Diving Into the Best P2P Benchmark in the World

Every 2 years The Hackett Group refreshes its procure-to-pay (P2P) benchmarking database by running its P2P performance study. It may be called a “study,” but it is a true deep-dive benchmark that is better than any other P2P study in the market, and for the money, I think it’s without question the best one in the world. If anyone wants to discuss or debate this and compare it to another study, I’d be happy to (but I can’t share anything that is not publicly available, of course).

So, why is it the best? First of all, it’s absolutely free, other than the time to collect the data (which is not trivial – as I’ll discuss later). If value equals utility divided by cost, and the cost is basically zero, the value is pretty damn high! But what utility is derived? Read on…

Study Comprehensiveness

The study provides a balanced scorecard of effectiveness and efficiency of the P2P process. Effectiveness metrics include process quality related metrics (e.g., First Pass Match Rate and On Time Payment Rate), spend-related metrics (e.g., Compliance to Preferred Suppliers; Level of Spend Visibility), requisitioner-focused metrics (e.g., Guided Buying Effectiveness) and others. Efficiency-related metrics are the Hackett core competency where it uses a series of methods to help ensure an accurate and normalized assessment of true activity-based costs at granular process levels that are then ascribed to the transactions and spend (to associated suppliers) that flow through those processes. Cycle times are also measured.

Benchmarked companies that are top quartile in both the effectiveness and efficiency composite metrics are then deemed “top performers.” (It’s basically the same methodology as used in giving the “world class” designation at the overall procurement functional level). This designation is then used to highlight the differences between the 2 groups – not only in the KPIs, but also in the practices.

The Study is Actionable

The Hackett P2P benchmark also measures the level of adoption of practices in areas like organization (e.g., centralization, end-to-end process alignment), process (e.g., segmented buy-pay channel strategies) and technology (level of automation). Sometimes there’s a big difference in the top performers versus peer groups – and sometimes not so much. Of course, no process transformation is a cookbook, but knowing the general good ingredients to use is helpful to most.

The Study is Validated, Somewhat

The P2P benchmark study has a formal process to it, including how to gather the fairly voluminous amount of data, as well as how to interpret and analyze the information. Data collection guides spell the whole thing out, and the collection does take time (note that some of this information includes fully-loaded wage rates for the staff performing the various processes, so senior-level sponsorship is very helpful to push through). The full version of the study will usually take 8-20 hours to collect the data (the shorter version takes about 4-12 hours). Hackett then performs some basic data validation to ensure that the data is in fact collected the right way and is accurate enough to be allowed into the database. The validation is by no means perfect, but it’s better then the stuff that most studies allow in.

The Study is Modular, Personalized and Comes in 2 Versions

The study, and its “value-grid” methodology is calculated at the P2P level, but since most of the data is collected at lower process levels in both transactional purchasing and in accounts payable, the data is also presented at both the transactional purchasing level and the A/P level (including travel cards) so that the individual groups can see the performance metrics and metrics that they’re most interested in.

The long version of the study has more than 120 questions, and the short version has slightly less than 50 – mostly due to the depth of the practices assessed, but everyone gets placed on the value grid and even receives a personalized version of their study (i.e., company data vs. top performer and non-top-performing peers). A webcast presentation of the study results to the participants is the final cherry on top.

Anyway, you get the idea here – this study holds a ridiculously good value. It’s basically like a free consulting diagnostic. But, if you want to participate, you better do it soon, because the study closes on June 26. The study registration link can be found on the Hackett website here.

What’s the Catch?

Well, basically, Hackett needs to keep its data refreshed and it’s harder to do that (and charge for that) when companies are being surveyed to death. So, it’s had to basically lower its price to zero. In return, participants are educated on the superior Hackett approach and might choose Hackett to help them in downstream consulting work (Hackett is a publicly traded consulting company and has shareholders to serve).

If you want to get more details on Hackett’s overall benchmarking approach versus other providers, please see this analysis or our broader “Benchmarking the Benchmarkers” series (click here for the Hackett analysis), or feel free to reach out me.

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