Last week on the news there was a headline which referred to the actual cost of a specific lightbulb compared to the price the MOD were paying for the same.
Needless to say, because this was a news headline the variation was quite substantial! At first glance this seemed like a classic case of benchmarking two different services. It was easy to assume that the higher price the MoD were paying included the labour involved in actually fitting the bulbs. On closer inspection, this was not actually the case and the prices quoted were for the same service.
Neverthless, this misunderstanding provoked a discussion in the office about the importance of comparing ‘like with like’ when benchmarking services and goods.
So, what is actually meant by the term ‘benchmarking’? Bernard Williams, in his book Facilities Economics defines benchmarking as:
“The process of comparing a product, service, process – indeed any activity or object – with other samples from a peer group with a view to identifying ‘best buy’ or ‘best practice’ and targeting oneself to emulate it.”
Some items and services can be fairly straightforward to benchmark. The provision of stationery or a motor fleet, for example. But other services are not quite so straight forward, particularly where premises are involved. For example the cost of maintenance of building services depends on many factors such as the quality of the original workmanship, the number of hours the premises are used and the preventative maintenance policy.
Even in my industry, facilities management training, it is difficult to accurately benchmark the cost of courses against other tuition providers. We might provide the same course with ostensibly the same end result, but how much support do we give learners against another provider and what added value services do we provide that may not be provided by others?
So, how do we accurately benchmark to ensure the process is of true value? The key is to obtain as much data as possible about the various sevices or goods you are comparing. There are three main sources which can be used to enable accurate benchmarking to take place:
- Published data
- Facilities auditor’s database
- Peer group consultation
There are advantages and disadvantages to each of these. Published data is relatively easy to get hold of but, and it is a big but, it tends to represent average cost performance rather than best practice and therefore cannot and should not be used as a basis for benchmarking to excellence.
The facilities auditor’s database allows for cross fertilisation of ideas and cost effective solutions and tends to be a highly efficient source of benchmarking data but it does need to be constantly updated and then analysed.
Peer group discussions can also be beneficial in that a group of Facilities Managers get together to compare notes on costs, performance levels and so on and are excellent at leading to the development of best practice; however, time constraints and a general lack of analytical skills can often cause such meetings to flounder.
Williams suggest a possible solution in bringing the auditor and the peer group together so that the auditor can undertake the analysis of information provided by the peer group.
Whatever method you decide upon to benchmark your products or services the key is to ensure you benchmark like with like or, as we always say:
‘Apples with Apples, not Crab-apples!’