5 Steps to a successful Benchmarking Process
Businesses are always striving to be one step ahead of their competition.
With the help of the right benchmarking process, business can compare themselves to the best and drive change through knowledge.
5 Steps to a successful Benchmarking Process
Being the initial step, the planning phase is crucial and generally affects the entire benchmarking process. Therefore it is important to invest sufficient time and attention during the planning phase to ensure that the rest of the phases can be conducted as efficient and effective as possible.
Planning includes identifying and prioritizing opportunities (“what to benchmark”), determining which “best-in-class” companies you want to compare to (“whom to benchmark”) and what success you are expecting from implementing a benchmarking process.
In order to decide “what to benchmark” top management should be involved and decide what products and services or which processes are critical to the company’s success. The next step is to determine the company or organization you want to benchmark against. It is important to keep in mind that there is no “perfect” enterprise and thus several companies should be considered for your study in order to increase insights and findings.
Depending on what you want to benchmark, you should document all relevant metrics of your process, services or product. This step is necessary, on the one hand, to create a comprehensive structure for analysis and, on the other hand, to get an idea of what data you will need from the businesses you want to measure your performance against.
For example, while technical data and characteristics, production times and cost expenditures are of particular importance for product analyses, a closer look at work steps, departments and employees involved as well as working hours is relevant for the analysis of a process.
3. Data Collection
This step might be very time-consuming and most difficult, but is also the most important one in the benchmarking process: collecting data.
Identifying, organizing and structuring data and information is necessary in order to conduct a comparison between your business and the selected companies that will be relevant and useful for further benchmarking activities: The more relevant, detailed and high quality data you can collect, the better and more meaningful your competitor analysis will get.
The tricky thing: Usually companies keep relevant competitive information to themselves and publish as little data as possible, so that a lot of information generally come from many different sources. It is important to implement a strategy to be able to gather necessary information within a reasonable time period.
In one of our previous articles, we took a closer look at the collection of competitive data and how to best organize such information.
4. Data Analysis
As soon as the relevant data for the planned analysis has been collected and is available to the benchmarking team, work can begin on bundling, structuring and mapping the existing information. In this step, it can be useful to refer back to the documentation that has been prepared for your own company in the previous steps.
The resulting structure now outlines your company but also the the other organizations you want to benchmark and enables targeted comparisons between your performance and that of the selected organizations. This process allows to identify weak points and gaps your company might have and analyze why the benchmarked companies are able to perform better than you.
Based on the benchmark analysis and results, you should set goals for the improvement of your company and develop corresponding measures as well as a concrete action plan to improve your processes, services or products.
Tip: In order to fully exploit the gathered data and the defined structure, it can be helpful to include appropriate benchmarking software tools in the process. Such a tool can help to optimally display the desired structure, to store all competition-relevant data in a central location, and to perform previously defined analyses at the click of a mouse and to output them clearly and intuitively.
The results of the prior phases as well as the proposals for improvement should be communicated and presented to the top level management and head of responsible departments in order to gain approval and authorization for the action plan. Securing the commitment and engagement of the management is essential for the smooth implementation of changes and further sends a clear message to all employees. In addition, of course, all employees who may be affected by the recommended changes should be informed as well. They should understand the need for adaption, accept the change and support it in a targeted manner.
After everyone has been informed and is on board, it is necessary to develop a detailed action plan which should include all key activities and key factors that are relevant to improve the process, service or product.
Ultimately, when the changes have been is in place, a report should be prepared, which shows the benefits of the revision compared to the performance before the change and further compared to the expectations during the approval phase. In general it is necessary to establish a system or mechanism to review the performance of the revision and ensure that benefits are retained.
For each individual phase, we have developed a questionnaire with which you can check whether you have observed all crucial points of the respective phase. You can get the question catalog here free of charge.
Benchmarking comes with a lot of benefits for your company.
However, it is important that benchmarking gets the attention that it deserves: Companies have to keep in mind that benchmarking should not be understood as a one-time process, but should be a continuous one.