(Photo above | Pixabay)
Our industry specialized teams work across the Pacific Northwest with organizations large and small and from a diverse group of industries. In most scenarios, we are finding that nearly every organization can reap huge rewards from doing some basic industry benchmarking.
What is benchmarking? Benchmarking is the continuous process of measuring products, services, and practices against competitors or those companies recognized as industry leaders. This process is framed by asking, “How are we doing in a specific area compared to our competitors and others in our industry?” Often you will want to regionalize this comparison to the local economy and market, in other situations you will be required to benchmark against national or international organizations.
Benchmarking is designed to:
• Establish a baseline from which goals can be set and performance can be measured and optimized.
• Better understand actual performance in relation to strategic, operational and financial objectives.
• Provide statistical feedback that is valid, meaningful and consistent to leadership and management.
• Identify and better understand the performance of your company within your industry and market area.
Getting started with Benchmarking
Benchmarking requires that you begin by identifying a group of key performance indicators (KPIs) that you want to track. It might be data that is financial, operational, supply chain, sales or other performance data.
The second component is that you are able to obtain or compile industry data that matches your KPIs for comparison. Every industry has a different set of data resources. Some of these include industry publications, financial reports, business educational resources and trade associations.
A simple way to conduct benchmarking is to categorize and band the data in three categories like: poor performance, average performance and better performance. This approach provides a quick visual that all stakeholders can immediately grasp.
Sometimes following your own company KPI trends can actually be as valuable as comparing your performance to industry data. One approach is to identify a period that produced great results for your organization and benchmark to that period. For example you might frame this as, “How are we doing relative to our best year in company history?”
Benchmarking can alert you to problem areas, however benchmarking only identifies where problems exist, benchmarking does do not tell you why the problem exists or how to solve it. Benchmarking can be a valuable first step to problem solving.
When you identify a set of KPIs that are crucial to your business success, and begin benchmarking to industry data to determine your performance relative to others, you gain an insight that can result in superior management that yields a competitive advantage.
Brian Newton is a partner and shareholder in the Jones & Roth Bend office. Brian specializes working with physician-owned healthcare practices, nonprofit healthcare practices and provides strategic tax and consulting to business owners and individuals. Brian holds a bachelor of science in accounting from the University of Oregon. (Go Ducks!)