governments and similar governance contexts.