Functional benchmarking – learning from the best

Dean Richard Franza’s column appeared in the Sunday, November 23 edition of the Augusta Chronicle. The post can be viewed:

In my column two weeks ago, I introduced you to benchmarking – an important tool to improve your business or organization.

As we all know, if we are not continually improving, our competitors will pass us as if we are going 30 mph on Interstate 20. Benchmarking has played an instrumental role in the success of businesses I have consulted with and organizations I have led over the years.

In the previous column I presented two essential types of benchmarking: internal and competitive. As I noted, internal benchmarking is done by comparing current performance against past performance and/or comparing the performance of multiple similar locations of your business against one another and adopting the practices of those that perform better. Competitive benchmarking is charting your performance and practices against the best in your industry.

However, as I noted, both have their limitations. Internal benchmarking, while beneficial, only provides insights on how your organization is improving without any opportunity to learn new ways to improve. Competitive benchmarking is a great way to see how you perform relative to your toughest competitors, but it is often difficult to get the details that go into their performance. In this column, I am going to address to how to overcome these limitations.

There are things you can do when competitive benchmarking to mitigate these barriers. First, you might know companies in the same industry as yours who do not compete in the same geographic markets as you. If so, they might be more willing to share how they achieve high performance.

For instance, I serve as volunteer evaluator for AACSB, the accrediting agency for collegiate schools of business. In this role, I travel to other university business schools around the country (currently, those visits are virtual) and learn how they deliver education to students and communities. I have found these visits to be treasure troves of practices that improve how we do things at the Hull College of Business. While on these visits, I do my best to provide those schools with some of our excellent practices.

Other sources of competitive benchmarking can come from your competitors’ former employees as well as their former and current customers. When servicing existing customers or soliciting potential customers, ask about how your competitors do things. For instance, my younger daughter is a student at another business school in the state, as she did not want to stay home for college. So, as a potential customer, she can provide insights on how her school operates.

Finally, when you hire an employee from one of your competitors, you can also learn about their best practices. At the Hull College, we recently hired someone from one of our state/regional competitors and now have new insights into that school.

However, you don’t always have the luxury of learning from competitors, and even when you do, the knowledge gained is limited to those in your industry. Thus, you are less likely to learn practices that will allow you to “beat” them. So, how do you use benchmarking to leapfrog your competition? You do what is called “functional” benchmarking. Functional benchmarking is learning, understanding and adopting the practices or functions of companies outside of your industry that perform at world-class levels.

The benefit is that you learn from the best and they are willing to share their practices with you because you are not a competitive threat.

Many business “functions” or practices are common across many industries. Some that come to mind include customer service, employee recruitment, employee retention, new product development, order fulfillment and supply-chain management. By finding companies in other industries that have demonstrated excellence in areas important to your business, you can reach out to them and apply what you learn.

Emulating world-class functions of non-competitors give you an opportunity to surpass the best in your industry.

As you attend professional meetings and observe companies, you should be able to identify the ones that are excellent at certain functions. Some examples are Chick-fil-A for customer service and employee retention. Reach out to management at Chick-fil-A’s corporate headquarters or even a local franchisee, and I am sure they would be willing to share some of these outstanding practices that help you shine in your markets.

Look at Walmart’s ability to manage its supply chain, in particular its inventory management and logistics systems, to see how you can more cost-effectively manage your incoming supplies and your outgoing products.

Even in the world of sports, professional teams such as the Oakland Athletics and the Tampa Bay Rays in baseball and the Golden State Warriors in basketball have been pioneers in adopting business analytics for success on the field or court.

Hopefully, these two columns have given you the perspective to arm yourself with a portfolio of benchmarking types (internal, competitive, and functional) to improve your business and outpace your competition. I plan to use all three types to help move the Hull College forward!

I wish all my readers a joyful and blessed Thanksgiving.

Written by
Dean Richard Franza

Dr. Richard M. Franza is Dean of the James M. Hull College of Business and Professor of Management. Dr. Franza's primary areas of expertise are Operations Management (OM), Management of Technology (MOT), and Project Management.

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Written by Dean Richard Franza

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The James M. Hull College of Business is accredited by AACSB International and offers outstanding, highly-engaged business education at the undergraduate and graduate levels.