Benchmarking

What is benchmarking ?

Benchmarking is a management technique to improve business performance. It is used to compare performance between different organisations - or different units within a single organisation - undertaking similar processes. Benchmarking is an ongoing method of measuring and improving products, services and practices against the best that can be identified in any industry anywhere. It has been defined as 'the search for industry best practices which lead to superior performance'. Unlike traditional competitive analyses which focus on one industry and its benchmarks, benchmarking can compare the ways in which similar processes are carried out irrespective of whether the outputs are different or are difficult to measure. This is particularly relevant when comparing IS/IT service provision where exact like-for-like comparisons are rare.

Why is it important?

The Government wants to develop modern, high quality, efficient and customer- focused public services. Organisations like yours will be required to focus on end results and service standards, rather than simply on their business activities and processes; you will need to look for ways to improve value for money and service performance.

You need to know how well your organisation is performing in comparison with others; you also need to know where you could make improvements that would be worthwhile. There are major advantages in using structured approaches such as benchmarking when seeking opportunities to improve services and/or reduce costs through efficiencies.

For construction projects, benchmarking is an important component of the Achieving Excellence initiative, in which client organisations must compare their management of construction projects with that others are achieving.

Potential benefits
Organisations that use benchmarking successfully report that the costs of benchmarking are repaid at least ten-fold. Benchmarking can be used to help identify which processes to improve - that is, in what areas should we aim to be achieving the best? It ought to help set targets - that is, what is the gap between our organisation's existing processes and the best practice found in other organisations? It can also help when used in conjunction with a number of performance improvement techniques, such as business analysis and redesign of business processes.

Who is involved?

Within an organisation there will be three parties involved in benchmarking:

• the business - that is, the business manager responsible for acquiring services to meet business objectives. The customer's interest in benchmarking would be: 'How can I improve my performance in procuring services and managing service providers, and in supporting the business through its services?'
• the external end-user such as the citizen - that is, anyone who uses the organisation's services for information access or to carry out transactions with government. Their interest (through user representatives) in benchmarking would be:'How can services be improved to meet our needs?' (The Performance and Innovation Unit has produced reports on citizen perceptions of electronic service delivery; see also the Cabinet Office report The View from the Queue)
• service providers, providing services under service level agreements negotiated with and managed by the customer. The provider's interest in benchmarking would be:'How can we improve our performance in the delivery of services which meet the requirements of our customers and which are cost-effective and timely?'

Levels

Benchmarking can be applied at three levels:

• operational - within individual business units (for example, benchmarking user participation in projects).
• functional - which may look across the organisation (for example, procurement and contract management). Benchmarking at this level will benefit all parts of the organisation
• strategic - which affects the formulation and implementation of an organisation's strategic planning (for example, encouraging ownership/business sponsorship of the strategy and the management and technical policies). Strategic benchmarking is not a 'quick win' but has the potential to achieve major benefits over the long term, often through a process of radical change.
  

Principles

Figure 4 shows typical benchmarking objectives.

Figure 4: Benchmarking objectives

Searching for best practices that are relevant to your organisation

Published sources of best practice are a valuable proxy for developing best practice within your organisation, helping you to improve through the experiences of others. For example, the NAO's assessment of low value procurements identifies the likely costs and benefits of improved procurement processes. Note that the fundamental measures for improvement are business measures. You should apply Goals/Questions/Metrics thinking in assessing whether another organisation's scope for improvement is relevant to your organisation - does it have similar objectives and can relevant comparisons be made? If so, their process improvements are likely to be worth considering.

Identifying what is important for you to benchmark

Which are the processes and activities which you must be really good at to be successful? Benchmarking should be applied to these. In the context of business services these may be the things which are most relevant to improving:

• the provider's relationship with users of the services
• the organisation's relationship with its customers and other stakeholders of the businesses which the services support
• those areas which deliver greatest benefit to the business
• those areas which account for most expenditure.

Looking at what others do well

You will need to:

• take an external view. Bring together business intelligence and internal performance to draw conclusions about the way internal resources and processes must be improved to achieve and surpass the performance of others
• look for better practice
• compare processes, not outputs. Comparisons with organisations in the same sector are unlikely to identify the significant improvements that have been made elsewhere or overturn the conventions of the sector.

Getting value for money from service provision

To assess the value for money you get from your provision arrangements you must be able to answer these questions:

• is our expenditure on business services contributing in the most effective way to the organisation's business performance?
• is the organisation making best use of its resources by its choice of provider and its performance as a customer and user of services?

Process

Benchmarking consists of a logical sequence of stages which an organisation goes through to achieve continuous improvement in its key processes. It involves using reference models as your starting point, such as the process assessments provided by OGC's IT Directorate to identify where improvements could be made. You will need to:

• facilitate change
• provide senior management support
• involve process owners. Their involvement encourages acceptance and buy-in by those who will be affected immediately by the changes which will be required to improve performance
• set up benchmarking teams. As a benchmarking culture develops, people will apply the method as part of the normal way in which they manage their work
• acquire the skills. People who undertake benchmarking require a small amount of training and guidance. An experienced in-house facilitator or external consultant will probably be required to provide technical assurance and encouragement in making use of reference models.

The method can be applied at various levels from relatively straightforward in-house comparisons through to industry-wide search for best practice. It comprises four basic stages: planning, analysis, action and review.

Planning
This includes:

• selecting the broad business process or function to benchmark (such as strategic planning)
• within that process defining the activity to be benchmarked (such as business sponsoring)
• identifying the resources required for the study
• confirming the key performance measures or indicators to measure the performance in carrying out the activity
• documenting the existing way in which the activity is carried out
• identifying appropriate reference models as a starting point for your assessment; you may also find supplier intelligence information useful (OGC provides a commercial intelligence service).

Analysis
This includes:

• collecting information to identify the scope for improvement
• comparing the existing process with that of appropriate reference models to identify differences and innovations
• agreeing targets for improvement which are expected as a result of adopting new ways of doing things.

Action
This includes:

• communicating the results of the study throughout the relevant parts of the organisation
• planning how to achieve the improvements
• implementing the improvement plan, monitoring progress and reviewing as necessary.

Review
This includes:

• reviewing performance when the changes have been bedded in
• identifying and rectifying anything which may have caused the organisation to fall short of its target
• communicating the results of the changes implemented to the organisation
• considering benchmarking again to continue the improvement process.

Benchmarking continuously, not just as a once-off experience
Most organisations will not find the best performance at the first attempt and it may take several goes to benchmark with the best. The important thing is that each time you undertake benchmarking it should be in response to lessons learned from earlier exercises and taking account of any subsequent changes in the business environment. Your approach should not be static; rather, it should evolve over time.

You will need to:

• apply benchmarking as a continuous method
• ensure benchmarks measure things that are a current priority.

See the workbooks on Strategy Management and Performance Management for the contribution that benchmarking can make in these areas.

Further information

See the related briefings on positioning for the future and performance management; for construction projects see also Achieving Excellence Guides.

A bench marking checklist can be found in the Tools and techniques section of the Toolkit along with capability assessments as a starting point for internal assessments of process maturity. In addition, OGC's consultancy service and commercial intelligence service can provide advice.