The benefits of benchmarks and the top measures to manage them
Right now many leaders are preparing budgets, targets, adjusting strategies and building new goal setting frameworks. Part of this process is understanding both internally and externally what performance levels have and will likely occur. The most common tool to understand where the standard bars are placed is through the use of careful benchmarks deployed at strategic impactful or even local tactical levels.
Understanding benchmarking for business benefits.
To measure is one thing, but what we do with that information is the second most important factor. For business metrics to work efficiently and with robust confidence, they should be built from a basis of inspiration, facts, and serious consideration. This is why the appetite for white papers, research, and ongoing surveys form a necessary but time-consuming part of a strong and successful business strategy.
There is little point celebrating the progress that you make if your competitors are outpacing you. This is the power of using reference material obtained to help management reach comparisons to performance elsewhere.
A good paper to read that compares performance theorys including re-engineering and case examples comes from the University of Wisconsin-Milwaukee in 2002. This provides a great insight and useful start point for companies considering to embark on the road of comparison management as a strategic tool.
The seven benefits of performing market comparisons
Although comparisons can be made internally, most value is often gained from external market sources. Trade associations or trade press publications are typically good sources of such information. The quality and price varies dramatically.
Seven key benefits with using reference information include:
1. Define best practices
2. Identify trends and opportunity
3. Validate assumptions made
4. Highlight the need for resources
5. Monitor change
6. Establish target expectations
7. Stimulates competitive spirit
A note of caution using external data
No matter the intent, mistakes happen in life and business. Ensure a quality check is taken on the robustness and reliability and accuracy when using external data. The intent of a research paper or industry might have a motive outside the raw data. Therefore misrepresentation can be attained from numerous methods, such as the omission of less favorable results or statistical and rounding errors that skew the end conclusions.
We already wrote an article dedicated to understanding why an organization should not always compare itself to others figures.
Why you should measure your measurements.
Who checks the checkers, and who checks those also? Well, I will not ponder on that thought too much or discuss the needs for more independent and random design reviews of performance measures, but instead, focus on your need to manage the benchmark information used by your organization.
One of the important parts of management and leadership is to understand what needs to be understood and know what else to ignore. So, part of the whole business culture across specific industries such as Logistics, Finance and call centers is using common metrics. The companies within these industries like many others, spend a lot of time scrutinizing over the small differences between one another.
Watch this 4 minute video to generate an overview on what benchmarking means for a business.
What can be missing in companies reference and comparison material is the need to actually manage the process and contributions of the benchmarks themselves. Here I share a list of metrics that can be utilized to help improve the performance of the surveys and help shape a business strategy and understanding of their true potential and value.
The top 23 metrics to measure benchmark impacts
Here I list a breakdown of the important metrics plus a short explanation and then a separate question to be asked after the measures are taken.
Total # of benchmark surveys used – Each organizational pillar of the business should monitor this number. For some departments, the need will be higher than others depending upon the regulation and competitive elements or requirements demanded from your business.
· Q: Which departments should participate in more survey action? How have you established the optimal number of comparisons used? How long have these results been recorded and have their methods of measurement remained the same?
The # of business case studies for seeking market opportunity – How many has the benchmarks produced case studies from marketing, sales, technology, process, regulation or research for new business opportunities.
· Q: How can the information gained from surveys be designed to provide more impact and benefit?
# of market research studies conducted – Understanding the direction and trends of a business and industry is important. Without a clear overview of this number their individual impacts and weights may skew strategic direction.
· Q: How does the research compare to your existing capacity and potential? What investments might be needed to make use of a wider market scope?
% of benchmarking activities that result in implementation of enhancements – This is a self explanatory measure, yet often over looked. If your activities do not implement improvements then I suggest to design ones that do.
· Q: How can more value be generated from each separate survey?
The % of recommendations issued on time – If you use old data then the information may have too little value for the operational benefits. This is especially important when dealing with industry wide information complied by publishing houses.
· Q: How do we assure the timeliness of measured information is still relevant?
% of responses to survey – Before addressing the results from a survey it is important to understand how representative the information is. This also helps future survey design improvement.
· Q: What information and types of information could be missing from the survey and how could that impact the overall decisions for the business if this missing information could be gained? How can an improvement in responses be undertaken?
Average cost of benchmark survey – There are several breakdowns in this metric. One is the cost of the actual benchmark at source and the other is the cost of purchase of the information results from the survey. For example this might highlight the opportunity in collaboration, quality levels and value for money each survey provides.
· Q: How do the costs compare from department to department? How can this information be challenged to ensure you gain surveys at a fair price relative to its value for your business?
Average time to complete benchmarking – The speed of information is a key for competitive edge in today’s rapidly moving commercial environments. This is acutely important for specific industries such as fashion, tech and cash starved companies.
· Q: Why are the times to complete the work set as they are? How relevant and timely is the information generated and for how long is it useful after delivered?
Number of benchmark collaborations – Has the questions and measures taken, been part of a wider collaboration of action? Has your own business collaborated with others to perform your survey research?
· Q: What benefits can be gained from such a collaboration activity in terms of accuracy, scale and scope for business benefit?
The % of data integrity – I selected the word integrity instead of accuracy. Understanding rounding errors and tolerance bands from samples and information taken provides a level of confidence in the provided data.
· Q: What steps have been taken to ensure the integrity of the data is correct, relevant and statistically sound? How can these measures be improved?
Average lifetime relevance of benchmark findings – A straight forward measure that sometimes has a surprising variety of answers. The importance of metrics lifetime and lifecycle is important to structure responses and weighting measures of data significance.
· Q: What is the ideal frequency of measures to be taken?
The number of benchmarks no longer used – Some benchmarks are taken and then neglected overtime. Their relevance may become hidden from bias or quality.
· Q: What is the exact logic and reasoning for stopping specific survey actions?
% of rejected benchmarks – This metric can apply at different levels across a business. The measures may be rejected at source, collection point, departmental or leadership level.
· Q: How can this number be reduced to become more efficient and what potential bias has impacted these decisions for rejection?
% variation from budget – A standard financial control mechanism to understand future potential budgets needed and highlight current fiscal control levels.
· Q: What is the trend of budget control and how can this be improved?
Return on investment – Pure and simple, what is the direct traceable financial return on the investment for such surveys or other none financial measure that needs to be applied.
· Q: How can an improvement be made to optimize the ROI on benchmark actions?
# of new ideas to reduce processing time – This metric is for large corporations dealing with hundreds of process points to produce and manage the whole survey operations.
· Q: What motivation and rewards are in place to incentivize time improvements? Will technological investment help speed this process?
The total % of benchmarks outsourced – The design and full process understanding increase with outsourced survey actions. Gain an insight to this figure for the deeper understanding of the surveys they represent.
· Q: What are the benefits and disadvantages of insourcing versus outsourcing for each survey?
% of errors in data from benchmarks – There is uncertainty and inaccuracy when dealing with small, medium and large data sources. Having a base understanding of this metric allows confidence levels to impact decision making at tactical and strategic levels.
· Q: How can this percentage be improved? How accurate is the declaration of accuracy? What statistical or rounding errors should be acceptable and remain of use?
The total # of benchmarks to identify risks – Regulatory standards typically highlight risks to the business yet bias in survey design often overlooks the need for risk management factors in seeking data.
· Q: What risks have not been covered and should they be so in future? How can the wording and research be conducted to include more risk management features at lower or the same cost?
% of recycled printer paper used for reporting – Let’s face it, most data today still ends up on paper, so this demonstrates an environmental responsibility for the process.
· Q: How can the CO2 footprint of the whole process be further improved? Can we use a low impact survey as a supporting feature to our brand?
Financial and time cost of service delivery – Recorded as both financial and in hours, the amounts used for the benefit of reporting conclusion.
· Q: What can be done to improve these figures? What technology opportunities or purchase levers can be done to reduce these measures for optimal efficiency?
The % of higher management reviews from report findings – The percentage of interest and influence of research and their findings needs to reflect the strategic interest of the business. This will demonstrate how much so.
· Q: What is the attendance rate of these reviews from each department? What action is taken from the findings on a periodic basis?
% of delinquent suggestions – A strong indicator of the quality of the research and findings from the studies is a number of actions that fall foul or stop. This over time may highlight priority, resource or management factors for consideration.
· Q: How insightful is the quality of the research? How can better proposals and suggestions be gained from the reports?
Improving your insights for competitive advantage
Standard management and leadership practice should include mechanisms to generate competitive advantage. Through applied research and measurement, deep insights can form the framework and data needed for new strategies to be formed or assumptions validated. The recent birth of ever lower cost analytics and cheaper data sources means a burst of available reference material is arriving on the market.
Some key disciplines and management are required to help a leader control costs, resources and chasing too many opportunities. This will continue to be the research sellers unique selling point. Through big data analytics and machine learning advancements in data science, expect improved and special tailored studies offering consumers competitive insights to trends and relevant market opportunities. Use the metrics we have listed above as key qualification and negotiation frameworks to ensure your business is protected and gaining the highest value from any such offering.
Further Reading and homework for success
This article has provided some significant insights and tools to improve your management success from comparative measures internally and externally. To improve your knowledge further and act as supporting information we suggest the following reads.
The additional homework to consider includes a review of your existing practices. What are the assumptions made and use of reference measure material within your business? Creating these first steps will allow you to become more productive and effective with existing operations and workflows. These basic steps should be reviewed on a periodic basis, at least annually. Challenge the methods and use of your reference measures by using this strategic and tactical guide so your business can reach its goals and objectives.
There is no doubt of the benefits that performing comparison studies provide. However, it is imperative to ensure a recognition to the limitations of such studies can bring. For example, just because one business leads in one area of comparison does not tell the full details as to how or why. This simply should generate the questions for further investigation to identify the reasons for perceived performance.
There are many positive reasons for conducting the work and research but our list of metrics shared within this article highlight the need to manage the actual activity and process of benchmarking. There should be a benefit that contributes to the bottom line, strategy, competitive spirit or risk management for an organization. Should your benchmarking actions not be managed correctly their costs, value and usage can spiral either out of control or lose credibility through lack of strategic influence.
Even in a world that will continue to be consumed with ever more metrics, performance measures and powerful insights generated from big data, some common sense and human empathy are required when dealing with the motivation of people. The intelligence generated from a conversation can rapidly counteract a numerical scale showing an opposite perception, not least because the design of a question or context of measurement was wrong to start with.
Not all of the metrics we have shared with you here are needed or important to be measured for every business. Rather consider them as meaningful questions at first and then implement their measures to improve the impact of your benchmark actions and activities.
Let me know what questions you have on performance measures. Share this article and tell your colleagues what you think of comparison measures within your own business.
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