After the Go-live: Ten focus areas for effective Shared Service delivery - Part 6 - Benchmark to Monitor Performance

When a Shared Service implementation is performed correctly, a benchmark exercise will have been completed as part of the current state discovery process.  At that point in the transformation effort, baseline performance metrics are established to understand the gap to high-performing companies and to help prioritize the road map for the journey to high-performance.  It also sets the baseline for monitoring performance and ensuring that the Shared Service Organization fulfills the goals set out in the business case.  This is valuable information and should be leveraged as part of the performance monitoring process.

A benchmarking exercise should be conducted on a regular basis after the go-live.  A successful benchmarking program will have clearly defined metrics to measure both the effectiveness of service delivery (i.e. cycle time, defect rates) and the efficiency of the processes (i.e. the cost and organizational structure required to deliver the services).  It's important to create a specific focus for the benchmarking exercise.  While it's possible to benchmark the entire Finance function, it often makes sense to benchmark a specific process or activity.  For example, benchmarking the Accounts Payable process is much more manageable that a far broader scope. 

One of the biggest challenges in a benchmarking project is deciding which benchmark data to use to evaluate the Shared Services operations.  There are a number of consulting companies and industry organizations that have benchmark data available.  A question I often get is if it's necessary to benchmark against a strict set of peers in a specific industry rather than a cross-industry set of data.  My belief is that while benchmarking against a limited peer set can have value, there is also great value in benchmarking across industries.  If your company is in an industry that is not very progressive, you might be shooting for mediocre performance instead of truly world-class performance.  Organizational complexity such as lines of business, number of products, and the number of countries the company is operating in are better factors for determining a peer group than is the idea that only companies in a specific industry are valid comparisons.

One consideration that shouldn't be overlooked is the idea of benchmarking against an internal peer group.  A global company could easily have at least one Shared Service Center in each major region they operate in (i.e. North America, Europe, Latin America and Asia).  Successful companies have used the internal benchmarking perspective to evaluate where their operations are strong and how those lessons learned can be transferred to other internal operating units.

A final consideration (for this post anyway) is that the systems must be configured to automate the majority of the data collection.  Otherwise, the demands and associated costs of collecting the information will soon outweigh the benefits of the benchmarking program and the program will eventually be dropped.  Consequently it's important to select performance metrics that can be measured without a large amount of manual effort.  If you know it's going to be near impossible to collect data for a specific metric, look for a proxy measurement that may be easier to measure.

Benchmarking is an important activity within a Shared Service Organization to understand how existing performance compares to that of leading companies.  There is a specific skill set around benchmarking that should exist either within the Shared Service Organization itself or in the broader company.  By benchmarking regularly, a company has a realistic understanding of where it performs well and where potential opportunities for improvement exist.  This is critical as part of the continuous improvement effort to attain world-class performance.