|5th July 2021||Blog|
Successful performance improvement programmes rely on a combination of baselining and benchmarking – these are essential tools in achieving better procurement. You must know where you are on the route map to chart an effective course ahead. Here, SUPC Head of Procurement Services Rob Johnson talks about the increased need for benchmarking in higher education sector procurement and how this can help deliver tangible improvement.
The demands for change and growth are rife in public sector procurement at the moment, with much of this change needed and long overdue. The HE Sector has just completed an in-depth consultation in response to the Green Paper on Transforming Public Procurement and the latest opportunity to reform presents itself in the National Procurement Strategy Statement (NPSS). The NPSS outlines that “all contracting authorities should consider their organisational capability and capacity, with regard to the procurement skills and resources required to deliver value for money.” This provides an important opportunity for us, as procurement professionals, to consider how we need to develop in the months and years ahead.
The statement notes that while appropriate capability will vary depending on the scale and complexity of each authority’s portfolio, all organisations should begin considering how to address gaps in their capability now. Within the paper, the Government proposes a number of ideas to consider to improve capability, including collaboration with other contracting authorities, making use of shared services and professional buying organisations, as well as the development of in-house capacity and capability.
A significant proposal in the paper is the use of benchmarking to establish whether organisations have the appropriate procurement skills and capability to deliver value for money and to benefit from future reforms to the public procurement regulations. The statement says that all contracting authorities should consider benchmarking themselves annually against relevant commercial and procurement operating standards and other comparable organisations.
The paper outlines several elements to consider:
- Alignment of commercial objectives with organisational objectives
- Whether the people who are responsible for procurement have the required procurement capability and capacity
- Whether business needs are adequately informed by the commercial strategy to determine when, and how, to procure services and works
- Whether contract management capability is sufficient, and resources are proportional to complexity and risk
- Whether appropriate procurement systems and data reporting enables process efficiency, robust controls and effective decision making.
How is the HE Sector positioned to respond to the prompting and suggestions of the NPSS? What are the issues we need to consider and how prepared and resourced are we to capitalise on the opportunities the statement presents?
Baseline versus Benchmark
An important consideration to make at the start of such a review is that of the distinction between, and relevance of, baselining and benchmarking:
- A baseline is a measurement, or a state, at a point in time.
- A benchmark is the measurement against an industry standard, best practice or competitor.
Baseline measurements are used to compare results at different points in time, whereas benchmarks are used to compare performance relative to another entity at a particular point in time.
To illustrate, if you want to improve air quality you would start by measuring air quality today. The current observation can then be used as a baseline to be compared against future improvements. Benchmark measurements are used to compare results against others. For example, a city might compare its air quality with that of other cities.
The NPSS proposes the need to monitor organisational performance on a 12 monthly basis, and so it is important that a baseline of current procurement capability and competence is established, against which future progress can be measured. The frequency and extent of the benchmarking proposed will undoubtedly have implications for resourcing and reporting and it is, therefore, important to understand how this commitment should be best undertaken.
Why Undertake Benchmarking?
The objective of benchmarking is to provide an answer to one of the following questions:
- How good are we at what we do?
- Are we as good as others at what we do?
- How can we get better at what we do?
Often the focus or perception of benchmarking is on question two and that may impact the focus of the areas to be explored and the resulting actions.
Answering the first question encourages self-reflection and could be undertaken without the need for complex external engagement. Could we ask the questions of ourselves and also engage the opinions and views of our stakeholder communities? The answer is an unwavering ‘yes’.
A major pitfall surrounding benchmarking projects is that the focus typically concentrates on addressing the second question. We then lose sight that the exercise is also answering the final question – and the answer to that is where the major benefits will be realised.
What Might Benchmarking be Used to Assess?
Benchmarking, whether internal or external, can be used in three key ways:
- Strategic benchmarking. This compares strategies, business approaches and business models in order to strengthen strategic planning and determine strategic priorities. The idea is to understand what strategies underpin successful organisations (or teams or business units) and then compare these strategies to identify ways to be more competitive.
- Process benchmarking. This is about understanding processes, comparing performance against internal and external benchmarks, and finding ways to optimise and improve processes. By understanding how top performers complete a process, you can find ways to make your own processes more efficient, faster and more effective.
- Performance benchmarking. This involves collecting information on how well you’re doing in terms of outcomes and comparing these outcomes internally or externally.
Each of these ways of benchmarking shares a common goal: to identify gaps in performance and uncover opportunities to improve, whether that means making processes more efficient, reducing costs, or whatever.
How to Approach a Benchmarking Exercise?
Benchmarking typically entails the following (sometimes overlapping) steps:
|Determine the scope of the project||What is the purpose of the project? Which of the core questions (above bullets) are you seeking to address?|
|Choose benchmark partners||Which partners or peer groups are you going to compare against? How meaningful would it be for Accrington Stanley to benchmark themselves against Manchester City?|
|Determine measure(s), units, indicators and the data collection method.||How much resource or time do you have available? Is there a clear understanding of which data or information is being sought?|
|Collect the data||What data will be gathered and analysed? How can you ensure commonality in timescales, units etc.?|
|Analyse discrepancies; get to the facts behind the numbers||Who will interpret and analyse the data; are there prejudices or bias that will contaminate interpretation?|
|Present the analysis and discuss implications in terms of new goals.||Don’t get paralysed by excessive analysis.|
|Generate an action plan and/or procedures.||Assign owners to drive progress.|
|Monitor progress by continuously performing a benchmark.||Benchmarking should not be considered as a one-off exercise.|
Watson, G.H. (1993)
How can Benchmarking Drive Improvement?
1. Benchmarking offers a performance boost
As the process involves looking at the best practices of each task or process which must be completed, benchmarking allows you to identify areas where you currently might be inefficient. You are also able to compare how your performance matches up against the rest of the sector or peer group.
2. Benchmarking inspires creativity
Many organisations get stuck in the “We’ve always done things this way” mindset. As time progresses, environments change, standards evolve and expectations increase. While it’s sometimes not comfortable to do things in a new way, things must change to remain capable of fulfilling business and stakeholder needs. Benchmarking helps provide measurable goals and identify where performance gaps may have developed.
Benchmarking can provide comparative data that may prompt management to improve performance, but also indicate original, yet proven, solutions to apparently difficult problems. It is therefore the differences between organisations in the peer group that should be encouraged to yield insight to alternative ways of working.
3. Benchmarking encourages change
Benchmarking forces you to set and then achieve good standards and to innovate. It should be based on a combination of best practices and standards that have been analysed and determined for the sector.
4. Benchmarking yields greater self-awareness
Benchmarking helps an organisation understand itself on a deeper level. It also helps form relationships with peer organisations and helps explore what ideas and innovations the sector, and beyond, have to offer.
The NPSS paper references a number of models which can be used to inform the approach. These include the Commercial Continuous Improvement Assessment Framework produced by the Government Commercial Function, and the National Procurement Strategy Toolkit produced by the Local Government Association.
In addition to the high-level information included in the Procurement Value Survey (PVS) conducted by HEPA, the HE Sector already has its own bespoke benchmarking programme for procurement capability and performance.
The Procurement Maturity Assessment (PMA+) is an assessment of the procurement function which provides a baseline to measure improvements and benchmark scores against similar institutions. It helps university procurement functions engage effectively with their key stakeholders as part of the benchmarking process and provides a bespoke action plan for improvement. Since the inception of the PMA programme, over 100 institutions have taken part and there has been a continuous improvement of sector-wide scores in each category of assessment.
SUMS’ Procurement Value Assessment (PVA) is a tool for driving savings in non-pay expenditure and inform the benchmarking of procurement performance for universities and research establishments. Combining SUPC’s in-depth expertise in university procurement with SUMS Consulting’s efficiency and effectiveness know-how, the PVA allows institutions to target and prioritise procurement savings opportunities.
What are the Stumbling Blocks to Watch Out For?
Many benchmarking projects end in disarray or as an exercise portrayed as being as futile as comparing apples and pears. Even when performed in a structured way, the ‘we are different from them’ syndrome prevents benchmarking from leading to changes for the better.
Benchmarking cannot be done in isolation. Initiating a benchmarking project in isolation is unlikely to yield much benefit. There needs to be an overarching vision informing the programme and desired outcomes, overseen by leadership that can bring that vision to life for stakeholders and team members. Without their investment and commitment to the drive to achieve the improvements or aspirations identified, benchmarking on its own isn’t going to do much good. It will simply tell you how far you are from where you need to be.
Benchmarking doesn’t measure effectiveness. While benchmarking encourages consideration and adoption of alternative working practices or approaches, it is important to maintain a focus on how effective supporting processes are. What represents best practice for one organisation may not prove to be viable or effective when deployed within your own organisation. It is important to maintain focus on the effectiveness of the changes implemented and not be a mindless adherent to making change for changes’ sake.
Benchmarking can foster mediocrity. A key issue with benchmarking is the perspective behind it. If there is a mindset that says an organisation is already among the best in its field, then this bias will influence the information collected and the analysis and interpretation of the data.
Benchmarking may lead to complacency or despondency. One of the biggest pitfalls of benchmarking is when there are no stretch targets for organisations able to exceed the standards of their peer group or competitors. This may happen if the peer group is inappropriate or may even have been intentionally curated to portray the organisation in a positive light. Organisations in such a position may stop striving for more innovation, once they reach that point because there is a feeling they are already among the best in the field. Conversely, if the comparators under consideration are so remote or distant from yours in terms of size, spend or resource that attainment or alignment with their capabilities is impossible, an alternative sense of disillusionment may take hold.
Successful performance improvement programmes rely on a combination of baselining and benchmarking. Without an awareness of where the journey is commencing from it is not possible to determine an appropriate route map.
Benchmarking is not a magic bullet for improving performance – it’s a part of the process, not the solution. A more comprehensive approach requires you to set clear strategic goals; identify your critical questions; design data gathering and KPIs that help you answer those questions; track performance against your goals; and compare performance with peers using benchmarking.
Benchmarking will help improve organisational processes but can be a complex journey depending on what the desired outcome is. The proven, sector-specific, approaches offered by the PMA+ and PVA programmes offer powerful mechanisms to support the benchmarking prompted by the Cabinet Office’s National Procurement Strategy Statement.
For more information or support in undertaking benchmarking activity at your institution, contact SUPC Head of Procurement Services Rob Johnson at email@example.com.
Rob Johnson is an experienced purchasing professional with over 30 years’ insight gained in executive and consultancy roles throughout the manufacturing, service, finance and aviation arenas, and across the private, public, third and higher education sectors. He specialises in the development and deployment of procurement best practice, the creation of robust category strategies, the identification and delivery of cost reductions, and the creation of a value-adding procurement ethos. His category experience includes Professional Services, Estates and Facilities, Fleet, Transport Services and Catering.