Why Benchmark?
Information is more readily available than ever before and depending on a company's adjustment to this reality, the large amounts of data quickly become an opportunity or a burden. Companies often become so overwhelmed with the amount of data that the easiest solution is doing nothing with the information.
On a data analysis spectrum, companies fall somewhere between performing little or no data analysis and conducting peer benchmarking/best practices analysis. Determining where you are on the spectrum is not as important as where you could be or what the benefits of moving up the spectrum could bring to your company's results and culture. There should be consideration for time and personnel, but most companies find as their data analysis culture develops and matures, company performance improves.
Companies embracing a data analysis culture use benchmarking in analyzing performance. An effective benchmarking analysis includes more than an analysis of expenses and staffing. It is completed with the goal of defining best practices that will lead to superior company performance. In addition to data comparatives, the search for best practices involves an understanding of processes driving the quantitative results in your own company and against peers. Comparing numbers without understanding the underlying business practices can lead a company to make incorrect assumptions about performance. Or worse, not understanding the business practices could bring about a practice or strategy that may lead to poor performance. Benchmarking is meant to be an additional management tool, not a replacement to the tools already in place.
Benchmarking shows the cost of doing business, but this does not mean that expenses should always be low. Sometimes there is a risk to under-investing. Companies under-investing in their competitive advantages may miss strategic opportunities.
Benchmarking is a key element in the process for business improvement. Companies that excel in the benchmarking process take the outliers and drill deeply to understand the causes. Are these causes the result of a management decision? If not, should the company do something about it?
