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Best Practices in Benchmarking

By Deb McClanahan, BroadBandHR Consulting

This article may be useful to any organization undertaking a "first of" benchmarking activity in any functional area or industry — the basic principles spelled out here were developed over a long practice across many industries and types of organizations.

Baseline

It is critical to understand the baseline state of any function that you want to develop benchmarks for. Answering questions such as:

  • Who are the customers that must buy this product or service to stay in business?
  • Who are the customers for whom this is a want but not a need?
  • Who are the customers for whom this is a luxury item?

In addition to detailed and general market assessments, one should also assess factors such as competitors, labor market availability, and other macro-economic factors which impact the current state.

Establish Metrics

This assessment will point toward the development of a set of metrics for ongoing use. The development of the appropriate set of metrics is often where organizations go astray in this process. Metrics often reflect a lack of organizational focus or lack the objectivity necessary to accurately assess performance against competitors. Branding one's company as a "leader in the space" before this fact is objectively true is often a symptom of such bias in the metric set. We have often seen this as a sign of a benchmarking process gone awry — where a key leader has decided what the metrics should be without first establishing the baseline or working the benchmarking process from its start.

Establish the Timeline

It is important to establish a timeline for measurement that matches the product or organizational cycle. For instance if the typical product cycle includes the introduction of a new product every 9 months, then a reasonable time frame for the next measurement may be 9 months or perhaps 12 months. One source of input on the timeline are other survey instruments — how often do industry researchers commonly survey the industry? Does the industry expect new data from major research houses at a particular time of year (for instance December so that budget projections for next year spending are available)?

Decide Who Owns the Ongoing Activity

Is there a natural owner for the activity within your organization? Is there a Project Management Office or another executive function where this process can find a home? Remember that with an ongoing benchmarking activity there is year round activity with some regular peaks to the function. Ensuring that your organization sees this as valuable and worth doing means that it needs both resources and a champion.

Get Input from Multiple Sources

Effective benchmarking always includes multiple sources of input. It is critical to assess the objectivity of each source so that you have reliable information.

Roll it Out Loudly

Benchmarking activities sometimes fail due to lack of attention or lack of executive support. That means communicating effectively throughout the organization why this process is important. Planning an effective process must include thorough ongoing communications, from beginning to end. While some may view this as internal PR for the function, it is essential. Consult with internal communications personnel to ensure that your rollout fits into the ongoing communications calendar.

Summary

While many may think this activity has nothing to do with Executive Search, Headhunting, or HR Consulting, I often find that clients come to me for objective assistance in other spaces, like Business Process Management or Business Process Re-engineering or establishing a first benchmarking process on an area outside of HR.

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