Benchmarking, commonly known as learning from best practices, is an effective organizational performance tool that can boost a company’s performance, by enabling a learning experience that relies upon understanding best-in-class practices and implementing them within one’s own organizational structure.
This assessment process is conducted for the sake of improving your firm’s performance with the goal of filling the performance gaps between you and your best-in-class competitors or even exceeding their performance level in the long run.
However, as effective as it may seem, it is a time-consuming and resource-intensive activity that requires a well-defined methodology, action planning to identify best-in-class competitors, and an implementation strategy. Without these components, the positive effects of a benchmarking study on performance might be reduced.
The What, Why, and Who of Benchmarking
Benchmarking allows companies to focus on their strengths and weaknesses, by comparing them to those of their main competitors within their respective industry, or from another industry, which will allow them to strengthen their position on the market.
When searching for competitors, we focus on better understanding their best practices. Best practices refer to conducting a comparison of performance data, data that is obtained by analyzing our competitors’ similar processes and internal activities and by identifying those practices that led to superior performance. Once identified, those practices must be adapted and implemented within the boundaries of your own organization.
Hence, when conducted correctly, the benefits associated with benchmarking can include:
Measuring and comparing your organizational processes against those of another competitor or industry;
Discovering performance gaps;
Incorporating leading firms’ processes into your own process flow to increase performance and reduce gaps;
Future-oriented goal setting and improved resource prioritization;
Accelerating continuous process improvements – CPI;
Identifying better opportunities for growth;
Learning from industry standards.
To show that benchmarking is more than just comparing numbers, let’s consider the following example: in the electric utility sector, an electricity distributor has an average interruption time for residential customers of 105 minutes. Is this value good, acceptable, or bad? It is not easy to find an appropriate answer, unless the 105 minutes are compared to an objective standard, such as the industry standard of interruption time for the competitors in the sector.
However, it also depends on the company’s strategy. 105 minutes may be considered a satisfactory value for them, while someone else can view it as an alarming call for improvement.
The example above relies on the idea that performance represented through the usage of mere numbers can’t provide any meaning when analyzed without having a reference, or a benchmark value for the sector, as a comparison point.
When conducting a benchmarking analysis, no matter the industry of interest, there are usually three questions that must be answered before initiating the study:
What is to be benchmarked? (e.g. processes, strategies)
Against what or who will your organization be benchmarked? (e.g. KPI, competitors)
What will benchmarking do to my organization? (e.g. improve performance, analyze performance)
In general, nowadays, performance measurement has become a standard practice for any organization that uses KPIs.
However, the next step that needs to be taken to improve performance is the implementation of a benchmarking study, where your company can compare its own performance with the sector’s point of reference (a benchmark), or simply assess the compliance with respect to industry standards, understanding how you can learn from their best practices and apply them within your own organization.
Types of Benchmarking
A first step in conducting a benchmarking study involves the type of benchmarking that is to be constructed. This first step is necessary because any process, product, and function in a business are eligible for benchmarking.
The decision depends on the nature of the company, the sectors of interest, and above all else, it depends on what are the main goals the company has planned after its implementation of the best practices learned through this study.
There are three main typologies:
Performance Benchmarking: focuses primarily on the characteristics of products and services. For instance, analyzing # Average waiting call time in the customer care department
Process Benchmarking: compares similar activities to identify the most effective operating practices, for instance, % Delivered products on time
Strategic Benchmarking:focuses on identifying best practices in strategic processes to improve competitiveness within and beyond one’s own industry and assess what could be a long-term competitive advantage.
By contextualizing, benchmarking can provide the above-mentioned benefits to the company conducting the study, if it supports a strategic plan and if the plan is conducted on existing processes that are defined and in use.
The Bottom Line
Is benchmarking worth a company’s investment and time? Yes, it is a potentially powerful tool to promote continuous improvement in performance and performance comparison among industry players.
Nevertheless, you have to remember that quite a lot of attention and time must be dedicated to defining the initiatives that must be taken and to the methodology that is used, otherwise, the results may be ambiguous.
Given the complexity of designing a Benchmarking study and all the related challenges associated with it, The KPI Institute’s training program, Certified Benchmarking Professional, is designed to fill the gaps you might have or to provide complete new knowledge about aspects on how to conduct a benchmarking study.
For further knowledge, feel free to download any of our webinars that are focused on the idea of Benchmarking or take a look at our solutions, which span from audit services to framework optimization.
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Editor’s Note: This article has been updated as of September 17, 2024
Democratizing strategy planning refers to the process of involving various stakeholders of all organizational levels in the strategy formulation process. In the traditional approach, strategy planning is a top-down process formulated by selected stakeholders like the senior management and key decision makers. So, to make the process more inclusive and participatory, democratizing strategy planning comes into account.
One of the main advantages of democratizing strategy planning is that it increases employee engagement. Thomas, K. W. (2009) discussed in his paper “Intrinsic Motivation at Work: What drives employee engagement” that when employees feel that their voice is heard within the organization, they are more likely to feel connected and invested in the organizational success, which increases their motivation, commitment, and job satisfaction, and that means a lot for them as they feel more valued in the organization.
Another advantage of democratizing strategy planning is that it enhances ownership and accountability, which will be reflected in improved employee engagement, as employees who participate in the strategy planning feel a stronger sense of ownership and responsibility, which leads to extra accountability and willingness to go the extra mile in achieving the organizational objectives as per the psychological ownership theory, which emphasizes on the role of psychological ownership in influencing employee attitude and behavior which lead them to be more engaged, motivated and committed to their organization.
To implement democratized strategy planning, having and securing the leadership buy-in is crucial to its success, so it is necessary to present the benefits and potential of increasing employee engagement and fostering innovation in the organization.
After getting leadership buy-in, we need to define a clear scope of where employee inputs would be more valuable, which is recommended to be initiative-specific in the beginning to avoid any potential analysis paralysis. In addition, it is vital to develop a precise feedback mechanism to capture different stakeholders’ diverse perspectives and ideas and recognize and reward participation.
This process will take time to be implemented correctly without any issues, so it is essential to mention that continuous improvement is critical to reach a practical approach. To read more comprehensive articles on strategy, click HERE.
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Editor’s Note: This article was originally published on November 30, 2023 and last updated on September 17, 2024.
Khalid Alharbi boasts over 20 years of experience in partnering with business unit executives to develop strategic plans, direction, market analysis, partnership, growth guide, and operation excellency. He leads large and complex projects to achieve key business objectives and promote digital transformation. He is pursuing a career in engineering, project management, sales and strategy planning.
As a Strategic Planning and Performance Manager, Aubrey Phillips engages both people and data to optimize departmental efficiency. She has demonstrated leadership by spearheading interagency teams responsible for the development of Pinellas County’s COVID-19 dashboard and relief programs. Aubrey holds a bachelor’s degree in political science and environmental studies from New College of Florida, along with an advanced Geographic Information Systems certificate.
Turki Alderaan is the Director of the Risk Department at Al-Jouf University and a Senior HRB Partner at the Technical Vocational Training Corp (TVTC). He is also an organizational development (OD) expert in four governmental sectors. Additionally, he is a leadership and strategy professional, an executive and performance mentor, a performance design and measurement specialist, and an accredited professional trainer. In this interview, he imparts the valuable experience and profound wisdom he has accumulated over the course of his career.
Would you tell us more about your educational and professional background? How did your previous experiences lead you to your current position?
I have a bachelor’s degree in political science and HR management and a master’s degree in business management. I have since delved significantly deeper into the world of institutional performance management and had the opportunity to practice it professionally. I hold certificates from organizations like The KPI Institute (TKI) and the Society of Human Resource Management (SHRM). Currently, I work as an organizational development expert in both the public and private sectors, and I am the director of risk management at Al-Jouf University.
What are your main responsibilities and goals in your current role?
I ensure the application of systematic work standards, lead organizations to adopt the appropriate workflow to conduct organizational transformation, and develop organizational strategies. I utilize technical tools in business analysis to implement improvement measures according to specific performance indicators.
Please take us through your daily job routine. Could you describe your activities and work hours in detail? You may specify certain areas of your job, such as your work arrangement (remote, on-site, or hybrid) and the stakeholders you frequently contact or meet with.
I work for various organizations in both the public and private sectors, working remotely and on-site. At times, I work 16 hours a day, meeting government leaders who supervise my performance. I am grateful for the experiences that have enhanced my development and skills.
Do you think that strategy and performance management in the public sector is different from that in the private sector? How so?
Nations lacking competent strategies and performance management face challenges in achieving organizational transformation, resulting in a weaker position. The private sector offers flexibility, swift decision-making, and sharing. Meanwhile, the public sector excels in resources and an appealing working environment, encouraging many to focus on performance and how to measure it.
A positive work environment with ample resources and tools promotes productivity. Performance is measured through KPIs, feedback, and goal achievement. Regular evaluations and open communication foster a culture of continuous improvement. Quantitative metrics like resource ratio, budget allocation, and utilization rates provide insights into resource efficiency. Qualitative feedback, turnover rates, and job satisfaction surveys also contribute to assessment.
What are the main achievements you are proud of thus far during your time working in strategy and performance management in the public sector?
Across my 15+ years of professional experience, I am still proud of my first achievement with the Institutional Accreditation Team at Al-Jouf University, where I contributed to institutional accreditation in administrative and technical procedures. I did so by establishing modern departments and introducing concepts like risk management, governance, corporate performance management, etc., and linking them to the strategic plan and the design of the follow-up and control mechanisms.
What are the main challenges that you face working in strategy and performance management in the public sector? When faced with such challenges, what do you do?
Government sector strategic plans often exceed 500 pages, with leaders focusing on goals without clear follow-up mechanisms. Training programs can help consolidate knowledge and skills, enabling effective guidance and senior leadership support.
For the future of your career, do you intend to keep on working in the public sector, switch to the private sector, or does the sector not really matter to you? Why?
Working with both sectors has pros and cons, but the main goal is to leave behind a meaningful impact. My most significant contribution is to the government sector, wherein I aimed to help achieve the Kingdom of Saudi Arabia’s Vision 2030 by facilitating institutional excellence and systematically improving performance management.
If someone is looking to work in strategy and performance management in the public sector, what skills, knowledge, and experience would you advise them to acquire?
Enhancing communication skills is crucial, whether written, verbal, or physical. Aside from that, it is important to have the skill of writing and rewriting policies and procedure manuals to support management systems and performance measurement at all administrative levels.
Khalid Alharbi boasts over 20 years of experience in partnering with business unit executives to develop strategic plans, direction, market analysis, partnership, growth guide, and operation excellency. He leads large and complex projects to achieve key business objectives and promote digital transformation. He is pursuing a career in engineering, project management, sales and strategy planning.
As a Strategic Planning and Performance Manager, Aubrey Phillips engages both people and data to optimize departmental efficiency. She has demonstrated leadership by spearheading interagency teams responsible for the development of Pinellas County’s COVID-19 dashboard and relief programs. Aubrey holds a bachelor’s degree in political science and environmental studies from New College of Florida, along with an advanced Geographic Information Systems certificate.
