Towards national benchmarks for Australian mental health services

1.1 Performance indicators and benchmarking - definition of terms

Page last updated: 2003

There has been increasing interest and activity in developed countries over the last decade in improving the performance of government services in general, and the performance of the health sector in particular. Benchmarking, and the development and use of performance indicators, are some of the methods that have been adopted in this endeavour. This section provides a brief introduction to some of the terms used in recent discussions about this development.

1.1.1 Performance indicators
1.1.2 Benchmarking

1.1.1 Performance indicators

There are a number of definitions of performance indicators. The Australian Council on Healthcare Standards (1999) defines a performance indicator as:

A quantitative measure designed to monitor performance on an ongoing basis. An indicator acts as a 'flag' to alert staff to occurrences or events that warrant further review. Examples of the indicators of performance that can be measured include effectiveness (quality, appropriateness, access or equity) and efficiency (cost per unit of output).
The National Health Performance Committee defines Health Sector Performance Indicators as:

Statistics or other units of information which reflect, directly or indirectly, the performance of the healthcare system or an intervention or series of interventions, in achieving policy objectives including the management or maintenance of the well-being of the target population (adapted from Boyce 1997).
Performance indicators may be used in active or passive processes. In an Australian Council on Healthcare Standards (ACHS)-type model, the values of indicators are set by an external agency, generally in cooperation with expert groups, and drawing on performance data from a wide range of similar organisations. Individual organisations monitor their own performance against these indicators and undertake investigative action, and corrective action if necessary, if their performance is worse than the indicator values.

Performance indicators may be used within a benchmarking process. Organisations collaborate to identify the organisation(s) which perform best in agreed activities. The methods used to achieve this peak performance becomes the model of 'best practice' and the level of performance achieved becomes the benchmark against which the performance of other organisations are compared. The task being benchmarked may have a number of dimensions which contribute to overall performance (quality, cost, timeliness etc) and performance indicators may be derived for each of these dimensions of performance (see next section).

Performance monitoring – whereby organisations supply a range of primary data, or calculated performance indicators – to an external agency which produces a set of 'league tables' can also contribute to improving performance. However, knowing where it stands in a league table does not help an organisation know what it needs to do to improve its performance. If the league tables are constructed from primary data by the external agency, organisations being compared may take little notice of the process and may regard the supply of data as just another chore. Top of page

1.1.2 Benchmarking

Benchmarking is concerned with 'finding and implementing best practice' (Bullivant, 1994).

Benchmarking is:

the ongoing, systematic process to search for and introduce international best practice into an organisation (Australian Manufacturing Council, 1994).
A benchmark is used as a 'reference point in surveying' or a 'criterion by which to measure something' (Collins Dictionary).

So benchmarking is the process of establishing 'best practice' and a benchmark is a standard of performance derived from that process.

The current uses of the terms 'benchmarking' and 'benchmarks' are attributed to the development by the Xerox Corporation in 1982 of a process to assist it improve aspects of its performance and hence its competitive position in the market place. However its origins can be traced back to the 1950s, and most of the activities used in benchmarking have been employed in processes such as quality assurance, total quality management, continuous quality improvement and quality circles for much longer (Bullivant, 1994, p9-10). Current benchmarking activities focus on customer or client needs, making comparisons with the 'best in the class', collaboration with similar organisations, and concerns about changing organisational culture. This customer or client focus differentiates it from most of the earlier approaches.

Benchmarking may take place by comparing performance of individual units within a single organisation – internal benchmarking. It may be undertaken by groups of independent organisations with a common interest in a particular industry (motor vehicle manufacture, provision of hospital services) – competitive benchmarking. Benchmarking can also be undertaken with partners coming from different industries but who have an interest in a particular process (eg booking lists – airline bookings, hospital waiting lists) – generic benchmarking. Benchmarking partners generally identify a specific process or aspect of performance on which they agree to collaborate, although, as discussed later, some benchmarking activities seek to benchmark organisations as a whole.

The detailed activities usually performed in benchmarking are described in The Benchmarking Process.

Box 1: The Benchmarking Process

Benchmarking comprises five basic phases:
  1. Preparation, in which the following are determined:
    • what to benchmark; and
    • who or what to benchmark against.
  2. Comparisons, which may include the following activities:
    • data collection;
    • data manipulation, construction of indicators, etc; and
    • comparison of results with benchmarking partners.
  3. Investigation, that is, identification of practices and processes that result in superior performance.
  4. Implementation, in which best practices are adapted and/or adopted.
  5. Evaluation, where new practices are monitored to ensure continuous improvement and, if necessary the whole cycle is repeated.

Source: Australian Manufacturing Council (1994) First National Report on Health Sector Performance Indicators, p65.