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«Comparing to Improve, or Simply to Assert? A Case Study of the Application of the Benchmarking Theory within the Public Sector Lii Lindgren Wictor ...»

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Comparing to Improve, or

Simply to Assert?

A Case Study of the Application of the Benchmarking Theory

within the Public Sector

Lii Lindgren

Wictor von Walden

Madeleine kruzenhof

Master Thesis of Science in Business and Economics 30 ECTS

Fall 2013

Supervisors: Roland Almqvist and Andreas Sundström

Acknowledgements

During the past semester the work with this study has been conducted in cooperation with the

Institute for Municipal Economy (IKE). Although the work has been extensive, it has particularly been very interesting and educational. There is a relatively wide crowd that should be acknowledged and thanked, since nothing of this would have been possible if it were not for them.

Firstly, a thank goes out to all of the respondents who invested their time and effort by participating in the conducted interviews. Through this the main aspects were obtained, meaning that their role in this study were essential. Secondly, a special thank goes out to the supervisors, Roland Almqvist and Andreas Sundström, who provided valuable support and considerations, which contributed to the quality of the thesis. Thirdly, a thank goes out to the opponents who during the semester articulated constructional criticism that enabled the thesis to be developed to the better.

Besides this, thanks are also directed towards IKE, for the opportunity of writing this thesis for them, the department of business administration and Stockholm university, other participants during the seminars for general discussions regarding thesis writing, and in particular friends and family for all the positive encouragements.

Lastly, a great thank to each other for all the hard work and dedication, during early mornings, bright days, and late nights.

Stockholm, January 2014 Lii Lindgren Wictor von Walden Madeleine Kruzenhof Abstract Title: Comparing to Improve, or Simply to Assert? A Case Study of the Application of the Benchmarking Theory within the Public Sector Background: Public sector organizations are pressured to become more efficient and effective.

Several initiatives have been taken in order to improve their level of performance, where the adoption of New Public Management is prevalent. Benchmarking is one concept derived from this, of which have been subject to excessive research. Thus, focusing on issues concerning the benchmarking cycle and its degree of compliance in the public sector is yet lacking.

Aim: To scrutinize how thoroughly the benchmarking theory is applied within the public sector, in order to achieve performance improvements.

Research Question: How are the interconnecting steps of the benchmarking process carried out in the public sector, in order to generate performance improvements within its comprising municipalities?

Method: A case study was carried out in accordance to a qualitative scientific theoretical approach, where a total amount of 14 semi-structured interviews were conducted with CFOs and officials from seven different municipalities. A document analysis was also conducted in order to complement the interviews.

Theory: Different theoretical frameworks in relation to benchmarking were studied, summing up in an analytical model, of which was used in order to analyze the empirical findings.

Empirics: The empirics comprise the most vital findings for the aim of this study, obtained from a compilation of the semi-structured interviews and the document analysis.

Conclusion: The empirical material attained indicated significant difficulties in conducting the entire benchmarking process. The initial parts were carried out thoroughly, whilst the last parts, in particular the analysis, were mainly lacking.

Key Words: Benchmarking, Public Sector, Key Performance Indicators, Performance Improvement Table of Contents

1. Introduction

1.1 Background

1.2 Problem Discussion

1.3 Problem Formulation

1.4 Research Question

1.5 Aim

1.6 Scope and Delimitations

2. Literature Review

2.1 Previous Research

2.1.1 New Public Management

2.1.2 Benchmarking

2.1.3 Benchmarking in the Public Sector

2.1.4 Key Performance Indicators

2.2 Theoretical Framework

2.2.1 Benchmarking in Four Steps

2.2.2 Benchmarking in Three Categories

2.2.3 Economic and Institutional Benchmarking Theories

2.2.4 Criticism against the Benchmarking Theories

2.3 Conclusions and Analytical Model

3. Method

3.1 Qualitative Scientific Theoretical Approach

3.2 Research Methodology

3.2.1 Case Study - Network Södertörn

3.2.2 Semi-Structured Interviews

3.2.3 Sampling

3.2.4 Interviewing, Transcribing and Coding

3.2.5 Document Analysis

3.3 Criticism

3.3.1 Subjectivity

3.3.2 Generalizability and External Validity

3.3.3 Snowball Sampling

3.3.4 Disadvantages regarding Semi-Structured Interviews and Coding

3.3.5 Secondary Data

3.4 Ethical Considerations

4. Empirical Findings

4.1 Structure and Building Blocks

4.1.1 The Structure and Building Blocks of Network Södertörn

4.1.2 CFOs

4.1.3 Administrative Management





4.1.4 Workgroups

4.1.5 Project Directive

4.1.6 Conference Day

4.1.7 Development Over Time

4.1.8 Target Group

4.1.9 Key Performance Indicators and Data Collection

4.2 Intermediation of Information

4.3 Evaluation and Implementation

4.3.1 Utility and Value

4.3.2 Secondary Analysis

4.3.3 Change Implementations

4.3.4 Deficiencies

4.4 Document Analysis of the Project Directive of Network Södertörn

5. Analysis of Empirical Findings

5.1 Application

5.2 Adjusting the Situation

5.3 Adequate Competence

5.4 Actions in order to Improve

5.5 Management and Institutional Pressure

5.6 Communication and the Importance of Secondary Analysis

5.7 Value Creation

5.8 Fulfillment of the Analytical Model

6. Conclusion

6.1 Further Research

References

Appendix I: Dictionary and Abbreviations

Appendix II: The Steps in the Analytical Model

Appendix III: Profiling of the Respondents

Appendix IV: Interview Guide for the Semi-Structured Interviews

Appendix V: Coding Scheme

Appendix VI: Organizational Scheme

Appendix VII: Assignments

Figures and Tables Figure 1. Four Steps in the Benchmarking Process (Peters, 1995, p.

24)

Figure 2. Three Levels of Benchmarking (Peters, 1995, p.

27)

Figure 3. Framework Combining the Economic and Institutional Benchmarking Theories within the Public Sector (Helden and Tillema, 2005, p.

342)

Figure 4. Analytical Model in Benchmarking

Figure 5. Analytical Model Applied to Network Södertörn

Table 1. Distribution of the Semi-Structured Interviews

Table 2. Different Levels of Communication

Table 3. Deficiencies

Table 4. Complementary Aims

Table 5. Time Schedule for the Undertaken Work

1. Introduction In the introducing chapter a background of the thesis´ research field is presented. Then a section in which the issues and problems of the field are discussed, further leading to a stated problem formulation and aim, underpinning the study that is going to be conducted. Lastly, a section addressing the scope and delimitations of the study is recognized.

1.1 Background The public sector, particularly municipalities and counties, constitute a major role in production of Swedish welfare, and accounts for considerable consumption. Their size makes them a significant actor in the society, regarding economic factors and in terms of creating social good, i.e. maximizing citizens’ wellbeing (SOU 2005:110). In the 1970s, a debate regarding public sector organizations was brought to surface (Cappelli et al, 2011), of which focus was directed towards the concept of performance measurements (Bourne et al, 2000). The debate came to develop further during the 1980s and 1990s (Cappelli et al, 2011), where measurement systems, at the time, were criticized for their shortcomings (Bourne et al, 2000). The argumentations for change were numerous and the continuing modernization of this sector is still of utmost importance (Cappelli et al, 2011). Several initiatives have been taken at national level to improve public sector performances (Norrlid and Törnvall, 2007). The public sectors have further been subject to multiple changes, commonly referred to as New Public Management (NPM)1, which are a cluster of ideas imitating private sector nature (Almqvist, 2006).

This resulted in that many public services provided were under pressure to become more efficient and effective without decreasing quality. This in order to minimize demands on the countries taxpayers, i.e. by focusing on the maintenance and constitution of an enhanced wellbeing of the citizens (Brignall and Modell, 2000). In order to reach these new demands, public sector has been exposed to new management techniques, encompassing the NPM-reform (Brignall and Modell, 2000). Within NPM, a major branch that has been incorporated is referred to as benchmarking (Kouzmin et al, 1999). Benchmarking is a tool that comprises conduction of comparisons between entities in order to reach improvement (Kouzmin et al, 1999), and can in Abbrevations will be used throughout this study. As proceeding please see Appendix I for a full dictionary.

best case scenario lead to improved quality and reduced costs (Bowerman et al, 2001). Evidence, from a study where 75 % of Chief Financial Officers (CFO) in Swedish municipalities took part, shows that 70 % of those who answered are using benchmarking within their organizations (Siverbo and Johansson, 2006). This impact can be explained by that organizations actively are seeking solutions regarding how to improve and achieve more efficiency and effectiveness (Bowerman et al, 2001).

During the years of 2007-2009, Swedish Government invested 12 million Swedish crowns with the aim to engage approximately 200 municipalities and all county councils in a recurrent benchmarking-project called Project National Comparison (Norrlid and Törnvall, 2007). The project was a co-operation between Swedish Association of Local Authorities and Regions (SKL), the Swedish treasury department and Council for Local Government Analysis (RKA), where the purpose was to develop sustainable quality measures and permanent features regarding cost efficiency, by using key performance indicators (KPIs). The project consisted of 28 networks with 5-10 municipalities in each network (SKL, 2009). As a result from this, the interest for benchmarking has increased in public sectors (Norrlid and Törnvall, 2007). Many of the networks created still exist and have further managed to establish a continuous work with benchmarking. One of these is Network Södertörn, which municipalities represent the south region of Stockholm2 (Södertörnskommunerna, 2013a).

By comparing and analyzing municipalities from produced KPIs, management can improve their knowledge regarding organizations they are in charge of (SOU, 2005:110). Consequently, it represents a tool that enables opportunities for enhancing performances. However, concerns have been expressed regarding the understanding of the real nature of benchmarking implementations in public sector (Tillema, 2007). It has been questioned whether the public sector has been able to further analyze and implement obtained data of measurements made, in order to actually initiate actions for performance alterations. Subsequently, this constitutes an issue this study aims to scrutinize.

Botkyrka, Haninge, Huddinge, Nynäshamn, Salem, Södertälje and Tyresö.

1.2 Problem Discussion In the course of benchmarking, Kouzmin et al. (1999) highlights the importance of spreading and analyzing obtained findings throughout entire entities. This enables entities to identify underlying factors, which further creates opportunities to adopt measures for change. It is stated that, the process of benchmarking is first completed once concrete actions are carried out, and only then opportunities to change and improve prevails (Peters, 1995).

However, concerns have been elevated regarding the comprehension and real nature of the benchmarking implementation in the public sector (Tillema, 2007). Helden and Tillema (2005) argues that due to the fact that there are no threats of existence within the public sector, in terms of consumer choice, this could result in a lack of incentives for utilizing benchmarking for performance improvements. In that stance, it is further argued that focus largely lies in generating comparative data used to defend and justify accomplished performance, rather than complete the benchmarking cycle, i.e. analyze the results (Tillema, 2007). Consequently, it can be questioned if the process of benchmarking and its comprising components are used thoroughly and if benchmarking of KPIs is an assignment worth doing.

As argued by Peters (1995), benchmarking is more than attaining required data, since these figures have to be used in the last step of the cycle for an organization to be able to reach changes and improvements. Further inferring that the municipalities can excel in collecting data and creating reports from figures calculated, but if the benchmarking process is not conducted thoroughly, a significant amount of value and potential outcomes are being lost. This also implies that managers could miss out on essential information useful to establish suitable actions to enhance the operations of entities, in terms of efficiency and effectiveness. It can then be questioned if components of the benchmarking process have not been utilized as initially designed, and further if the entities and municipalities of the public sector have been assigned the right tools and knowledge to be able to analyze and implement outcomes.

On the contrary, in the work carried out, different strategies have been used to make decisions.



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