After what may have felt like a brief respite following the demise of audit commission inspections, the TSA recently found they could not account for more than a third of operating cost variations between landlords, and have indicated they will be looking to challenge organisation’s who may be failing to discharge responsibilities on value for money - as part of a stronger focus on proactive economic regulation.
It’s this time of year when the majority of landlords are either busy number crunching data for their benchmarking clubs or receiving results and pondering what to do with them. But is benchmarking, as lean system thinkers would advocate the 'fastest route to mediocrity', or the route to excellence?
The rationale for benchmarking remains the same regardless of methodology or sector - comparing costs (economy), performance (efficiency) and quality (effectiveness) to industry best performers, with a view to learning from them to reduce costs, and improve performance/quality.
In the private sector, it has been used extensively for several decades – as a tool in the box of ensuring ongoing competitiveness and success. There are plenty of examples in supermarkets, service and manufacturing industries, who focus their message on listening and responding to customers, and may define it as market research, but in reality are benchmarking their prices (economy), how their operations perform (efficiency), and customer satisfaction (quality) as part of ensuring they continue to grow market share and meet company objectives.
We all instinctively benchmark as part of our everyday lives too, ranging from colloquially ‘keeping up with the Jones’, to using the many price comparison and travel websites which have boomed in recent years.
In the housing sector, it has largely been about value for money – ensuring more bang for the buck from the tax payer’s money which funded new homes and still makes up the vast majority of housing organisations’ income. Most recently, it’s been about the TSA’s value for money standard - a ‘comprehensive approach to managing ...resources to provide cost-effective, efficient, quality services and homes to meet tenants’ and potential tenants’ needs’, with ‘effective forms of ... benchmarking … to encourage providers to improve continually improve’.
Without benchmarking in the housing sector, organisations and regulators aren’t effectively able to test, demonstrate or review whether value for money is being delivered - or could be improved.
The route to mediocrity
There is no doubt that organisations or regulators focussing on unit cost benchmarking alone - seeking to reduce costs without taking outcomes for customers or their requirements into account - will be on the route to mediocrity. Cost (economy) is only one element in the benchmarking process. Fortunately, as the TSA also stated in their preamble to the current standards, they are ‘primarily concerned about outcomes for tenants’, and the current value for money standard requires a balanced, co-regulatory approach which focuses equally on improving outcomes of value to customers such as performance and quality.
Not comparing with the best
The route to mediocrity is paved by those who don’t compare with the best. There is a reticence across the housing sector to do this, choosing instead to focus on narrow geographical or organisational characteristics (e.g. traditional HA/LSVT/ALMO/Council) to ensure a ‘comparable environment’. Such benchmarking is limited in scope, does not produce a true picture or learning opportunity from the best across the sector, and makes genuine comparisons difficult for tenants. Involved tenants themselves, in the ‘First year review of annual reports – could do better’ TSA funded publication urged their compatriots to ‘insist that ... landlords seek out and compare themselves with the best performers’. They recognise that while costs may vary by geography or stock profile, good performance and satisfaction in key priority areas such as repairs, anti social behaviour, estate management and customer service are the product of effective organisations - not their location, characteristics, geography or stock profile. National benchmarking should be the norm and there is no reason why best performers in other sectors should not be included.
Thinking it’s inaccurate
The route to mediocrity is also littered with those who claim organisation’s compile and account for data in different ways, manipulate them to serve their own purposes, or their organisation/service is wholly unique and can’t be compared. The benchmarking and data collection industry across the sector has all kinds of built in validation checks, but it isn’t infallible. Even when organisations submit data on a standard basis, like guess the weight of the cake events at summer fayres, there will be variations, but the average of all the data will be more accurate than its parts, and will ultimately identify best performers – just like the wisdom of crowds’ experiments.
Making it too complicated
Benchmarking organisations have also been architects of the route to mediocrity. As it has grown into an industry, so has the data to feed into the system and interpret outcomes from. It’s no wonder many organisations participate on a once a year tick box basis, wheel out the standard reports and then get on with the day job. Organisation’s need to use benchmarking on a principle of less is more – less information but of a much higher value. The best organisations choose and identify with their customers which are the key cost, performance and quality measures that dovetail with their corporate plans or objectives, and then have mature discussions about type and frequency of benchmarking, outcomes, and what to do with them. As the audit commission repeatedly stated, it’s about agreeing a structured approach where a balance is achieved between costs, performance and quality of services.
The Route to Excellence
Effective benchmarking can give an accurate picture of how value for money compares, and be the catalyst for ongoing improvements in outcomes for businesses and their customers. It can’t be used in isolation though. By using it well, and making it an integral part of the business planning and performance management process, the climate for change and continuous improvement should follow as a natural result. Good leadership, as ever, is the key.
Benchmarking and lean systems techniques aren’t mutually exclusive either. There are numerous examples from industry and across the housing sector where organisations have acted on the causes of variation identified from benchmarking - exploring value in customer’s terms, removing waste from the system, and improving value for money as well as organisational measures in doing so.