There’s a renewed interest in benchmarking, it can be a helpful tool.
When I worked at the Audit Commissioner Local Government they used to produce an annual statement analysing each council’s costs. You could see if a high cost service resulted from a service which had greater volumes, or higher costs per transaction.
By way of a fictitious example – you might look at a library service. You could see the staff costs – and that they were above average, but then by looking at the pay per employee (compared with the average) and number of staff employed/book stock you might find it was because whilst individual pay was below average, but that the library employed more staff than typical. You might then find that the library was much better used than neighbouring libraries.
The first lesson we learned at the Commission was that the information was merely a prompt to ask questions, it was not an answer in itself.
At Oxford City Council I developed our own set of variance analyses. We used some of the same cost trees that the Commission had a decade before. We included that in our annual performance report. Managers across the council contributed with varying degrees of enthusiasm.
The analysis and the subsequent assessment by the scrutiny panel helped that council understand why some costs were comparably high – and helped start a discussion about service levels.
What did I learn?
Benchmarking helps managers ask sensible questions based on a shared understanding. The benchmarking should be sufficient to achieve this, but no more. Its very easy to devote ever more resources into this area for sharply declining returns.
A benchmarking study can create stiff resistance. This will involve questioning the analysis as insufficiently detailed/missing key points and so on. Partly this may be true, but the danger is to over complicate the work. Less is better.
Finally avoid the siren voices trying to find the “most relevant” comparator. If you can – try to benchmark against different businesses, and certainly the best one organisations can find. If you can – look across different sectors and countries.
markluntley 