Custom Versus Off-The-Shelf Benchmarking Surveys
The American Cancer Society’s (ACS) shared service center (SSC) provides accounts payable and travel expense processing, donation processing, purchasing card administration, strategic procurement and eprocurement administration, bank reconciliations, and scanning and image management to both the society’s National Home Office and its chartered divisions nationwide. The center’s mission is to maintain high-quality support services while exercising the most efficient stewardship of ACS resources.
Selecting a Benchmarking Provider
In the fall of 2002, at the request of its Customer Leadership Group, the SSC began making preparations for a series of external benchmarking studies for invoice and donation processing. Three providers submitted proposals to conduct the studies.
The winning provider proposed that the center participate in its ongoing research program for accounts payable processes. The provider also agreed to work with the center to design, develop, implement, and host a web-based research project for the donation process. The provider offered both services at a substantial cost savings over the other providers’ proposals.
The center undertook the benchmark studies in February 2003. The team’s first step was to visit the provider’s web site and download its accounts payable, purchasing card, and travel expense surveys, all of which would ultimately be completed online. Because the surveys were so comprehensive – ranging from 385 to 713 questions each – the team scheduled weekly one-hour meetings with the subject-matter experts to avoid significant disruption of the center’s schedule and to ensure continual progress toward completing the surveys. This schedule allowed all three surveys to be completed within seven months.
After the center submitted the completed surveys, the provider shared results from similar organizations for comparison. The provider’s system supplied extensive statistics, including costperformance gaps, to help the center identify opportunities to achieve first-quartile performance.
Completing the benchmark studies posed two challenges. First, at the time of the study, the center was not yet operating at full capacity. The surveys were completed based on actual costs and volumes, but the center’s fixed costs per transaction were much higher than they would be at full capacity. The center’s estimated full capacity invoice cost falls in the lower end of the second quartile, only 16 cents higher than first quartile. The costs and volumes cited in the study placed the center’s invoice processing in the lower end of the third quartile.
A second challenge related to the center’s use of a ghost purchasing card. Because rebates received from the purchasing card ultimately exceed transaction costs, the center uses the card consistently. This practice increases the cost of invoice processing in comparison to other organizations. In fact, many of the practices adopted by first-quartile performers in the purchasing card study would materially reduce the center’s lucrative rebate if adopted.
Despite these challenges, the off-the-shelf accounts payable benchmark studies highlighted opportunities for improvement that will help the center achieve best-in-class performance – an established goal for the future.
Based on the studies, the center has set specific goals related to cost-reduction in its balanced scorecard. The results of the study also encouraged the center to reexamine the way overhead is allocated. Some overhead that was previously allocated based on FTE will now be allocated based on other methods, such as available desktops, square footage, and total number of staff employed in one year. Also, now that the center has completed the migration of divisions for processing accounts payable, the center has and will regularly recalculate its accounts payable benchmarks.
During the same time period, the center worked with its provider to complete a custom study on the processing of check, credit card, and cash donations given at Society events (rather than in response to a direct mail campaign). The custom study consisted of five steps:
- The center identified five to 10 other nonprofit organizations to participate and invited them to join the study.
- The provider helped the center define the study’s scope and create question sets.
- Participants completed a short survey (20 to 30 questions) online and a 45- to 60-minute interview with the provider to discuss process design alternatives.
- The provider summarized the survey results and analyzed design alternatives.
- The provider hosted web-cast calls with participants to discuss results.
Questions were created and participants identified by July 2003. Five other major nonprofit organizations participated in this custom benchmarking survey. The results of the 117-question survey were distributed via email in October 2003, and a conference call to discuss the results with all participants was held in January 2004.
According to Ed Lord, the center’s director of business strategy, the custom donation processing study reinforced his perception that nonprofit organizations would be well served to work together to process transactions. "Together, collaborating organizations could afford new technologies that reduce donation processing costs," he said. "I was also pleased to learn that the investments the center has made in technology and process design enabled us to offer processing services that are on a par, or superior, to what other nonprofits offer."
Custom vs. Non-Custom
Did the custom study or the non-custom studies best meet the center’s needs? Well, the non-custom studies certainly provided more data and processing options to analyze. However, many criteria did not match the center’s precise situation and therefore did not accurately measure its processes.
According to Debbie Kastner, the center’s director of operations, "custom studies are more effective when you have a unique service, a specific process you want to benchmark against best-in-class, or the need to benchmark against selected organizations with an uncharted focus".
The custom study may also prove to be fruitful in other, unexpected, ways. Bob Bruder-Mattson, the center’s vice president, found the custom study much more valuable for fostering relationships and opening non-related avenues of cooperation. "The center is currently exploring the option of consolidating t-shirt purchases with some of the participating nonprofits to get more reasonable prices. The financial impact of establishing such relationships could be materially positive for the ACS," he said.
In general, the center prefers custom studies because of the highly valued dialogue between participants, but that preference will, of course, hinge upon the cost. The center’s first donation processing custom study was priced the same as the non-custom accounts payable study. And, although more effort was required up front for the custom study (recruit participants, design questions), the non-custom accounts payable study required extensive effort at the back end to analyze the results and the suitability of first-quartile performers’ practices. Ultimately, the total time and effort was probably equivalent for both studies, although the custom study did require the center’s leadership group to be more involved in the effort to recruit participants from other nonprofits.
In the future the center may still choose to participate in non-custom benchmark studies with one caveat: the provider must help analyze the results and determine the best practices to adopt for optimum performance.
About the Author
Catherine Maninger is the Manager of Quality Assurance for the American Cancer Society’s SSC in Oklahoma City. She is responsible for facilitating quality programs, data collection and analysis including benchmarking, disseminating quality performance statistics and serving as an advocate for the SSC's customers. Catherine.Maninger@cancer.org