To explain first what benchmarking is, takes us back to the ‘father of scientific management’ Frederick Taylor (1856-1915) an American Mechanical Engineer who started his career at the bottom on the shop floor of a Steel Works. Working his way up to Director and authoring his famous book, ‘The Principles of Scientific Management’ Taylor has become known as being one of the first gurus in Management.
I wont go into too much of his work as that would take some doing and we should focus on Benchmarking here. The actual term is exactly how it sounds – marking the work bench of works with a chalk mark to signify high performance and skill. Something that then inspired others to strive for.
It has of course developed over the years and become a tool that can be used in any industry sector and in fact not just for individuals but for teams, departments and even in comparison with other organisations.
This post is to assist the understanding of the subject at all levels so we will look first at team performance here for Levels 3 and 4 and later organisational benchmarking for Levels 5 and 7.
KPIs (Key performance indicators) and Benchmarking
It’s easy to confuse the two so just the clarify:
KPI’s are usually set based on the feed through of Strategic Objectives from the Organsation. So however small the team, its performance indicators will be linked to assisting larger objectives and targets. Knowing this enables an understanding as to why those KPI’s are important.
Benchmarking is a comparative exercise so this would involve taking the team performance metrics to analyse the data and comparing it against how other teams or departments are performing. It can also be used for external comparisons against other companies which Ill go into later. Benchmarking can also be historic so a comparison can be made in the same team over time to see how performance metrics have changed.
What the above both do together and singularly is help you identify gaps in your team performance and offer the opportunity for continuous improvement.
As I mentioned above the comparison can be with other teams or it can be historic. The latter is probably preferable to most teams to see how they are improving over time and monitoring weak spots were actions have been put in place to exceed previous periods. Its also difficult to compare team performance with other teams as they likely do something different and yes you can look at how well they perform against their KPI’s vs how your team performs against your KPI’s but there will be many different factors impacting on this depending on what the team does.
Benchmarking with comparable organisations.
You may, depending on what industry you are in, find that this information is difficult to come by. Many of the large corporates will publish an annual report which can be informative. Some organisations purposefully benchmark together for mutual benefit so they can gain an insight into how others are performing in comparison – this isn’t always about finance and profit. Take supermarkets for example who will use benchmarking to assess how they compare in terms of customer ratings, food waste, environmental carbon foot print, customer queue size and wait time and so on.
I find a competitor analysis is a good start point particularly if a SWOT is integrated into the analysis and measured against others. For my Level 5 and 7 students this is an important exercise and provides evidence of benchmarking in areas of business performance for the purpose of continuous improvement, Equality, Diversity, Inclusion and staff retention rates. I will go further on this in another post to show how to benchmark these particular areas.
The Benchmarking Matrix
Designed to help you benchmark internally and externally the matrix is a simple grid that divides into 4 parts as below:
|Benchmark Matrix||Products / Services||Functions / Processes|
|Internal||Compare different departments within an organisation. What products are produced and or what services are provided?||Compare tasks and processes within an organisation between departments|
|External||Compare with other organisations products / services provided||Compare tasks and processes within external organisations|
(I still prefer a competitor analysis with a SWOT for external.)
Benchmarking isn’t an easy exercise but it is certainly well worth doing. It can help you find your place in the market, consider the areas you need to strengthen and look at gaps that you should look to fill to stay ahead.
301 ML11 1.1 Explain the use of benchmarks in managing performance
710 ML66 3.2 Benchmark performance against historical data, other comparable
702 ML67 3.2 Benchmark an organisation’s performance against its competitors
703 ML56 4.1 Benchmark the organisation’s place in the market and its lifecycle