Dean Richard Franza’s column appeared in the Sunday, November 8 edition of the Augusta Chronicle. The post can be viewed: https://www.augustachronicle.com/business/20201107/rick-franza-benchmarking-ndash-key-tool-for-business-improvement
As I drive to work each morning, one of the things that is always at the top of my mind is how I can help make the Hull College of Business at Augusta University better.
As the leader of an outstanding team of faculty and staff, my primary goal is improving how the Hull College serves its many constituencies.
Those constituencies include, first and foremost, our students, who along with their parents expect Hull to provide an outstanding and cost-effective education that will ultimately lead to a great job and career in business.
Another key constituency are companies local and statewide who expect us to provide an outstanding workforce of future business leaders.
Finally, our faculty and staff are an important constituency that hope we will provide them a fulfilling and pleasant work environment.
While I think we serve all of these constituencies fairly well, we definitely have room for improvement. In my careers as military officer and as an academician, I have found “benchmarking” to be one of the best organizational improvement tools.
In this column, I will focus on how benchmarking is essential, and how using a “portfolio” of benchmarking types can optimize your improvement.
In my column in two weeks, I will provide examples and tips on how to benchmark far outside your industry to significantly increase your ability to leapfrog your competition.
At its simplest, benchmarking is comparing a company or organization’s performance and/or practices to similar firms and organizations to evaluate how well it is doing – and what it could be doing better.
Benchmarking has been traditionally viewed as a continuous process of measuring a firm’s products, services and practices against its toughest competitors or against companies recognized as industry leaders. The thought is that comparing yourself to the best will yield the most improvement.
Benchmarking elucidates what you might do to perform better. The continuous process of measuring, comparing and emulating should lead to “raising the bar” of your performance.
Ultimately, you are searching for best practices.
There are multiple types of benchmarking that you will see in business publications and the mainstream press. However, I classify benchmarking into three types: internal, competitive and functional. Each has pros and cons, so I recommend every organization use all three to give itself the best chance for improvement. Today’s column delves into internal and competitive benchmarking.
Internal benchmarking, as you might expect, takes place internally in your organization. There are two ways you can do internal benchmarking, and I recommend that you do both. The first is a chronological comparison of performance metrics; the first time you do it can also be called “baselining.”
You compare your organization’s performance over time using a series of metrics similar to those used in what is called a “balanced scorecard,” which examines financial performance, customer satisfaction, internal processes and metrics that chart the learning and growth of your organization’s people. By looking at how these metrics change over time, you can see if your organization is improving or regressing.
A second method of internal benchmarking typically can only be done if you have multiple locations (e.g., stores, manufacturing facilities, customer service centers) that do the same thing. Then, you can benchmark the locations against one another and adopt the practices and processes of the best performing sites. This should improve the performance of all locations.
While internal benchmarking has value, it is of limited use on its own. It provides insight into how much you are improving over time and allows you to transfer knowledge within your firm, but it is less able to tell you if that improvement is good, comparatively. It also provides limited information on “how” to improve.
In fact, if your organization is not a very good performer to start with, internal benchmarking may not help much at all. Therefore, taking the next step – competitive benchmarking – is a must.
Competitive benchmarking is when you measure your performance and processes against the best in your industry. The advantages are obvious. First, it establishes a standard by which to judge yourself. Second, because you are comparing yourself to your best peers, you can see what you are up against and how far you have to go to be competitive.
While competitive benchmarking is extremely helpful when used in concert with internal benchmarking, there are some limitations to competitive benchmarking. First, not all the data you need to benchmark may be publicly available. While some of your competitors’ processes are visible, your competitors are not likely to give you a complete picture of why they are successful. Many firms’ internal processes are protected for competitive reasons.
And even if you can thoroughly benchmark your competitors based on what you can learn, you will only be able to match their performance, not beat it.
So, if you have not been doing traditional internal and competitive benchmarking, I recommend you get started as soon possible.
Be sure to come back to this space in two weeks and I will tell you about a critical benchmarking tool. It will enable you to not only catch up to your best competitors, but surpass them!