Select Methodologies

After making the initial choice (here, assumed to be Performance Benchmarking), decision-makers need to focus and refine this choice to identify specific aspects of the practice they want to benchmark.

  • To what extent are data on inputs, outputs, and environmental conditions available on a consistent basis across organizations?
  • How do the performance comparisons relate to the final goal sought by those conducting the study?

To answer these questions, analysts need to have a clear idea of what kind of information they are seeking, what aspects of performance are likely to need improvement, and what targets for future performance might be most reasonable. At this stage, analysts need to have clear objectives so appropriate data are collected and a suitable model can be specified.

  • Are firms producing on the frontier—so no additional output could be obtained from the inputs? (technical or engineering efficiency)
  • Is the right combination of inputs chosen to minimize costs? (cost or production efficiency)
  • Is the quality of service consistent with customers’ willingness to pay (an element of allocative efficiency)
  • Do prices reflect incremental production costs? (an element of allocative efficiency)
  • Are organizations operating where scale economies have been achieved? (scale efficiency)
  • Are organizations operating where economies of scope have been achieved (scope efficiency reflecting multi-product economies, such as delivering water and wastewater services)

Based on the objectives, decision-makers then need to choose the timeframe and comparison group for the analysis.

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