Benchmarking – what is it?

There are numerous definitions of benchmarking but, in essence, it is learning from others through the comparative analysis of process performance, writes Ray Wilkinson, director of The Best Practice Club.

These processes can be people-, business- or technology-based. It is widely accepted that benchmarking can be formal or informal in nature, and focused on either performance or best practice.

The level of formality is dictated by how much time and effort you wish, or are required by your organisation, to invest in the rigour surrounding the activity (see the previous article on benchmarking in this series). Often, this depends on how quickly the results are required. As with all performance improvement activities of this nature, there is often a trade off between the investment made and the robustness of the results achieved.

“Performance benchmarking” is the comparative analysis of key performance indicators, while “best practice benchmarking” requires understanding of a best or superior practice in order to adapt it for your own organisation. The former can be carried out at a distance from your benchmarking partners as what is required is a “reference group” against which your performance is judged. The latter has to be done “up close and personal” as the level of understanding you need to gain of best practice can only be achieved by engaging directly with a benchmarking partner.

As a driver for change, performance benchmarking is seldom bettered, but it will only quantify the improvement gap you need to close – not how to do that. You need to engage in best practice benchmarking to identify how to improve.

How can benchmarking help your organisation to improve?

The results of a classic piece of research carried out in 1997 by the London Business School on behalf of the CBI, involving more than 200 UK organisations remain valid today. “Fit for the future. How competitive is UK manufacturing?” demonstrated that those organisations carrying out high levels of benchmarking had better customer service levels than those that did little or no benchmarking. Why?

It appears that organisations that benchmark themselves on a regular and frequent basis have lower complacency levels and thus have a constant and continuous desire to improve performance. This sounds obvious but a high proportion of organisations do not “horizon scan” on a frequent basis to ensure that they are continuing to remain on top of their game.

So the lesson must be to carry out benchmarking regularly on at least an annual basis if you are doing it formally. As it is relatively inexpensive, in terms of resources, you can benchmark informally as often as your improvement capacity will allow and large organisations may be able to benchmark a variety of internal units first before looking for an external partner.

What is the best way to learn from benchmarking?

Start by looking for the process that, if it were operating at best practice levels, is going to contribute the most to the organisation. It must be strategically aligned and ensure you focus on only those processes directly relevant to the achievement of the strategy to avoid wasting scarce resources. Once you have selected your process then take the time to understand it thoroughly and highlight its characteristics. After that, make sure you have identified its key performance indicators and how it is performing. You should “know yourself” and have a benchmarking plan before you attempt to engage with a benchmarking partner.

A properly trained benchmarking team is vital to the success of a project and they must follow a robust process. A 2009 worldwide survey of over 400 companies by the Global Benchmarking Network confirmed that these two aspects are not being addressed adequately and that consequently most projects do not succeed.

When looking for a benchmarking partner throw your net as wide as possible, looking for organisations (irrespective of what industry they are in) with the process characteristics you have already identified. A word of caution: beware of the “halo effect”; just because an organisation is good at one thing, do not be misled into believing everything it does is good and therefore must be copied.

When you are considering benchmarking partners you also need to consider the internal conditions within your organisation. Is the organisational environment conducive to the implementation of a successful benchmarking project? In support of this, your stakeholders must be managed throughout the project so that they are bought into the process at every stage. You need them to be supportive of the external best practices you identify and then implement within your own organisation.

Once you have identified and understood external best practice, adapt it so that it works within your organisation’s culture and structure. Adaptation is key: just because a practice works in one organisation does not mean it will work in another. And beware the risk of unintended consequences; implementing a new practice in your organisation may detrimentally affect something else. All the way through the implementation manage the change in an iterative fashion using a continuous plan-do-check-act cycle of introduction so that you achieve the performance improvement results you desire.

Key questions to ask before you embark on benchmarking

These must include:

• What am I trying to achieve and why?
  
• Which process is going to give me the best return on investment?
  
• How is my current process configured and how is it performing?
  
• What resources do I need to do this and how am I going to get them?
  
• Whose support do I need throughout the project and how do I maintain it?
  
• What preparation do I need to do in order to make the project a success?

Benchmarking as a force for good or a “stick to beat you with”?

Benchmarking can be either a force for good or a “stick to beat you with” depending on the culture of the organisation implementing it. The key driver for effective benchmarking is an external focus, one that hungers after the knowledge from others to accelerate performance improvement. This can be done in an incremental and continuous fashion or a step change performance improvement fashion. In fact, both can work happily together with the former underpinning the latter, thus maximising the benefits obtained. Do not be a shrinking violet. If you are thinking about performance improvement consider using benchmarking to do it in the most effective way.

Ray Wilkinson is the director of The Best Practice Club, which provides benchmarking and learning opportunities for large organisations through personalised service support and a self-administered knowledge management portal.

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This article is the fifth in a series on using data and statistics more effectively in HR:

• How HR can gain more from benchmarking, also by Ray Wilkinson.
  
• Maximising the effectiveness of HR data, by Nick Kemsley of Henley Business School.
  
• How to use data to get results in HR, by Andrew Mayo, author of Human Resources or Human Capital?
  
• A closer look at employee opinion survey results boosts engagement at Barclays, by Gordon Tinline, director at Robertson Cooper, and Hazel Hodgins, head of employee engagement and insight at Barclays UK Retail and Business Banking.