«Comparing to Improve, or Simply to Assert? A Case Study of the Application of the Benchmarking Theory within the Public Sector Lii Lindgren Wictor ...»
430). A prevalent tendency identified when it comes to implementation of benchmarking is that it involves objectives regarding the use of obtained data, deviant from what is stated in the benchmarking theory (Bowerman and Ball, 2000). Hence, it is argued that these objectives could constitute a barrier to the use of benchmarking for performance improvements, since focus lies in producing comparative data that can be used to defend and justify current performance (Tillema, 2007). As further argued, also to obtain an increased accountability regarding the use of resources and to demonstrate that the performance of the organization compares well, counter to alternative service providers. Therefore, the aim to attain an acceptable performance level is the prevailing case of public sector benchmarking rather than best practice (Tillema, 2007).
2.1.4 Key Performance Indicators Benchmarking in business processes laid the foundation for KPIs, which concept involves assessing aspects of organizational performance and making comparisons with the best subject in that area (Haponava and Al-Jibouri, 2012). KPIs can be defined as “a summarizing numeric value that aims to describe some circumstances, real or unreal, true or untrue” (Catasús et al, 2008, p. 16). Their mission can be recognized as to quantitatively gauge performance with regards to goal and expectations, and KPIs can be both financial and non-financial (Sanchez and Robert, 2010). It is further important that KPIs possess the ability to be compared over time to identify trends. They become valuable, since they can enhance communication regarding what is going on within an organization (Catasús et al, 2008), although it is of importance to recollect that KPIs has certain duration and demands to be frequently assessed (Sanches and Robert, 2010).
In the private sector, market shares and profits, can provide an indication of how organizations are succeeding on efficient markets. However, the public sector cannot obtain such forecasts, further raising the need and importance of KPIs. The role of KPIs in the public sector are to present a clear picture of goals, the situation, and outcomes, both for operations and the economy (Norrlid and Törnvall, 2007), and further too serve as support for analysis (Lundberg Uudelepp et al, 2013). This can enhance managers and councilors foundation for decision-making, and for politicians operations it can be elucidated (Norrlid and Törnvall, 2007).
Organizations may select too many KPIs where the main purpose has not been clearly defined.
This can result in ignorance once calculated, further decreasing potential impact. Organizations might find it difficult to construct appropriate measures and to determine where to address focus, which in turn can result in spending valuable time on unsuitable topics. Lastly, the figures can be misleading if calculated inadequate or incorrect, which can be a result of e.g. carelessness (Catasús et al, 2008).
2.2 Theoretical Framework 2.2.1 Benchmarking in Four Steps According to Peters (1995) benchmarking is performed in four steps, which are; identify, analyze, plan, and implement and evaluate (see Figure 1). The identification step focuses on making benchmarking an integrated part of the corporate culture (Peters, 1995). In order to achieve results from the benchmarking process it has to be a recurrent process conducted regularly (Peters, 1995; Kouzmin et al, 1999). The next step is about analyzing, with the objective to define areas that need to improve. After finding these areas the organization moves to the planning step, where best practices should be identified, in order to create a base for comparison. After comparisons has been made this should lead to particular actions that should be carried out in the implementation and evaluation step. Benchmarking is more than collecting data, and the most important work starts after the three first steps has been completed. When the organization has obtained the data, they need to use the results to achieve changes within the organization, and in that way complete the cycle (Peters, 1995).
Figure 1. Four Steps in the Benchmarking Process (Peters, 1995, p.
24) 2.2.2 Benchmarking in Three Categories Benchmarking can also be divided into different categories; strategical benchmarking, process oriented benchmarking, and statistical benchmarking (result oriented benchmarking) as presented in Figure 2 (Peters, 1995).
The strategic benchmarking fulfills its aim by evaluating organizations strategical purpose and orientation, which mainly is done by analyzing organizations culture, employees, and existing competence. The process oriented benchmarking is directed against organizations operational methods and principles. Analyzes are carried out regarding organizations operations and business processes, respectively the management (Peters, 1995). In this category, organizations seek to establish how other organizations do things compared to them (Northcott and Llewellyn, 2003).
The third category, the result oriented benchmarking, directs attention at creating performance measures, which functions as a base for comparison of produced figures. Organizations usually invest a significant amount of resources and money in attaining data, but the figures themselves give limited information about what the organization actually need to change in order to improve. It is very important for organizations to know and understand on which of these levels they are working, to be able to make efficient and correct business decisions (Peters, 1995).
18.104.22.168 Result- and Process Oriented Benchmarking Result oriented benchmarking (performance evaluations) taking place in Swedish municipalities are often performed between entities, and involve comparisons of existing differences (Siverbo and Johansson, 2006). This process is external, and comparisons are made with organizations in the same sector (Northcott and Llewellyn, 2003), and of similar kind, in order to reduce uncertainties regarding quality, productivity and efficiency (Siverbo and Johansson, 2006). It can further be described as ”how other peoples outputs compare with ours” (Northcott and Llewellyn, 2003, p. 52). The measures used can be divided into different categories (Siverbo, 2007), and each of these categories aims their focus on specific parts of the organization (Ramberg, 1997).
Comparisons of this kind is not to be classified directly as benchmarking, since it is not followed by a process evaluation, where organizations seek to identify reasons for potential divergences (Siverbo and Johansson, 2006). In order to improve performance the external result oriented benchmarking need to be followed through and complemented with the process oriented benchmarking, which in its kind is internal. This is made in order for organizations to understand the processes and how they can change them (Northcott and Llewellyn, 2003). For benchmarking of KPIs to be useful in the managing of organizations, it is important that a general understanding of the process is established (SOU, 2005:110). The employees must understand the outcomes of the process, and actions that potentially need to be implemented in order to reach organizational changes (Kouzmin et al, 1999). In that way, the opportunities for analyzing the organization provided by the KPIs can be used by everyone in a managing position (SOU, 2005:110).
2.2.3 Economic and Institutional Benchmarking Theories To maintain support from stakeholders, a prevalent feature in the economic theory, public sector organizations must in the short run provide satisfactory levels of performance. In addition to this, the influence of higher authorities creates an institutional restriction on the establishment of performance gaps. Hence, constituting pressure of performance, in the long run, in the stance of possessing authority and power to contract out failing entities or place ailing performing organizations under supervision (Bowerman and Ball, 2000). Higher authorities have opportunities to decide on public organizations future position. Therefore public sector organizations must achieve a minimum level effectiveness and efficiency to survive. This further implies that economic arguments, as well as institutional aspects need to be considered within public sector benchmarking (Helden and Tillema, 2005).
In that regard, as argued by Helden and Tillema (2005), institutional theory provides insights to public organizations regarding the relation of certain decisions and elements in the performance of benchmarking, which broadens the scope of benchmarking theory in the public sector. It further becomes important to distinguish between two kinds of decisions, 1) decision to engage in benchmarking projects, and 2) decision to use benchmarking information to produce outcomes. Institutional reasoning can be used to determine in which institutional setting public organization are willing to engage in benchmarking, and further use the information to improve performance (Helden and Tillema, 2005).
The economic and institutional theory simultaneously stimulates poorly performing organizations to operate more efficient and effective. These further exploit the composition of the general process of benchmarking in public sector organizations (Helden and Tillema, 2005).
See Figure 3, in which the economic and institutional benchmarking theories are compiled to further explain their relationship.
- the average performance of organizations improves;
- poorly performing organizations improve more than other organizations;
- performance differences between organizations diminish.
Figure 3. Framework Combining the Economic and Institutional Benchmarking Theories within the Public Sector (Helden and Tillema, 2005, p.
342) 2.2.4 Criticism against the Benchmarking Theories Gable et al. (1993) argues for the disadvantages related to using benchmarking. Organizations adapting others´ decisions and processes might lose their creativeness and find themselves impeded. This further nourishes organizations to become very similar, which necessarily not is optimal. Gable et al. (1993) further argues for the risk of non-actions, meaning that the organization that is used for comparison might be at an equal level, and therefore no actions are implemented to change the situation. However, this level can be an indicator that they both are performing badly. This could mislead organizations and stop them from taking action. The fact that organization has no guarantee that they have selected the right benchmark further creates a risk of basing decision upon inappropriate foundations (Gable et al, 1993).
Ax et al. (2009) argues that identified processes in other organization can be difficult to transfer to other organizations operations, and some are further, at some points, reluctant to accept others solutions. Although the process of benchmarking can, if used correct, reduce costs, it might also need significant investments of resources in order to be able to carry the entire process (Ax et al, 2009).
2.3 Conclusions and Analytical Model It is obvious that the public sector have received increased pressure regarding becoming more effective and efficient without decreasing quality, which is further reflected in the new management methods that has been applied and spread throughout the sector. The presented benchmarking theories are different in their kind, and each address the benchmarking process in diverse manners, and further state what is needed from organizations in order to succeed. These theories are constructed in multiple steps and processes, that each needs to be recognized in order to achieve valuable results.
The first theory discussed the benchmarking process in four steps that organizations pass through during benchmarking. The second theory described the same process in different categories, where two of them are of more relevance for this study’s purpose. The last theory presented a benchmarking model aimed towards the public sector, and discussed different steps that organizations reach depending on decisions made. It further addressed the potential benefits if the organization decides to use information that has been attained. A combination of these three theories creates a more comprehensive model, where a number of steps on different organizational levels are integrated, to receive a more coherent description of the benchmarking process. Figure 4 outlines the different steps in the analytical model, and a short description is further presented in Appendix II.
The present chapter has presented relevant previous research and theories in line with NPM and benchmarking; both benchmarking in its general manner (see in particular Peters, 1995), but also aimed towards the public sector (see Helden and Tillema, 2005). NPM provides a base for the changes within the public sector, and further why these methods might not always work as well as in the private sector. The theories presented become relevant since they provide a contribution regarding important aspects to consider during a benchmarking process.
The analytical model will be used in Chapter 5, as a tool in order to analyze and evaluate the empirical results attained in relation to stated theories and previous research, i.e. how municipalities manage to fulfill the different steps of the benchmarking process. This can provide insights regarding if an enhanced degree of organizational efficiency and effectiveness potentially can be achieved.
Figure 4. Analytical Model in Benchmarking
3. Method This section entails a meticulously description of the scientific theoretical approach and its components applicable for this study, and is thereafter followed by the allotted research method and its design. The section is further enclosed with a briefing comprised of criticism of the sources, as well as research ethics, which is of paramount importance.