Benchmarking, the activity of comparing your organisation’s processes and performance against industry norms and best practices, is a critical concept for all leaders in organisations. It has a role to play in strategic planning, innovation, continuous improvement and performance management. Benchmarking can happen informally- the best leaders are even always on the look-out for new ways of doing things- but it also should be formalised and structured, so that it is not seen as something to be done occasionally but instead is a key process within the organisation.
Effective benchmarking can deliver significant benefits for an organisation, both in enhancing the skills of individuals and in allowing a more accurate assessment of how the organisation is performing than can otherwise be achieved through internal measurement and analysis alone. It can also help to confirm that an organisation is achieving excellence.
There are two main types of benchmarking:
- Benchmarking results: When an organization benchmarks its key performance results against peers and world class businesses, those results begin to have more relevance. Improvements seen in sales, reductions in costs or positive results in areas such as customer and employee satisfaction take on new meaning when benchmarked; they are shown either to be at the leading edge or lagging behind the norm. As a leader, this provides you with essential information in terms of planning for better results in the future. However, when benchmarking results, ensure you do so on true like-for-like comparisons.
- Benchmarking processes: Benchmarking also can deliver a positive contribution to improved performance by comparing how you manage a particular process against how that process is managed in other companies, particularly those deemed to excel in that particular area. However, benchmarking your processes is more than a ‘site visit to have a look around’ and should be structured to deliver tangible end-results. In addition, team-based a benchmarking are more effective, as they allow for clearer identification of the purpose of the benchmarking activity and greater sharing of learning as a result.
A team established to benchmark a particular process should consider the following:
- What aspect of the process is to be benchmarked? It is difficult to benchmark an entire process at one time; it is better for the team to identify specific activities within that process (usually, those that are underperforming) to be benchmarked. Specifically, the team must clarify what problems or issues they expect to get insights into by benchmarking.
- Which organisation to choose to benchmark against? For the exercise to have any real value, you should benchmark against an organisation that performs well in the particular areas under consideration- better still if you can benchmark against the leader(s) in that field. Once the company is selected, make contact to see whether they are willing to share their knowledge and, if so, to arrange the logistics of the benchmarking visit.
- How to structure the visit? To get the most out of the visit, there should be a clear agenda prepared in agreement with the benchmarking partner; the team should have their specific questions and be clear on what they want to see in practice.
- What to do with the information gained from the visit? Many organisations fall into the trap of trying to copy best practices they see in other operations. This rarely is effective because to do so ignores the culture and context that helped to generate the excellent results seen. Therefore, as the old saying goes, it is better to adapt, not adopt, and the team should explore how the principles learned can be applied in your organisation.
For all key processes in an organization, key performance measures should track how effective a particular process is. And, when improvements are made as a result of benchmarking, the impact of those changes should be reflected in the relevant measures over time.
