The Four Phases Of Successful Benchmarking
By Jamal Starr, CEO, Starr & Associates
Executive leaders and their respective staff often find it difficult to allocate the appropriate time and resources to understanding where opportunities for strategic or large scale operational improvements exist within their organizations. It can be difficult for managers to assess the relative effectiveness of an organization’s value chain due to a lack of clear comparative points. Comparative data points are often hard to identify and when they are identified, they are equally as difficult to interpret. When conducted properly, benchmarking allows managers to develop comparative insights that spur transformative thought often leading to enhanced organizational performance.
To identify comparative points of relevance, it is necessary to understand certain characteristics of your business operations, its customers and products. Commonalities between organizations can include product, organizational structure, scale, size, delivery model, transaction volume, and customer segments among others. It is important to know which parameters are relevant to the benchmarking analysis at hand. For instance, benchmarking the average transaction times of a high-end HVAC installation company may have absolutely no synergies whatsoever with a similarly sized, but price differentiated firm in the same industry. However, a sophisticated biomedical air filtration installation firm of similar size may provide more appropriate comparisons. Understanding the unique nuances of your business and what differentiates it is what makes Starr & Associates’ approach to benchmarking reliable and effective.
When executed effectively, benchmarking provides managers with the insights needed to drive targeted strategic and transformational initiatives that have significant impact on the company performance. Resources can be aligned to focus on portions of the organization that will yield the greatest benefit to overall performance, while not disrupting the support of day-to-day operations of the business
Phase 1: Current State Assessment
Our business scientists are experts at understanding the operations and performance of your organization. Our broad set of data collection tools enable us to understand, measure and provide insights into the areas of opportunity within your value chain. Our information collection tool kit includes: direct observation, time/motion analysis, operational data intelligence, stakeholder interviews, surveys, internal polling and internal focus group facilitation. Once we’ve collected the necessary information, we develop a concise and accurate depiction of your business model.
Phase 2: Benchmarking Participant Identification
The key to a meaningful benchmarking exercise is largely contingent upon the benchmarks included in the study. Unfortunately, selecting the best benchmark comparisons is not as simple as choosing intra-industry competitors and providers of like products or services. Oversimplification of the selection process can lead to missed insights, erroneous conclusions and wasted effort. We use an in-depth methodology in selecting the appropriate benchmarks. A deep analysis of synergies, practices, and performance of benchmark organizations allows our business scientists to optimize the sample of benchmarks around the pertinent piece(s) of your value chain. Considerations include: product/service complexity, product/service delivery model, customer segment similarities, promotion alignment, delivery channel similarities, complexity in product realization processes and cost structure.
Phase 3: Comparative Analysis
To truly understand key comparative differences between benchmarks, it requires the experience, training, and operational subject matter expertise that allows for positive identification of significant performance differences. The operational and financial expertise of our business scientists allows for a deep structural understanding of these differences. This understanding allows our practitioners to discern whether performance variation is a result of execution differences or merely a result of industry noise. We apply technological, quantitative, and operational knowledge to understand the drivers of performance trends and then identify the benchmarks that demonstrate best practices and greater proficiency in execution.
Phase 4: Strategic Prognosis
Once a comparative analysis is performed and operational drivers are identified, our strategists investigate further to develop and test hypotheses around how to enhance your organization’s performance through adoption of best practices. Operational know-how and real world experience is required to determine if practices are transferable. In the event they are not, our strategists dig even deeper to understand what attributes about the practice are responsible for the superior performance. These attributes are then tweaked and applied to your organization through collaboration and disciplined implementation.