Benchmarking Your Company – a Step-by-Step Guide
In this article, we’re going to give you a handy step-by-step guide for benchmarking your company (or any company) against its peers. This will set up the following article, in which we’ll show you how to leverage what you’ve learned.
Step 1: Outline the scope
This should always be your starting point. You don’t want this project to slide out of control before it begins.
So ask, and answer, these questions:
- What are the goals of the project?
- What are your criteria for success?
- What’s the timeframe for the project?
- What’s being assessed? That is, which lines of business, departments, business processes, work activities and/or employees will you benchmark?
- Is there any specific regional priority?
- What is the overall focus of the effort? Is it market-focused benchmarking? Financial-focused? Product-focused? Operational? Or individual-level benchmarking?
- Who will be involved in the project—and in what capacity?
OpsDog best practice tips: After you’ve answered these questions, write them down. The entire doc should be one or two pages long, max. Then distribute this piece to all project participants. Get their input. It’s essential that you establish the scope and direction upfront, as this document will double as a reference guide to help you keep the project on track.
Step 2: Define relevant KPIs
Which KPIs will you choose to compare your company’s performance to others? The list of metrics you create is crucial.
Keeping in mind the scope of the project (which you just defined in Step 1), build your list with the help of internal subject-matter experts. Refine your list with the help of research: tap the knowledge of industry associations, business contacts, and good ol’ Google to ensure you end up with a comprehensive list of metrics to study for the areas you plan to scope.
Here are some important requirements for your metrics:
- They must align with the focus and goals of the specified benchmarking effort. That is, they must meet the criteria for the questions you answered in Step 1.
- The list should be reasonable in length. It makes no sense to try and manage 100 different KPIs. As a rule of thumb, try and limit your list to about 5-10 KPIs per area to be studied.
- Lean toward KPIs that other, similar organizations are using to measure their operations. This will increase the likelihood that external data will be available for you to use.
OpsDog best practice tips: Create a detailed “data dictionary” which lists each of the KPIs to be measured, arranged by organizational area (check out OpsDog’s KPI encyclopedias to help you get started on this task). Each KPI “entry” in this “dictionary” should include:
- A simple definition.
- A formula.
- A few rules pertaining to its measurement (i.e., what to include and exclude from the calculation).
- Meta data related to any relevant systems, employees, or data sources.
Not only will your “data dictionary” be an ongoing reference throughout the life of the project, but it’s also a living document. It needs to be continually updated and refined throughout the project—and beyond.
You’re halfway done. Only two steps left. And they are:
Step 3: Source and compile your data
To compare your company to others, you’ll need to identify and gather data from two or more different sources (i.e., yours and others):
- Internal data. This is what you can gather from sources inside your company. This typically includes data exported from various internal systems (ERP, general ledger, HR management systems, etc.), as well as data included in pre-formatted reports.
- External data. This is info you’ll pull from other companies and data providers. Typical sources include industry associations, government agencies (e.g., FINRA, healthcare.gov, etc.), consultancies, and third-party data providers such as Bloomberg and OpsDog. And did we mention OpsDog? Right. OpsDog. We are a freakin’ data factory. Check out how much benchmarking data we put at your fingertips!
[Could our self-promotion be any more shameless? Let us know.]
OpsDog best practice tips: Before you— spoiler alert for Step 4—begin analyzing your data, make sure you compile it all, both internal and external, into a standard format, such as an Excel file. Simple meta data should be tagged to each value, including:
- KPI name.
- KPI definition.
- Demographic attributes (region, company size, etc.).
- Date of measurement.
- And so on.
Add data to this “master file” as it becomes available.
Step 4: Analyze and present your data
You’ve sourced and compiled your data. Congratulations! Now you’ll analyze it, collate it, and prepare it for center stage in your upcoming presentation.
Warning: Benchmarks can be divisive. (“You really think my department is that bad? Where’d you get that data?! Who are you comparing us to?! You are seriously threatening my bonus!”) So be sure to make clear, in your presentation, that 1) benchmarking is merely a means to an end, and not an end in itself; and 2) further action will be required to actually achieve the desired benefits of cost reduction, productivity gains, service-level improvement, etc.
With those admonitions under your belt, here are some basic presentation tenets to live by:
- Consider the audience. Executives, managers, and front-line employees each will have different perspectives and attention spans. Be sure to craft a slightly different presentation experience, tailored for each audience segment.
- File appropriately. Make sure that the file-format of your presentation works well for you and the others with whom you’ll share it. Should it be in PowerPoint, PDF, Excel, Tableau? It must meet the expectations and needs of your audience.
- Sweat the details. Invest the time needed to really nail the page layout, chart design, and related on-page elements. Keep them clear and devoid of clutter. This is easier said than done.
OpsDog best practice tips: Simplicity is hard. Don’t believe us? Consider these observations from history’s great thought-leaders:
- “I didn’t have time to write a short letter, so I wrote a long one instead.” —Mark Twain
- “Simple can be harder than complex: You have to work hard to get your thinking clean to make it simple.” —Steve Jobs
- “It costs a lot of money to look this cheap.” —Dolly Parton
It’s easier to make a complex presentation than a concise one. It takes time and effort Remember: Your audience will have a short attention span. So…
- Lead with key findings (the “headlines”) and anecdotes to get their attention.
- Briefly dive into detail to build credibility.
- Then go straight to the bottom line (i.e., what are the benefits and how can we get there?).
This entire cycle needs to be completed in a relatively short amount of time—we’re talking five minutes or less. Drown out the noise in your presentation, or risk losing your audience before you can make your point.
To help you with this task, develop a page format or document structure that creatively combines data (facts) with anecdotes (customer or employee stories). For example, if you are presenting a chart related to “How Long the Call Center Requires to Answer an Incoming Call (i.e., Average Speed of Answer),” pair it with some selected customer comments related to the wait times—and how that impacts their overall experience.
Crack a Beer
Or not. You’ve jammed a lot of important info into your brain in these past few minutes; consider yourself on the Road To Benchmarking!
In our next article, we’re going to pick up exactly where we left off here. That is, we’re going to give you step-by-step directions for identifying performance gaps, documenting and implementing best practices, and continuously measuring your progress.
Want some ammo for the journey? Peruse our downloadable library of benchmarking reports, packed with rich data spanning numerous industries and verticals.Back to All Resources