What if you want to improve the performance of your business or public service? You could study it carefully and hope to find inefficiencies and novel approaches. But maybe you could compare your practices to those of another organisation. That’s the essence of Benchmarking.
The idea of benchmarking is to compare yourself with others, to get new ideas from them, and to learn from what works for them. It’s a powerful idea that allowed Japanese manufacturing to catch up with and overtake the US. And then it helped the US regain lost ground, by codifying what the Japanese had learned, and the improvements they had made.
But it’s not universally loved. There are problems. That said, benchmarking is a big idea that every manager should be aware of.
Why do we need Benchmarking?
Arguably, we don’t. Plenty of organisations get by just fine without it. And many are the industry leaders that benchmarkers would love to emulate.
So, why should we be interested? Because those very industry leaders have something to teach us. If we can figure out what they do that makes the difference, then perhaps we can emulate it. This is a corporate-level example of modelling, which we saw when we looked at NLP.
What is Benchmarking?
A benchmark is a point of reference against which you can make measurements. The origin is a mark inscribed onto stone, that allows surveyors to install a level, or bench, for making their measurements.
In the modern business sense, benchmarking is finding and gathering references for comparison with aspects of your own operations.
By finding best practices, you can compare them with your own, to test the level of your performance. And then you can learn from the difference, so you can design and make improvements to the way you do things.
The Origin of Industry Benchmarking
Copying from your competitors goes back to the dawn of commerce. But most authors track formal industry benchmarking back to the work of Dr Robert Camp at Xerox. He developed a 10-step process that helped Xerox recover from a major slump in its competitive performance in the late 1970s. Camp documented his work in the now-classic best-seller, ‘Benchmarking: The Search for Industry Best Practices that Lead to Superior Performance’ (US|UK).
There are three forms of benchmarking that we can readily identify.
Do you chat to people from other organisations – whether in your sector or another? And do you sometimes take ideas back and try them out?
If you answered yes to those, then guess what? You’ve done benchmarking.
There are plenty of sources of information on the web, among your peer group, and from experts and consultants. Accessing any of these is a chance to informally benchmark your own processes, and learn from others how you can improve them.
Formal Performance Benchmarking
Stepping up a gear, you can examine the performance levels of other organisations in a structured way, and compare the results to your own performance.
Some organisations prefer to benchmark the performance of similar competitors, as a way of finding where they under-perform. Others like to look at different types of organisations, to see how they do similar things.
For example, if you are a bus company that wants to improve your rostering and scheduling, you could compare yourself with other bus companies, or maybe get more radical and look at train operators or airlines. But you could also see how freight operators do it, or even supermarkets and call centres.
Formal Best Practice Benchmarking
The most formal approach of all is to find the class leaders in any process you want to improve, and identify their practices. Surely, if one group of companies can convert a higher proportion of inbound calls into a profitable sale than the rest, you can learn from them.
The challenge is to look at everything they do. You may think it’s the software they use, or the scripts, or the training. Perhaps it’s something less obvious like the fact that the best performers give their staff office space with daylight and good quality coffee. Maybe it’s even some ineffable factor like the way the CEO talks to people.
How to do Benchmarking
Every consultancy that offers benchmarking support has its own methodology. As does every large organisation that uses it frequently. So this quick ‘how to’ section will be pretty generic. But it will give you the outline.
- Select a service or process to benchmark
- Set terms of reference
- Define the process and identify the performance metrics to study
- Identify potential partner organisations
- Review the current state
- Identify data sources
- Collect data on performance levels and practices
- Determine the gap
- Analyse the data to establish performance and process differences
- Identify opportunities to improve performance
- Determine the changes that will make a difference
- Set targets for performance improvements
- Implement the changes
- Communicate (in parallel with implementation)
- Review and evaluate your results
- Continuous improvement cycle
What is Your experience of Benchmarking?
We’d love to hear your experiences, ideas, and questions. Please leave them in the comments below.