Shared Services and Outsourcing Network Q&A with EquaTerra's Rick Bertheaud In early 2009, the Services and Outsourcing Network (SSON) interviewed Rick Bertheaud, Managing Director of Procurement Advisory Services at EquaTerra, on benchmarking best practices for start-up services delivery organizations. Following are excerpts from that interview. SSON:    What are the most important components of a start-up services delivery organization's benchmarking strategy? Rick Bertheaud:    In setting a benchmarking strategy, the question of when to start is probably the first biggest consideration. I tell clients if they don't know their starting line, they'll never be able to assess how far they've gone. Managing customer and stakeholder expectations through the start-up phase of a shared services initiative is critical to building momentum and overcoming change management obstacles. There clearly will be transition and growing pains through any major change in back-office service delivery. And I can't tell you how many shared services clients have bemoaned what they perceive to be an inability to measure progress in the first year. But without the ability to measure and demonstrate progress, the emphasis on early customer interactions will be overrun by dealing with those pains rather than celebrating early wins. Other elements of a benchmarking strategy should address: How much emphasis should you place on internal versus external benchmarking? While people naturally think about external metrics when they benchmark, understanding internal comparatives can also add a lot of value in terms of setting realistic first-year targets. How frequently should you benchmark externally? The cost and effort associated with external benchmarking is worthwhile about every three years. The data doesn't change significantly enough in much shorter windows. With whom and how will you partner? Are you merely looking to source data, or do you want advisory/analytical services to help interpret data and set transformational priorities? The answer will likely depend on how explicit and detailed you were in developing your launch strategy and operating plan. How will you integrate benchmarking with performance reporting? You obviously want at least some of your internal performance metrics to be comparable to external metrics. You'll likely have more internal service levels than you'll benchmark, but there should at least be some basis for key targets that are grounded in external competitiveness. How will you use/position the data? Are you providing transparency to your customer base regarding performance against external metrics? If so, as part of an annual review process or more frequently? How large a role does external competitiveness play in setting shared service leaders' individual/group performance objectives? How much reliance can you place on external benchmarks in setting financial targets for the start-up organization? Will you use external metrics (e.g., first quartile performance) to set internal targets/budgets? If so, what's your ramp time to achieve this level of performance? Are your investment plans consistent with this ramp cycle? How can you use external benchmarking in setting expectations for third-party providers? What process are you using to ensure outsourced or out-tasked services stay competitive through the term of your contracts? SSON: What are the most critical areas a start-up services delivery organization should measure, especially in today's challenging economic climate? Rick Bertheaud: Most shared services initiatives are launched with clear business case objectives. In today's environment, it's hard to imagine cost reduction not taking on paramount importance in any shared services start-up. While the concept of a balanced scorecard has been and will continue to be important, realization of savings objectives will occupy the greatest share of mind - for the shared services leadership and their customers - until those objectives are routinely getting met. Frankly, if productivity metrics are low and costs are high, you and your customers probably won't find a lot of solace in knowing average time on hold was cut 10 seconds in the employee call center. Having said that, the old adage "you get what you measure" is still true. So if you don't incorporate effectiveness, quality and satisfaction measures in the early days of the start-up, you'll quickly signal to staff that they aren't as important as key strokes and cost per transaction. My guidance is to establish at the outset the climate for broad measures of performance. When mind share is skewed to cost reduction, it takes more effort to stay focused on value realization. But attention to value realization will clearly pay off in the long run. The other aspect of measurement that's often overlooked by start-ups is the realization of strategic intent. I'm not aware of a single shared services initiative that wasn't launched with a particular strategy and business plan in mind. But once the strategy is set, what gets measured? For many, the determination of service levels begins and ends with transactions. I like to think of it as the difference between "are we doing the right things" versus "are we doing things well." Clearly, both are important - but if you only measure the latter, the real value proposition of shared services will get missed. For example, value drivers such as consolidation, standardization, self-service, and automation are likely key tenets of your shared services strategy. But if you rely solely on traditional quality, productivity and cost metrics to tell you if you're doing the right things, you will lose the forest for the trees. Especially in the start-up phase of shared services, you're banking on core behavioral changes taking root. And traditional metrics won't tell you if you're achieving the required behavioral changes - they'll merely point out the consequence if you don't. SSON: Are there benchmarking tools available to new services delivery organizations? Rick Bertheaud:   There are plenty of good examples of benchmarking organizations and tools, such as APQC's Open Standards Benchmarking Collaborative (OSBC), that address the question of "are you doing things well?" But as I emphasized earlier, that's only part of the equation. Service delivery organizations must also address whether they're "doing the right things". For start-ups, measuring the foundational elements of shared services - such as standardization, cost and service orientation, best practice implementation, executive sponsorship, service levels and measurement, developing joint governance and running shared services like a business - are critical to achieving early success. To answer the "are we doing the right things?" question, shared services organizations can utilize a diagnostic tool to determine the extent to which they're "getting it right." (EquaTerra has developed such a diagnostic, Shared Services Diagnostic , which is based on our Shared Services Excellence Framework .) This type of diagnostic examines not only the above-mentioned "foundational" elements, but also measures (and sets targets for) a wider variety of differentiators that mature and successful shared services organizations have used to excel to the next level. In all, 18 comprehensive performance elements are evaluated to help identify the specific levers an organization should pull to quickly achieve maximum impact. This Q&A session was originally published in the February 2009 issue of the Shared Services & Outsourcing Network’s Start-Up Services Delivery e-Alert.