Benchmarking

If you were to compare your performance or that of your business (large or small) to the “best in class”, how might you fare in such benchmarking? You know, having confidence in knowing where you stood and what you needed to do to get there, or stay there? Would you know where to start? And then?

What is benchmarking?

I found benchmarking defined as the process of comparing one’s business processes and performance metrics to industry bests or best practices from other industries. It is about finding a common set of metrics by which we can realistically compare like with like, having eliminated most potentially distortive iniquities.

In my corporate CIO career, I used benchmarking extensively. It was either forced upon me by audit committees or my parent company or me choosing to pro-actively wanting to prove a local point in my Australian market.

Positive Benchmarking Triggers

Benchmarking enables one to position your own service, cost or operational metrics against a range of other companies, processes or industries. Based on a common set of comparable indices and standards, we are able to establish exactly how we stack up. That can be to the best in class or to the relevant, comparable competitor or to the gap between us and the market leader. These results enable us to establish the size of the gap we want to close in order to match the best. And then we can map out the necessary paths to get there. This is usually done pro-actively and driven by a stretch desire.

Negative Benchmarking Triggers

Running the internal IT services for a corporate organization of several thousand employees and users is always going to come up against significant cost scrutiny. Every user department wants state of the art, best practice IT infrastructure and services, with the best possible information security and the greatest possible amount of flexibility (in itself an oxymoron). Yet wants it to cost nothing. Service levels will only be remembered as far as the last failure and when it comes to budget time. IT is usually seen to be one of “the most expensive overhead bad guys”. This is often exacerbated by IT being seen as a provider serving only the “back office” and never adequately able to support the “front office” to generate more profitable sales more easily. So IT is always on the back foot.

Albeit driven by negative or “protective” or “justification” triggers, situations such as these necessitate and welcome benchmarking. Why? Because it offers all the critics and skeptics relevant, indisputable and comparable information in respect of costs, service levels and expectations.

Whilst a lot of work, I always welcomed it. It gave us a credible, externally confirmed base with which to provide counter arguments to those we knew we would never be able to win.

Finding the right benchmarks

I’m known for saying: “the beauty about standards is that there are so many to choose from”. Of course as soon as we embark on a benchmarking exercise, opposing camps or those it is intended to convince will immediately begin the discrediting politics. Why? Because they know that some forms of indisputable truths will emerge that will weaken their position. This is what I wrote about in “Managing Spin”.

I remember raising some eyebrows, when I managed to have my fellow CIO counterpart of one of our strongest competitor organizations to embark on an IT costs and service levels benchmarking exercise with me. We both chose this path because what benefit was there in benchmarking against a bank or consulting house or agricultural organization, where there was almost no common ground. No, this was ideal because both organizations were playing in exactly the same markets with the same services. A true and ideal comparison. We both learned heaps from the process, and from each other and the winners were the internal users (and external customers) of both our companies.

We also did significant benchmarking of comparable services and costs across the subsidiary companies of all our companies in our Asia-Pacific region. That started badly for us, because of the high cost of living and high incomes we had to pay in Australia to find and keep the best IT resources. We were sick of being told how much cheaper several of our Asian counterparts were. Until the right level of benchmarking had everyone understand that if they paid their resources a year what we paid ours a month or a quarter, they saw we weren’t on a level playing field.

It was great to be able to remove those fundamental “furfies” and then we welcomed talking about what we could all learn from measuring ourselves against what was truly acknowledge to be “the best in class” and on a comparable basis. That not only got us to their level, but in doing so we managed to raise the bar even further for everybody involved. Isn’t that what “raising your game” is all about?

Are You Comparing Like With Like Benchmarks?

So any form of benchmarking needs to be sure to enable the comparison of like with like. Only then is there any learning and recognition of opportunities to either cut services or cut costs or justify raising services or raising fees. If these benchmarks lead to us being able to position our levels with the best in class, we know what it will take to emulate or raise ourselves to that level, at what price and for what prize. (The Price and the Prize).

Benchmarks are the playing field of all the consulting houses. I learned pretty quickly that they make good money from selling “common sense” processes, ostensibly hidden behind a range of expensive tools and techniques. After the first one, we developed our own. It’s not rocket science. The process matters and most of the work is to be done up front in defining what needs to be compared. That way the right definitions and categorizations are made realistically possible. Assumptions and standards and formats need to be agreed so that one doesn’t race off into the sunset only to find that critical or practical things were forgotten and we have to go back and start again.

So what next?

I would urge you most strongly to avail yourself of benchmarking for your business. Whether you are a start-up looking to position yourself in the market or a seasoned player wanting to test yourself against the best or others in the market. Whether you are a small business, an SME (Small to Medium size Enterprise) or a large corporate, these forms of benchmarking will enable you to compare what is important to you, to others out there. Everybody wins.

The leaders can figure out how long they think they can still maintain their edge before others catch up. They also become aware of the risk of complacency. The losers have a clearer picture of how far they are behind and what it will take and whether it’s worth it to raise that game to the envisaged level.

Most importantly however, I learned that it highlights specific opportunities that easily outshine others so you’ll know where to focus your attention on to get “the best for your buck”. You’ll know whether it’s a “killer” new customer retention process or a way to halve your cost or double your volume etc.

And if you can see how much sense this makes for you and your business, but you’re wondering where to start, why not engage a coach or business mentor? One that has such runs on the board to be able to guide you through the process or that can connect you to other professionals for specific areas that they can’t?

What if you did and it raised your game a few notches towards best in class and / or ahead of those you play against?
What if you could?