Do you know how well your business is performing compared to your competitors or to similar firms around the country, or even globally? Just think what you could learn about your own business if you could find out what you are doing well and where you are not doing as well as the best, or even the average, firm. The way to find out? Join a benchmarking study.
The objective behind benchmarking studies is to allow the participants the opportunity of comparing their own performance over a large number of business metrics with similar firms or with similar activities. If you are a web design firm, you could join with others doing the same service and see how you are performing. You can also join a study into just one aspect of your business, say human resources, and then find out over a very large number of different companies how you are performing.
Often, we don’t know what we are doing well or we think we are, but have no data to verify our views. Imagine your surprise if you thought you were doing really well on a specific activity to find out that you were in the bottom 10% of your sector. Or the reward to your staff to find out they are doing so well in one task that they are in a leadership position.
Apart from the certainty which comes from finding out what you are doing well and not so well, you really want to find out where you can improve and what level of improvement is possible. Once you can pinpoint an area which has some room for improvement, you can set about working out what you can do to lift your productivity.
Benchmarking also plays an important part in an acquisitions strategy. Once we have our own benchmarking data, we can use this to examine target firms to see where we can quickly bring them up to our level of performance. If there are clear indications of areas for improvement in the target company, based on where they perform on the benchmark studies, we can gain a greater return on an acquisition investment.
There are numerous benchmarking studies available. Many are conducted by industry associations for their own members. Some are hosted by university research groups and there are a number of commercial programs for specific sectors. It just takes a little bit of research to find those which are relevant to your own business.
You might also think about undertaking some on an informal basis with competitors or with firms similar to yours across the country.
The greatest contribution of benchmarking to any firm is the discipline it introduces through the systematic and periodic measurement of activity levels. It is very difficult to improve performance if you have no metric to indicate where you stand and where your performance is varying. Once you start examining your performance on a regular basis, you will discover insights into what you are doing well and where you are falling down. Benchmarking with other firms often provides the discipline to do the job properly.