1. A
Benchmarking to Become Best in Class:
Guiding Principles in Gresham, Oregon
Benchmarks make cause-and-effect relationships visible by aligning goals
with the external environment, employees with key objectives,
and measurementactivities with organizational goals.
here is a perception that government is
not working very well and it costs too
much. Many citizens believe they are
paying a lot to government without a clear
comprehension of what each governmental
entity is doing, why it is doing it, and who
is in charge let alone who is accountable.
The issue of accountability is frequently
highlighted at election time, when voters
are asked, "Are you better off now than
you were before?" Voters respond with a
form of "benchmarks" of what "better off
than before" means to them. If government
is to answer this fundamental question,
then government needs to target some
specific outcomes, find ways of measuring
progress towards them, and hold itself
accountable for the achievement of these
outcomes. Benchmarks can serve this need.
Recognition of benchmarking began as
part of the "quality movement" in the late
1980s. An ongoing outreach activity,
benchmarking has as a goal the identifica-
tion of the best operating practices and
processes that, when carried out, produce
superior performance. As used in the
corporate world, benchmarking is viewed
as the process of seeking the best examples
of good practice, often by the most profit-
able companies, and setting a target to
meet or exceed that standard. This requires
becoming the "best in class," not just in
profitability but in long-term improvements
in efficiency of core business functions and
adaptability to the marketplace. For pur-
poses of benchmarking, only that which
can be measured exists.
In local government, benchmarking is
being used to gauge the organizational and
community efforts in accomplishing pre-
defined and measurable desired outcomes
developed with the participation of policy
makers, management, staff, customers, and
stakeholders. Benchmarks in the public
sector are indicators that convey informa-
tion about the level of achievement of
policies, programs, or services.
Benchmarks require two things: a fixed
point and metrics-a means to measure.
Benchmark selection requires first the
identification of what is to be improved
and secondly the application of metrics to
the improvement process. Benchmarking
requires a commitment of time and re-
sources, beginning with top management.
Approval of benchmarking by the most
senior executive within the scope of the
functions to be analyzed and one person at
a higher level (i.e., a champion) is vital.
The Organizational Framework
The City of Gresham developed a five-
year management plan consisting of 10 city
goals established by the council. Depart-
ments then identified their respective
ongoing core business functions that
support each goal and established objec-
tives for their respective departments
supporting each goal, which linked imple-
mentation of the departmental objectives to
the achievement of the council goals. Each
council agenda item is required to identify
to which council goal, departmental core
business function, and/or objective it is
linked. Employee progress reports include a
section that links some aspects of employee
performance to a particular departmental
core business function and/or objective.
Budget decision packages also identify the
goal that they support. The degree of
standardization within this process and
continual improvement of the process
increases the linkage of departmental,
employee, and program outcomes.
FEBRUARY 1997 " GovERNmENT Fn4ANcE REnEw
By Anthony H. Rainey
A benchmarking model based on this
management plan could be formulated, but
first it was necessary to communicate the
big picture to employees about how the
organization works and how benchmarking
fits into the way the organization works.
To aid in this effort, an organizational
model was developed (Exhibit 1). This
model identifies and describes the relation-
ships among:
+the levels and/or roles employees in the
organization may have;
*some of the generic position(s) in the
organization for employees to find where
they fit;
*the typical emphasis at each level;
*the nature of the information typically
required at each level;
"the type of report typically required at
each level, with an accounting example to
denote the increasing comprehensiveness
of reporting requirements; and
*the type of software that would be best
suited for each level.'
The model enables employees at all
levels to understand and acknowledge the
varying relationships within the organiza-
tion and to identify their role in achieving
the objectives in the management plan.
Hierarchical in its structure, the model
characterizes five levels of governmental
concerns: strategic planning, management
control, operational control, operational
performance, and customer satisfaction.
The role of strategic planning by the
executive, legislature, and senior manage-
ment is to define-in the form of a policy-
why the enterprise is headed in a desig-
nated direction. It typically requires a
broad-based strategic plan and information
support in financial accounting. The role of
management control by program managers
is to determine what is to be accomplished
5

2. 6
in the form of a program and to formulate
a management plan to monitor the re-
sources used and measure the attainment of
the objectives. Operational control by
operational management or supervisors
establishes and ensures when things will be
accomplished in the core business func-
tions. It requires the formulation of a
detailed operating or project plan, which
typically is supported by cost accounting.
The mission of operational performance by
staff is to designate how to do things as a
process, task, or activity. Cost accounting
provides costs for some types of procedures
and/or practices. The customer satisfaction
process seeks to ensure that all employees
identify who their customers are and what
products or services will meet their needs.
The metric at this level is quality.
A table such as Exhibit 1, depicting the
Gresham organizational model, is used as a
training tool, alerting employees to the
importance of identifying the particular
needs of their customers before they try to
develop benchmarks. The benchmarking
strategy of requiring employees to rethink
the needs of the city's customers at different
FEBRUARY 1997 * GovERNMENT FINANCE REVIEW
Exhibit 1
ORGANIZATIONAL MODEL FOR THE CITY OF GRESHAM
Emphasis
Development of goals
and methods for achiev-
ing them. Why the
organization is headed in
a specific direction in
terms ofpolicy.
Process of ensuring that
goals are being accom-
plished. What is to be
accomplished in the
terms of program.
Process of ensuring that
specific tasks are being
accomplished. Ensure
when things will be
accomplished.
Control of day-to-day
operations including
feedback of exceptions
to appropriate level of
management. Designate
how things will be done.
Request, receipt, and
review of products and/
or services.
Information
Unstructured and
irregular, each
problem different.
Long-range (1-10+
years).
Unstructured or semi-
structured. Irregular,
each problem
different. Medium-
range (1-5+ years).
Semi-structured.
More structured;
cyclical, largely
repeating. Year-to-
year, monthly.
Highly structured,
repetitious. Weekly,
daily, hourly.
Unstructured and
structured. Each
problem different.
levels of the organization enabled staff to
avoid wasting a lot of time and effort. This
review of customer needs also helps bring
about wide acceptance of performance
measures and/or benchmarks.
Customer needs are important determi-
nants of appropriate benchmarks and the
type of information to collect and report.
Customers at the strategic planning level
require information of a global perspective
with less detail than what is needed at
lower levels in the organization, where
more accurate, timely, and detailed infor-
mation is necessary.
Benchmarks and Performance
Although benchmarks are a measure of
performance, their application is distinctive
from that of performance measures, which
typically are used in a budget to communi-
cate an annual result, such as "reduced
costs by 30 percent." Performance mea-
sures fail to provide the metrics to aid in
responsibly managing operational perfor-
mance throughout the levels of the organi-
Reports
Planning oriented In
terms of entire enter-
prise. Financial
accounting.
Comprehensive and
planning-control
oriented. Financial and
management account-
ing.
Detailed and control
oriented. Management
and cost accounting.
Detailed work specifi-
cations that are job
oriented. Cost ac-
counting.
User-friendly, timely,
and consistent. Bills,
receipts, statements.
Software
Executive
information
system
Management
Information
system
Transaction
processing
system
User-friendly
transaction
processing
system
zation and throughout the year. High-level
performance measures, for example,
cascade to lower levels of the organization,
usually in the same units of measure,
despite the fact that the methods, out-
comes, and metrics may change at each
level. As a result, senior management and
employees can be stuck with an efficient
but ineffective tracking system.
When benchmarking is used, metrics are
customized to fit the means, and the
achievement of a goal represents the
outcome of a series of reliable sequences.
By controlling the methods and limiting
them to measures, benchmarking improves
the likelihood of achieving the desired
outcome and planned results.
Benchmarks control the means at every
Jevel of the hierarchy. As a goal rolls down
through the organization, benchmarks
serve to convert strategies into tactics and
projects, through alignment and linkage,
into action. The metrics change accordingly
so employees can monitor the results and
adjust behavior for the desired outcomes.
Every objective is translated into one or
more means by assigning every means a
Level/Role Position(s)
Strategic planning. Executive,
Formulating strategy legislative,
and resources. senior
Vision, mission, management
values, goals.
Management Program
control. Directing management
implementation of
plans and resources.
Objectives.
Operational con- Supervisory
trol. Managing or team
implementation of management
plans and resources.
Processes.
Operational perfor- Individual
mance. Carrying out management
plan components.
Tasks, activities.
Customer satisfac- Internal and/or
tion. End-user or external
receiver of product/ customers
service.

3. measure or indicator (desired outcome). In
this way, words and numbers link the
objectives and the outcomes, and managers
can verify that the combination ofpro-
gram plans adds up to delivery of the
organizational requirements.
Benchmarks make cause-and-effect
relationships visible through a process of
alignment:
" alignment of an organization's goals with
changes in the external environment;
" alignment of employees with key objec-
tives; and
" alignment of process, task, and activity
metrics with organizational goals.
The result is an organization that consis-
tently focuses on a fixed number of priori-
ties, clearly communicates that focus
throughout the organization, and identifies
improvements in core business functions to
achieve program objectives. To this end,
benchmarking requires that managers
understand the cause-and-effect relation-
ships that drive their programs and that
they document and study the rationale of
their choices. It also demands an under-
standing of the key relationships that
generate and control the process of change
and designing change strategies to reflect
these relationships.
Three Types of Benchmarks
Benchmarks are tools for managing,
reporting, and correcting which are used at
three basic levels: strategy, performance,
and operations. Strategic benchmarks
measure the success of a policy that ad-
dresses broad community goals, perfor-
mance benchmarks compare a program's
accomplishments with similar programs,
and process (operational) benchmarks deal
with finding improvements in the delivery
of a service to the customer. (See Exhibit
2.)
Strategic Benchmarks. A pioneer of
benchmarking in the public sector, the
State of Oregon looked at benchmarking
as a tool for addressing its economic
downturn in the mid-1980s. Although
some of Oregon's strategic benchmarks are
stated in terms of moving the state up in
the ranking of states, Oregon strategic
benchmarks often call for improving the
lives of the people in the state. This mea-
sured improvement is relative to their
present situation or compared to some
objective standard of health, safety, eco-
nomic well-being of the state's population,
and the state's resulting economy and
public finances. This is the bottom line for
the government, just as the bottom line for a
private company is its ranking against other
businesses or financial profit for the owners
or shareholders.
Strategic benchmarks assess where the
entity or state intends to be in the future
and indicate progress toward achievement
of its strategic vision. They keep leaders,
employees, and citizens focused on achiev-
ing these outcomes. Tracking results
through benchmarking enables decision
makers to set priorities and adapt and
modify programs as they learn what works
best.
Gresham's Use of Strategic Benchmarks:
Housing. Goal 10 of the city's management
plan is to create opportunities for living in a
full-service community through economic
development and housing. Strategic plan-
ning requires considering what housing in
Gresham should be like in the next 10, 20,
and 30 years; what should be the average
selling price, percentage of income to
qualify for a mortgage, or percentage of
single versus multifamily housing units?
Clearly, they should be bette; but better
than what? Strategic benchmarks will
provide the focus of what the strategic
outcomes for housing efforts should be. The
attainment of the housing outcomes set out
in Goal 10 makes the lives of Gresham
citizens better-measurably better-in
specific ways.
In 1995, city council created the
Gresham Progress Board to identify and
develop strategic benchmarks as a means of
providing community-based benchmarking.
Board members were selected on the basis
of geographic and other demographic
factors to ensure most of the neighbor-
hoods within Gresham were represented
and to include a diversity of views and
opinions. Applicants were solicited from
neighborhood and civic associations,
religious organizations, service groups and
clubs, as well as business and educational
organizations. The progress board believes
this type of neighborhood representation
provides the best input from a local per-
spective so that the strategic benchmarks
for housing can be especially targeted at a
neighborhood level.
The following scenario illustrates the
application of housing benchmarks cur-
rently under development in Gresham.
Target areas of affordability and housing
mix are being formulated by each neighbor-
hood district. This requires examining
historical housing data, trending them to
'ek ib I
. , . , .
g TypI-& OF BENCHM'1 KS
j pUbfie, .prldate,and nonprofit otganiIa-
tlone'dcMnpM With-each other. Strategic
`, ber~dlircfa Cingfs seldom Industry focused. It
. ~ioves'acr ;ndwslries and cities to deter-
,,mina what;are th best-:kclass strategic
orne&h,6 Oregon Progreas hoard's
ehchiriaf '4ro'rin example of strategic
~i'rchmad'cs* .
f loWVt t lit, povater andnonprofit organize-
,'tipiss, ;:gititpare thernaepres with each other in
terrM,61 prodocf aril service, Performance
l nch rfcin uaualryfo~Crases onelements of
prlce~ teofsnfr;al quality, atloillary product or
seryice-fel~t~re~s,,sp~9ast, reli~hility, and other
'Qrni oornpadsons.
.W pxiblic,'ptivafeyand nonprofitorganize-
mns' cem~are through the identification ofthe
`taa~`stw;rfteafi ie:bperetirlg praoficea from many
prgai'llzdtionstl~t perlorm similar work pro-.
. ;ct~ss~
.
FEBRUARY 1997 GovERNMENT FINANCE REVIEW

4. TIPS FOR GETTING STARTED
Before modifying an existing planning system, draw a map of it and take time to identify
defects. Map the various components, inputs, and calendar aspects of current processes
to figure out where to start. This is essential, even though the existing strategic planning
process may be an informal or unstructured one.
Create an open and safe setting to review the planning process so that senior managers
will not be reluctant to report candidly the extent to which they currently manage their
plans. Emphasize the need to identify opportunities for improvement.
Senior management leadership and support must be visible.
Target initial efforts to gamer a quick but effective success and plan time to learn on the
smaller, doable projects. Benchmark selection may lead towards a complex and time-
consuming program or to one that needs only minor tweaking of current practice . Keep it
simple in the beginning, with additional detail and complexity being the result of refine-
ments.
Utilize what already exists; include the Internet and professional organizations among your
resources. Other jurisdictions may have worked on a particular area to benchmark, and
staff will probably be more than happy to share their experiences.
Employees must recognize the long-term importance of the effort . Be persistent in staying
the course.
Do not arbitrarily try to adopt a carbon-copy approach of benchmarking or performance
measurement from another organization . Employee buy-in, acceptance, and ownership of
the new techniques are necessary. Success cannot be imported without participation and
acceptance by the creators and users of information. Communicate.
Be ready to crumple it up and redesign it.
8
1995, and factoring in some future-year
demographic assumptions to derive desired
outcomes. Staff and community stakehold-
ers review and refine these outcomes, then
present them to the Gresham Progress
Board, which will solicit feedback from
private, public, and not-for-profit stake-
holders for further revisions. The board
will then present these housing strategic
benchmarks to city council for adoption.
The success of Gresham's housing policy
will be measured by these strategic bench-
marks.
Strategic benchmarks will be formulated
in only those areas that the city can directly
control or influence. The housing strategic
benchmarks, specifying targets for particu-
lar future years, will influence the city's
budget, along with other stakeholder
organizations, and guide efforts toward the
attainment of these outcomes. The
benchmarking process may suggest budget
shifts by revealing costly programs or
efforts that do not work and prompt new
approaches to the problems of housing.
Performance Benchmarks. Performance
benchmarks compare one organization's
products and services against those of
another. They will indicate how a jurisdic-
FEBRUARY 1997 GOVERNMENT FINANCE Review
tion compares but do not reveal why the
numbers differ. The difference between
performance benchmarks and performance
measures is comparability. Jurisdictions
usually create performance measures to
establish targets for a program or activity
they have defined or is unique to that
jurisdiction; this means that comparing
performance measures is often comparing
apples to oranges. The challenge with
performance measures arises when citizens
or elected officials look at the performance
measures and ask, How do we compare
with another jurisdiction? Many govern-
ments can do this, while others cannot.
Performance benchmarks, on the other
hand, require that a common attribute or
similarity exists so that apples-to-apples
comparisons are possible. The purpose of
performance benchmarks is to enable one
unit or organization to compare itself easily
with others. Performance benchmarks are
used for this purpose constantly in the
business world.
One example of a performance bench-
mark related to housing is a comparison of
permit processing, inspections, lot size, new
infrastructure, average family income,
zoning, grant funded housing projects, or
plan reviews with jurisdictions of similar
size. A popular source of data for perfor-
mance benchmarks is the American Sub-
urbs Rating Guide and Fact Book, which
provides information on the suburbs of the
50 largest metropolitan areas throughout
the nation. They are benchmarked and
ranked from best to worst, overall, and in
seven categories: economics, affordable
housing, crime, open spaces, education,
commuting, and community stability.
While many jurisdictions may not yet have
committed themselves to do any type of
performance benchmarking, it is no sur-
prise they are already included in these
performance benchmarks by the private
sector as a means of comparison with other
areas of the country.
Learning from others-determining who
has the best performance through perfor-
mance benchmarking and studying the
practices they use (known as best prac-
tices)--can be a precursor toward the
attainment of breakthroughs in the way
business is done. Performance bench-
marking provides a baseline from which to
make a comparison and identify gaps to
close in relation to an entity's best perfor-
mance and to the best in class.
The International City/County Manage-
ment Association (ICMA) is using perfor-
mance benchmarks in its Comparative
Performance Measurement Consortium.
The City of Gresham is using ICMA's
support services performance benchmarks
as a means of comparing itself to other
municipalities in core business functions,
such as fleet management, facilities man-
agement, human resources, risk manage-
ment, information technology, and pur-
chasing. These benchmarks provide
Gresham a basis of measurement to assess
its standing with other municipalities. City
staff will examine the feasibility of utilizing
the lCMA's performance benchmarks
relating to neighborhood services and
housing and will work with other juris-
dictions and professional organizations to
select the most appropriate and beneficial
performance benchmarks.
Process Benchmarks. Process bench-
marks are used to assess the effectiveness,
efficiency, and service quality of a program
' or core business function. Before a process
can be improved, it is important to know
how the process is currently working and
to monitor the key input, process, output,
and outcome indicators that customers use
to evaluate service delivery. Process bench-
marks, the lowest level of the benchmark
hierarchy, can serve as the basis for initiat-

5. ing improvements through a variety of
tools and techniques.
The City of Gresham has used a modi-
fied service efforts and accomplishments
model that measures the flow of inputs,
processes, and outputs that affect the
desired outcomes of programs or functions.
As the city establishes its strategic and
performance benchmarks, they are used in
efforts to improve processes related to
housing. Staff of city programs involved in
housing will participate in the formulation
FOR FURTHER INFORMATION ON BENCHMARKS
Comparative Performance Measurement Consortium, International City/County Manage-
ment Association, 777 North Capitol St. N.E., Suite 500, Washington, DC 20002-4201
(202/289-4262) . Contact: Michael Lombardo (e-mail: mlombardo*icma.org)
PUBLICATIONS, HANDBOOKS, AND GUIDES
American Suburbs Rating Guide and Fact Bookby Alan Willis and Bennett Jacobstein
(1993). Contact: Toucan Valley Publications, 142 N. Milpitas Blvd., Suite 260, Milpitas, CA
95035
Benchmarking: A Manager's Guide by Meredith Bolon and Amy Weber (1995) and pub-
lished by Coopers Lybrand. Contact: Bookmasters (800/247-6553)
Business Process Benchmarking: Finding and Implementing Best Practices by Robert C.
Camp (1995). Contact: American Society for Quality Control Press, P.O. Box 3005, Milwau-
kee, WI 53201-3005
Benchmarking ManagementGuide by International Benchmarking Clearinghouse (1993).
Contact: American Productivity and Quality Center, 123 N. Post Oak Lane, 3rd floor,
Houston, TX 77024
Effective Benchmarking (SMA #4V) by the Institute of Management Accountants (1995).
Contact: Institute of Management Accountants, Publications, 10 Paragon Drive, Montvale,
NJ 07645
Strategic Benchmarking: How to Rate Your Company's Performance Against the World's
Best by Gregory H. Watson (1993). Contact: John Wiley Sons, 1 Wiley Drive, Somerset,
NJ 08875
WORLD WIDE WEB SITES WITH BENCHMARKING INFORMATION
American Productivity and Quality Center (http:/twww.apgc.org)
American Society for Quality Control (httplAvww.asgc.org)
Benchmarking for Quality Management and Technology (http./Avww.mcb.co.uk/services t
contentsAiblink/webpages/hl31001001 .html)
Centerfor Advanced Purchasing Studies Benchmarking Reports (http:/Avww.napm.org/
capslbmr-hmpg .htm)
Department of Energy's Business Practices Homepage (htipJ/www.prdoe.gov/pr5.htm1)
Performance Benchmarking (httpJ/www.lbb.state.tx.us/Ibb/memberst reports/strat/
SPAPP3.htm)
Education best practices (httpJ/www nhmccd.cc.tx.us/groups/stw/srvy-W.html)
EuroOual Benchmarking (httpJ/www.euroqual.orglgtdAlit/bench.htm)
National Performance Review Reinventing Government Toolkit (http://www.fc.ul.ptt
npr-page.htmi)
National Institute of Standards and Technology Quality Program (http:l/
www.quality.nist.gov)
Oregon Progress Board (hnp://www.scon.state.orus/opbAndex.htm)
The Strategic Planning Institute Council on Benchmarking (httpJ/www.spinet.orM
of efficiency, effectiveness, and service
quality desired outcomes that will be linked
to the budget. Process benchmarks for the
city mediation program and fire and
emergency services department have been
developed and are used as a tool to im-
prove service delivery continuously and as
a reporting mechanism. The process of
developing these benchmarks involves the
identification of desired outcomes for
programs, and the sifting of the key inputs,
key processes, and key outputs.
Lessons Learned
Each customer has different information
needs; this translates into different types of
benchmarks. A clear understanding of this
was necessary for Gresham staff to create a
model for linking and aligning information
needs. As information systems profession-
als well know, there must be an architec
ture from which to design, develop, and
deliver information to meet the needs of the
various users of the system. It became
apparent to Gresham staff that numerous
benchmarking, strategic planning, perfor-
mance-based budgeting, and total quality
management efforts throughout the coun-
try lacked the necessary architecture, often
prompting users to ask, Where does this
fit into the big picture?
Examining the experiences of other
jurisdictions and analyzing their own initial
efforts has led officials in Gresham to four
conclusions about what benchmarks should
do.
Benchmarks must link operations to
strategic goals. Departments and func-
tions should know how they are contrib-
uting separately and together in meeting
their strategic mission.
The benchmark system has to integrate
financial and nonfinancial information in
a way that is useable by program manag-
ers-management and employees need the
right information at the right time to
support decisions.
The real value of benchmarks for the city
would derive from their ability to focus
efforts on core business functions related
to customer requirements.
Benchmarking must provide added value
to the user. Reports should not be created
for the sake of measuring but rather to
help people manage, make decisions,
assess past performance, and plan for
future performance. O
NOTE
1 This extended model was derived fromPlanning and
Control Systems:A Frammork for Analysis by
Robert N. Anthony (Cambridge, MA. Harvard
Business School, Division of Research, 196S).
ANTHONY H. RAmYis administrator ofbenchmarks
and strategic planning for the City ofGreshamand a
member ofGFOA's Committee on Governmental
Budgetingand Management. Heformerly served as
budget and benchmarks director for the City of
Gresham, planning and budget director for the Seattle
Municipal Court in Washington, andregional informa-
tion resources managerofthe SmallBusiness Adminis-
tration Seattle Regional once. He can be contacted by
telephone (5031618-2362) ore-mail
(rainey®ci.gresham.orus).
FEBRUARY 1997 9 GovERNmENT RNANa REviEw 9 .