Diagnostic benchmarking - why is it so popular with housing professionals?

27-01-2016

By Louise Dunne, head of CIPFA’s Housing Benchmarking and Diagnostic Service

The outcome from any benchmarking exercise should be to help an organisation improve its performance, not just measure it and then compare this with others. The private sector have long since used benchmarking in this way – taking a ‘whole’ organisational approach not a segmented one. 

By contrast in the public sector, benchmarking has tended to focus upon the performance of its operational functions and the delivery of outcomes. The difference for the two contrasting approaches has probably been the different drivers that have led organisations’ to adopt benchmarking as a management tool. For the public sector, a key driver of benchmarking throughout the 1980’s and beyond was CCT, and more recently, the result of a defensive reaction to external inspections under Best Value, CPA and CAA. 

Here at CIPFA, we were approached by groups of customers who asked us to look in detail at designing a new approach to benchmarking that could take into account the changes over the past 10–15 years, and one that could accommodate not only the increasing commercialisation’ of the sector, the chronic shortage of affordable housing for rent, and the increasing pressures on all public finances; but one that was also flexible enough to adapt to ‘unexpected’ change as it happened.

What our customers wanted was a new approach that was, in their words, ‘fit for purpose’.

To do this, we needed to not only understand the history of benchmarking in the public sector, but to understand right at the very heart of these providers (local uthorities, ALMOs and Housing Associations) – what it was they needed ‘benchmarking’ to deliver for them, to justify continuing to use it as a management tool.

The key to unlocking the potential for benchmarking is to include performance metrics for the strategic activities of any organisation – which requires metrics that can measure past, present, and importantly, future likely performance across both strategic and operational parts of the business/services. 

This is what CIPFA Housing has been working on throughout 2014/15. In consultation with our members and many other customers, we have designed a fresh new approach to social housing benchmarking that we (and our customers believe) addresses the modern complexities of Providers’ businesses, and at the same time, acknowledges the governance and political context within which services are delivered. 

For the sake of brevity our new methodology starts from the following premise: Performance information presented to Cabinet/Boards must allow them to: focus on the things that matter - too often across the sector this is simply not happening. If we get the measurements right, of the right things, it follows that the outcome from Diagnostic Benchmarking will be to improve performance and optimise value creation. 

Diagnostic benchmarking includes a detailed review of the performance of the strategy setting, the performance of the operational delivery, and the performance of the inter-relationships or functionality between strategy and operations. And it’s easy for the customer – because all of the hard work or diagnosis and prognosis – is done by CIPFA’s team of experts.

If providers of all types are to thrive as well as survive in the current political and economic climate – they will need performance information and diagnostics that will tell them:

  1. Whether or not their present business is effective.
  2. How it’s potential can be identified and realised going forwards.
  3. What has to be done now, and over the coming years to make it into a different business in the future.

If Benchmarking as a management tool is to be successful, it must provide insight into the unique circumstances of each organisation participating in the study of its performance since this enables a more accurate diagnosis as to why it is that specific parts of the infrastructure; services or governance are performing well, or could be performing better. 

The challenge for us at CIPFA in conducting these diagnostics is to determine which facets of a customer’s business model are sufficiently shared with other organisation’s to allow useful comparison’s to be made. Finally, our expertise will be used to guide organisation’s to where they want to be: and never to simply copy the practices of the ‘best in class’ because by definitional fiat, those organisations will already be doing, and certainly thinking about doing, something new and completely different.

Louise is head of CIPFA's Housing Diagnostic and Benchmarking Service, launched in 2015. To find out more visit the service home page.