Nathan Walker
The benefits of benchmarking are so widely understood that it is common practice in many industries to achieve ambitious goals (Castro and Frazzon, 2017), however, the challenge remains of how to compare the performance of different organisations from different sectors (Bititci et al., 2013). Companies can gain value from this by being able to identify leaders in other sectors to then begin the process of learning from them, ultimately instigating improvements in their company, dependent on what they were measuring and analysing (Cankar and Petkovsek, 2013). Similar benefits can be gained from within-sector benchmarking (Walker et al., 2021a) but by transcending sector boundaries and possibly common practice dogma, companies have the possibility to learn something that could not have been garnered from peers.
We conducted research to investigate the performance of UK utilities across the water and sewage, energy, and communications sectors, and develop a methodology to compare whole companies effectively across sectors. A methodology was constructed based on service, environmental and economic metrics, and cross-sector benchmarking was undertaken which generated performance scores based on company metrics relative to sector peers. For example, if a company in the water sector performed the best for their customer service, they got a score of 5, then this score could then be compared to companies in the energy and communications sectors and their customer service scores. This approach avoided issues of indicators often being mismatched across sectors and the lack of relevance and context when sectors do use similar indicators.
Results showed that the sample of 18 utilities had two distinct clusters, one of eight sector leaders and the other of ten lower performers (Figure 1). The two distinct groups of sector leaders and lower performers can be employed to specifically identify other companies that may offer opportunities for learning. Top performers can assess top performers in other sectors to identify how they might continue improving, rather than be potentially limited within their own sectors. Conversely, lower companies can look within and across sectors to begin identifying best practices to improve their performance.
Figure 1. 3-D plot of company group scores with highlighted K-means clusters.
This research is under review with the journal ‘Utilities Policy’ for publication, thus a full peer-reviewed version of this research will be available in the upcoming months.
References
Bititci, U. S., Firat, S. U. O. and Garengo, P. (2013) ‘How to compare performances of firms operating in different sectors?’, Production Planning & Control: The Management of Operations, 24(12), pp. 1032-1049. doi: 10.1080/09537287.2011.643829
Cankar, S. S. and Petkovsek, V. (2013) ‘Private And Public Sector Innovation And The Importance Of Cross-Sector Collaboration’, J. Appl. Bus. Res., 29(6), pp. 1597–1606. doi: doi.org/10.19030/jabr.v29i6.8197
Castro, V.F.d. and Frazzon, E. M. (2017) ‘Benchmarking of best practices: an overview of the academic literature’, Benchmarking: An International Journal, 24(3), pp. 750-744. doi: doi.org/10.1108/BIJ-03-2016-0031
Walker, N. L., Styles, D., Gallagher, J. Williams, A. P. (2021a) ‘Aligning efficiency benchmarking with sustainable outcomes in the United Kingdom water sector’, J. Environ. Manag., 287, pp. 112317. doi: 10.1016/j.jenvman.2021.112317
