Benchmarking – A great tool for all businesses!

John Walters

John Walters

Companies within some industries routinely use benchmarking. What about you and your industry?

Large companies frequently use benchmarking, but perhaps you are a small business, in which case you may mistakenly believe that benchmarking is not for you!

I believe that benchmarking is a great tool regardless of your industry or size, and when used correctly can be invaluable in uncovering areas of strength and weakness.

Benchmarking in itself is a fairly simple technique involving comparing the performance of one activity, department, office, and or company with another using predefined definitions to calculate metrics.

Benchmarking studies can be contained to a few high level metrics i.e. Sales/FTE’s (full time employees), Cost/FTE’s etc. but more often than not the technique is expanded to cover both operations and finance. The studies can be both internally and externally focused and can become quite sophisticated.

For instance, the Petrochemical Industry subdivides its production processes in to a number of discrete areas and individual companies report their performance based upon agreed definitions.   An independent third party collates the information so that the individual responses remain confidential, but they go one step further and introduce the concept of the “Theoretical Plant”.

Here they take each step of the process and identify the best performer, which they then aggregate to come up with the “Theoretical Plant”.  The rationale is that no one single company has the best performance in all steps and so even the industry leader can potentially improve on its current performance. It becomes a matter of cost vs. benefit.

I’m not necessarily suggesting that everyone should take benchmarking to the above level, but I am suggesting that benchmarking is a tool that can be used in every business.

As such I’m suggesting that you should spend a little time thinking about how you can use benchmarking within your business to uncover areas of strength and weakness. To gain a more complete understanding of benchmarking you may wish to take a look at the following presentation.

Should you wish to further explore benchmarking, I suggest that you contact us. We have the experience, we care and we are there to help you with all your benchmarking needs.