How Does YOUR Service Desk Stack Up Part 3

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					                       How Does YOUR Service Desk Stack Up?


                     Part 3: Benchmarking Peer Group Selection

                How to Ensure a Fair, Apples-to-Apples Comparison of
                       Your Service Desk Benchmarking Data
                (Part 3 of a 6-part Series on Service Desk Benchmarking)


                           By Jeff Rumburg and Eric Zbikowski
                                  Managing Partners at:




Introduction
The first question we often hear from Service Desk that wants to join a MetricNet
benchmarking consortium is “How many companies do you have in your database from
my industry?” An equally common question is “Do you have companies ABC, and XYZ
in your database?” Both of these questions assume that a valid Service Desk
benchmark must include only companies from your specific industry. Sometimes this
assumption is accurate, but oftentimes it is not. The fact is, there are many other factors
besides industry affiliation that are more important – sometimes far more important –
when selecting a peer group for benchmarking comparison.
Service Desks can improve their overall performance based on internal benchmarks
alone, but will eventually experience diminishing returns in their improvement efforts
unless they look outside their own organizations. It is in comparing themselves to peers
that they can put their results into context, and begin to experience “breakthrough”
improvements. For example, a Service Desk may take pride in reducing its cost per call
by 10%, but not realize that their peers are still 30% lower in cost!. Your Service Desk
performance is therefore best examined in light of comparisons to appropriate peer
groups. This begs the question of what is an appropriate peer group…one that ensures
a fair, apples-to-apples comparison of your Service Desk?
From 30 plus years of benchmarking experience and more than 1,000 Service Desk
benchmarks, MetricNet has developed a proprietary technique called Dynamic Peer
Group SelectionTM that ensures a fair and accurate benchmark of your Service Desk.
Here, for the first time, MetricNet explains the process, and provides an approach for
selecting a valid peer group for your benchmark.

Reality Check
Let us start by debunking a couple of common myths about benchmarking. This is
important because it sets the stage for how to select your benchmark peer group.
Benchmarking is an inexact science. Because of differences in the way Service Desks
define their metrics, account for their costs, and track their performance, there will
always be some inconsistency in the way Service Desks report benchmarking data. As
an example, one Service Desk may define an abandoned call to be any call that is
dropped at any point after a call hits the ACD. By contrast, another Service Desk will
define an abandoned call to be any call that is abandoned only after a caller has waited
on the line for at least 20 seconds before abandoning. Clearly, these different definitions
will yield different results for call abandonment rate, even if the two Service Desks have
exactly the same number of abandoned calls.
These inconsistencies become even more pronounced when looking at costs, and
specifically cost per call, one of the foundation metrics that every Service Desk should
be tracking. Because of differences in the way Service Desks account for their costs –
depreciating vs. expensing an asset, for example – cost metrics can vary dramatically
between Service Desks even when their spending levels are exactly the same.
My point is that any data used for benchmarking is imprecise. That’s right…it lacks
precision! No one else in the industry will admit to this fundamental drawback in
benchmarking, but it is critical to understand this limitation. Too often, those who
engage in benchmarking draw conclusions based upon small performance gaps. This
can lead to serious problems because a Service Desk may take action based on a
perceived performance gap that does not really exist. Despite this, benchmarking is still
an extremely valuable tool. However, it is a blunt instrument, and the lack of precision
has profound implications for how the results or your benchmark are interpreted.
Benchmarking is good for identifying large performance gaps, but is simply ineffective at
identifying small differences in performance between your Service Desk and a peer
group. The implication is that small performance gaps are usually meaningless. These
small performance gaps are “down in the noise”, as they say. As a rule of thumb,
whenever I come across a benchmarking performance gap in the 1% - 5% range, I
ignore it. Benchmarking data is simply not precise enough to guarantee accuracy to
within plus or minus 5%. Performance gaps in the 5% - 10% range, however, may be
meaningful. But at this level I look for corroborating evidence from other metrics before I
assume that a real performance gap has been uncovered. It is only when the
performance gap is 10% or greater that I can conclude with confidence that a real
performance gap exists. In the jargon of the industry, this is “directional accuracy”. The
results of any benchmark are never precise, but they are directionally accurate, meaning
that you can act on them with confidence when the performance gap is large enough to
outweigh any inconsistencies in the benchmarking data that is reported.
The second myth I would like to address is the notion that you can only benchmark
against other Service Desks that look just like yours. This is pure fallacy. First off, if a
Service Desk looked just like yours, there would be no point benchmarking it because it
would perform just like yours! Secondly, there is no such thing as a Service Desk that
looks just like yours”…it doesn’t exist! There are simply too many differences between
Service Desks to even hope that you will find a peer group of Service Desks that look
just like yours. These differences include the types of transactions handled, the volume
of transactions, geographic location, and a host of other factors.
Both of these points are designed to make a larger point, which is that you have a lot of
latitude and flexibility when it comes to peer group selection. In fact, this is one of the
most creative parts of the benchmarking process. Please rid yourself of the notion that
you can only benchmark against other Service Desks from your industry. As you will
see below, some of the best benchmarking candidates are likely to come from outside of
your industry.
Dynamic Peer Group Selection
Dynamic Peer Group Selection (DPGS) TM is a clearly defined process of selecting
companies for benchmarking that ensures a fair and valid comparison of data from one
Service Desk to the next.
The DPGSTM process assumes that the benchmarking data you are compared to is
timely and accurate, and that there is a common methodology to collect the data.
There should also be a set of measurements, or KPI’s, agreed upon for the
benchmarking comparison.
DPGSTM is built upon a number of criteria that should be considered when selecting a
peer group for any benchmark. These criteria include:
       Willingness to benchmark
       Transaction types
       Scale (i.e. volume of transactions handled)
       Industry
       Geography
These are among the most important criteria to consider in peer group selection, but this
is by no means an exhaustive list. Additionally, even taking these factors into
consideration, the benchmarking performance comparisons by themselves may be
invalid unless other adjustments are made to the data. As I discuss each of the major
criteria that make up the DPGSTM methodology, I will also explain how performance
differences due to these factors can be normalized out of any benchmarking
comparison.
Let’s take a closer look at each component of DPGSTM.

Willingness to Benchmark
Contrary to what some may believe, benchmarking is not a cloak-and-dagger exercise
that is performed surreptitiously, without the knowledge of the Service Desks being
benchmarked. Although it may be possible using competitive analysis techniques to
learn some things about a Service Desk without their participation, true quantitative
benchmarking requires the active participation of every Service Desk in the peer group.
Some companies fear that such active participation in benchmarking may publicly reveal
information about their performance that they would rather keep private. In this case, it
is important to implement measures to ensure the privacy of their data. When
participating in any benchmark, you should make sure that your benchmarking
consultant or facilitator takes precautions to protect the identity and security of your
confidential data, just as MetricNet does in its syndicated benchmarks.
At MetricNet, we believe that willingness to benchmark is the single most important
factor in selecting Service Desks for your benchmarking peer group. Service Desks that
are actively and enthusiastically engaged in the benchmarking process are far better
candidates for benchmarking than those who only grudgingly share their data, or who
otherwise don’t invest the time necessary to provide valid data for their benchmark.
Although such a willingness to share data is no panacea, it is a prerequisite to
successful benchmarking. That, in addition to committing to metrics; putting the
benchmarking infrastructure in place; consistently collecting accurate and complete data;
and rigorously analyzing the performance gaps.
This first component of DPGSTM may seem obvious, but it is surprising how often this bit
if wisdom is ignored. So above all, you should seek out Service Desks for your peer
group that are willing to share their data on an open and candid basis.


Transaction Types
It should be immediately obvious that you would never benchmark a password reset
Service Desk against an enterprise applications support Service Desk, or a desktop
shrink wrap support Service Desk against an SAP Service Desk. The transaction types
are simply too different to obtain a valid benchmarking comparison. The handle times
will be different, the nature and complexity of the calls will be different, the agent skill
sets will be different, and the performance metrics will be different.
So the second criteria in DPGSTM, therefore, is to ensure that the Service Desks you
benchmark against are handling similar transaction types. The peer group doesn’t
necessarily have to have the same transaction volumes, but the types of transactions
handled should be very similar. If your Service Desk handles password resets and MS
Office support, then the Service Desks you benchmark against should do the same
thing.
But keep in mind that handling the same types of transactions does not necessarily
ensure a fair benchmarking comparison. You must also take into account the relative
volumes of each transaction. As Figure 1 below illustrates, different Service Desks can
handle the same types of transactions, but if the percentage of each transaction type is
different, the aggregate handle times will also be different even if the handle time for
each transaction type is the same. Since call handle time is the single biggest driver of
labor, and hence cost, these Service Desks may appear to have differences in their cost
per call, when in fact it is the percentage of each transaction type that is driving the cost
differences shown. Fortunately these differences are easily normalized by making
adjustments for the unique mix of calls in your call profile.




Scale
Virtually everything in the Service Desk is subject to scale economies. This is
particularly true when it comes to the volume of contacts handled. The approximate
scale effect for volume is 7%. What this means is that every time the number of
transactions doubles, you should expect to see the cost per contact decline by 7%. So,
for a Service Desk that handles 10,000 transactions per month at a cost of $20 per
contact, you could expect to see the cost per contact drop by 7%, to $18.60 per
transaction, if the volume doubled to 20,000 transactions per month. Likewise, if the
volume doubled yet again, to 40,000 transactions per month, the cost per contact would
decline by another 7%, from $18.60 to $17.30 per transaction. This is one of the major
drivers of the trend towards consolidation that we see in the industry. Larger Service
Desks are simply more efficient than smaller Service Desks due to this scale effect. This
trend is illustrated in Figure 2 below, which shows the effect of scale for more than 100
different Service Desks.




When selecting a peer group for benchmarking comparison, you should strive to identify
peers that are similar to yours in the number of transactions handled. Additionally, you
should make adjustments for any differences in scale between your Service Desk and
the peers by adjusting your cost per contact using the 7% rule mentioned above.


Industry
Benchmarking solely within your own industry and against direct competitors may be
appropriate during the early stages of benchmarking, when the competitive “gap”
between your organization and the best in your industry is the widest. But as your
organization’s performance improves, the gap will narrow and it will become necessary
to reach for loftier goals. To achieve world-class performance, superior practices from
non-competitors must be adopted. This requires that you benchmark against out-of-
industry companies.
Having Service Desks from your particular industry is the least important factor in
DPGSTM. It is not uncommon to see multiple industries represented in a Service Desk
benchmark. In fact, it is encouraged! As you will see below, you often gain more insight
by benchmarking against Service Desks from outside of your industry. Nevertheless,
Service Desks from a particular industry, whether from utilities, financial services, retail,
or any other industry, do share certain common characteristics. So it is worth
considering these in-industry Service Desks for your peer group. But once again,
industry considerations should take a back seat to other factors such as scale and
transaction type when selecting your peer comparison group.
The more important point when it comes to selecting benchmarking peers from a
particular industry is the potential to gain “breakthrough insights” by benchmarking
against Service Desks from outside of your industry. Federal Express beat the
competition in the early 1990’s by developing the most advanced package tracking
system in the express delivery business. They were the first in their industry to use bar
coding and computerized package tracking, and other competitors soon followed suit.
But they did not adopt this technology from another express company. Rather, the bar
code technology was originally “borrowed” from the grocery store industry, and
computerized package tracking was “borrowed” from a government logistics operation.
Benchmarking companies outside of the express package industry gave Federal
Express a decided lead in their industry at the time. It helped them achieve the highest
profitability of any player in the industry, and forced the competition to play catch up.
The same is true of Service Desks. MetricNet has seen literally hundreds of examples
of Service Desks that have gained a competitive advantage by adopting ideas,
processes, and technologies from outside the industry. As you can see in Figure 3
below, Service Desks handling exactly the same types of transactions are simply more
efficient in some industries than in others. When selecting your benchmarking peer
group you should you should always consider candidates from outside your industry
because they often provide the greatest insights for Service Desk improvement.
The cardinal rule when selecting benchmarking candidates is to maximize the amount of
learning you take away from the process. Selecting companies in the same industry that
tell the same story will often yield fewer insights than benchmarking against diverse
organizations, each of whom takes an innovative and unique approach to providing end-
user support.




Geography
The main factor that is affected by geography is cost; specifically labor cost. Since labor
accounts for 65% of service desk operating expense, it is important to normalize North
American Service Desks, for example, never benchmark against Service Desks from
India or other low-cost regions of the world because the labor cost differential is simply
too great. Even within the United States and Canada, starting salaries can vary by as
much as 50% depending upon where the Service Desk is located.
Cost differences due to geographic disparities can be normalized or “factored out” when
doing your benchmark. The basic approach is to look at the cost of living index for a
particular region, and adjust the labor costs accordingly. These cost of living indexes
are published by a variety of services, but the one used most frequently by MetricNet is
produced by the American Chamber of Commerce Association. Figure 4 below shows
the cost per contact for various bank Service Desks in different regions of North
America. You can see that the cost per contact when unadjusted for cost of living
differences is quite substantial. However, once the cost of living differences are factored
into each Service Desk’s costs, the range of values for cost per contact is not nearly so
great. In fact, one Service Desk in New York that initially appeared to be high cost, was
actually lower cost than the average of the peer group after adjusting for cost of living
differences.




These types of normalizations or “adjustments” for things like scale and geography are
critically important when doing benchmarking. Without them, the reported performance
gaps are simply not valid. Worse, Service Desks that do not make these adjustments to
their benchmarking data run the risk of taking action based on “false” performance gaps.


The Law of Large Numbers
One of the perennial problems in benchmarking is finding a peer group large enough to
produce a meaningful benchmark. As a veteran of several consultancies, I am
convinced that the vast majority of Service Desk benchmarks do not have nearly enough
data points to draw any valid conclusions.
Obviously the more companies you have in your benchmarking peer group, the better.
The validity of benchmarking data increases geometrically as the peer group grows in
size. With fewer than five companies in a peer group, a benchmark is simply invalid;
there is not enough data in such a small peer group to draw any meaningful conclusions.
With a peer group of five to ten, the data becomes more meaningful, but is reliable only
for diagnosing large performance gaps. With a peer group of 10 or more, the
benchmarking data begins to gain some statistical validity. Among other things, with a
peer group this size you have an error canceling effect, whereby data errors on the plus
side tend to be cancelled out by data errors on the negative side.
Although benchmarking syndicates – large groups of Service Desks that join together for
the purpose of benchmarking – are relatively new, MetricNet favors this type of
benchmarking consortia because they guarantee a larger peer group than the “one off”
benchmarks that are so common in the industry. Participating in a benchmarking
consortium, in turn, greatly improves the statistical validity of your benchmarking results.
Whenever possible, your Service Desk benchmark should be done as part of a
benchmarking syndicate or consortium. This will ensure that your benchmarking peer
group is large enough to produce meaningful results.
Conclusion
When it comes to benchmarking peer group selection, there are no hard and fast rules.
Nevertheless, there are some guidelines that will dramatically improve the value of your
benchmark, and the validity of your benchmarking results. Specifically, you should look
first for a willingness to benchmark on the part of other Service Desks. This is the single
most important factor in selecting peers for your benchmark. Secondly, make sure that
your benchmarking peer group handles similar transaction types as your Service Desk.
If the types of transactions handled by the peer group is different than those handled by
your Service Desk, the benchmarking comparison will be invalid. Thirdly, recognize that
scale has a significant impact on your costs. When benchmarking against Service
Desks with different transactions volumes, you can make adjustments for scale based
on the 7% rule explained in this article. Fourth, don’t get hung up on the idea of
benchmarking only against other Service Desks from your industry. Some of the most
valuable benchmarking insights are gained by looking at Service Desks from outside of
your industry. And finally, keep in mind that the geographic location of a Service Desk
will have an impact on labor costs, and hence the cost per contact. These labor cost
differences can be normalized as explained in this article.
Finally, you should include as many Service Desks in your benchmarking peer group as
possible. The larger the peer group of valid benchmarking candidates, the more
statistical validity you will have in your benchmark. Participation in large scale
benchmarking syndicates of the sort sponsored by MetricNet is the best way to ensure a
robust peer group for your benchmark.
Due to space limitations, this article barely begins to scratch the surface on the topic of
benchmarking peer group selection. In subsequent articles, MetricNet will continue its
series on Successful Benchmarking for the Service Desk, with articles on:
       The Benchmarking Performance Gap: Diagnosing the Causal Factors Behind
       Your Service Desk’s Performance Gaps
       The Cost vs. Quality Tradeoff: How Benchmarking Can Help You Achieve the
       Right Balance Between Cost and Quality in Your Service Desk
       The Benchmarking Payoff: How to Build a Hard-Hitting Action Plan From Your
       Service Desk Benchmark
Stay tuned for next month’s article!

About the Authors
The authors of this article, Jeff Rumburg and Eric Zbikowski, are both Managing
Partners at MetricNet, the premier provider of performance metrics, benchmarks,
performance reports, and scorecards for corporations worldwide.




Jeff Rumburg is a co-founder and Managing Partner at MetricNet, LLC. Jeff is
responsible for global strategy, product development, and financial operations for the
company. As a leading expert in benchmarking and re-engineering, Mr. Rumburg
authored a best selling book on benchmarking, and has been retained as a
benchmarking expert by such well-known companies as American Express, EDS, IBM,
and General Motors. He has more than 19 years of industry experience, much of it
focused on service desks, and was the founder of The Help Desk Benchmarking
Consortium.
Prior to co-founding MetricNet, Mr. Rumburg was president and founder of The Verity
Group, an international management consulting firm specializing in help desk and call
center consulting. As president of The Verity Group, Mr. Rumburg launched a number
of syndicated benchmarking services that provided Information Technology benchmarks
to more than 1,000 corporations worldwide. These included the Help Desk
Benchmarking Consortium, and the Call Center Benchmarking Consortium.
Mr. Rumburg has also held a number of executive positions at META Group, and
Gartner, Inc. As a vice president at Gartner, Mr. Rumburg led a project team that
reengineered Gartner’s global benchmarking product suite. And as vice president at
META Group, Mr. Rumburg’s career was focused on help desk and call center
consulting.
Mr. Rumburg's education includes an M.B.A. from the Harvard Business School, an M.S.
magna cum laude in Operations Research from Stanford University, and a B.S. magna
cum laude in Mechanical Engineering. He is author of A Hands-On Guide to Competitive
Benchmarking: The Path to Continuous Quality and Productivity Improvement, and has
taught graduate-level engineering and business courses.
Mr. Rumburg’s contact information is as follows:
Jeff Rumburg
Managing Partner
MetricNet, LLC
1431 Mayhurst Blvd
Telephone: 703-992-8160
Facsimile: 703-992-8130
E-mail: jeffr@metricnet.com
Eric Zbikowski is a co-founder and Managing Partner at MetricNet, LLC. Eric oversees
all of worldwide sales, marketing and operations, and assists in the direction of
MetricNet's global enterprise.
Mr. Zbikowski is a knowledgeable leader with nearly 15 years experience in operational
management, customer service and performance benchmarking. Previously, he was The
Director of Operations, Worldwide Sales and Services at MicroStrategy - a leading
enterprise software company. There, he ran worldwide sales operations and assisted in
the execution of an overall sales strategy. Prior to that, he was Director of Sales and
Marketing at The Corporate Executive Board - a global research firm focusing on
corporate strategy for senior executives. Previously, he was a Vice President of
Consulting at META Group - a leading information technology research and advisory
services firm, where he helped create and launch META Group's Call Center Benchmark
for Energy Utilities and fulfilled numerous help desk, call center and customer
satisfaction engagements for Fortune 2000 companies.
Prior to joining META Group, Mr. Zbikowski worked at The Bentley Group, A TSC
Company, where he managed and directed the Information Services Division, focusing
primarily on customer satisfaction, competitive analysis and performance benchmarking.
Mr. Zbikowski also spent 3 1/2 years at Gartner Group, where he was well-published in
performance benchmarking. There, he served as a regular speaker at conference
seminars and co-created/launched a quality-management, customer-satisfaction
benchmarking service used by CIOs of Fortune 500 companies.
Mr. Zbikowski is also extensively involved in the community and is Co-Founder and Vice
Chairman of The Board and Chairman of The Development Committee at The Computer
Corner, a nonprofit community technology center in Washington DC. The Computer
Corner continues to be rated "one of the finest small charities Greater Washington has to
offer" by The Catalogue for Philanthropy. Mr. Zbikowski graduated cum laude in
Economics from The Wharton School at the University of Pennsylvania, with a dual
concentration in entrepreneurial management and marketing.
Mr. Zbikowski’s contact information is as follows:

Eric Zbikowski
Managing Partner
MetricNet, LLC
2328 Champlain St NW Suite #308
Washington, DC 20009
Telephone: (office) 202-758-0128; (cell) 202-321-5760
Facsimile: 202-333-3234
E-mail: ericz@metricnet.com


About MetricNet
MetricNet is the leading source of on-line benchmarks, scorecards, and performance
metrics for corporate managers worldwide. MetricNet benchmarks encompass virtually
every industry and government sector, and address all major business areas including
IT, customer service, and technical support.
Our mission is to provide our clients with the benchmarks they need to run their
businesses more effectively. MetricNet is committed to making the benchmarking
process quick and easy for its customers. We have pioneered a number of innovative
techniques to ensure that our clients receive fast, accurate benchmarks, with a minimum
of time and effort.

MetricNet offers a number of competitive differentiators vs. other industry consulting
firms. These include:

   •   Credibility and Experience – The principals of MetricNet have collectively
       completed more than 1,300 benchmarks since 1988. Each of them has
       extensively researched, written, and published on the topic of Service Desk
       Benchmarking. Prior to joining MetricNet, the founders of the company held
       senior management positions at a number of companies including Gartner,
       META Group, MicroStrategy, the Stanford Research Institute, and the Verity
       Group.
   •   Benchmarking Database – MetricNet’s Service Desk Benchmarking database
       is the most comprehensive in the industry. The database contains information on
       more than 40 Key Performance Indicators (KPI’s), salary data for key service
       desk positions, technology profiles, and more than 70 best practices from
       hundreds of service desks worldwide.
   •   Methodology Expertise – Through decades of Service Desk consulting
       experience, MetricNet has perfected its methodology for Service Desk
       Benchmarking and assessments. MetricNet’s approach to peer group selection,
       data normalization, gap analysis, and action planning yields consistently positive
       results for its service desk clients. One of MetricNet’s co-founders, Jeff Rumburg,
       authored the first ever book on benchmarking in 1989, and MetricNet has
       authored and published numerous articles on the topic of Service Desk
       Benchmarking.
   •   Objectivity – MetricNet’s recommendations are independent and unbiased. We
       have no relationships with hardware manufacturers, software vendors or systems
       integrators, and we do not perform downstream hardware or software
       implementation work. As a result, our clients receive objective recommendations
       that are free from any vendor bias.
MetricNet, LLC serves a global client base from its headquarters in McLean, VA.
MetricNet’s Federal Tax Identification Number is 20-5791285 and its web site address is
www.metricnet.com. The principle location of MetricNet, LLC is:

       1431 Mayhurst Blvd.
       McLean, VA 22102
       Telephone: 703-992-7559
       Facsimile: 703-992-7558
       E-Mail: info@metricnet.com
For More Information
For more information on MetricNet, go to www.metricnet.com, e-mail us at
info@metricnet.com, or call us at 703-992-8160.