It is part of our human nature to compare ourselves to others. In business this practice is known as benchmarking. A good criterion of an effective benchmark project is that it provides objective data to answer specific questions about a company’s performance relative to others in their industry. It is important to have a clear outcome and purpose in order to get good data. Here are some guidelines to help you achieve the best results:
- Benchmarking is a means to an end – it is not an end to itself. Quite often, managers and executives want to use the data to prove a point. Benchmarks are nothing more than a measurement. Like most measurements we need to do something with the information. Often times the benchmark results raise new questions, usually about strategy or operations that must be answered and acted upon. Have a clear objective of what you are measuring and even clearer about what you are prepared to do once you review the results.
- Improvement not validation – Don’t go into benchmarking with false expectations. The results will do far more than validate how you are doing; it will provide insight on where you can improve. Rarely does a company engage in a benchmark study only to learn that everything is fine and dandy with the current status quo. Don’t for a moment think that there is nothing new to learn either. I’ve worked with many companies who commissioned benchmark studies to validate the need to make a change in one area only to learn that the perceived issue was only a symptom associated with a different problem.
- Scratch below the surface – Thoroughness is the name of the game when it comes to benchmarking. Often times the answers are hidden well below the surface. It is the job of the benchmark analyst to be an agent of change. This requires that they dig deep and go wide. Performance in one area may be directly related to a performance in another. There are a number of factors that impact performance. Quite often these factors are the root cause of the problem and/or a function of the underlying systems and processes being measured.
- Look for relationships – You must understand relationships in the data if you are going to interpret it correctly. You also need to be good at spotting patterns. The goal of benchmarking is to get to the root cause of the problem and identify where improvements need to be made. Quite often only one or two corrective actions are needed to make significant performance improvements in multiple areas. This is only possible if you can effectively observe patterns and relationships in data.
- Seek advice of an expert – Let’s face it benchmarking can be a complex task. Work with someone who has been there before. Find someone who understands your business and the industry you are in. More importantly, make sure you find someone who understands what’s possible within the realm of reason so that you can innovate. Ideally, you’ll want to compare you company not only to direct competitors in your market but to best practice companies in any industry or market place with similar characteristics. After all, your customers will do this. Why shouldn’t you? It is likely you will want to hire or retain an experienced industry expert to help you with this analysis.
- The answers are within you – There are times when there will be anomalies in your data and sometimes these anomalies contain tons of answers to why things are the way they are. The only person who can explain this is you. Also, one thing for certain is that even the greatest expert in the world can’t make decisions for you. Only you can do this. You’ve completed your benchmarking efforts now it is time to make real change. Whether you use a consultant to help you make this change is up to you. It is all about being resourceful and we all have this capacity within us.
Takeaways – Benchmarking is a strategic endeavor that must be part of every executive’s tool kit. As the old adage goes, that which gets measured gets improved. This is the primary objective of any benchmarking effort. The ability to effectively analyze patters and relationships in data is critical since root cause of performance is often systemic or procedural in nature. The experience and perspective of an objective third party advisor can ensure quality results and an efficient process. While experts can’t make decisions for your company, they can serve as a valuable guide in helping you find answers.