The goal of benchmarking is simple: To learn what works and how to avoid unnecessary mistakes. The challenge, and where the confusion comes from, is how to apply benchmarking as an effective management tool within an organization.
Benchmarking has been a widely used management tool for years. Only growing in globally recognized usage and significance, Bain & Company’s Management Tools and Trends studies have placed benchmarking in the top 10 tools used over time. Recently benchmarking has become even more critical as organizations were compelled into rapid change without warning or time to plan. The massive amount of process changes that have occurred since COVID found its way into our lives, forcing us to change how we work and live and has created a new sense of urgency and application for benchmarking.
What’s the Point of Benchmarking?
Benchmarking is an ideal approach when applied to process design, redesign, improvement learning and/or professional development. The misconception is that it has to be formal. Benchmarking is equally effective as an informal tool used to jump-start, move quickly and learn “how to.” It is also a widely used tool to understand where opportunities to improve exist, or how to establish budgets and targets within and across industries. Benchmarking is best used where there is consensus surrounding the problem or need, identification of any associated impact and crystal-clear outcome goals, then the adaptation of the benchmarking approach to ensure the goals are met. As an example of this process, I’ll highlight how Boeing reinstituted their benchmarking approach to achieve company goals.
Where Effective Benchmarking Starts
Show me a problem or process where benchmarking cannot help in improving the outcome and I will show you how it can. Getting started shouldn’t be difficult when you follow these four recommended key steps to effective benchmarking.
- Define the scope. The clearer the scope, the better the outcome. At APQC, we often help organizations define what is in scope, by starting with what is out of scope, then working backwards to carefully narrow a scope that can be communicated and managed. Narrow is ALWAYS better in defining scope. The biggest misstep we see when assisting organizations in defining the scope, is too broad of a scope, therefore not allowing for a deep dive, and not really getting to the golden nuggets of learning. An example of this is when organizations attempt to benchmark the hiring process entirely. Instead you should break down into sub processes and isolate areas in the hiring process that are not performing. Are the areas of concern job requisitions, recruiting, screening of candidates, selection process, or on-boarding? Once defined, the biggest pitfall is the inability to get all of your stakeholders to sign off on what is in and out of scope. Getting agreement will set the stage for all that is to follow and will be your friend should you find yourself “managing up” later in the process.
- Identify the specific outcomes that are expected. The approach used to gather the information will be dictated by the specific outcomes that are desired. For example, if the outcome is to collect quantitative data, then a survey is necessary, and the survey should include clear definitions for the quantitative responses as needed. This type of data collection will likely be administered by written survey, with verbal validation. Alternatively, if the objective is to learn “how to”, once you identify the key learnings desired, often a phone conversation can provide the insight you are looking for. APQC recently launched a scholarship program to support educational costs within the underserved in our community. We knew nothing about administering scholarships, and to help get us started, we benchmarked how others managed the process. We identified what we thought we needed to know, sought calls with five organizations we had relationships with, and spent an hour on the phone with each. The approach was simple, we learned much more than we ever expected, and were able to short cycle the launch of our program by over four months as a result. As a caution, make sure you document the desired outcomes and can tie back to your scope. If the outcome isn’t tied directly to your scope, remove it, and use the agreed upon scope as the basis for doing so. Be specific on what you want to learn and how you will use it.
- Design your data collection approach. Back in the 90s, every benchmarking project was laborious, expensive, and took forever to complete. Today, it can be done rapidly and much more cost effectively. For example, APQC members can access a benchmarking portal that has over 1200 process metrics available instantly to be used for benchmarking performance, establishing targets or setting budgets. Once you select the metric, a peer group and a report is generated from our data sets that house 3 million fresh, validated, data points. In designing your data collection approach, you will need to determine how to best gather the information and who you will gather from. The key here is to keep it brief. No one wants to spend 36 hours on a scavenger hunt to respond to your questions. Successful participation and response will depend on how difficult others perceive your questions to be and how long they will take to answer. For quantitative data collection, the rule of thumb is that while one person can respond, the information needed is intuitive to the responder or they know exactly where to find it. We always suggest to our clients that they answer the survey themselves to test its ease of response.
- Execute Well. Once you have a clear scope, know what you want to learn, and your approach has been designed, it’s time to execute. Whether by structured survey or telephone interview, collecting the data and information is a thought-provoking exercise that provides deep insight into how others structure and perform work. Remember to be willing to share why you are seeking the information, and how you intend to use it. Often it is appropriate to share blinded, aggregated findings with those who provided information. This is the fun part as you will build your network and learn and grow as part of the execution of your project.
Regardless of the type of benchmarking you will be doing, the APQC Benchmarking Code of Conduct is always a first stop to ensure a successful benchmarking effort.