Benchmarking

Directors’ Briefing

Strategy

Benchmarking
Every business can use benchmarking. At its simplest, it helps you to compare statistics and control costs. More sophisticated benchmarking looks at process design and business strategy. Benchmarking is a process that compares your business activities to similar companies. It questions what you are doing, identifies opportunities for improvementand often provides the momentum necessary for implementing change. This briefing outlines: • The opportunities benchmarking offers. • How to select benchmarking partners. • How to use benchmarking. employee, gross profit margins or wastage levels. Others may require qualitative, as well as quantitative, analysis. For example, to assess the effectiveness of training activities or levels ofcustomer satisfaction. Indicators which show that the company is underperforming represent opportunities to improve. 1.3 Benchmarking often proves particularly successful when comparing processes. This involves looking in detail at how other organisations carry out the same or similar processes. • For example, what technologies and production techniques they use.

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1 The opportunitiesBenchmarking simply involves comparing your business activities and processes with those of other organisations (see 3). 1.1 The simplest form of benchmarking is to compare costs. • For example, utility bills or salaries. Costs which are higher than the industry norms may provide opportunities for savings. 1.2 Most benchmarking compares key performance indicators. This tends to focus on productivity andefficiency. • Some indicators can be expressed as simple statistics. For example, sales per Reviewed 01/10/08

England

Directors’ Briefing
You may be able to apply some of these ideas to your business. 1.4 Benchmarking can also be used to compare businesses at a strategic level. • For example, what strategic objectives organisations have, where resources are focused and what standards theywork to. • Again, you may be able to incorporate the lessons learnt into your own strategy. However you use benchmarking, it is only a tool which highlights opportunities. Benchmarking does not tell you what to do about them (but see 5). •

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2 Planning
2.1 Establish a project team from different parts of the business. • Select influential people who will have the power to see changesthrough. Unless your company is prepared to change, the project will lead to nothing. A team of six people, at most, will find it easier to reach consensus. Provide any training necessary for the team to understand the benchmarking process (and project management skills).

2.2 Link the benchmarking activity to your company’s objectives. • Identify which activity you want to benchmark and what thekey performance measures are. Benchmarking models (see box) or consultants (see 6.1) can help you. There is little point in benchmarking peripheral activities. Focus on the key areas of your business.

Benchmarking at your desk
Valuable benchmark information can be obtained without approaching an external benchmarking partner.

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• A • You can benchmark key statistics against widelyavailable industry norms. For example, published information on key financial ratios for your industry, or salary surveys.

It is always easier to benchmark functions that have quantifiable outcomes. Derek Burn, DLA-MCG Consulting

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2.3 Benchmarking will not work unless you know yourself. Be clear about the ‘cultural’ factors which influence your performance. These will include: • • Thebusiness environment you operate in. For example, your market and your customers’ requirements. Your management structure and style. For example, if your company has highly centralised management control, it will be difficult to introduce processes which work in more decentralised organisations.

B You can assess yourself using a benchmark package. A benchmark package may include: • • A model of how...