How can you decide what to benchmark on?
In the search for best practices in the industry, companies need to look after some key aspects that can lead them to achieving superior performance. The benchmarking methodological uniqueness refers to the identification of business processes that can lead an organization to a superior performance, followed by the analysis of the best practices behind that success.
Hence, benchmarking represents a key strategic initiative that offers the opportunity to compare an organization’s performance against industry competitors, noting strengths, weaknesses and different ways of executing projects.
Prior to starting the effective benchmarking study, a benchmarking plan needs to be set up. Hence, aspects like the purpose of the study, benchmarking team, benchmarking partners and actual benchmarks need to be established.
If planned properly, all these aspects can make the difference between a benchmarking study’s success and failure. Roughly, these are some steps that can assure you are on the right track with setting your benchmarks:
1. First steps in deciding what to benchmark on are related to the processes that need to be analyzed and the key performance indicators (KPIs) used for measuring their performance. These kind of benchmarking measurements represent the starting point for various types of comparisons, like comparing performance gaps in the actual performance with other organizations’ results or measurement systems analysis comparison.
When benchmarking on KPIs, it is vital to ensure that both partners are tracking those KPIs, or that the KPIs can be easily determined from the existing measurements.
2. After establishing the KPIs that will be used in the benchmarking process, there are other details that need to be considered. One of the most important aspects is related to the measurement units and how these units will be classified. Moreover, it is important to state from the very beginning what aspects will be included in the measurement and what aspects will not be part of the measurement.
3. Another important detail is related to the calculation methods for every KPI and how to conduct them.
4. It is also very useful to provide some practical examples of standard measurements, for guidance.
5. Another important step in this process refers to a common agreement upon the benchmarks, as the list of KPIs needs an approval before beginning the data collection. The responsible board may consider various aspects in the approval process, such as: understanding the reasons behind performance gaps in low performing organizations, understanding the exact impact that the selection of KPIs will have upon customers or associates, as well as prioritizing those KPIs, by including the ones that could be vital for improving the organizational performance first.