Some companies strive to be number one—and others don't. Wal-Mart, for instance, strives to be super efficient in its internal processes, which it hopes will help translate into the lowest prices on the store shelves. Most companies have more modest, but still worthy, goals. When I worked for a large Canadian software company, for instance, we had a goal to be in the top 25 percent in terms of the fewest administrative resources required to support the business. We did not strive to be number one, but we wanted to move from the lower 50 percent to the top 25 percent when compared to similar sized companies.
No matter whether your company's goal is to be number one or number 100, acting on the results of a solid benchmarking study can help make your goal a reality. Once you have the results of your benchmarking study, you need to decide what you want to do with that information. Chances are that your company's results do not rank number one. That information is good to know, but how exactly should you use it? The benchmarking results are only of incremental value if you do not act on them in some way.
More on benchmarking
If you would like to read more about benchmarking, check out these earlier articles:
- "Use benchmarking to improve your organization's performance"
- "Plan your benchmarking approach before starting to collect metrics"
- "Benchmarking requires a common set of processes and metrics"
First, validate your understanding of the results
You can't start to make improvements in areas if you aren't sure what the benchmarking report is telling you. If you are ranked low in certain benchmarking categories, make sure that you understand how the benchmark was calculated, and mentally visualize how the benchmark relates to your organization. Remember that the benchmarks are based on a common set of processes that may not easily translate to your company.
For instance, a benchmarking study that I participated in asked about the number of hours spent on the testing function. The benchmarking model was based on an organization with a separate testing group. Our company did not have a separate testing group, so it was hard for me to approximate how much time we spent on testing. Therefore, when our company was rated low in the testing category, I did not want to jump up and put an improvement plan into place, since I could not validate the accuracy of that particular benchmark as it related to our organization.
Determine which areas to work on
Once you have read and understood the benchmarking report, you need to determine which areas, if any, should be focused on for future improvement. This is an important area to work on with the management team. There may be dozens of benchmarks reported, and you cannot focus on trying to improve everything at once. The areas you choose will be based on the ones that are the most important to your organization, the ones where you have the most opportunities for improvement, and the ones where you have the easiest ability to improve.
As an example, let's say that one benchmark shows that you are ranked fifth out of 25 companies. Unless your organization is one that feels it absolutely has to be number one, this is probably not an area you need to work on. It is not worth the effort to move up marginally in an area where you are already doing a good job. Let's take another benchmark where you rank 20th out of 25 companies. After reviewing the benchmark, however, you determine that this particular benchmark is not important to your strategy and goals, and so this is not one that you focus on either.
A third benchmark, however, is very important to your organization, and you currently rank 15th out of 25 companies. This one goes down on your list as an area for improvement.
Talk to industry leaders regarding best practices
You have now identified a handful of areas where you think you need to improve to be more effective and efficient. Now you need to get more information and ideas for how to improve. One method is to talk with the companies that are considered best in class for those benchmarks. You don't need to talk to the companies that are one or two places in front of you. Talk to the companies that are at the top of the benchmark. For instance, if you rank low in your ability to deliver projects close to your estimates, then talk to the top three companies in that area. The company that performed the benchmarking study should be able to get you connected with the appropriate people at the top companies. Talk to them about their processes. You may discover ideas that you can bring to your organization as well.
Set your targets
At this point, you have identified improvement opportunities as well as best practices from the top companies in each area. Your management team needs to determine where they want to be in each area in the future. As I mentioned before, most organizations don't have a need to be world-class in every internal process. But for some companies, there are areas where that is the challenge. Most companies, however, will set goals to be in the top 50, 25, or 10 percent.
Your targets are also influenced by where you are today. If you're ranked last in an important category, your target may be to get into the top 50 percent. If you're in the top 50 percent of an important category, you might set a target to move to the top 25 percent.
Create and execute an improvement plan
If you do everything up to this point, but you do not create and execute an improvement plan, then everything else will have been wasted. You should now have a short list of best practices from leaders and targets for where you want to be at some point in the future. You need to create a plan to get there.
You may be able to put some aspects of your improvement plan into place immediately. Other components of the plan may need to wait. If your organization is large, it may take multiple years to get you where you need to be. However, everything starts with a vision and a plan to get you there.
Benchmark again at a later date
You will never know whether your plan succeeded unless you perform follow-up benchmarking in the future. Remember that you may have improved, but the other companies in the study will be improving as well. If possible, a similar benchmark against similar companies would be best. If you participate in a completely new study, you may not be able to compare apples to apples when determining whether your improvement plan was successful.
Use the results
Some people advocate benchmarking without understanding what it is, how a program works, and how to ultimately gain value from the study. If you create a program from scratch, you have a lot of work to do. If you participate in a benchmarking study that has already been defined by another company or a vendor, you still need to know how the study was put together.
If you don't intend to put an improvement plan into place, then you might as well not participate in a benchmarking program to begin with. Improvement is the ultimate goal. Benchmarking is a tool that can provide relevant information on where you need to improve and by how much.