The most valuable characteristic of benchmarking is its ability to objectively diagnose areas of strength and weakness. By identifying key areas for improvement, benchmarking provides a firm foundation to develop strategies that increase performance and build competitive advantage.
But, benchmarking alone won’t drive change. Businesses must act on the findings – which elevates the exercise from an interesting study to one that is a catalyst for strategic improvement in focused areas or right across the business. Used in the right way, benchmarking can lead to increased productivity, growth, loyal customers, greater efficiency, increased business resilience, employee retention and greater innovation.
While there are many positive outcomes from benchmarking, here we share the main ones:
1. Identifying strengths and weaknesses: By finding the areas in which a business is under performing compared to industry peers or best practices, business can prioritise their improvement efforts and allocate resources more effectively. Alternatively, businesses can build on the areas of strength identified to increase competitiveness.
2. Setting performance targets: Comparing performance against industry best practices and peers is a great start point on the path to delivering the vision of the business. Performance targets should be stretching but achievable. To yield real change they should be ambitious enough that the business won’t necessarily know exactly how they will be attained at the start, but also SMART (Specific, Measurable, Achievable, Realistic and Time Bound).
3. Improving operational efficiency: Benchmarking identifies areas where businesses can become more efficient and reduce costs by sense checking their performance in comparison to others. This naturally leads to greater business resilience and increased profitability.
4. Enhancing customer satisfaction: Assessing a business’s overall value proposition by benchmarking the customer experience, value for money, and satisfaction with the product/service offer, and then acting on these, can lead to step change improvement in customer satisfaction.
5. Enabling informed decision-making: The objective data and insights inherent to benchmarking tools help to guide decision-making, taking the guess work out of choice selection by enabling managers to make more informed choices in areas such as investment, resource allocation and strategic planning.
There are a variety of benchmarking and diagnostic tools that are designed to help businesses develop and grow. The start point is to select the right benchmarking tool - one that assesses key areas effectively and provides a good foundation for subsequent planning and improvement.
The choice of tool will be driven by the required outcomes and will include whether business adviser support is needed or a self-assessment approach is preferred. Below are 6 key characteristics to look out for when choosing the right diagnostic tool for your organisation:
1. Data driven – Quality data provides objectivity
2. Options – that enable comparison with similar businesses by, for example, sector, turnover, number of employees and geographical area
3. Proven and reliable - Look for proven and reliable tools that have a track record of improving business outcomes
4. Improvement methodology - Ensure that the tool either comes with - or fits into - an overall improvement methodology. This will help the business to make sense of the data and turn it into a plan of action that delivers
5. Strong data and system security – which is essential to mitigate the risk of cyber-attacks.
6. Anonymity – the identity of the business and those they are compared with should remain confidential, data captured should be solely for the purpose of the benchmarking exercise.
One final point: benchmarking and diagnostic exercises should not be one-offs. The first exercise provides a baseline against which future changes in performance and practices can be assessed. This line in the sand is an invaluable tool to measure if strategic plans are leading to the achievement of future vision.