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Business

lnformation

Benehmarking

www.mysmallbiz.co.uk

Every business can use benchmarkrng. At its

stmptest. it helps you to compare statistics
and control costs. More sophisticated

benchmarkrng looks at process design and

business strategy. Benchmarking is a process that
compares your busrness activities to similar
companies. It identifies opportunities for
rmprovement and often provides the momentum
necessary for implementing change.
This briefinq outlines:

+ The opportunities benchmarking offers.

How to select benchmarking partners.

+ How to use benchmarking.

@rf,e

opportunities

For example, utility bills or salaries.

Costs which are higher than the industry

norms may provide opportunities for savings
(see Cost control, ST 2).

Most benchmarking compares key

performance ind icators.

This tends
efficiency.

to focus on productivity and

+ Some indicators can be easily expressed

as simple statistrcs.
For example, sales per employee, gross

profit margins or wastage

io

assess the effeciiveness

FURTHER HELP

of ,

There are other

training activities or levels of customer

satisfaction.
lndicators which show that the company
underperforming represent opportuniiies
to improve.
is

Benchmarking often proves particularly

successful when comparing processes.
This involves looking in detail at hovr other
organisations carry out the same or similar

Directors' Briefing titles

. that can

:
:
:
r

help you
These briefings are
referred to in the text
by name and by the
code given to each

brieiing. For example,

the strategy briefings
have the codes ST 1,
ST 2. etc.

processes.

You may be able to apply some of these

The simplest form of benchmarking is to

compare costs.

For example,

+ For example, what technologies and

production techniques they use.

Benchmarking simply involves comparing your

business activities and processes with those of
other organisations (see 3). It questions what
you are doing and highlights opportunities for
rmprovement.

quantitative, analysis.

levels.

+ Others may require qualitative, as well as

rdeas

to your business.

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Sponsored

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(}Learndirecf'
...fits learning into the life of
your organisation

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Benchmarking can also be used to compare

businesses at a

strategic

parls of the business.

level.

For example, what strategic objectives

organisations have_ where resoLlrces are

{nrused and rnrhat stanCarCl lhe;, .,,,,cr-k

i;

Again, there may be an opportunity to

incorpo.ate lesscns tearnt fr.om suc:es:ful
organisations into your own strategy. (See

Writing a business plan,

+ A team of six people, at nlost,

easier to reach consensus.

ST 6 )

However you use benchmarking. it is only

tool which hiqhlights opportunities.
Benchrnarking does not tell you what to do
about them (but see 5).
a

arlld

You

an

ard
ywr busrirs.

get involvd in a

collaiora&e

study of your industry

+ Your trade asciation may run a
fr:r:lc}lmarknudy.

f)

source

information on
lnvestors in People
or ISO 9000, see
lnvestors in
People, HR 1, or
tso 9000, 5T 3.

Benchmarking partners

v,ou can ilse

internal partners ieg different

departments or sites) in order to standardjse
and improve your operations at the level of
your best performers.
+ lf you only do internal benchmarking, you
run the risk of complacency.

labrnef asa primary

of data.

Contacf Susiress Link and yaur7radie

associatian fo see what is available.

+ For more

Use the aims of your project to establsh the

kind of benchmarking partners you want.

Yan can ase fhe

Mark Modena,
Winning Moves

involved.

running a study or be able to

anange for ya; (andothsconpanfus)
fo share fhe ccts of one.

will include:

A typical benchmarking project will take three to

four months, up to the point of implementation.
Unless you purchase external services, the only
significant cost is the time of the employees

A benchmarking crlrsulFincy may

akady

absenteeism and

cashflow shortfalls "

difficult to introduce processes which work

in more decentralised organisations.

help yau colbcf

analyse data about

address issues ranging

from poor productivity

to low sraff morale,

Be clear

o Your management structure and style.

For example, if your company has highly
centralised management control, it will be

lnvstors in Faq/e.

A 'faciliiatd to

business.

For example, your market and your

customers' requrrements.

+ Quantibtive data covering spxific

adivities, basedon a sample a{
compnis. Find aut if tlrcsarnp/e usd
is relaant to your busin*, and find aut
if the data has beer? vatida:ted
+

the key areas of your

for measuring

perlormance, using
oblective criteria. lt is
particularly valuable for
indentifying problem
areas, letting you

+ The business environment you operate in.

t A model of howbusrnsesshould

9W

"Benchmarking is an
ideal tool

about the 'cuitural' factors

which influence your performance. These

Eenchrnark packages nwy include:

l5O

measures are.

know yourself.

+ ficre.nmp@. puMishd infonration on

key finarrcial rrtis far ywr industy, or
salary surveys.

operate. For example, sfandarcb such

DLA-tvlCG Consulting

Rcnrhmarlrinn

Benchmarking will not work unless you

widely available indus&y narms.

uirg

Provide any training necessary for the

team to understand the benchmarking
process (and project management skills)

Focus on

an bnchmark keysfialrrtrcsqgrarhst

You r:rn assessyourself

utcorn es. "

Derek Burn,

+ There is little point in benchmarking

peripheral aciiviiies.

Valuable bschmark infsmation can be

an enferna/
benchmarking partner.

benchma* package.

will find it

mndal< /ca^
ev^, vPPU)r
^^^^.;+^rrE/
\rLL h^or consultants (see 6A) can help you.

obbind without apgcx;hirg

rhat have quantrfiaDie

+ lcjentity which aclvity you want to

Lrenchmark and what the key performance

Benchmarking at yeur desk

Yan

" lt is always easle[ to

benchmark funciions

Link the benchmarking activity to your.

companyt objectives.

@ Planning
A Establish a project team from different

Select influential people who wili have

the power to see changes through.
Uniess your company is prepared to
change, the project will lead to nothing.

lnternal benchmarking is unlikely to lead

to any dramatic insights.

Most benchmarking invofues exGmal

comparisons.

Drnpglons,
BnreBnrru

IillltlrnkGtl
page

Aim to compare yourself against

businesses of a similar size and structi.tre,
witl r srmilor objectrves

This should include:

+ What information you want
+^

-L-,,
^r^^--^l
cpar Eu LU >r
tdte
l.J

meanin gful ccmpar"isons

:
I I f eLUi,n
,

How yoir wili use the information.

+ Who wili use the information.

+ You can alsc compare separate processes

which are going to be similar across

different companies.

How and when you will collect the

information.

The more focused your research is the more

useful it is likeiy to be (see 65).

For example, the operation of the mail

room is likely to be similar for most

companies.

Decide horar yorr Wanl. to collect data

; Simnlp
.l>+, -.^
.-T_.
lurr h^
r.* oneratinnel
uu s^!r
^--t--^-^!
torlyru
by using a guestionnaire
either by pcst
or ihrough a phone survey.

+ Competitors usuallv provide a direct

comparison.

It may be difficult to collect detailed

information from them.

+ There may be legal or ethical constraints

which prevent a free exchange of

information.
For example, if the information is
confidential or if you could be accused of
anti<ompetitive coilusion.

to exchange.

Never ask for information ihat you are not

Understanding how their objectives,

constraints and cuitures ciitfer from Vour.s
rs important if you are going to make

"lt

is

often possible

to learn just by looking

at holv a different
companv does the same
thing. even if the other
buslness does not
dlrectly compare to

A site visit

r,vill give you a much beiter feel

for the environment in which your partner

yours. "

operates.

Sylvia Codling.

Use a checklist and visit in pairs. (lv,ro

people may find it easier to get complete,
objective information and impressions.)

Benchmarking Centre

Send cooies of vorrr vi<it Fh^r+< +^ rho

partner organisations so that they can verify
the facts and figures

I _FYr

rJ

Lv

Lr

'\

marking agarnst outstanding

businesses is one of the best ways io bring
about a quantum leap in performance.
+ lt can be more difficuit to make
Eench

lnvite your partners to conduct similar visits

r They can coileci information on you.

r You can hear their views on how

comparisons if they operate in a very

diiferent business environment.

you operate.

ldentify and select three to six individual

partners.
+ Your Business Link and trade association
can suggest potential partners.

G]*rnrging
A

Summarise where you

Business publications and other

information sources can provide ideas.

Depending on your objectives. you may

identify:

+ Differences in performance indrcators.

For example, higher staff turnover or

+ lf you are searching in a broad or

lower gross margins.

unknown area, contact a benchmarking

clearing house or club (see 6C).

+ Differences in individual processes.

For example, how you recruit or how your
productron processes work

O Colteaing information

opposite number.
+ Explain the objectives of the study and
emphasise its mutual benefits.
Draw up a benchmarking agreement or
use a standard agreement, available from
the Benchmarking Centre (01 507 53407.1)

A (onsultant with

relevant database is
best positioned to
address the issues
raised. "
Derek Burn,
DLA-MCG Consulting

For example, what your human resources

policies are, or what qualitry standards yoL-t
have for your products.

those organisations with whom

Use any existing contacts to make

the initial approach, or contact your

"Benchmark,ng studies
always throw up more
questions than answers.

+ Differences in strategy.

you ,.t,ant tc make comparisors.

differ from your

benchmarking partners

+ Talk to colleagues, customers and suppliers

to establish who leads the field in the area
you are benchmarking.

A Approach

improvement

lnvestigate

why you differ.

Typical reasons include:

+ Your cost control is poor.

Your processes are outdated or inefficient.

+ You have made a different trade-off

For example, if you choose

to recruit low_

grade (and inexpensive) employees in the

DmscroRs,
Bnmrnw;
page 3

knowledge that they will soon leave.

You have a different focus from your

benchmarking partners.

you have achleved best practice today, regular

benchmarking is essential to keep you up to
daie ancj ahead of the competition.

08700 111111);

For example, if you have a different

t>rnat

m:rlza+

. \bu have different organisational

technology.

action to take and imolement

Decide what
+L'^
-L^--^Lt rtr tt
tdt

rrEoitrEt

S
A

constraints.
For example, if you do not have the
financial resources to invest in new

wtere to get hetp

You may want to involrre a consuttant.

consultant can help with:

Associates,0117 915
4024)

+ Enablishing internal data and

organisational processes.

+ You may decide to do nothing.

You may accept that there is a good
reason for the drfference, or that it would
be impossible to make changes.
+ You may feel that you should adapt your
processes.

lf your benchmarking partners are simiiar

to you and achteve better results wjth a
different process, you may want to adopt
elements of that process in your business.

r You may target specific

areas for
improvement and further investigation.
For example, if it is ciear that your
marketing is underperforming but unclear
what you can or should do about it. See

Planning your marketing, MA

+ You may realise that you need
elements of your strategy.

5.

to redefine

For example, changing your objectives

or standards.
Like all business improvement tools, the
success of benchmarking depends on

management commitment.
The more complex and far-reaching the
change, the more time and effort you will
need to devote to developing and
implementing action plans. (See Managing
'1

An external consultant may find it easier

FURT.}iER READING

to be objective about your

Tiris brieiing was cowritten by Sarah Cook,

partners.

Only use a consultant for the parts of the

study you require help with.
(See Using a

consultant, HR 17

Business Links can provide help and

information.

Most Business Links offer a benchmark

service, the UK Benchmarking lndex,
which provides a health check of your
organisation.

It can also highlight where benchmarking

activi! would be most beneficial to your
business.

+ Business Advisers are trained io take you

through the process.
Other sources of information and help
include:
+ Your trade association.

r The Benchmarking
or

wvr,u,t.

Centre (01 507 534071

bench marki

g. co. uk).

+ The Best Practice Club (0800 435399).

Business Hotline
Publications Ltd 200'l
tsSN 1369-1996. Ail
rights reserved No part

of this publication

may

be reproduced or

transmitted without the

written permission of

the publisher. This

publi(ation is for

5)

general guidance only

The publisher, expert
contributors and
distributor disclaim all
liabiliiy for any errors
or omlssions Consult
your local business
support orqanisation or
your pro{essional

What went well and what would you

do differently next time?
your business pei'forming

adviser for help and

advice.

now?
Did the actions you took lead to
incremental improvements or to a step
change in performance?

Dnpsrons,
Bnrnrnrc;

Benchmarking is not a one-off activity. Even if

Published by Business Hotline puuications Lid
24Sa Lavendr Hill London SWlt ILE

Page).

Overcoming resistance to change.

Did the benchmarking study achieve its

cbjectives?

is

author o{ Practical
Benchmarking

(f17 99, Kogan

+ Prolect management.

yvell the benchmarking study

and what impact the changes had.

+ How lvell

business,

ldentifying and contacting benchmarking

Revhw how
went

(Benchmarking Centr,

0r507 534071);
Neil Britten (BLN

There wlll normalfy be several options open

to you:

ourtrtEy

iiiei.jei,-Cegos tse^,
4151 445 242.6):
Sylvia Codling

Aiihough many benchmarking studies are

conducted without external help, a

tge5.

change, HR

EXPERT CONTRIBUTOR5

Thanks to Derek Burn

(DLA-MCG Consulting,

BRIEFING ST4
020 7924

137

lrl,ww-businsshotlinepublications.co-uk

page 4