Governing regional development policy is a complex task. The environment is characterised by vertical inter-dependencies between levels of government, horizontal relationships among stakeholders in multiple sectors, and a need for partnership between public and private actors. In this context, effective governance requires a flexible mechanism for meeting information needs and promoting performance. Indicator systems hold promise for doing just that.

This chapter elaborates a conceptual framework for understanding how indicator systems can contribute to improving the governance of regional development policy. The first section provides a rationale for using indicator systems. It begins by describing the multi-level governance arrangements that characterise regional development policy. It explores how information gaps produce governance challenges that affect policy performance. The second section discusses the broad benefits of indicator systems. Finally, note is made of the difference between monitoring and evaluation.

Technical issues emerge when designing and using indicator systems to enhance the governance and performance of regional development policy. This chapter examines important issues in system design that should be considered when establishing indicator systems and when improving them over time. It begins with a look at what indicators should be included and the process of selection, before turning to the critical issue of incentives. Incentives that affect the behaviour of regional actors are inevitable when measuring and monitoring performance. The discussion in this chapter addresses how design considerations affect the type and degree of influence those incentives may have. Two additional design issues are also addressed: target setting and the use of performance information. Neither task is easy but must be considered if indicators are to be used to enhance performance.

Describing the technical aspects of monitoring systems is often easier than implementation. Policy makers and planners can and do encounter a variety of challenges in the planning, implementation, and revision of indicator systems. This chapter details the variety of factors that can hinder the design and effectiveness of indicator systems as a governance tool. It also notes the various mechanisms available for mediating these difficulties. It begins by outlining the specific characteristics of regional development policy that can pose a challenge for designing and using indicator systems. It then underscores the importance of stakeholder capacities with respect to effective implementation. A number of both direct and indirect “costs” are reviewed before turning to the mechanisms available for facilitating system effectiveness.

This report has laid out a rationale for the use of indicator systems in regional development policy as well as important technical considerations for designing and using them. But do indicator systems “pay off”? Are they a governance tool worth investing in? This chapter underscores that yes, indicator systems should feature in the toolkit of a regional policy maker or planner. It begins by examining whether or not the expected benefits of using indicator systems described in Chapter 1 materialise, particularly as demonstrated by the case studies in Part II. It then turns to “lessons learned” about these systems that should be considered. The chapter concludes with final comments and thoughts on areas for future research.

This chapter examines the European Union performance reserve during the 2000-06 programming period. It begins by placing the mechanism in the wider context of EU regional policy and the evolution of monitoring and evaluation at the EU level. It then details the design and implementation of the performance reserve, which attached monetary rewards to the achievement of targets. The case study reveals the political and technical challenges of implementing this mechanism, while also highlighting the learning effects which took place.

Italy is a unique national example of the use of explicit incentives to improve the performance of regional development policy. During the 2000-06 programming period for the EU Structural Funds, Italy extended and reinforced the logic of the EU performance reserve by adopted a national performance reserve aimed at promoting modernisation of the public administration. This chapter takes a look at the implementation of this performance reserve, the associated indicators, and the system currently in place for 2007-13.

This chapter examines the evolution of performance assessment for the Regional Development Agencies (RDAs) in England. Since being established in 1998, the English RDAs have been subject to a number of different approaches to monitoring. After providing a brief overview of the history of the RDAs and the environment in which they operate, the chapter examines four generations of indicator systems to monitor RDA performance.

This chapter explores the implementation of the Government Performance and Results Act and the Balanced Scorecard at the US Economic Development Administration (EDA). It begins by providing an overview of the history and programmes of the EDA before turning to the indicator systems used to monitor performance. The case study demonstrates the importance of using indicators to generate information that can be used for decision making on both a short- and a long-term basis.