Benchmarking helps assess performance and makes for better decision making in universities

Universities tell us that that benchmarking helps them to assess their performance and makes for better decision making, says Chris Hale, Deputy Director of Policy at Universities UK, who explains how the sector is working to improve the ways that management information is shared and measured.

When we worked with Sir Ian Diamond on the Universities UK report Efficiency and Effectiveness in higher education, we asked universities about the challenges they faced in achieving efficiency and value for money, and what factors can help to overcome them. A message we often heard was that high quality management information can help with making better decisions.

Much has been made of the role that shared services or process improvements, for example, can play in making institutions more effective. But a clear evidence-based understanding of where to target such interventions is vital, to avoid business cases falling at the first hurdle or projects having uncertain impact.

Understanding costs and performance

With its primary focus on operational functions, the Diamond review found that many institutions are already implementing various tools and techniques to understand their costs and performance in key business areas.

One of the main tools being used by institutions is benchmarking, which allows them to compare their performance to other internal functions or other institutions. We picked up a strong appetite in the sector for doing more of this.

However, universities helped us to identify three problem areas that are limiting its potential.

  • The quality of the available data on operational costs wasn’t good, particularly in relation to business processes.
  • There are real challenges in getting consensus between institutions on what should be measured and how.
  • The implications of competition law were also raised as a concern.

Benchmarking project

In response, Sir Ian’s report made a number of recommendations for helping the sector to improve its benchmarking abilities. With support from the Innovation and Transformation Fund, jointly funded by HEFCE and the Leadership Foundation for Higher Education, UUK has been working closely with its partners to make progress in this area. Starting in Autumn 2012, the focus of the first phase of this work was to get a better sense of current practices, data sources and uses of operational cost benchmarking within the sector.

Benchmarking in higher education: six key findings

  • A range of benefits: The stated benefits of operational cost benchmarking are that it supports management decisions, informs the development of process improvement initiatives and shared services, helps target investment decisions and supports institutions in demonstrating value for money to stakeholders.
  • Diversity and varying levels of openness: There is currently a diverse set of data sources and tools within different operational areas that provide some operational benchmarking functions. These have developed largely independently and within professional domains. The degree of open access to these also varies.
  • Good initiatives: Some provide a service covering different operational activities but have limited sector reach. For example, the Benchmarking in HE facility developed by Association of Managers in Higher Education Colleges (AMHEC).
  • Sector-level demand: Although institutions are already using commercial and other tools there is an identifiable demand, and need, for operational cost benchmarking at a sector level.
  • Data sources need development: Existing data sources are not currently well enough developed to support a sector-level operational cost benchmarking tool.
  • A common framework and taxonomy: These would enable data to be integrated from a range of sources, potentially including professional associations.

The next phase of the project

The next phase of the project is underway. We are starting to develop the proposed common framework and operational cost taxonomy, setting up pilot projects with a number of universities. We are also making sure that we link in closely to HESA’s work in supporting benchmarking practice around the sector. We hope to share outputs from this phase in Spring 2014.

In the final phase of this work, we will ask some pilot institutions to test the taxonomy and start using their own and other available data to benchmark across the common areas identified.

A common approach to benchmarking

Given the diverse nature of institutional structures and functions, there is never going to be a completely perfect approach. But this work will allow the sector to take an important step forward and provide the right conditions for developing a common approach to operational cost benchmarking.

At the end of this project we hope to make the taxonomy freely availably along with supporting materials developed during the process. This will enable institutions and those with an interest in supporting benchmarking to use them and develop approaches that meet their own needs – all within a common framework.

Competition regulation

On the question of competition regulation, we have received advice that benchmarking of operational functions should not necessarily be curtailed when thinking about competition law. Indeed, benchmarking operations against competitors may result in institutions offering their services more efficiently, which could benefit students and tax payers.

However, care must be taken to ensure that participation in a benchmarking exercise does not result in the exchange of ‘strategically useful’ information, which is effectively information that could result in a reduction of competition. Ideally information should also be anonymised and particular care taken when benchmarking between a small number of institutions.

We will develop this advice further and provide guidance to institutions along with the project outputs.

Chris Hale is deputy director of policy at Universities UK. Follow Chris on @chrishaleuk