For those of us old enough, you may recall that according to Sol “oils aint oils”. Well for me benchmarks ain’t benchmarks.
The simplicity and one size fits all approach often used for benchmarking first hit me when as a young GM I had feedback about a planned major capital item in our budget. When viewed as a high level target our planned production level for the proposed new large rope shovel did not compare well to our sister mine down the road. In this case there was a simple explanation as our machine was planned to work a 5-day roster. This easy understanding isn’t always the case.
Image: CASTROL GTX2 Oils Ain’t Oils 1988 commercial. Sol on the right.
To help avoid this one size fits all problem, Enable thinks
of benchmarking as a three level model:
Many benchmarking exercises are developed as either Level 1 or Level 3 benchmarks due to the type of information and time available. The danger is in the application if we allow Level 1 and Level 3 benchmarks to masquerade as Level 2 benchmarks.
Level 3 benchmarks are considered “Inputs”. They are usually the detailed data and what we often think of as the estimators delight. Examples might include headings per jumbo, availability, labour unit costs, ratio of labour hours per tonne of steel installed etc. These provide a useful basis for building up first principal estimates. Level 3 benchmarks are highly useful to support the inputs into our first principles models.
“The danger is in the application if we allow Level 1 and Level 3 benchmarks to masquerade as Level 2 benchmarks.”
We think of Level 1 as the high-level benchmarking of total project outcomes where there is limited information and work to eliminate scope differences. These should be used for establishing a strategic batting order and relative attractiveness. The differences in key drivers of level 2 benchmarks may be why the Level 1 strategic batting order makes Asset A favorable to Asset B.
For meaningful performance and rate metrics, a Level 2 understanding is required to ensure the context and therefore relevance and usefulness is understood. Level 2 understanding requires additional contextual information not just for the physicals such as depth and geography but also organizational context.
To avoid misuse, consideration of the “real scope”, physical attributes and structural issues that impact is required. This requires work to fully define and describe the context for Level 2 benchmarking to ensure like for like comparison.
In the example of my shovel the explanation was readily evident however it may be buried deeper in the physicals, scope or fitness of the project.
FITNESS OF THE PROJECT:
So the next time you are looking at benchmarking data or even drafting a scope for a benchmarking exercise, be like Sol and remember benchmarks ain’t benchmarks.