Benchmarking Might Be Boring…Until It Drives Revenues and Saves Money!
Benchmarking is a widely-used global management process, yet many organizations don’t engage or effectively utilize its benefits.
Simply put, benchmarking is evaluating or checking where your organization fairs by comparison to a standard. Benchmarking your performance against competitor and/or industry standards can help your organization (1) know where you need the most work, and (2) maintain a broad focus versus a myopic one.
Aren’t you just a little bit curious as to how you compare to other organizations in a few meaningful indicators? As a former CEO, I know I was.
To consider if benchmarking is right for your organization at this time; let me answer a few benchmarking questions:
Why aren’t more organizations engaging in benchmarking analysis?
What are the advantages of well-executed benchmarking efforts?
What aspects of an organization can be benchmarked?
Is there a benchmarking process that can be followed?
What are a couple of your personal benchmarking stories?
Why aren’t more organizations engaging in benchmarking analysis?
It takes planning, time and forethought to get the right benchmark data.
In the short term, benchmarking takes you away from solving daily problems.
Without follow-up actions, benchmarking can feel like just checking out what others are doing, possibly leading to reduced internal creativity.
Even with good benchmark data, not all changes are feasible for all organizations.
What are the advantages of well-executed benchmarking efforts?
Increase your quality, performance and cost efficiency.
Heighten your awareness of industry standards and how you compare to those standards.
Strengthen your competitive advantage.
Provide input for vital continuous process improvement.
What aspects of an organization can be benchmarked?
Internal benchmarking – Compare organizational aspects among departments, offices and geographies.
External benchmarking – Compare among peer organizations or associations.
Performance benchmarking – Compare aspects like employee turnover, financial performance (revenue, profit, collection rates, project errors & omissions percentage), client satisfaction, lead to customer conversion success rates, etc.
Best Practice benchmarking – Compare aspects like best employer and quality control practices.
Process benchmarking – compare aspects like diversity/equity/inclusion policies, employee review & feedback processes, etc.
Is there a benchmarking process that can be followed?
The six steps to benchmarking are relatively straight forward, yet the actual work takes some effort. You’ll likely want to establish a benchmarking committee with someone to champion the effort. And like most effective projects, you’ll want to set goals and a time frame at the start.
6 Steps to Benchmarking
1. Decide what to benchmark and why
Some examples of what you can benchmark can be found above, but the best way to establish what you’ll benchmark is to probe into areas of strengths, weaknesses, opportunities and threats.
2. Determine how to obtain the data
You need to decide who will collect the data and how. Will you conduct primary research from calling peers? Will you rely on secondary research compiled by industry organizations?
For my A/E/C clients, you may consider PSMJ, McGraw/Hill, AIAIL, Zweig White. For my Park & Recreation clients, you may consider NRPA, IAPD and IPRA. Certainly, the compiled research requires less time and effort, but it also offers less flexibility and benchmark detail.
3. Collect the data
If you are conducting primary research, you’ll need to decide if you want to use an electronic survey, one-on-one calls/meetings, focus groups, or internet research tools. If you are conducting secondary research, you’ll need to determine which organizations provide what type of data, and purchase reports or booklets.
4. Examine the data
How you review the data should consider your capacity to review the data. You don’t want to collect so much as to become overwhelmed, but you want enough that it feels representative of your industry. While facts are facts, facts interpreted under the wrong light or condition can lead you to make the wrong decision. Always employ your brain and your gut while examining data to decide if what you see makes sense to you.
5. Recommend what to change at your organization
A well-rounded benchmarking committee and clearly established goals for the benchmark project will help you focus on a more beneficial series of recommendations tailored to your organization. Keep in mind what you wanted to resolve and why you conducted the benchmarking exercise in the first place. Don’t let the shiny data deflect you from your original goal.
6. Develop a plan to incorporate the organizational changes
It’s not reasonable to tackle everything at once. While some organizations choose to employ the method easiest to implement first, it’s wise to start with the recommendation with the biggest impact. Break that recommendation down into manageable steps before jumping on the other recommendations.
What are a couple of your personal benchmarking stories?
Here are two of success stories from organizations I have worked in.
Benchmark Financial Performance Exercise – Double Firm Revenues and Quadruple Profits
When I started overseeing contract negotiation, I wanted to know how competitive our fees were and how reasonable our profit margin was. After conducting secondary research, I learned we had a long way to go to match other small, Midwest architectural firms. We identified several areas to change and created processes that allowed us to double our firm revenues and quadruple our profits, finally landing us in the “high performing” range.
Benchmark Best Practice Exercise – “Best Place to Work” Award & Meaningful Careers for Every Team Member
During one of the recessions, an industry organization started a “Best Place to Work” award. While we always had a desire to be a good employer, our benchmarking committee was challenged with understanding the best practices of winning firms for this award. Not only did our firm eventually place in the small firm category, but by understanding the parameters being measured in our industry, we established revised compensation/benefit packages, career advancement processes, and employ-driven suggestions. This allowed us to meet our initial benchmarking objective of being a best place to work and create meaningful careers for every team member.
If you would like to consider a benchmarking exercise, feel free to give me a call to discuss where to start, how I can assist you with the information gathering and/or implementing some of the agreed organizational changes based on the data.
Let’s all take a cue from one of my process improvement and leadership role models--Ask some questions about how your organization can improve, then consider gathering benchmarking data. And remember, “The ultimate purpose of collecting the data is to provide a basis for action or a recommendation.” – W. Edwards Deming
After multiple years of writing monthly blogs, I’m taking a pause in 2021. You will find my 45 most popular blogs in the Resources section of my newly relaunched website. I will still be adding new Resources on a regular basis, just not monthly. Expect to see Carol’s 2020 Recommended Reading in the weeks to come.
