Do you benchmark? Do you use benchmarks? What’s the difference and why should you care?
The answers to these questions depends first on the context: are you a surveyor, a geo-cacher, a technician measuring computer performance … or a leader or change-agent concerned with improving an organization’s performance? This article is aimed at those of you in the last category.
There are many definitions and perceived meanings of benchmarking. This leads to situations where people think they are communicating when they aren’t. Below are definitions that are consistent with benchmarking thought-leaders and associations. Listed first is the original definition since it is the basis for all of the other definitions (and you can use it in a trivia contest someday.)
(1) Chiseled horizontal marks that surveyors made in stone structures, into which an angle-iron could be placed to form a “bench” for a leveling rod, thus ensuring that a leveling rod could be accurately repositioned in the same place in the future.
(2) The standard or reference point against which to establish targets and measure progress.
(This is a nice broad definition and you can imagine how it evolved from the original).
(3) The best level of performance in a particular process, system or activity.
(This meaning evolved after people started dropping superlatives in front of the word “benchmark” such as “best-in-class”. This confuses people who think of a benchmark as a ‘baseline’ measurement. While one can argue that this is more consistent with the original surveyor definition, in the context of organization performance ‘benchmarks’ are generally thought of as the best level of performance and one to strive to meet or surpass).
Benchmark (ing) (verb):
(1) The process of measuring products, services and practices against best-in-class companies and world-class practices.
(This is a useful activity if the data derived is used in target setting, fact-based problem solving and process improvement).
(2) Discover and learn “best” practices from others … QUICKLY!
(This is a powerful technique IF it is followed by steps to rapidly adapt the best practicesas a means of improving performance).
Why should you care?
In today’s world, it goes without saying that organizations need to continually improve performance and adjust to new realities if they are to survive, let alone be successful. Today, the question isn’t should an organization change, but rather how rapidly can it adjust for changes in customer needs, technology and competitive landscapes. No organization has time to “reinvent the wheel”. No one has a monopoly on good ideas; so leverage what others have tried and tested. This is why effective benchmarking and the ability to innovatively adapt best practices is a valuable organizational competency.
Notice that I said ‘adapt’ best practices, rather than ‘adopt’. That is because it is generally better to adapt than copy directly. That is to say, learn best practices and then creatively and opportunistically integrate them into your culture and operations. Two reasons for this:
1. You want to seamlessly incorporate the practice into YOUR unique organization and continue to build on YOUR unique organization and distinct strengths
2. You should set your sights beyond the “current best”. A “me too” mindset leads to mediocrity, not a competitive edge.
(Having said this, there are some non-core processes in your company that aren’t critical to your strategy, however, you want to be as efficient in them as possible. In these situations you may want to just clone valuable practices as long as they are not incongruent with your culture and operations.)
The management consulting firm Bain and Company has been conducting surveys of companies since 1993 to find out what management tools are most commonly used. Benchmarking, which typically is near the top, was #1 in the most recent survey published in 2009. This is not surprising given the importance of both speed and the need to minimize both cost and risk. A practice proven to work somewhere has less risk than learning from trial and error.
Not just the metrics!
As you can see in the definitions, benchmarking is as much about finding best practices as it is about identifying the best performance levels. A story that illustrates the importance of doing both is that of Dick Fosbury. Let me take you back to 1968. (And don’t rub it in if you weren’t born yet). Fosbury, an Olympic athlete, started to shatter old records in the High Jump, the sport where the athlete jumps over a horizontal bar.
Using the situation as an analogy for benchmarking performance, it wouldn’t have done any good for a coach to tell his athletes that they need to start practicing harder, running faster, and getting better lift-off in order to beat Fosbury’s new benchmark. Unlike other performance areas where the practices are not highly visible, it was easy to see there was a new best-practice. Fosbury, who struggled with the traditional “straddle” and “scissors kick” approaches, invented a new technique of running up to the bar in a curve and then flopping over backwards. With his new method, the “Fosbury Flop”, he quite literally “raised the bar”.
Similarly, setting targets for an organization based on best-in-class performance can have negative consequences (e.g. straining resources or demoralizing a work team) if the organization doesn’t adapt the practices, processes, and in some cases the technology that enables the superior performance.
Types of Benchmarking
It is helpful to think about three types of benchmarking as described in “Benchmarking for Best Practices” (by C. Bogan and M. English). The objectives and techniques are different in each.
1. Strategic Benchmarking – Look in and beyond your own industry for winning strategies to build long-term advantage. An example is a sand and gravel company reinventing delivery and billing services by adapting ATM technology.
2. Performance Benchmarking – Assess the relative competitiveness of your products and services, primarily in your own industry. Compare key aspects of performance: cost, speed, customer service, etc. Other areas that can be benchmarked are technology, employee and supplier performance. At a macro level, financial performance should be benchmarked. Performance benchmarking is particularly valuable in target setting for various levels of the organization.
3. Process Benchmarking – Focusing on an important end-to-end process such as “order-to-cash” or “customer concern resolution”, learn from others who have highly effective and efficient processes. Directly tie this into a project to understand and sustainably improve your process. This type of benchmarking has proven to produce the greatest bottom-line results in the relative short term.
A short article can’t come close to providing an adequate “how to” for benchmarking, partly because there are multiple approaches depending on several factors such as:
- What type of benchmarking are you doing? Strategic, Performance or Process?
- What is the scope and nature of what you are benchmarking?
- How readily available are performance data and insights on processes and practices? Is it an area where studies have already been conducted? Is it an area where information is generally shared?
- Are there industry standard measures, or will it take some effort to get “apples-to-apples” comparisons?
- How much money, time and effort are you willing to invest?
- Do you have valuable practices that you are willing to share in exchange for learning from others?
- How creative and resourceful can you get?
There are some valuable benchmarking methods to be aware of, but don’t be limited to them. You should be ethical, but beyond that, any way you can learn rapidly from others is wise. You don’t want to “steal ideas”, but rather “honorably adapt them”.
I’ve seen so many benchmarking processes I don’t know which I am “honorably adapting from”, but below are basic steps and some key points about each.
1) Define and Plan
- Document the objective of your benchmarking effort and make sure it is aligned to your organization’s strategy and priorities. (If not documented, it will morph. If not aligned, you’ll probably waste your time.)
- Establish a team that can be as small as a couple of people. It should include the person who will be accountable for performance in the future. It should also include at least one person who can bring “fresh eyes” and unbiased thinking. Of course, it is good to engage an experienced benchmarker at least as an advisor.
2) Discover and Collect
Find best-in-class performance data and discover valuable practices. This is the phase where many factors should be considered in determining approach. (See “No Cookbook” above.)
Two basic approaches:
– Get help:
- Consider: general benchmarking associations, management / professional associations, business / non-profit networks, and specialized consulting / benchmarking services.
- Organizations such as above may have knowledge and data bases you can tap into, studies you can participate in, and forums you can use to collect data or conduct a tailored project for you.
- Caution: you generally get what you pay for. Free or inexpensive information will rarely lead to true insights or credible relevant data. Also avoid just adapting the common practices that your competitors are using. You want competitive advantage, not parity.
– Do it yourself:
- Identify high performing and successfully innovative organizations. As part of your research on which the best are, ask key suppliers and customers.
- Develop a survey: data you want to collect and questions to uncover practices correlated to high performance and results.
- For organizations that may be willing to be benchmarking partners, engage them to be part of open sharing and learning. For others, gather data from public sources or direct interaction with the company. (Be creative, but be ethical.)
- Organize the data and best practice information you gather. A simple matrix can be a useful way to summarize for analysis.
3) Analyze and Select
- Identify practices that result in high levels of performance, are consistent with your strategy, and with some innovation can give you a competitive advantage.
- Set performance targets for your organization. If you do not think it is feasible to meet / exceed the benchmark this year, when will you? And what are the milestones? Who is accountable?
4) Innovatively Adapt
- Be Creative: brainstorm and engage a diverse team to leverage your strengths and move toward your vision while seamlessly integrating great practices you’ve discovered.
- Be Disciplined: use the continuous improvement methods your organization embraces (Lean, Six Sigma, quality fundamentals, etc); use good change management and project management discipline.
5) Verify and Sustain the Gains
- Assess how well you achieved objectives. If necessary, identify actions to close gaps. If you have achieved objectives, celebrate and recognize those who contributed to taking you to a “new level”.
- Raise the bar on performance goals and ensure clear accountability.
Benchmarking is a great tool for moving organizations through rapid learning cycles. As speed and agility become more critical, organizations can combine the power of benchmarking with their innovation and other strengths to gain competitive advantage.
The metric side of benchmarking (getting the “benchmarks”) is important in setting aggressive, fact-based targets. Without external, objective information, target-setting can be a guessing process. A short article can’t cover many of the methods, tips, resources and best practices in benchmarking which continually evolves as an art and a discipline. As you would guess, benchmarking practitioners hone their craft by benchmarking their own process. If your organization hasn’t started, consider making benchmarking one of your competencies to accelerate your never-ending improvement journey.
Jerry is a change-agent with a track record of driving performance excellence in a variety of organizations and sustainable improvements in end-to-end business processes. After a 30+ year career leading and facilitating continuous improvement in a global corporation, he co-founded Performance Results, LLC in 2009 to help businesses and non-profit organizations accelerate their operational excellence journey. Jerry and his wife, Nancy, are proud parents of 4 children and reside in a suburb of Rochester, New York.
Contact him at JR@perform-results.com