Benchmarking is a method of improving performance in a systematic and logical way by measuring and comparing your performance against others, and then using lessons learned from the best to make targeted improvements.
It involves answering the questions:
"How do we compare?"
"Who performs better?"
"Why are they better?"
"What actions do we need to take in order to improve our performance?"
Whilst benchmarking has been used occasionally in the construction industry for many years, the recent surge of interest has been encouraged by the publication of sets of national Key Performance Indicators that allow companies to measure their performance simply and to set targets based on national performance data.
Imagine for a moment that your business is a sports team and your people members of it. If this were the case then benchmarking would be a way of life. You would constantly be measuring your performance against that of your competitors; through league tables, match results, goals scored, goals against, crowd sizes, ticket prices, transfer prices, training methods, etc. These measures would directly influence your future planning. For instance, if you were top of your league your strategy would be vastly different to that if you were languishing at the bottom.
Benchmarking, at its simplest, is the business equivalent of sporting league tables and the Benchmark Index is the scoring system used to create those tables. You can measure your company's performance against a wide range of criteria and industry sectors, giving you a comprehensive view of your company's performance levels and what your priorities for action should be in the future.
What is a Benchmark?
A benchmark is "the best in class" performance achieved for a specific business process or activity. It is performance that has been achieved in reality, and can be used to establish improvement goals. The term 'benchmark' is sometimes used incorrectly to refer to average performance or even to refer to a minimum acceptable standard. Care should be taken to use the term correctly.
The key benefits of benchmarking to organisations are:
Increased customer satisfaction.
Establish goals and objectives.
Measure true productivity.
Identify best practice.
Proof that you compare well with industry leaders.
Types of Benchmarking
Benchmarking can be carried out against any organisation or target that is deemed to be 'best in class'. A full benchmarking exercise will involve not only the collection and comparison of data, but will include fact-finding studies to unearth the reasons for superior performance. Data driven benchmarking is made easy now that suites of KPIs are published nationally. Care must be taken to select the correct set. When an organisation wishes to carry out fact-finding studies as part of benchmarking, it can carry these out in one of three ways:
Internal - a comparison of internal operations such as one site (or project team) against another within the same company. Large companies will often have plenty of scope for this sort of benchmarking, and should aim to bring the level of performance of the whole company to the current 'best in company'.
Competitive - a comparison against a specific competitor for the product, service or function of interest. This will provide data and information about what competitors are achieving. It is more difficult and complex to carry out. A number of benchmarking clubs have been established to allow collection and comparison of data from organisations which compete with each other.
Generic - a comparison of business functions or processes that are the same, regardless of industry or country. In a well-documented case in USA, a ready-mix concrete company compared its delivery performance against a pizza delivery company. Both were in the business of delivering products which had to arrive at the point of use promptly!
There is no "best" method of carrying out fact-finding studies. Internal benchmarking is relatively easy to carry out, but levels of innovation may not yield high levels of innovation. Competitor benchmarking is difficult and usually requires a facilitated benchmark club. Generic benchmarking can reveal high levels of innovation, but the ideas may be difficult to implement in a new environment.
Key Performance Indicators (KPI's)
A KPI is the measure of performance of an activity that is critical to the success of an organisation. Construction KPI's allow comparison with industry norms.
KPIs will differ depending on the nature and objective of the organisation, so care is needed in selecting the KPIs to use.
The Construction Industry KPI wallcharts contain graphs for 10 KPIs that are commonly used in the construction industry that can form the basis of a more comprehensive set of performance measures.
Regular measurement using appropriate KPIs enables an organisation to set and communicate it's performance targets, and to measure whether it is achieving them.
What is the Benchmark Index?
The Benchmark Index is the largest database of SME performance data, with over 5000 companies benchmarked. It is becoming recognised as the model for business sectors and has become international - 8 European member states use it as well as Australia and South Africa, etc.
The Benchmark Index looks at the whole of a business:-
Financial & Management - "hard" indicise that are quantitive;
Business Excellence - "soft" indicise that are qualitative.
How does Benchmarking Work?
The Process The benchmarking process has been designed for maximum simplicity and time-efficiency, with a commitment to generating organisational improvement and an efficient data collection mechanism. A number of benchmarking organisations and initiatives exist. Of these, the Benchmark Index is one of the most comprehensive. Using a computer-based system, it provides the objective results and expert human support that enable companies to implement new and effective business strategies. There are over 100 questions measuring business performance in areas covering not just financial results, but perhaps more importantly the drivers that have led to those results.
There are four basic steps to the benchmark process:
Step 1 - Gathering Information - The first step is filling in the questionnaire(s), by answering a series of quantitative and qualitative questions on your company. The process is facilitated by an experienced business advisor, who is on hand to help you with any questions.
Step 2 - Comparing & Understanding - With the help of your advisor, you select the organisations against which you want to be benchmarked. Your advisor transmits all the data to a secure database, which immediately generates your Benchmark Index report. The report provides comprehensive and quantifiable performance indicators, highlighting your company's strengths and weaknesses against those of the comparison group chosen.
Step 3 - Analysing the Information - A preliminary analysis is carried out by your advisor with the aim of starting to identify the key improvement areas that you should focus on. The report is considered alongside your advisor's prior knowledge of the organisation and its vision for the future.
Step 4 - Implementation - Armed with the report your advisor visits you and together you review the results. This process is invaluable and provides the catalyst for change and improvement. A clear action plan is developed with you to ensure that strategic decisions are implemented on a controlled and systematic basis.
Key Benefits to Your Company
The use of the benchmark index gives you more control of your business through objective measurements which:-
- Compare your company's performance against others
- Identify where improvements are required
- Prove the gains from improvement initiatives
It also provides a pathway to project performance improvement and enhances management information to quantify:-
- Your company's ability to use best practices
- Industry norms and trends.
Since the launch of the Benchmark Index a series of benefits have consistently surfaced from participating companies. Specifically, they show that benchmarking has helped them to;
- Improve productivity
- Improve competitiveness
- Overcome competitive threats
- Address growth issues
- Gain a complete picture of the business
- Open minds to new opportunities
- Attract funding
- Develop a strategic action plan
- Improve relationships with customers
Remember - the Benchmark Index is only the starting point - Benchmarking is a tool for continuous improvement..