«Comparing to Improve, or Simply to Assert? A Case Study of the Application of the Benchmarking Theory within the Public Sector Lii Lindgren Wictor ...»
Putting this in relation to the fact that the initial constructing bases of the municipalities´ structure are analogous, it has been contended that the comparisons conducted between the municipalities are profitable (SOU, 2005:110). In that regard, the main objective behind Network Södertörn is to provide the City Council an overview of how costs and services stand in relation to other participating municipalities, as well as to use the KPIs as a support for operational development (Södertörnskommunerna, 2013b). The public sector nature does not comprise any competition for market shares, which enables significant potential for managers to utilize the benchmarking process to the utmost (SOU, 2005:110). However, it can be questioned if managers exploit this opportunity and to what extent.
Tillema (2007) states that even though the engagement of using the benchmarking process has increased, and gained a more central role of financial control, benchmarking information is not necessarily used with purpose to improve performance. Given these aspects it can be questioned, as asserted by Bowerman et al. (2002, pp. 434-435), whether “the promise that benchmarking in the public sector will lead to enhanced organizational efficiency and effectiveness” actually is or can be fulfilled.
1.3 Problem Formulation An excessive amount of research has been conducted addressing different aspects and perspectives regarding the theory of benchmarking. Thus, research focusing on issues concerning if the benchmarking cycle is performed thoroughly regarding all its different steps in the public sector, in order to incorporate received information for implementations of performance improvements, is yet lacking. Concerns are raised regarding the usage of the material in a subsequent second stage, moreover, if analyzes are performed. Hence, this constitutes an identified research gap that would be of relevance to explore.
The municipalities within the public sector comprise equal initial structures and thereof possess the same prerequisites for their continuous operations, which enables potential to utilize the benchmarking process in a wide extent. In that context, Network Södertörn constitutes an interesting ongoing project to scrutinize. With regards to this, it becomes questionable how this network carries out the results in their benchmarking process and if comparisons made actually are conducted in order for the municipalities to become more efficient and effective. Further, if the actors in the public sector contains adequate knowledge and expertise, as well as time and resources, to be able to accomplish this sort of work with regards to the desired outcomes.
1.4 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?
1.5 Aim The aim of this study is to scrutinize the process of benchmarking in the public sector, using a concrete subject in practice. The focus will be directed towards how the components of benchmarking are applied and further, how the information obtained in the process is used in order to achieve performance improvements. Thereby, this study contributes to existing literature within public sector benchmarking by developing an understanding of how the benchmarking process is carried out. Further, contributions are made regarding what aspects that, in particular, need to be considered in order to achieve a successful cycle where all steps have been assessed.
1.6 Scope and Delimitations This study undertakes the perspective of benchmarking towards KPIs. In order to make the extent and results of the study more manageable and applicable, the focus was narrowed to municipalities in the Swedish public sector. More precisely, municipalities located in the south region of Stockholm, Sweden, whom are active in Network Södertörn.
The public sector is an arena of less competitive nature compared to the private sector, which consequently constitutes the prerequisites that allows the benchmarking process to be utilized thoroughly. The comprising municipalities are therefore interesting subjects to study in relation to benchmarking and KPIs. Further, potential opportunities are prevailing for municipalities in the public sector to enhance operations in order to enable further effectiveness in their production of social good. Accordingly, by having a clearly stated picture of what to be studied as well as how and where it should be carried out, the structure of the study itself can be chartered in a manner that could promote its results.
2. Literature Review This chapter is divided into two parts, previous research and a theoretical framework. The previous research gives the reader fundamentals regarding relevant areas further developed in the theoretical framework. The chapter is initiated with New Public Management, and further addresses benchmarking and key performance indicators. The theoretical framework presents benchmarking theories, and criticism against it. The literature is finalized with a presentation of an analytical model, which provides a base for analysis of the empirical data.
2.1 Previous Research 2.1.1 New Public Management NPM is characterized by a number of ideas originating from the private sector and their managing of organizations. NPM tend to be goal oriented and focuses on achieving different objectives (Almqvist, 2006). Performance is on the forefront (Kouzmin et al, 1999), and changes like NPM are usually reforms with objectives to change society. These reforms was partly introduced to make leadership more efficient and optimal, and it was argued that ”the more management, the better” (Almqvist, 2006, p. 15). Dunleavy et al. (2006) argues that some organizations that adopted parts of NPM might be overly optimistic, and are using the tools in hope of being able to banish bureaucracy. It is further argued that ideas behind NPM are not applicable in all settings, and that some organizations might find it difficult to benefit from the usage (Dunleavy et al, 2006). It is assumed that private sector organizations have profit requirements, further making benchmarking a suitable tool. However in public sector organizations, due to social and political pressure, this might not be the case (Kouzmin et al, 1999).
Organizations intended to achieve results from NPM by implementing the different theories and ideas into their organizations, in order to change the practical work undertaken. Managing of organizations has during this reform developed to focus more towards aspects that cannot be seen directly, and more emphasis is aimed towards non-financial measures and performance management (Almqvist, 2006). The attention towards these branches of performance measurements is one of the more lasting aspects of NPM (Siverbo and Johansson, 2006), as a major concern that arose in organizations at this point of time was how they would be able to continuously improve their performances, in order to increase efficiency3 and effectiveness4 (Andersen et al, 2006).
2.1.2 Benchmarking A major trend that developed within NPM aimed focus on creating measurements systems that enabled comparisons of different organizations same activities (Kouzmin et al, 1999). The term benchmarking emerged during the 1980s, and the concept was then mostly used in the private sector (Andersen et al, 2006). Benchmarking has now grown to become a broader process, where for example organizations come together in different groups or sub-units (Kouzmin et al, 1999), attempting to help and learn from each other by comparing key indicators (Ax et al, 2009; Drury, 2008; Kouzmin et al, 1999). Benchmarking is considered as a core component within NPM (Grace and Fenna, 2013), and can according to Camp (1989) be defined as, ”the continuous process of measuring products, services, and practices against the toughest competitors or those companies recognized as industry leaders” (Andersen et al, 2006, p. 726; Kouzmin et al, 1999, p.
123). Benchmarking can be used for many different purposes, where improvement is considered to be the main objective. This is often organizations primary focus (Andersen et al, 2006), where they attempt to identify superior performance among other organizations (Kouzmin et al, 1999).
By identifying organizations considered representing “world-class best practice”, organizations can compare their own operations against these, in order to find aspects to improve (Drury, 2008, p. 554), and sources of inspiration (Ax et al, 2009). These should further work as a foundation in the creation of suitable actions to receive continuous enhancements (Kouzmin et al, 1999;
Andersen et al, 2006; Drury, 2008). This can also stimulate poorly performing organizations and make them more efficient and effective (Tillema, 2007). In terms, benchmarking “improves performance through observing and analyzing what is already working well for others” (Gable et al, 1993, p. 52), and the main thought is that other organizations possess greater knowledge regarding certain areas, which are beneficial to utilize (Ax et al, 2009). A successful Efficiency can be stated as “… the relation between output and input” (Bruggeman, 2004, p. 159), thus mainly expressed in quantities (Ax et al, 2009).
Effectiveness can denote how well an organization conducts its operations (Ax et al, 2009), i.e. “effectiveness expresses the extent to which the realized output is aligned with the goals and strategies to be realized” (Bruggeman, 2004, p. 159).
benchmarking can be cost beneficial, since resources can be saved by avoiding mistakes other organization already been subjected to. The process can further be seen as an ideal way to advance and reach high standards (Drury, 2008).
The important thing to determine for organizations during benchmarking is not how much other organizations are doing better, rather how they manage to do things better (Kouzmin et al, 1999).
In order to achieve efficient benchmarking, it is of importance that the right indicators are chosen for measurement (Peters, 1995; Kouzmin et al, 1999; Delbridge et al, 1995). This combined with that the subsequent analysis is conducted thoroughly in order to reach change, which often demands a certain degree of knowledge and experience (Peters, 1995). Gable et al. (1993) stresses that decisions within benchmarking cannot be made without first having executed an extensive analysis. As argued by Catasús et al. (2008), organizations need too deliver reasonable and competent explanations regarding why KPIs are changing, and organizations are further unlikely to reach change before this is completed. As further argued by Francheshini et al. (2007, p. 9), “a strategy without indicators is useless, indicators without a strategy are meaningless”.
The stage of analysis is usually where organizations tend to falter and fail (Peters, 1995). Peters (1995) stresses the importance of a thoroughly communication in order to get everyone involved, since change is more easily established when awareness for the reasons exists. Peters (1995, p.
153) further argues that the “crowning achievement” is first reached when actions of change are implemented.
2.1.3 Benchmarking in the Public Sector The Swedish public sector directs more attention towards performance measurements, which is of increasing popularity (Siverbo and Johansson, 2006), and managers are under continual stress to enhance performances (Holloway et al, 1999). Simultaneously with the NPM development, benchmarking has received an enhanced establishment, and gained a central role in the process of improving organizations by identifying performance gaps in operations of the public sector (Tillema, 2007). Governments vigorously stress the use of this process, and that it further should be used across all entities of the public sector (Holloway et al, 1999). The strategic environment and choices surrounding organizations in the public sector are very different from the environment in the private sector, and are further confronted with a unique set of operational concerns (Dorsch and Yasin, 1998). However, the reason for using benchmarking in the public sector can be directly transmitted from private sector objectives (Dorsch and Yasin, 1998;
Andersen et al, 2006), where one seeks to learn from others to reach improvement (Andersen et al, 2006).
18.104.22.168 Substitute for Market Forces In contrast to the application of private sector benchmarking techniques, public sector benchmarking has been referred to as a substitute to existing market forces (Helden and Tillema, 2005). That is,
Market forces comprise the leeway for consumers to switch from one supplier to another, a phenomenon that does not prevail in the public sector, since many public sector organizations are constituted as “territorial monopolies” (Helden and Tillema, 2005, p. 340). This absence of consumer choice generates risks of causing a negative performance gap, since there are no direct threats of public sector organizations existence (Helden and Tillema, 2005). Further, implying that organizational efficiency might be of secondary consideration, and causing the organizations structure to differ from the private sector (Bogt, 2003).
Correlating with the economic perception of benchmarking (which presumes that all organizations exposed to competition will exert proactive activities to improve performance) this indicates a certain absence of existing performance improvements incentives (Helden and Tillema, 2005). As argued by Bowerman and Ball (2000), negative gaps can in the long run be threating to public organizations survival, and it is therefore important to derive the right amount of attention and recognition to economic aspects within the public sector (Bogt, 2003).
22.214.171.124 Reasons for Implementation
In the context of benchmarking it is argued that:
However, Bowerman et al. (2002) expresses concerns that exist regarding the “understanding of the real nature of benchmarking” implementations in the public sector (Bowerman et al, 2002, p.