The APQC Blog

The Cost of Not Knowing

Trustworthy information remains the critical element needed for good decision making. When it comes to improvement initiatives, many business leaders rely on a combination of facts and intuition to make the call on what will work. To strengthen the “facts” part of the equation, the source of information must be credible. Those facts provide greater insights that can lead to better business outcomes. Conversely, the cost of not knowing those facts can bring detrimental consequences to the business through sub-optimal performance and missed opportunities.

The cost of not knowing can be reduced or eliminated through effective benchmarking. Information that results from benchmarking will support better decision making by helping in several key areas.

  •    Understand performance gaps and their root causes.
    •    Benchmarking allows the decision maker to quantify performance and establish a current state baseline. In addition, benchmarking enables decision makers to identify performance gaps and associated root causes. This information becomes the foundation to shape improvement initiatives. Without a clear understanding of reasons for performance gaps, an attempt to construct an effective improvement strategy may be a shot in the dark. This could lead to misdirected corrective efforts, resulting in wasted time and resources.

  •    Understand basis to set realistic performance targets.
    •    Many businesses struggle with setting performance goals due to a lack of reliable information. Finding credible and validated external benchmarks will help business leaders establish appropriate performance targets. APQC research shows that setting reasonable performance targets will help build staff buy-in for performance measurement. Greater buy-in promotes desired staff behaviors sought by measurement.
    •    Benchmarking can also help business leaders set effective performance targets by identifying trends within industry. Even though an organization is improving, its competitors may be advancing at an even faster pace. Monitoring these trends through benchmarking will inform decision makers about whether there is a need to adjust performance targets. Business leaders can then adjust improvement strategies to step on the gas to match or exceed the improvement pace of competitors.
  •    Understand practices tied to breakthrough improvement.
    •    Naturally, practices that are tied to better performance are those that business leaders seek. Benchmarking brings visibility to these practices. Using objective facts (e.g., performance metrics) to identify best practices will help eliminate the guess work regarding what practice is truly best. This will allow decision makers to forego unnecessary experimentation regarding which practices to adapt. Decision makers can then focus on optimizing decisions by choosing the best among the good when it comes to business practices.

With the many challenges business leaders face, understanding the best path to continuous improvement is an unending goal. How those leaders achieve that goal rests with what sources of information they use to know what to do to improve. By not knowing, businesses run the risk of false starts and misdirected effort. By using benchmarking to know, business leaders open the door of opportunity for breakthrough improvement and long-term success.

What examples can you share regarding how your organization has used or plans to use benchmarking to drive business improvement? APQC would appreciate receiving your comments.