Benchmarking analysis is a process where businesses can compare their performance and processes to other companies, or even to other divisions within their own organization. It can help identify best practices, allowing a company to improve their performance by incorporating these practices into their business.
The benefits of benchmarking are numerous, from streamlining processes to identifying weak spots and prioritizing areas for improvements. However, a benchmarking analysis is only a useful tool if it is reliable. Before a company engages in an internal or external benchmarking process, it should first take the time to gather important information and set goals to ensure that the evaluation is beneficial.
What a Business Should Know for Reliable Benchmarking
Before undertaking a benchmarking analysis, a company should carefully consider the purpose of the benchmarking as well as the metrics by which best practices will be measured. With this in mind, the benchmarking can be carefully structured to increase its accuracy and reliability.
What Is the Goal of Benchmarking?
The first step in any benchmarking process is to identify the purpose of the analysis. Narrowing down the focus is critical to having a worthwhile benchmarking analysis. A business can start by identifying the issues or areas that it may wish to improve, or a particular aspect of the business that it would like to evaluate to gain or maintain a competitive edge.
For example, if a company is having difficulty attracting or retaining employees, it may decide to perform a benchmarking analysis of several different areas, such as the compensation and benefits offered to employees. A benefits benchmarking could then evaluate the types of benefits offered by competitors or how its current benefits package is being utilized by employees. Each type of analysis would lead to different results, which is why it is important to clearly define exactly what the analysis seeks to achieve. By establishing the goal of a benchmarking analysis precisely, a company can make sure that its benchmarking analysis is more productive, useful, and reliable.
What Is the Current Process?
To successfully compare one process or procedure with another, it is vital to understand the original procedure. Without current knowledge of the process prior to the benchmarking, the analysis may lack focus and waste time and energy.
Without a full understanding of the current process or procedure, it will be difficult to drill down into problems or to make a valid comparison. For example, if a company seeks to perform a benchmarking analysis on how its products are distributed, it is first necessary to understand each step of the distribution process. Gathering this information may help to identify potential problem areas, which can then be utilized to limit the analysis further to increase its utility. It can also aid in choosing a competitor whose process is similar and better than its own, which will make a benchmarking analysis more useful.
What Data Will Be Analyzed?
The value of a benchmarking analysis will be low if it is not accurately comparing or evaluating items. An analysis of two or more companies will only be valid if the same things are analyzed, and performance is measured in the same way. This is why it is important for a company to set firm standards for what data will be analyzed and how it will be analyzed at the outset of a benchmarking analysis.
If a hospital seeks to determine how effective its medical professionals are at treating patients in the emergency room, for example, there are several methods by which this analysis can be performed. A benchmarking analysis could look at how quickly patients are treated, whether the patient returns for follow-up treatment, or even how the patients rate the quality of care. The process could be entirely internal — comparing doctors against their co-workers — or could involve looking at similar information from competing hospitals. To perform a reliable benchmarking analysis, the data to be evaluated and the methods of analysis must be identified ahead of time — and it must be measured in the same way each time. If hospital A uses a different metric to determine when a patient’s treatment begins as compared to hospital B, then this information will not likely be helpful in determining how quickly patients are provided medical care.
The metrics for a benchmarking analysis should be clearly defined, and should be in writing to assist in the process. This will help ensure the accuracy of the measurements and the ultimate usefulness of the benchmarking analysis as a tool to help a business improve its processes.
Performing a Benchmarking Analysis for Your Company
If you seek to improve your business, a benchmarking analysis can be a critical tool to determine weaknesses in your current policies or procedures and to identify best practices. A benefits consulting group can assist your company with analyzing your current benefits program or the number of claims made against your various policies. Contact The Business Benefits Group today to learn more about how you can obtain a reliable benchmarking analysis.