Benchmarking to become best in class: guiding principles in Gresham, Oregon.
There is a perception that government is not working very well and it costs too much. Many citizens believe they are paying a lot to government without a clear comprehension of what each governmental entity is doing, why it is doing it, and who is in charge let alone who is accountable. The issue of accountability is frequently highlighted at election time, when voters are asked, "Are you better off now than you were before?" Voters respond with a form of "benchmarks" of what "better off than before" means to them. If government is to answer this fundamental question, then government needs to target some specific outcomes, find ways of measuring progress towards them, and hold itself accountable for the achievement of these outcomes. Benchmarks can serve this need.
Recognition of benchmarking began as part of the "quality movement" in the late 1980s. An ongoing outreach activity, benchmarking has as a goal the identification of the best operating practices and processes that, when carried out, produce superior performance. As used in the corporate world, benchmarking is viewed as the process of seeking the best examples of good practice, often by the most profitable companies, and setting a target to meet or exceed that standard. This requires becoming the "best in class," not just in profitability but in long-term improvements in efficiency of core business functions and adaptability to the marketplace. For purposes of benchmarking, only that which can be measured exists.
In local government, benchmarking is being used to gauge the organizational and community efforts in accomplishing predefined and measurable desired outcomes developed with the participation of policy makers, management, staff, customers, and stakeholders. Benchmarks in the public sector are indicators that convey information about the level of achievement of policies, programs, or services.
Benchmarks require two things: a fixed point and metrics - a means to measure. Benchmark selection requires first the identification of what is to be improved and secondly the application of metrics to the improvement process. Benchmarking requires a commitment of time and resources, beginning with top management. Approval of benchmarking by the most senior executive within the scope of the functions to be analyzed and one person at a higher level (i.e., a champion) is vital.
The Organizational Framework
The City of Gresham developed a five-year management plan consisting of 10 city goals established by the council. Departments then identified their respective ongoing core business functions that support each goal and established objectives for their respective departments supporting each goal, which linked implementation of the departmental objectives to the achievement of the council goals. Each council agenda item is required to identify to which council goal, departmental core business function, and/or objective it is linked. Employee progress reports include a section that links some aspects of employee performance to a particular departmental core business function and/or objective. Budget decision packages also identify the goal that they support. The degree of standardization within this process and continual improvement of the process increases the linkage of departmental, employee, and program outcomes.
A benchmarking model based on this management plan could be formulated, but first it was necessary to communicate the big picture to employees about how the organization works and how benchmarking fits into the way the organization works. To aid in this effort, an organizational model was developed (Exhibit 1). This model identifies and describes the relationships among:
* the levels and/or roles employees in the organization may have;
* some of the generic position(s) in the organization for employees to find where they fit;
* the typical emphasis at each level;
* the nature of the information typically required at each level;
* the type of report typically required at each level, with an accounting example to denote the increasing comprehensiveness of reporting requirements; and
* the type of software that would be best suited for each level.(1)
The model enables employees at all levels to understand and acknowledge the varying relationships within the organization and to identify their role in achieving the objectives in the management plan.
Hierarchical in its structure, the model characterizes five levels of governmental concerns: strategic planning, management control, operational control, operational performance, and customer satisfaction. The role of strategic planning by the executive, legislature, and senior management is to define - in the form of a policy - why the enterprise is headed in a designated direction. It typically requires a broad-based strategic plan and information support in financial accounting. The role of management control by program managers is to determine what is to be accomplished [TABULAR DATA FOR EXHIBIT 1 OMITTED] in the form of a program and to formulate a management plan to monitor the resources used and measure the attainment of the objectives. Operational control by operational management or supervisors establishes and ensures when things will be accomplished in the core business functions. It requires the formulation of a detailed operating or project plan, which typically is supported by cost accounting. The mission of operational performance by staff is to designate how to do things as a process, task, or activity. Cost accounting provides costs for some types of procedures and/or practices. The customer satisfaction process seeks to ensure that all employees identify who their customers are and what products or services will meet their needs. The metric at this level is quality.
A table such as Exhibit 1, depicting the Gresham organizational model, is used as a training tool, alerting employees to the importance of identifying the particular needs of their customers before they try to develop benchmarks. The benchmarking strategy of requiring employees to rethink the needs of the city's customers at different levels of the organization enabled staff to avoid wasting a lot of time and effort. This review of customer needs also helps bring about wide acceptance of performance measures and/or benchmarks.
Customer needs are important determinants of appropriate benchmarks and the type of information to collect and report. Customers at the strategic planning level require information of a global perspective with less detail than what is needed at lower levels in the organization, where more accurate, timely, and detailed information is necessary.
Benchmarks and Performance
Although benchmarks are a measure of performance, their application is distinctive from that of performance measures, which typically are used in a budget to communicate an annual result, such as "reduced costs by 30 percent." Performance measures fail to provide the metrics to aid in responsibly managing operational performance throughout the levels of the organization and throughout the year. High-level performance measures, for example, cascade to lower levels of the organization, usually in the same units of measure, despite the fact that the methods, outcomes, and metrics may change at each level. As a result, senior management and employees can be stuck with an efficient but ineffective tracking system.
When benchmarking is used, metrics are customized to fit the means, and the achievement of a goal represents the outcome of a series of reliable sequences. By controlling the methods and limiting them to measures, benchmarking improves the likelihood of achieving the desired outcome and planned results.
Benchmarks control the means at every level of the hierarchy. As a goal rolls down through the organization, benchmarks serve to convert strategies into tactics and projects, through alignment and linkage, into action. The metrics change accordingly so employees can monitor the results and adjust behavior for the desired outcomes. Every objective is translated into one or more means by assigning every means a measure or indicator (desired outcome). In this way, words and numbers link the objectives and the outcomes, and managers can verify that the combination of program plans adds up to delivery of the organizational requirements.
Benchmarks make cause-and-effect relationships visible through a process of alignment:
* alignment of an organization's goals with changes in the external environment;
* alignment of employees with key objectives; and
* alignment of process, task, and activity metrics with organizational goals.
The result is an organization that consistently focuses on a fixed number of priorities, clearly communicates that focus throughout the organization, and identifies improvements in core business functions to achieve program objectives. To this end, benchmarking requires that managers understand the cause-and-effect relationships that drive their programs and that they document and study the rationale of their choices. It also demands an understanding of the key relationships that generate and control the process of change and designing change strategies to reflect these relationships.
Three Types of Benchmarks
Benchmarks are tools for managing, reporting, and correcting which are used at three basic levels: strategy, performance, and operations. Strategic benchmarks measure the success of a policy that addresses broad community goals, performance benchmarks compare a program's accomplishments with similar programs, and process (operational) benchmarks deal with finding improvements in the delivery of a service to the customer. (See Exhibit 2.)
Strategic Benchmarks. A pioneer of benchmarking in the public sector, the State of Oregon looked at benchmarking as a tool for addressing its economic downturn in the mid-1980s. Although some of Oregon's strategic benchmarks are stated in terms of moving the state up in the ranking of states, Oregon strategic benchmarks often call for improving the lives of the people in the state. This measured improvement is relative to their present situation or compared to some objective standard of health, safety, economic well-being of the state's population, and the state's resulting economy and public finances. This is the bottom line for the government, just as the bottom line for a private company is its ranking against other businesses or financial profit for the owners or shareholders.
Strategic benchmarks assess where the entity or state intends to be in the future and indicate progress toward achievement of its strategic vision. They keep leaders, employees, and citizens focused on achieving these outcomes. Tracking results through benchmarking enables decision makers to set priorities and adapt and modify programs as they learn what works best.
Gresham's Use of Strategic Benchmarks: Housing. Goal 10 of the city's management plan is to create opportunities for living in a full-service community through economic development and housing. Strategic planning requires considering what housing in Gresham should be like in the next 10, 20, and 30 years; what should be the average selling price, percentage of income to qualify for a mortgage, or percentage of single versus multifamily housing units? Clearly, they should be better, but better than what? Strategic benchmarks will provide the focus of what the strategic outcomes for housing efforts should be. The attainment of the housing outcomes set out in Goal 10 makes the lives of Gresham citizens better - measurably better - in specific ways.
In 1995, city council created the Gresham Progress Board to identify and develop strategic benchmarks as a means of providing community-based benchmarking. Board members were selected on the basis of geographic and other demographic factors to ensure most of the neighborhoods within Gresham were represented and to include a diversity of views and opinions. Applicants were solicited from neighborhood and civic associations, religious organizations, service groups and clubs, as well as business and educational organizations. The progress board believes this type of neighborhood representation provides the best input from a local perspective so that the strategic benchmarks for housing can be especially targeted at a neighborhood level.
The following scenario illustrates the application of housing benchmarks currently under development in Gresham. Target areas of affordability and housing mix are being formulated by each neighborhood district. This requires examining historical housing data, trending them to 1995, and factoring in some future-year demographic assumptions to derive desired outcomes. Staff and community stakeholders review and refine these outcomes, then present them to the Gresham Progress Board, which will solicit feedback from private, public, and not-for-profit stakeholders for further revisions. The board will then present these housing strategic benchmarks to city council for adoption. The success of Gresham's housing policy will be measured by these strategic benchmarks.
Strategic benchmarks will be formulated in only those areas that the city can directly control or influence. The housing strategic benchmarks, specifying targets for particular future years, will influence the city's budget, along with other stakeholder organizations, and guide efforts toward the attainment of these outcomes. The benchmarking process may suggest budget shifts by revealing costly programs or efforts that do not work and prompt new approaches to the problems of housing.
Performance Benchmarks. Performance benchmarks compare one organization's products and services against those of another. They will indicate how a jurisdiction compares but do not reveal why the numbers differ. The difference between performance benchmarks and performance measures is comparability. Jurisdictions usually create performance measures to establish targets for a program or activity they have defined or is unique to that jurisdiction; this means that comparing performance measures is often comparing apples to oranges. The challenge with performance measures arises when citizens or elected officials look at the performance measures and ask, "How do we compare with another jurisdiction?" Many governments can do this, while others cannot.
Performance benchmarks, on the other hand, require that a common attribute or similarity exists so that apples-to-apples comparisons are possible. The purpose of performance benchmarks is to enable one unit or organization to compare itself easily with others. Performance benchmarks are used for this purpose constantly in the business world.
One example of a performance benchmark related to housing is a comparison of permit processing, inspections, lot size, new infrastructure, average family income, zoning, grant funded housing projects, or plan reviews with jurisdictions of similar size. A popular source of data for performance benchmarks is the American Suburbs Rating Guide and Fact Book, which provides information on the suburbs of the 50 largest metropolitan areas throughout the nation. They are benchmarked and ranked from best to worst, overall, and in seven categories: economics, affordable housing, crime, open spaces, education, commuting, and community stability. While many jurisdictions may not yet have committed themselves to do any type of performance benchmarking, it is no surprise they are already included in these performance benchmarks by the private sector as a means of comparison with other areas of the country.
Learning from others - determining who has the best performance through performance benchmarking and studying the practices they use (known as best practices) - can be a precursor toward the attainment of breakthroughs in the way "business" is done. Performance benchmarking provides a baseline from which to make a comparison and identify gaps to close in relation to an entity's best performance and to the best in class.
The International City/County Management Association (ICMA) is using performance benchmarks in its Comparative Performance Measurement Consortium. The City of Gresham is using ICMA's support services performance benchmarks as a means of comparing itself to other municipalities in core business functions, such as fleet management, facilities management, human resources, risk management, information technology, and purchasing. These benchmarks provide Gresham a basis of measurement to assess its standing with other municipalities. City staff will examine the feasibility of utilizing the ICMA's performance benchmarks relating to neighborhood services and housing and will work with other jurisdictions and professional organizations to select the most appropriate and beneficial performance benchmarks.
Process Benchmarks. Process benchmarks are used to assess the effectiveness, efficiency, and service quality of a program or core business function. Before a process can be improved, it is important to know how the process is currently working and to monitor the key input, process, output, and outcome indicators that customers use to evaluate service delivery. Process benchmarks, the lowest level of the benchmark hierarchy, can serve as the basis for initiating improvements through a variety of tools and techniques.
The City of Gresham has used a modified service efforts and accomplishments model that measures the flow of inputs, processes, and outputs that affect the desired outcomes of programs or functions. As the city establishes its strategic and performance benchmarks, they are used in efforts to improve processes related to housing. Staff of city programs involved in housing will participate in the formulation of efficiency, effectiveness, and service quality desired outcomes that will be linked to the budget. Process benchmarks for the city mediation program and fire and emergency services department have been developed and are used as a tool to improve service delivery continuously and as a reporting mechanism. The process of developing these benchmarks involves the identification of desired outcomes for programs, and the sifting of the key inputs, key processes, and key outputs.
Each customer has different information needs; this translates into different types of benchmarks. A clear understanding of this was necessary for Gresham staff to create a model for linking and aligning information needs. As information systems professionals well know, there must be an architecture from which to design, develop, and deliver information to meet the needs of the various users of the system. It became apparent to Gresham staff that numerous benchmarking, strategic planning, performance-based budgeting, and total quality management efforts throughout the country lacked the necessary architecture, often prompting users to ask, "Where does this fit into the big picture?"
Examining the experiences of other jurisdictions and analyzing their own initial efforts has led officials in Gresham to four conclusions about what benchmarks should do.
* Benchmarks must link operations to strategic goals. Departments and functions should know how they are contributing separately and together in meeting their strategic mission.
* The benchmark system has to integrate financial and nonfinancial information in a way that is useable by program managers - management and employees need the right information at the right time to support decisions.
* The real value of benchmarks for the city would derive from their ability to focus efforts on core business functions related to customer requirements.
* Benchmarking must provide added value to the user. Reports should not be created for the sake of measuring but rather to help people manage, make decisions, assess past performance, and plan for future performance.
THREE TYPES OF BENCHMARKS
STRATEGIC BENCHMARKS How public, private, and nonprofit organizations compare with each other. Strategic benchmarking is seldom industry-focused. It moves across industries and cities to determine what are the best-in-class strategic outcomes. The Oregon Progress Board's Benchmarks are an example of strategic benchmarks.
PERFORMANCE BENCHMARKS How public, private, and nonprofit organizations compare themselves with each other in terms of product and service. Performance benchmarking usually focuses on elements of price, technical quality, ancillary product or service features, speed, reliability, and other performance comparisons.
PROCESS BENCHMARKS How public, private, and nonprofit organizations compare through the identification of the most effective operating practices from many organizations that perform similar work processes.
TIPS FOR GETTING STARTED
* Before modifying an existing planning system, draw a map of it and take time to identify defects. Map the various components, inputs, and calendar aspects of current processes to figure out where to start. This is essential, even though the existing strategic planning process may be an informal or unstructured one.
* Create an open and safe setting to review the planning process so that senior managers will not be reluctant to report candidly the extent to which they currently manage their plans. Emphasize the need to identify opportunities for improvement.
* Senior management leadership and support must be visible.
* Target initial efforts to garner a quick but effective success and plan time to learn on the smaller, doable projects. Benchmark selection may lead towards a complex and time-consuming program or to one that needs only minor tweaking of current practice. Keep it simple in the beginning, with additional detail and complexity being the result of refinements.
* Utilize what already exists; include the Internet and professional organizations among your resources. Other jurisdictions may have worked on a particular area to benchmark, and staff will probably be more than happy to share their experiences.
* Employees must recognize the long-term importance of the effort. Be persistent in staying the course.
* Do not arbitrarily try to adopt a carbon-copy approach of benchmarking or performance measurement from another organization. Employee buy-in, acceptance, and ownership of the new techniques are necessary. Success cannot be imported without participation and acceptance by the creators and users of information. Communicate.
* Be ready to crumple it up and redesign it.
FOR FURTHER INFORMATION ON BENCHMARKS
* Comparative Performance Measurement Consortium, International City/County Management Association, 777 North Capitol St. N.E., Suite 500, Washington, DC 20002-4201 (202/289-4262). Contact: Michael Lombardo (e-mail: firstname.lastname@example.org)
PUBLICATIONS, HANDBOOKS, AND GUIDES
* American Suburbs Rating Guide and Fact Book by Alan Willis and Bennett Jacobstein (1993). Contact: Toucan Valley Publications, 142 N. Milpitas Blvd., Suite 260, Milpitas, CA 95035
* Benchmarking: A Manager's Guide by Meredith Bolon and Amy Weber (1995) and published by Coopers & Lybrand. Contact: Bookmasters (800/247-6553)
* Business Process Benchmarking: Finding and Implementing Best Practices by Robert C. Camp (1995). Contact: American Society for Quality Control Press, P.O. Box 3005, Milwaukee, WI 53201-3005
* Benchmarking Management Guide by International Benchmarking Clearinghouse (1993). Contact: American Productivity and Quality Center, 123 N. Post Oak Lane, 3rd floor, Houston, TX 77024
* Effective Benchmarking (SMA #4V) by the Institute of Management Accountants (1995). Contact: Institute of Management Accountants, Publications, 10 Paragon Drive, Montvale, NJ 07645
* Strategic Benchmarking: How to Rate Your Company's Performance Against the World's Best by Gregory H. Watson (1993). Contact: John Wiley & Sons, 1 Wiley Drive, Somerset, NJ 08875
WORLD WIDE WEB SITES WITH BENCHMARKING INFORMATION
* American Productivity and Quality Center (http://www.apqc.org)
* American Society for Quality Control (http://www.asqc.org)
* Benchmarking for Quality Management and Technology (http://www.mcb.co.uk/services/ contents/liblink/webpages/h131001001.html)
* Center for Advanced Purchasing Studies Benchmarking Reports (http://www.napm.org/caps/bmr-hmpg.htm)
* Department of Energy's Business Practices Homepage (http://www.pr.doe.gov/pr5.html)
* Performance Benchmarking (http://www.lbb.state.tx.us/lbb/members/reports/strat/SPAPP3.htm)
* Education best practices (http://www.nhmccd.cc.tx.us/groups/stw/srvy_txt.html)
* EuroQual Benchmarking (http://www.euroqual.org/qtd/lit/bench.htm)
* National Performance Review Reinventing Government Toolkit (http://www.fc.ul.pt/npr-page.html)
* National Institute of Standards and Technology Quality Program (http:// www.quality.nist.gov)
* Oregon Progress Board (http://www.econ.state.or.us/opb/index.htm)
* The Strategic Planning Institute Council on Benchmarking (http://www.spinet.org/)
1 This extended model was derived from Planning and Control Systems: A Framework for Analysis by Robert N. Anthony (Cambridge, MA: Harvard Business School, Division of Research, 1965).
ANTHONY H. RAINEY is administrator of benchmarks and strategic planning for the City of Gresham and a member of GFOA's Committee on Governmental Budgeting and Management. He formerly served as budget and benchmarks director for the City of Gresham, planning and budget director for the Seattle Municipal Court in Washington, and regional information resources manager of the Small Business Administration Seattle Regional office. He can be contacted by telephone (503/618-2362) or e-mail (email@example.com).
|Printer friendly Cite/link Email Feedback|
|Author:||Rainey, Anthony H.|
|Publication:||Government Finance Review|
|Date:||Feb 1, 1997|
|Previous Article:||Public Participation in Public Decisions: New Skills and Strategies for Public Managers.|
|Next Article:||Meeting future challenges: business planning in Grande Prairie, Alberta.|
|How to benchmark your way to better telecomm.|
|BENCHMARKING PUBLIC LIBRARIES: COMPARISONS IN CONTEXT.|
|A High Performance Government.|
|A programme for benchmarking.|
|A programme for benchmarking.|