As organizations strive to improve their business impact, better leverage technology, and become more service-oriented, they are increasingly looking to benchmarking. A brief tour will explain what benchmarking is and how you can take advantage of this important approach to improving efficiency and effectiveness in your own organization.



What Is Benchmarking?
Simply, benchmarking refers to comparing yourself against some form of benchmark statistics, trends, or best practices. Commonly used in technology companies to measure the effectiveness of new technology over old, benchmarking is a checklist reality. By definition, a benchmark is a standard by which something can be measured or judged. The goal in benchmarking is to compare your performance against relevant measures to identify strengths, weaknesses, and specifically where to focus improvement measures. In its most common form organizations compare themselves with other organizations to judge their readiness to meet market demands.

A frequent question (of mine) to client companies is: How would your market be affected should you trade key people and resources with your chief competitor. The answers are very revealing, and point to the need for effective benchmarking.

Why Benchmark?
Benchmarking can identify "out of range" conditions--financial, organizational, or operational. Once identified, one can narrow his focus on improving in these areas of opportunity.
Even without formal benchmarking, organizations will likely improve over time, moving up the learning curve as the chart above shows. However they will not see results as quickly without pinpointing key areas of opportunity. Benchmarking points to these quickly and clearly.
HR managers often say they are not sure if their operations are effective. A visceral measurement may indicate areas of success, but without comparisons to peers and industry statistics it is difficult to validate qualitative (instinctive) measures. Benchmarking provides the science that informs greater results.

Models of Benchmarking
There are two fundamental approaches to organizational benchmarking: “competitive” and “best practices” benchmarking.

Competitive Benchmarking
This approach means to compare an organization against peer organizations (or sometimes competitors) in specific, measurable areas. In competitive benchmarking a set of analytical measures is defined, after which the peer organizations are identified for comparison, the data are acquired, and finally, the comparisons are performed. Some things to keep in mind from a national leader in benchmarking (Bersin & Associates):

* Don’t compare yourself against broad industry averages. Many measures (i.e. spending per employee, hours of training per employee) vary widely from industry to industry and across different size organizations. The average may be totally irrelevant to you. For example, the average training invested per employee in the US is $1412 per year. In the retail industry, it is only $250 per employee per year. A retailer that compares itself against the broad industry average will be disappointed and may be driven to overspend.

* Compare yourself against others in your industry and at your size. Size has a significant effect on training benchmarks. Large, global organizations, for example, spend 1/6 as much on LMS systems per employee as small companies. For example, one pharmaceutical company wanted to be benchmarked against 10 similarly sized, global pharmaceutical companies with similar product lines. By going through the process the company discovered it could do a much better job of content sharing across independent R&D Units. A high-technology company interested in improving its customer training compared itself against eight similarly sized product companies with a significant focus on customer and channel training. After extensive analysis the company realized that its training revenue as a percentage of sales was far below industry averages. The company decided to revamp its customer training business unit and replace its LMS with a more flexible approach.

* Build numeric benchmarks on a per-employee basis. Broad budget numbers (i.e. training as a percentage of sales, etc) are helpful, but do not become truly actionable until you compute them on a per-employee basis. The most actionable information is highly "normalized" against the number of employees and other similar measures.

Best Practices Benchmarking
The second form of benchmarking is more qualitative. In best-practice benchmarking the organization decides where to focus its learning efforts. They may be processes, workflows, systems, tools, and methodologies used by other organizations.

For example, many learning organizations are currently trying to identify the best practices in e-learning content development. Professionals are asking questions such as: "How might we organize ourselves to best develop high-quality content in an efficient and reusable manner? What tools would we use? How would we collaborate with SMEs? What is the best approach for a company of our size, in our industry, with our types of training?"

In this approach to benchmarking an organization reviews case studies of companies with similar problems, talks with these organizations, and learns what works.

The key to “best-practices” benchmarking is focus. Define specifically what area you want to improve (competitive benchmarking will help you here), and then search out the right set of peer organizations to study and interview.

The How To
A key aid to both competitive and best-practice benchmarking is to gain access to unbiased, relevant research, available from a variety of sources:

1. Up to date publications with detailed, actionable information such as field research. If purchased or downloaded, it is important to have access to the source data to filter and sort by industry, organization size, geography, and focus area. If the data is not carefully cleaned and analyzed, it may be biased or from too small a sample size.

2. In-depth case studies and examples of how companies have solved similar problems. Trade shows, industry webcasts, and research are some ways to get it. Most employing the technique are happy to talk about their experience. Their professional development partners will put you in touch with clients that are successful with the method.

3. Talking with your peers. When visiting a trade show or attending a webinar, take the time to review notes with a peer. A face-to-face meeting or a one-hour telephone call are sufficient. If purchasing a product, call vendor references and ask precisely how they used the product to solve the problem you are facing.

4. Contact a development firm that has the ability to help implement a benchmarking program. Some have large databases of training industry trends, statistics, and best practices, as well as advisory services to get you started.

Benchmarking is very new to the learning and development industry, but it borrows on common sense approaches to organizational solutions. It’s as natural as comparing pricing before buying product.