Using benchmarking metrics to uncover best practices.(Selected Topic)

For companies, embracing change means seeking out and adopting best practices. Benchmarking-the research and analysis of quantitative, empirical data--is a way to isolate weaknesses and strengths and to make connections between best practices and performances. Once these connections have been made, determining which practices are appropriate for an organization to adopt becomes a competitive imperative.

Metrics expert Chris Gardner recently discussed the dynamics of benchmarking for identifying best practices. Gardner is the manager of APQC's Center of Excellence, which helps organizations uncover performance gaps and best practices through benchmarking.

Beachmarking Fundamentals

A fundamental question to ask when benchmarking is: What should we measure? "The key to developing effective benchmarking is to begin by choosing measures that are aligned with the company's strategic objectives," said Gardner. "Collecting data is time consuming and costly, so it is important that organizations have a clear sense of how the data will be used before starting the collection process."

The next step in the benchmarking process is collecting and comparing data to determine how the organization stacks up to others researched. "This is what most organizations traditionally think of as benchmarking," said Gardner.

Metrics allow an organization to understand its operational performance relative to external benchmarks (such as the industry average and top performers) and to assess its own internal progress over time. To ensure comparability, metrics should be normalized (i.e., put on a common unit basis) to reduce issues of operational scale.

Although metrics are useful, it is important to also look at the facts behind the numbers. Simply knowing that cost per full-time employee (FTE) is higher than the industry average, for instance, will not help an organization improve its performance. Instead, Gardner advises analyzing the data to discover what factors (e.g., management practices, systems, and organizational structure) within an organization are responsible for performance gaps and then identifying key practices for improvement.