Benchmarking data to improve provider performance
Whether you are realigning your current deal or entering your first outsourcing contract, benchmarking data can be used to manage and improve provider performance.
As we are slowly but surely climbing our way out of recession, corporations are shifting emphasis from maintaining position to focussing on achieving sustainable profitable growth and seeking ways to scale and replicate successful business processes globally. Process benchmarking is one of the effective ways of identifying the best processes to replicate or highlighting those which need improvement.
Although the benefits are obvious, benchmarking seems to be one of the major IT challenges facing Government departments.
Martyn Hart, NOA chairman, has a clear view on the subject. “I am of the opinion that no government contract costing more than £1 million per annum should be signed off without a clearly-defined, rigorous benchmarking programme. In order to analyse value-for-money, major projects should use an independent organisation to benchmark the deal. Benchmarking needs to incorporate a detailed normalisation process, employing a wide range of parameters, to allow for like-for-like comparison against other outsourcing contracts.
“This is essentially an outsourcing exchange rate mechanism, enabling you to review spending against a peer group of highly-complex, seemingly disparate, outsourcing deals; helping you test your provider not merely against other government department projects, but the IT marketplace as a whole. If your project is seen to be under-performing, then there are consequences for your provider. It would have to improve scope and quality of services, reduce costs, or maybe even give a refund… imagine the sensationalist headlines that would make!”
Mr Hart believes that the basis and methodology for normalisation should be open and transparent – there should be no secrets, no ‘black box.’ Currently, there is no internationally recognised formula for benchmarking and normalisation.
It seems as if a ‘normalisation’ of normalisation processes - a global code of IT benchmarking – could make deal comparisons clearer. This, in turn, could drive up standards and make the marketplace even more competitive. All of which would be truly in keeping with the key teachings of the Open Services white paper: transparency of information and freedom to choose the best provider for the job.
Although benchmarking is a time-consuming process, it can also provide research for organisations to compare and align internal strategies.
Last year Ochre House benchmarked a range of major companies, as well as a targeted selection of fast growing SMEs to measure their talent management strategies. Ochre House found that one of the most worrying findings of the research has been the fact that very few organisations have any real concept of what skills and capabilities their employees will need in five years’ time, let alone how feasible it is to source such skills in the current marketplace.
Helena Parry, director at recruitment outsourcing and talent management specialist, Ochre House, said: “From our own benchmarking, we found that few businesses really plan ahead for their employees’ needs and development. Those businesses who take the idea of strategic workforce planning seriously are able to provide a template for any others that might care to follow their lead. One of the most striking examples is Arcelor Mittal, the world’s leading steel company. Here HR is one of only two functions that report directly into the chairman and CEO, Lakshmi Mittal and is tasked with maintaining a rolling plan which identifies what capabilities the company will require over the next three and five years and how to access them.”
Overall - benchmarking is not simply a technique. Your organisation is unique; and it needs a specific recipe for your specific needs for your specific situation. Benchmarking is also not just collecting metrics, or numbers. How to achieve those numbers is the fundamental mission of benchmarking, but if all you do is collect numbers, all you’ll accomplish is to be a good number collector. However, if you compare and contrast your process measurements with those organisations superior to yours, then you will learn to change for the better.
So final words of wisdom? Formal benchmarking should be used wisely, sparingly and jointly. The entire operation should be benchmarked – client-side and supplier side and jointly and openly respond to findings. Mutually select the benchmarking company and methodology and do it once or twice thoroughly in a 7-10 year deal.