Ask Us Answered: How Do I Measure Financial Benefits of Benchmarking?
What’s on the minds of other process and knowledge practioners? Ask Us Answered is an APQC blog series that shares a sample of the questions members submit to APQC’s Ask Us service along with the resources and expertise provided. If you’re an APQC member and have a question you’d like us to answer please Ask Us!
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Question from a lead project manager at an aerospace company:
“I was reading some of the recent Webinar slides, very helpful as always! One topic that I saw a slide on was measuring the financial benefits of benchmarking. What information is available or what advice would you all have for how to do that?”
Answer: Approximately 60 percent of organizations don’t measure the financial impact of benchmarking, from cost savings, improved efficiencies, or even revenue generation. This lack of measurement may be attributed to not having a common method for capturing the financial impact. However, that leaves 40 percent of organizations that have clearly linked their benchmarking efforts to financial value.
Given that the primary purpose of benchmarking is to support decision making, it can be difficult to not only measure its success but directly link it to financial measures as well. However organizations that do track the financial value use different measures, based on the purpose of their benchmarking activities/projects. You can see the most common measures for different business activities in APQC’s 2016 Value of Benchmarking Report. For example organizations that use benchmarking for activities like process improvement are typically focused on cost savings and efficiency improvements. Hence they are able to link the investment in the benchmarking activity against the financial values of cost savings or productivity increases that come out of the project; ultimately creating a ROI on the benchmarking activity. While other activities (e.g., M&A) use revenue generated as one of their measures of success and are able to conduct the same type of calculation.
- Creating Measurable Value—This article explores the drivers behind the financial value of benchmarking.
- 2016 Value of Benchmarking Report—This report explores organizations’ benchmarking resources, practices, goals, and measures for benchmarking, as well as what characteristics of benchmarking improve the effectiveness of key business activities such as strategic planning. It also looks at the relationships between benchmarking practices and key business activities, as well as the financial value of benchmarking and the common challenges of the respondents.
- From the Bench to the Starting Lineup: Benchmarking Tips and Tricks You Need Today! (Slides)—These are slides from a recent webinar discussing trends in benchmarking practices, goals and measures, and the characteristics of benchmarking across several functional areas including process, knowledge management, finance, supply chain, and human capital. You can refer to the recording here.
- Benchmarking Basics (Collection)—This collection contains the main items you will need to start a benchmarking initiative, including templates, tools, a glossary, APQC's Process Classification Framework.
- The Value of Benchmarking (Collection)—This collection includes a lot of content related measuring success and value of benchmarking.
Resources provided by APQC expert, Holly Lyke-Ho-Gland, Principal Research Lead, Process and Performance Management. You can follow Holly on Twitter @hlykehogland.Tweet