Benchmarking briefing

1.1 The simplest form of benchmarking is to compare costs.

• For example, utility bills or salaries.

1.2 Most benchmarking compares key performance indicators.

This tends to focus on productivity and efficiency.

• Some indicators can be expressed as simple statistics.
• Others may require qualitative, as well as quantitative, analysis.

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.

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 they work to.

2.1 Establish a project team from different parts of the business.

• Select influential people who will have the power to see changes through.
• 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 the key performance measures are.
• There is little point in benchmarking peripheral activities.

2.3 Benchmarking will not work unless you know yourself.

Be clear about the 'cultural' factors which influence your performance. These will include:

• The business environment you operate in.
• Your management structure and style.

3.1 You can use internal partners (eg different departments or sites) in order to standardise and improve your operations at the level of your best performers.

• If you only do internal benchmarking, you run the risk of complacency.
• Internal benchmarking is unlikely to lead to any dramatic insights.

3.2 Most benchmarking involves external comparisons.

• Aim to compare yourself against businesses of a similar size and structure, with similar objectives.
• You can also compare separate processes which are going to be similar across different companies.
• Competitors usually provide a direct comparison.
• There may be legal or ethical constraints which prevent a free exchange of information.

3.3 Benchmarking against outstanding businesses is one of the best ways to bring about a quantum leap in performance.

• It can be more difficult to make comparisons if they operate in a very different business environment.

3.4 Identify and select three to six individual partners.

• Your Business Link and trade association can suggest potential partners.
• Business publications and other information sources can provide ideas.
• Talk to colleagues, customers and suppliers to establish who leads the field in the area you are benchmarking.
• If you are searching in a broad or unknown area, contact a benchmarking clearing house or club (see 6.3).

4.1 Approach those organisations with whom you want to make comparisons.

• Use any existing contacts to make the initial approach, or contact your opposite number.
• Explain the objectives of the study and emphasise its mutual benefits.

4.2 Draw up a benchmarking agreement or use a standard agreement. This should include:

• What information you want to exchange.
• How you will use the information.
• Who will use the information.
• How and when you will collect the information.

4.3 Decide how you want to collect data.

• Simple operational data can be exchanged by using a questionnaire - either by post or email or through a phone survey.
• A site visit will give you a much better feel for how your partner operates.

4.4 Send copies of your visit reports to the partner organisations so that they can verify the facts and figures.

Invite your partners to conduct similar visits.

• They can collect information on you.
• You can hear their views on how you operate.

5.1 Summarise where you differ from your benchmarking partners.

Depending on your objectives, you may identify:

• Differences in performance indicators.
• Differences in individual processes.
• Differences in strategy.

5.2 Investigate why you differ.

Typical reasons include:

• Your cost control is poor.
• Your processes are outdated or inefficient.
• You have made a different trade-off.
• You have a different focus from your benchmarking partners.
• You have different organisational constraints.

5.3 Decide what action to take and implement the changes.

There will normally be several options open to you:

• You may decide to do nothing.
• You may feel that you should adapt your processes.
• You may target specific areas for improvement and further investigation.
• You may realise that you need to redefine elements of your strategy eg changing your objectives or standards.

5.4 Review how well the benchmarking study went and what impact the changes had.

• Did the benchmarking study achieve its objectives?
• How well is your business performing now?

6.1 You may want to involve a consultant.

Although many benchmarking studies are conducted without external help, a consultant can help with:

• Establishing internal data and organisational processes.
• Identifying and contacting benchmarking partners.
• Project management.
• Overcoming resistance to change.

6.2 Business Links can provide help and information.

• Most Business Links offer a benchmark service, the UK Benchmarking Index, which provides a health check of your organisation.
• Business Advisers are trained to take you through the process.

6.3 Other sources of information and help include:

• Your trade association (020 7395 8283).
• The Benchmark Index (08700 111143)
• The Best Practice Club (0800 435399).