Regardless of the current economic environment, business strategy should always take priority. While creating ambitious goals, organization can fall into the habit of focusing on internal growth without observing and learning from the surrounding business environment.
However, with business benchmarking, you can avoid minimal and temporary growth. In the content below, we define business benchmarking and explore why it is important.
Defining Business Benchmarking
Before discussing the importance of benchmarking, we must introduce the term and its functions. Essentially, benchmarking is the term for finding and creating the best standard of performance seen in a specific company. In most cases, the benchmark standard could be drawn from a business competitor or another industry. This strategic process helps organizations stay congruent with the current market and customer needs.
The Process of Benchmarking
As your business begins the strategic principle of benchmarking, the process involves four primary phases.
Phase One: Identify
In this phase, find the areas where your organization is keen to identify actionable insights. These areas could include the cost of production, the amount of critical quality errors in your product, and employee engagement and activity. Essentially, the objective is to identify areas that help increase the value of your business.
Phase Two: Shortlist
After identifying areas of improvement, create a shortlist of competing companies or industries to benchmark.
Phase Three: Collect
In this third phase, take your shortlist to collect the appropriate data concerning your actionable insights discovered in phase one.
Phase Four: Analyze
Finally, assess your acquired data from phase three and compare any gaps between your company’s current standard with that of the benchmark you created. As you compare your current results with those from your shortlist, strategize a new standard to help your company rise above the competition.
Benchmarking vs Competitor Research
Although business benchmarking sounds like competitor research, both strategies represent different steps and purposes. The primary strategy in business benchmarking is to focus on the best practices for your business and identify next steps. While striving for continuous improvement, your business will partner to share information needed to maintain a competitive edge against others in your industry. To help find the best practices for your business, a key benchmarking strategy is to receive and adapt to your customers’ needs.
Separate from benchmarking, competitor research focuses primarily on measuring performance in search of a quick fix or temporary “business bandage.” Often considered corporate spying, this business growth strategy attempts to mirror another company’s process. Although unnecessary for business growth, competitor research can prove beneficial to strategizing marketing goals.
The Importance of Benchmarking
As aforementioned, benchmarking does not follow the same tactics as competitor research by mimicking a successful competitor. As a result, businesses often find themselves reluctant to practice the strategy. With a firmer understanding of the definition and process of benchmarking, take the necessary time to see the importance behind the strategy. Below, we observe a few crucial impacts.
Refocus the Questions You Ask
With practicing business benchmarking, you begin to regroup the way you think about your organization’s success. To best apply strategic thinking for internal and external business applications, begin by asking the following questions:
- How satisfied are the employees with the compensation and benefits offered to them in comparison with employees from other organizations?
- Is the company’s quality focus matching or excelling what is expected from your industry?
- Is your organization’s workforce actively and sufficiently engaged?
- Does your company offer an efficient work environment that enhances performance?
Using specifically targeted questions that generate an assessment and comparison, your business can create and adhere to a new standard. Therefore, by refocusing, you can better implement the benchmarking strategy to boost both internal and external aspects of your business.
Improve Quality, and Leverage Strengths
In addition to refocusing the questions you ask, business benchmarking helps create the blueprint by which to take corrective actions. By understanding the top standard for your industry, you can begin implementing strategic changes that match or excel those of your competitors. As a result, benchmarking reveals areas requiring improvement.
While benchmarking is important when pinpointing where quality is lacking, this helpful strategy also helps you discover areas in which your business shows strength! By enlightening where your business is excelling, you can compare with competitors in the same market.
Enhance and Prioritize Performance
If your business environment finds satisfaction in complacency, benchmarking helps overcome that obstacle. As a result of implementing new and improved standards, business benchmarking allows for enhanced performance throughout your entire organization.
Remember, enhancing your organization’s performance is not a single occurrence. While organizations know the necessity of continuous development and improvement, there may be moments of uncertainty regarding which direction to take. However, by creating and implementing business benchmarking strategy, your organization better prioritizes areas lacking in performance.
Make Cost-Efficient Decisions
Through strategizing in congruence with other competitors, benchmarking provides valuable insight that helps your company make cost-efficient decisions. By referring to technology insufficiencies or inadequate avenues within the business environment, you can generate calculable goals that increase productivity and quality while reducing cost.
Begin Your Benchmarking Strategy with Flynn & Company
Benchmarking serves as a simple litmus to assess your organization’s current standards and how much improvement is necessary to excel above the competition. While benchmarking used to be considered a “good to do” initiative, it now serves as a critical strategy for organizations who wish to stay relevant and gain a competitive edge.
At Flynn & Company, we understand that growth is exciting but works best with strategy. Before making an impactful financial decision, you must consider your business benchmarking standards. As business consultants and CPAs, we bring a wealth of experience navigating complex business challenges – from financial assistance and succession planning to business valuation and multi-state employment guidance. We are poised to guide businesses through successful decisions, transitions, and growth.
Do you have additional questions about our services? We are ready to help! Contact us today at (513) 530-9200 or via our online form to begin a conversation.