How to Benchmark

Benchmarking is a beguiling idea.  You look at how your competitors do things, work out what is the best practice and then implement it.  Benchmarking should create real competitive advantage.

A fabulous concept, what’s not to like?

So how do you benchmark?  As with all things in life, there is an easy way and a hard way…

The easy way:

  • Write a cheque and join an industry wide body
  • Sign up for their benchmarking programme
  • Ask somebody in your business to collate the information that is asked for
  • Sit back and wait for the report that shows how you perform against your competitors

The hard way:

This involves asking some rather difficult questions:

What should you benchmark?

What is important to you?  Is it the speed that you make deliveries, the impact your customer service agents have on your customers, the way you interact with your regulator?  Focusing on a single business problem that supports your corporate goals might just end up in tangible insights and results

N.B. the easy method looks at everything; you will get data on lots of stuff that you don’t need and not much about the stuff that is really helpful.  At best most of the information is useless and at worst it is distracting

How good are you?

How well do you perform at the thing that is important?  You should go to town and work out how your business currently performs, how it’s processes and systems and customers interact.  Gathering external benchmark information is only really helpful if you know what you are bench marking against.

There is a spin off benefit here, chances are that by doing your homework you will gain lots of ideas for improvement anyway

N.B. the easy method involves asking somebody junior (usually a trainee accountant or somebody in management information) to run around the business compiling numbers that they don’t really understand and that people haven’t the time or inclination to give them

Who should you benchmark against?

What would be a suitable benchmark to compare yourself against?  Where would you learn something valuable?

It might be internal (factory A against factory B), the data should be readily available, and there aren’t (or at least shouldn’t be) any competitive issues.

Alternatively the benchmark might be outside your industry.  BAA (British Airports Authority) teamed up with Wembley Stadium on the grounds that both of them could learn about mass arrivals and departures of customers.

Once you have found a benchmarking partner, work out what they do and how they do it.  What you can learn from one another?

N.B. the easy method benchmarks you against your competitors.  These people have precisely no incentive to show you their best and worst bits.  Let’s be honest, how much time did you put into filling in the survey correctly for them?

What did you learn?

What were the key insights?  What are you going to do differently?

If your benchmarking exercise went well you will have got some data, maybe complaints per customer or deliveries per hour.  But the data is out of context, so isn’t really very helpful, you are comparing apples with pears (or wheelbarrows).

The real insights come from the way in which your benchmarking partner operates.  Can you act on those insights?  Can you put in place tangible changes to the way your business works by implementing the clever method of crowd control / order taking / scheduling maintenance?

N.B. the easy method invariably results in the circulating of a very heavy report with a host of unintelligible graphs and the implementation of some targets (without any insight on how to improve performance, which was the whole point in the first place)

Death to the easy way

I have stabbed the easy method 4 times in the back.  I hope it is dying in your mind.  But just in case it is still live and kicking, consider this:

If the easy method worked, then all of your competitors would share their good stuff with you and you with them.  Then you would all busily implement best practice.  The outcome?  You would all look exactly the same and nobody would have any competitive advantage at all.

Is it dead yet?

If everybody looked the same, we’d get tired of looking at each other ~ Groove Armada

Read another opinion

Image by quinn.anya

Comments

  1. James,

    Very good material here.

    Energy assessments of commercial and industrial buildings so commonly “involve asking somebody junior…to run around the business compiling numbers that they don’t really understand and that people haven’t the time or inclination to give them.” It’s not wonder the assessment’s value is often questionable, to the point that many buildings see no value in them and therefore take no action.

    Is it the requirement for confidence and/or self determination, or the willingness to accept and learn from an error that makes the RIGHT way seem hard??

    Best,
    Paul Dragich

  2. James Lawther says:

    Thank you Paul, glad you liked it

    Personally I think it is just laziness. Maybe that is a little controversial

    JL

  3. Bingo! Granted we’re constantly bombarded with so much marketing from so many industries that want us to believe a very common message: “There’s an easier way! You have to find the easier way! We’ll show you how!”

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