P e r f o r m a n c e    b e n c h m a r k i n g

Definition:

Performance benchmarking is the collection of (generally numerical) performance information and making comparisons with other compatible organisations.

It answers the question:

What are the most important performance yardsticks and where do we rank, compared with others in our industry and other analogous industries?

Ideally performance benchmarking is repeated over two or three years, so that progress can be effectively monitored.

Characteristics:

• Focus: a number of performance indicators, possibly covering a range of activities in the organisation.
• Partners: a number of separate organisations agree at the beginning of the project to share data.
• Form of comparison: data gathered from each partner is circulated in a report.
• Confidentiality: the identity of partners as a group is known, but each partner's data is masked in the report by a code. Each partner knows their own code but not the codes representing the other partners.

Method:

1. Form syndicate: a group of organisations, or branches of a single organisation, forms with the intention of sharing data with each other, on a strictly confidential basis. They usually choose a range of performance indicators that are of interest to all or most members of the syndicate.
2. Choose measures: a Benchmarking PLUS consultant works with the syndicate to develop the data structure to be used.
3. Collect data: the consultant develops a data gathering template and syndicate members provide the data.
4. Analyse data: the consultant analyses the raw data provided and develops ratios, percentages and other derived data so that performance indicators can be accurately compared.
5. Produce report: the consultant provides a confidential report, using codes so that each syndicate member can identify their own data but is unable to attribute results to other syndicate members.
6. Repeat annually: since it is most useful to monitor progress over time, the study is repeated annually at least twice.

Advantages:

• Allows a wide range of performance indicators to be studied.
• Protects confidentiality of all partners.
• Allows comparisons with competitors to be made.
• Assists in identifying priorities for improvement.
• Allows performance shortfalls to be clearly seen.
• Can use performance indicators at a variety of levels.
• Provides a cheap way of making comparisons internationally.

Disadvantages:

• Difficulties getting agreement on what indicators are to be used.
• Difficulties in defining the data.
• Gives only limited information about how to correct performance shortfalls.

Pitfalls to Avoid:

• Not spending enough time up front to get the right framework of performance indicators.
• Not defining the data items correctly and consistently.
• Not collecting the data accurately.

Outcomes:

Performance benchmarking can lead directly to improvements, but often it is an ideal pointer to specific processes that may be improved through in-depth study using process benchmarking (see separate Fact Sheet on Process Benchmarking).

Optional Approaches to Performance Benchmarking with Benchmarking PLUS:

Option 1: "Private" Syndicate

Under this option, an organisation may assemble a syndicate of its own business allies, suppliers, customer organisations, other organisations in the same or related industries, and competitors. Participation is by invitation only.

A Benchmarking PLUS consultant works with the syndicate to establish the performance indicators to be benchmarked, and defines the data items, usually in a one-day workshop. The consultant then sets up and distributes a data-gathering template. This is usually done via e-mail or other electronic means.

Once the data has been provide by the participants, the consultant analyses the incoming data and produces a report that shows each participant's data in comparison with all the others. Individual participants' data is represented by a code, and only the consultant knows the identity of each participant.

The reports are distributed to each participant.

Option 2: "Public" Syndicate

This option uses exactly the same methodology as the "private" syndicate option. However the participants may apply for inclusion, following publicity given to the study. Under this option an industry association may offer the opportunity to compare performance to its members, who elect to join the study.

Related Techniques:

Balanced Scorecard Performance Measurement can be a useful precursor to Performance Benchmarking, as it clarifies the key performance indicators that are vital to the health of the business.

Process Benchmarking often follows Performance Benchmarking, in order to identify just what changes to processes and practices are required in order to improve performance.