We first view Figure 1 starting off at an institutional setting. This is, of course, part of the institutional benchmarking theory, as indicated by the dashed line surrounding the text "Institutional Setting." From the institutional setting and via the institutional benchmarking theory we arrive at our need to preserve support from the stakeholders involved with the organization, which moves us to the econmic benchmarking theory. The economic theory of public sector benchmarking looks at the question "Can benchmarking be viewed as a substitute for market forces?" (p. 338). Because, as the authors point out, the mere existence of market forces implies benchmarkers in and of themselves -- consumers determine quality and performance of organizations by either selecting or not selecting what these organizations offer. When consumers select an organization's product, the organization in question is given implicit positive feedback and is compelled to progress along the lines it already has set out for itself, as well as improve upon these practices to continue being the preferred organization. When consumers do not select an organization's product and instead prefer something else, the organization that is not preferred is compelled to modify its practices in order to be more in accordance with organizations in the same area that are preferred by consumers, otherwise the non-preferred organization risks dissolution. In short, "economic reasoning presupposes that all organizations that are subject to competition will improve performance" (p. 339).

But economic benchmarking theory seeks to provide an alternative to these benchmarking market forces, as often there is no competition in certain areas of the public sector.

So, returning to Figure 1.1, "need to preserve support from stakeholders" is handled by economic benchmarking theory because there is no competition available. Economic benchmarking theory bases its function on three ideas: 1) "benchmarking will improve the average performance of organization," 2) "benchmarking is a stronger incentive to improve performance for poorly performing organizations than...

341).
From the need to preserve support from stakeholders, the figure goes two ways. At the top, via the institutional benchmarking theory, the figure takes us to a decision to engage in a benchmarking project. Because this decision is within the institutional benchmarking theory, we can assume that the decision has been made because the organization's actions are determined by the many different pressures exerted on it. For example, the government, professional groups, interest groups, and the general public all can exert pressure on an organization.

From both the decision to engage in a benchmarking project via the institutional benchmarking theory and the need to preserve support from stakeholders via the economic benchmarking theory, the figure takes us to the decision to use benchmarking information to improve performance. This decision, in turn, leads us to three outcomes, which are all housed under the economic theory of benchmarking. The first outcome is that the average performance and effectiveness of the organization improves. The second outcome is that organizations that are performing sub-par improve more than organizations that are performing in an average manner. The final outcome dicated by Figure 1 is that the differences in performance between organizations becomes smaller.

References

Bowerman, M. And A. Ball. (2000). "Great Expectations: Benchmarking for Best Value." Public

Money and Management, 20, (2), 21 -- 26.

Bruder, K.A. And E.M. Gray. (1994). "Public Sector Benchmarking: A Practical Approach."

Public Management, 76, (9), 9 -- 14.

Camp, R.C. (1989) Benchmarking: The Search for Industry Best Practices that Lead to Superior

Performance. New York, NY: Quality Press.

Helden, G. Jan Van and S. Tillema. (2005). "In Search of a Benchmarking Theory for the Public

Sector." Financial Accountablity & Management, 21, (3), 337-361.

Oliver, C.…