Benchmarking Knowledge Creates Power

Posted on December 5, 2011


To elucidate the power of benchmarking, let me offer this anedote.

Recently a public county hospital Board of Directors in the southeast which came under fire by its county.  As many hospital are these days, this particular one was losing money and struggling to get in the black. Despite the poor recent performance of the hospital over the past few years, the Board voted to give the hospital’s CFO a substantial raise and bonus. County residents were furious. The local small-town newspaper was incredulous:  in this economy and with an increasing emphasis on pay-for-performance in the workplace, especially among executives, how could a reward of poor performance be justified?

The Board’s answer:  benchmarking. In the Board’s eyes, the CFO’s current pay and bonus structure was not in line with comparables from other CFOs in similar positions around the state, so the Board voted to adjust the pay up—despite the poor job performance of the hospital administrator.

Benchmarking is defined as the process of comparing something you do, such as your business practices, with industry averages or “best practices”. Through the comparison, knowledge is gained as to what is typical and how you measure against industry leader performance.

Benchmarking in hospitals can be used for many different reasons, but most often it is used to both confirm what is done now is not out-of-the-norm, and to direct strategy.

In healthcare construction, benchmarking can be as informal as asking leaders at other hospitals if your project program and budget ‘sounds right’. It could mean gathering your executive team and setting up a few visits to projects or facilities similar to what you are planning, just to make sure your expectations are in line for what you plan to design and build. Or, it could be downright competitive where you find out what everyone else is doing, and then go above and beyond so you can stand out.

The important action in benchmarking is to get out of your comfort zone and find out what the rest of the region, nation, world is doing in similar circumstances. Often a hospital is lulled into the way they have always done things, and many aspects of healthcare design and construction become assumed when they should not be. Ideas are not challenged, things begin to look the same, cost the same, age the same, perform the same—when they could or should perform much better.

This is happening on project delivery as well. A hospital gets comfortable with design-bid-build or CM and they think “I’m done.  No need to mess around with anything different.”  In fact, they may find a hospital of similar size, community and financial performance doing something very different with design-build, with more attractive results. Or worse, a direct competitor has evolved right under their nose and delivers their projects a few months faster with design-build—just enough to provide a 4-, 7-, 10-percent boost to the bottom line with each project. In a few years, that adds up and suddenly there is a noticeable financial difference between two previously similar hospitals.

Benchmarking cannot solve all of a hospital’s ills, but it can provide a comparison between what you do and what others do that is easily understood. Many times this can be shown quite clearly and easily in a visual way. This evidence can become the logical back-up needed to facilitate change, and that itself can be priceless.