Recently I ran the Sydney half marathon with one of my daughters (she beat me). When the results came out I was less than enthused by both my absolute and relative performance. This is an example of an unpleasant realisation from benchmarking.
When I consider benchmarking for approved providers I find the following helpful:
- result or outcome is a function of goal, effort/preparation and performance (yours and others)
- a psychologist once told me: The result we get is a combination of our ability, motivation and personality
- in a business setting the result you achieve is a combination of organisation capability, culture and mission
There are two kinds of benchmarking:
- internal - this is where you compare performance over time or to an agreed standard
- external - where you compare your performance to some external standard
Internal benchmarking is quite straight forward - you agree on some key performance indicators and then measure actual outcomes against these. You can then create a time series out of this by comparing performance over time. A simple example of this is occupancy rate.
By comparison external benchmarking is a little more complex. Revisiting my half marathon it is clear that someone of my age (58) is going to perform very differently to a much younger person. This highlights the need to benchmark on a like for like basis.
In designing the recent RSM study that was undertaken for ACFA and the Department, which was one input into ACFA’s considerations in its advice to the Minister, we were faced with the challenge of external benchmarking. This led us to compare providers using multiple factors, indeed this was the driver for the study. These included size, ownership, location and resident care profile. This segmenting allowed us to get multiple views as to the relative performance of providers from which we could draw some meaningful conclusions.
When we started to drill down into organisational capability and culture things start to get a little fuzzy. For example wages, or employee costs to revenue is an oft quoted benchmark. If you use this measure, then care needs to be taken that you are comparing like for like. Just as comparing my half marathon time to a 10K run time would be misleading, so comparing the wages to revenue of a facility that insources cleaning, laundry and catering to one that outsources some or all of these would be misleading.
This is where the results of the qualitative survey that was part of the study undertaken for ACFA added greatly to the depth of insight that can be drawn from the report. The report was able to align the results of a number of qualitative factors with financial performance and this allowed inferences to be drawn as to the association between corporate process / ability and financial outcomes. As we looked only at a point in time we were unable to make direct causal inferences in relation to qualitative factors we considered.
Considering benchmarking in this way raises some interesting questions:
- which will allow you to improve more? Benchmarking results or performance/capability?
- what factors should be benchmarked?
- what benchmarks should you be comparing your performance to?
I’m an occasional runner and cyclist, sometimes I simply run and ride to keep fit, and when I do this I tend not to benchmark. When I decide to do an event, I set a personal goal and then start on a training program. While I’m training, I benchmark or monitor my progress (frequency of training, weight, times etc.). Finally, I compete in the event assessing my performance against my own goal and against my age cohort. When I get the result, it takes me back to the most critical ingredient of all: motivation. How I perform against my own expectations and my peer group acts to either motivate me to do better or reinforces that my current level of effort is sufficient.
Applying the above it seems to me that benchmarking the performance of a residential aged care facility is only of value if:
- you have a goal/mission
- you are concerned about relative performance
- you are committed to taking the feedback on board