In Part 1 and Part 2 we provided an overview of benchmarks and the benefit to using independent companies like Source One to provide you with a reliable and actionable benchmark report. The last part of this series is the secret ingredient to a successful benchmark: stakeholder involvement.
The path leading to an insightful benchmark report that a client will find valuable is entirely variable. But regardless of what is being benchmarked, whether the report focuses on a qualitative comparison between service levels or a quantitative analysis of product pricing, the process always begins with the stakeholder. I will argue that beginning with and maintaining strong communication with the stakeholder from the exercise’s kick-off to delivering the end product will not only make the process more efficient, but increase the value of the benchmark report itself.
Define Your Target
All benchmark reports are not created equal, nor are they meant to be. In fact, in some cases, the stakeholder may reveal circumstances that may alter a benchmark report significantly. For example, consider a client who is seeking to negotiate their professional services contracts and the only information concerning the professional services company is the existing Master Services Agreement (MSA). After reviewing the MSA you note that there have been multiple rate cards established for IT Delivery Consulting, Industry-specific Strategy Consulting and General Management Consulting. With the information provided you benchmark all rate cards to determine current competitiveness. However, the client is only utilizing the service provider for General Management Consulting and the other established rates are meaningless and will never be utilized. The client wanted a comprehensive benchmark report focused on only General Management Consulting Services as well as negotiation points not only for reduced rates but improved Service Level Agreements (SLAs) and Key Performance Indicators (KPIs). Prior to jumping into a benchmark with limited information it is extremely important to work with the stakeholder to define your target. This way you can present a benchmark report specifically tailored to the client’s needs.
Get the Inside Scoop
Let’s use the same scenario as above, you have the professional service provider’s existing MSA and now know that the services being provided are for General Management Consulting services. You also know the client is looking for the benchmark to be focused on an industry hourly rate comparison as well as industry best in class contract terms and conditions, SLAs and KPIs. You begin your benchmark by performing a rate comparison against provided rates for General Management Consulting Services for the same industry, with similar annual spend volumes. After benchmarking the clients existing rates you note that the rates are extremely high, 60% above the market average. The high variance throws up a red flag, but you proceed with completing the rest of the benchmark report, only to present the material back to the client to be told that, “Oh, we aren’t actually charged the rates provided in the MSA rate card, we negotiate rates on a project by project basis.” This is a risk that can easily be mitigated by having these answers provided through an in depth stakeholder interview at the beginning of the process. The investment in meeting with the stakeholder will allow you to have the information you need to produce an accurate benchmark report. In this example, it is apparent that individual SOWs were required in order to assess the discounted rates and produce a benchmark report that is comparing actual rates rather than established rates.
It’s not only important to understand the current state of the supplier relationship but also where the client expects to utilize the supplier in the future. Perhaps a supplier has competitive rates significantly below market average and is under contract where the current terms and conditions are very favorable to the client. The client expects to secure a new three year contract with the supplier. However, the supplier is currently specialized in a niche IT space that is becoming outdated in the near future. Your benchmark report should not only compare this suppliers rates and current contract, but should also be taking a forward look at the market in order to give your client valuable market insight that in the next year it may be time to select a new supplier for this space.
Clearly, it is in the best interest of both the sourcing group and the client to begin any benchmarking exercise with involvement and insight from the primary stakeholder. Maintaining a level of involvement throughout the process helps you to efficiently and effectively understand the supplier relationship. It facilitates the data acquisition process and the number of man-hours needed to produce the report, and even better, it results in a more valuable, insightful, and focused benchmark report that highlights exactly what the client is looking for.