Member-Centric Models of Benchmarking and Their

Relevance to Shared Services Centers

Richard Langley, formerly of Australia Post, describes the formation and

development of a successful benchmarking consortium

By: Richard Langley

(Issue Details: Volume 6, Issue 3, May 2004).

"If I have seen further it is by standing on the shoulders of giants."

Sir Isaac Newton, 1676

My experience with benchmarking has taught me that its true power lies in the
open collaboration of organizations in pursuing process improvement through the
sharing of each other’s practical experience and learnings. The overriding goal of
the group is the continuous improvement of all its members. Each new learning,
each increment in knowledge benefits all the group’s members.

If the power of benchmarking lies in the collaborative process, then the best way
to effect this practically is to ensure open channels of communication between
benchmarking group members. The benchmarking group or consortium becomes
a quasi-organization, separate from its member organizations. Each consortium
member represents the interests of his or her organization within the consortium.

I have coined the term "member-centric" for such models of benchmarking. The
purpose of this article is to explore benchmarking and its relevance to shared
services centers (SSCs), emphasize the benefits of the member-centric model,
and conclude with a description of my own experience in setting up such an
organization.

The Relevance to Shared Services is Simple

The relevance to shared services is simple – the whole purpose of creating an

SSC is to add value to your organization through continuously improving the
efficiency and effectiveness of the services that you perform. The only way to
continuously improve is to create an environment in which your people
continuously question the way in which things are done. Benchmarking provides
that incentive by challenging your people’s perception of what is possible.

The Member-Centric Approach Contrasted with the Consultant-Centric

Approach

The Consultant-Centric Model (traditional structure): a useful metaphor for the

"traditional" benchmarking study structure is the constellation of planets, moving
around the sun. The sun, in this metaphor, is the consultant, and the planets are
the member companies participating in the study.

I believe that intent drives structure. The traditional structure sets in play a
particular dynamic, playing on people’s fears about confidentiality and secrecy –
all of which, in my opinion, work against a collaborative learning approach where
the growth of all benchmarking participants should be the objective. In a
consultant-centric model, the data flows into the consultant via a rigorous
process, and is turned into glossy reports, which then flow back out to the
participants.

The Member-Centric Model (collaborative structure): how then does the member-
centric approach differ from the consultant-centric or traditional approach? Well,
on a number of levels, actually, but fundamentally at the level of intent. That is:
the intent of the member-centric approach is all about ongoing commitment to
the process of improvement for all members of the consortium. It is about the
learning and growth of the members through collaboration, openness and
honesty.

The members of the group are in a supportive relationship, not in competition.

Most importantly, they are in a direct relationship with each other, and not via the
consultant. I understand that the idea of breaching company confidentiality and
sharing information with the "enemy" may seem radical; however, with goodwill
on all sides this issue can be addressed successfully.

If we return to the "planets" metaphor, it is the consortium and its members that
are now the center of the universe. Real power is thus unleashed through the
direct relationships between members of the consortium.

My Experience with a "Member- Centric" Benchmarking Consortium

My personal experience with such consortiums began as a member of the senior

management team of the Australia Post SSC, back in 2001. We had become
frustrated with traditional models of benchmarking, and our inability to
understand the wide discrepancy in results between study participants.

Driven by our desire to derive meaningful decision-making information from

benchmarking data, we approached an Australian-based SSC, which had
participated with us in a traditional benchmarking exercise, with a request for
more detailed data. In retrospect, this first step was instrumental in leading to
the creation of the first Australian-based shared services member-centric forum.

Pre-Planning

We set out four key objectives as the basis of our benchmarking "charter":

o exchange of sufficiently detailed information to ensure meaningful comparison

and ranking of performance ("apples to apples");
o identify a hypothetical "best practice" specification for each process studied;
o generate value-added learning for the benefit of all members;
o identify process improvement opportunities.

As a first step to setting up the benchmarking consortium, it was important for us

to build internal support within our own organization. `To do so, we formed an
internal steering committee made up of SSC management and a senior member
of the corporate finance team, whose role was to ensure the validity and
credibility of the results.

Initial Meeting with Consortium Members

We sent invitations to other major, Australian-based SSCs in both public and
private industry, to attend a forum at our SSC to discuss the possibility of forming
a benchmarking consortium. At that forum we put forward our case for a
"member-centric" group, and shared our data collection template with the
invitees. From that initial meeting in May 2001, we gained agreement from 10
other shared services managers to become part of a member-led shared services
forum.

Structure of the Formal "Member-Centric" Organization

The role of the organizational steering committee was to ensure that the
benchmarking project met the four "charter" objectives that we, at Australia Post,
had set down as a pre-condition for our involvement in the consortium.

Within the benchmarking consortium itself there was a steering committee made
up of one senior person from each company taking part in the study. The role of
this body was to make key decisions in relation to direction, and to provide
guidance on benchmarking projects. The consortium itself was underpinned by a
confidentiality agreement signed by each of the member companies.

A project manager/coordinator was appointed (and financed) by the consortium,

charged with the responsibility of managing the overall project and ensuring that
timeframes and objectives were met. Other resources committed were: project
consultant (providing guidance and advice to the consortium and presenting the
final, independent report); and core groups (one core group per benchmarking
study, each made up of one process expert from each company; in the case of
the payables study our representative was our payables team leader. The core
group leader was responsible within her/his organization for collecting and
cleansing the data required by the study questionnaires).

Study Specifics

Once the consortium steering committee had agreed that two studies were to be
commenced (“payables” and “employee benefits”), the project coordinator, in
consultation with the consultant and members of the core groups, created an
exact definition of the processes that were in scope for the study.

The studies themselves were intensive 12-week exercises (both the payables and
the employee benefits studies ran in parallel) which included the development of
data collection tools, data collection, data collation, validation, analysis and report
compilation.

There were essentially two elements to the surveys: a quantitative study focusing
on process metrics; and a qualitative study focusing on the environmental
conditions within the centers.

There were two key criteria for the quantitative results: cost (highest vs lowest);
and performance (based on 10 features, e.g., number of duplicate payments,
turnaround time for invoice processing), with actual performance compared to
other companies’ performance.

For the qualitative part of the study there was a 104-question survey, with four
key criteria: Process; People; Systems; and Customer Service Measures (basically
a balanced-scorecard view of the organization).
A set of performance profiles were developed for each criteria. Each profile
contained a set of features rated as: 5-excellent, 3- average, 1-poor. The data
collection method employed for the qualitative survey was a mix of interviews and
documentary evidence presented by the core group member.

As to the rigor of this process, we relied upon honest feedback. Whilst that may
be open to subjectivity, it is important to view this in terms of the consortium
structure and its emphasis upon collaboration and learning, rather than a clinical
audit approach.

Key Challenges for the Consortium

Key challenges that we successfully overcame:

o agreeing on precise definitions/scope (three iterations of the model);

o ensuring all members pay equal diligence to submitting accurate data on a
timely basis;
o role of the consultant – this issue took the members a significant time to
resolve. It was finally agreed that a consultant would be employed by the
consortium to assist the project coordinator with the collection, processing
and analysis of the data;
o confidentiality – of all the challenges this was the most significant. The fact
that it took over three months with 13 revisions of the original agreement is
testament to the sensitivity of the issue. In the end, as part of the practical
resolution to member’s confidentiality, it was decided that "raw" results could
only be shared between members of SSCs, and not with other members of the
individual organizations.

Consortium Outcomes

The studies were completed in early December 2001, and the final reports were
issued to members in January 2002. It was agreed that the consortium itself had
delivered a quality result that justified its continuation. The process itself had
been thoroughly tested and now provided an infrastructure that would support
future studies.

Each member organization received two final reports on each of the studies
undertaken. First, an "A" report, which identified each of the SSCs and was to be
available to members of the SSC only; and secondly, a "B" report which masked
the identities of the other participating organizations and was available for wider
distribution within the organization.

The reports ranked performance across six criteria, and profiled a hypothetical
best practice organization. The main issues uncovered by the study were
discussed in a "high level findings" paper for each member company.

In this study, unlike traditional studies, the participants had a strong

understanding of the "what", the "how", and the "why" of the results. For the
member-centric consortium, the report is seen as the beginning of the learning
exercise, rather than the end of the journey.

Postscript
Although I am no longer part of Australia Post Shared Services and have not been
directly involved with the consortium since late 2002, I am pleased to report that
it is still going strong.

I found the experience of setting up and being a part of such a consortium very
rewarding personally, and would gladly undertake it again. If you have any
specific questions regarding member-centric consortia, I would be more than
happy to discuss them with you directly by email.

About the Author

At the time of his involvement in the benchmarking consortium Richard was the
Manager of Accounting Operations, Australia Post Shared Services Division. He is
now working in the Logistics Division of Australia Post and completing a Six
Sigma Black Belt qualification. He retains a keen interest in the business of
shared services and current developments in Business Process Outsourcing.
rlangley@ozemail.com.au

Copyright © 2008 SSON. All Rights Reserved.

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