I have been in many situations where leadership of a business or process want to understand what their goal should be. It is not stated like that. It is more a discussion on how they want or need to better, more “efficient”, faster. This can lead the team down the path of benchmarking. While I understand some of the reasoning and find that the research is usually lacking in at least a couple of respects.

Benchmarking, from my perspective, is done when you don’t internally know what you are capable of and/or what you should expect. This is because terms like better and cheaper are not quantifiable and sometimes are a cover for not understanding the process. So, if someone is doing “better” than the firm you are with, we need to study them! I find that error shows up in at least one of the three major areas:

Not picking a goal that makes sense

Picking the wrong business / process to benchmark

Benchmarking the wrong behavior

Not picking a goal that makes sense. The goal needs to be well thought out and measurable. Not just dollars but what are the input and output metrics that you will be using to understand the process and if you are winning or losing. This also means you know the scope, resources and time required to hit this goal. If you benchmark, do you know how long it took the process or business to get to this point? Do you know who helped them? Do you know how much money it took or their internal ROI? Probably not. What about the external metrics that drive trigger points and countermeasures? You usually won’t even have visibility to internal measurements.

Picking the wrong business / process to benchmark. Hey, I am in the recycling business, so I should look at how other recycling businesses do accounts payable? Don’t limit yourself. Go to the best business that performs this work. Usually, this is hard to duplicate but there are almost always items that you can learn from or adapt to your process. “But I don’t know who is the best, I just know who my competitors are.” Spend about 30 minutes perusing the internet or check at the National Chamber of Commerce and you will find where the best processes are. One of the arguments that I hear is that they have proprietary software. Could be, but they will also have the right information and knowledge that can help you find your solution. After you find the best of the best and glean whatever you can, go back and look at your competitors. Also, when looking at the best, they will usually give you more information than you could ever receive from your competitor or someone with an ancillary or similar product.

Benchmarking the wrong behavior. “I want to watch people receiving my product and my competitor and see what works.” This is a great idea but too late in the process. This is related to the first point in that you don’t know how the company or process got where they are now. You are just looking at the outcome, you may not have any insight into how they did it which, though you can reengineer it, it will probably pale in comparison to what they are already doing. A way around this would be to look at the attributes of the process as well as ask the consumer or customer of the process on why this works or doesn’t. From this you can then back out what you can from your existing process.

This was a little long winded but in the end I want to make sure you look internally for your goals and limit yourself to your competitor as well as understand how you can modify your process to be the best not just better than the next guy.

 

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