Leadership

Use benchmarking to chart your organization's performance

Measuring performance is one thing; understanding how well you are doing against a set of established metrics is another. Benchmarking is perhaps the best way to achieve this understanding. Here's how a solid benchmarking program works.

If you want to show that you are performing more efficiently and effectively, you have to be able to provide quantitative numbers. If your CIO asks how well you are delivering on projects, you can’t provide examples of how much complementary e-mail you have received over the past three months. This type of information is anecdotal and does not provide the hard facts that people need to make decisions.

In the end, if you want to determine your effectiveness in the company, you are going to have to put together the in-house metrics that show your capabilities and improvements. If you want to prove your worth to the overall success of the company, you are going to have to use benchmarking to show how you are measuring up to similar efforts at other companies.

Here is a basic look at how, by using metrics as a starting point, you can eventually implement a benchmarking program that can help prove your success in the marketplace.

It all starts with metrics
Once you have made the decision to collect organization-wide metrics, you must first look at the products and services you are providing and define a set of metrics that will give some indication of how you are performing. These metrics are going to come from one of two methods. One method is to collect metrics on an organization-wide basis. For instance, you can easily determine how you are managing finances by collecting information about your budgets and your actual expenditures on an organization-wide basis.

The second method to collecting organizational metrics is to consolidate consistent metrics from lower-level groups. For instance, if every project area reported how it performed against its initial budgets, you could consolidate the numbers and come up with qualitative information related to performance on an organization-wide basis. If all projects reported a common set of metrics on an ongoing basis, then you can determine whether or not the organization is improving over time.

Metrics must become more sophisticated to provide more value
Once you get past the simple metrics, you can develop more sophisticated common metrics. Even though the metrics are more sophisticated, they should be easy for the project team to collect and report. These metrics might be used to compare how certain types of projects are delivering their work versus other types. For instance, you may be able to gather simple demographics (characteristics) on each project. For example, if you have enough projects reporting, you can start to compare how successful finance division IT projects are versus other business units. You could also determine how successful Web-based development projects are versus client-server development projects. If you collected information on the relative size of the projects, you might be able to tell how effective the organization was at delivering small projects versus large projects.

Benchmarking allows you to compare against other companies
As your company becomes more sophisticated at using metrics, you might realize that collecting internal data is valuable, but it can only take you so far. You don't really know how efficient your project delivery is, for instance, unless you can compare how you deliver projects against other companies. You may find, for instance, that after implementing a common project management process, your average project budgets are reduced by 20 percent. However, this does not tell you that you are efficient. It only tells you that you are more efficient than you were previously. If you compared yourself against outside companies, for instance, you may find that it still takes you twice as long, and at twice the cost, to deliver projects of similar size and complexity.

Benchmarking studies (one-time) and benchmarking programs (longer-term) are a way to compare your projects against others. Benchmarking requires that you gather a set of predefined metrics that describe the result of very well defined processes. The resulting metrics are also captured from other companies, using the same set of processes and definitions, so that you can compare your organization against others. This information can be evaluated to determine if there are similar changes that can be applied to your organization to achieve similar results.

Five aspects of a benchmarking program
I have been involved in a number of benchmarking efforts at both an organizational level and at a detailed project level. A more detailed benchmarking program is more difficult to set up, but can also provide the most value to the organization. Let’s look at an example of a benchmarking program that will focus on how organizations are delivering projects. In general, there would be five areas you would need to define:
  • Company demographics: These represent characteristics of your company, and allow you to compare your company against similar companies.
  • Project demographics: These are descriptive characteristics of each individual project. Demographics are needed to be able to compare similar types of projects against each other. 
  • Common processes: Each company must have in place a common set of project-related processes. Even if the internal processes are different, each company must be able to map how it runs projects into a common set of processes for the purposes of the benchmarking effort.
  • Common metrics for each process: The common metrics should be easy (or relatively easy) to collect, and they should represent some fundamental piece of data that can be used to create the benchmarks.
  • Benchmarks: Metrics are combined into benchmarks that allow companies to compare themselves with other companies. This is ultimately the information everyone wants to see and compare.

More to come
Be sure to check back for other installments in this series, which will describe this benchmarking process in detail.

 
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