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Last updated July 2011
As a business improvement process, benchmarking has been around since the early 90’s and is now considered vital in the private and public sector as a tool to improve operational performance and enable strategic re-positioning.
Why does Business Benchmark?
At a strategic level, benchmarking has been credited for literally turning companies around. The earliest example of this came from Xerox, the first pioneer of benchmarking, who used the approach to learn from their competitors in order to redefine their core offering. As a result they were able to regain market share at a time when their business was being rapidly eroded away by global competition.
Now organisations use benchmarking to specifically consider new strategic directions. for the organisation and to improve processes within core business functions such as finance, procurement, HR, sales and others. In Japan, benchmarking is a core management practice - all managers are expected to not only keep up with colleagues but also to surpass them. The process of benchmarking becomes part of a process of continual improvement.
At its heart, benchmarking is a learning activity - as one author on the topic suggests ‘Those that benchmark do not have to reinvent the wheel! (Parker 96).
So what is benchmarking?
Benchmarking is the process of comparing key performance indicators for one organisation with the indicators of others who are considered to represent the industry standard or best practice for that field.
According to the Global Benchmarking Network, this process of comparison can be divided into informal benchmarking and formal benchmarking (sound familiar?!)
- Informal benchmarking is used almost unconsciously by most as we compare our activities, learn from experts, consult with peers and harness the web.
Formal benchmarking is divided into two areas – performance and best practice benchmarking.
- Performance benchmarking provides a comparison of key performance indicators which will vary from function to function. Typically they may be defined in terms of cost, cycle times, customer satisfaction, product performance , absenteeism but generally they are set to provide a standard against which other achievements can be measured. However performance benchmarking alone merely highlights the gap. It is of limited value unless the results are acted on.
- Best practice benchmarking on the other hand focuses on action – why are others getting the results they are getting and how can I improve as a result of that knowledge?
With this in mind, benchmarking becomes more than just comparing where you are with historical data – it has to be a dynamic process that reflects continual change. Equally, benchmarking isn’t just about comparing your situation with those in the identical industry – much can be learned from other industries facing similar problems and a new perspective can release new creativity. Is also isn’t just about outputs – benchmarking has to consider the processes that impact the outputs if it is to have any value at all.
Are our current L&D benchmarks adequate to help address the challenge we face?
According to the GBN, the most popular areas to conduct benchmarking projects are in customer service ,administration, training and human resources, and corporate strategy and planning. And it is good to see Training and HR in the list of popular areas.
We are operating at a time where skills are seen as essential to leaving the recession and with resources being slashed , it is critical that as a core function the L&D function is able to redefine it’s offering, improve performance and take on a new strategic direction.
As we can see from other business areas, benchmarking provides an ideal opportunity to raise the bar within the function in terms of performance, products and focus.
However when we look at typical training benchmarking , the most detailed performance indicators that are currently used include % of staff attending training sessions, % of budget spent on training, average cost per employee, average test scores, in recent years, we’ve also seen the numbers of programmes that are web enabled creep into industry benchmarks.These are all input indicators and so far are all based on the traditional model of classroom training.
But , times are changing and these traditional benchmarks just do not serve the learning and development adequately – new tools, new methods of learning and new business expectations for L&D to respond faster with more just in time learning approaches mean that we need to redefine what good looks like.
Refining what good looks like - a new benchmark for L&D
At the start of our own benchmarking journey, our aim was to investigate how L&D departments were using technologies to make a real impact on the businesses they were serving. With this focus on impact we had to consider new performance indicators for L&D that historically had only belonged in the benchmarking domain of other functions.
For example we considered indicators of efficiency improvement, bottom line business impact, staff motivation and morale as well as take up and speed to competency. This has now given us a measure of ‘performance benchmarking’ that is unique in the industry. But creating performance benchmarks, as we’ve mentioned above isn’t enough. It is just as important, if not more so, to dig into the best practices behind the performance so that we can act on them.
And this is where the process starts to get real teeth! The benchmark has adapted over the years through the input of key industry players and the 1000+ organisations who have participated to date.The focus is always on continually improving the business impact of learning and identifying practical proven, good practice to help deliver performance. Yes we can benchmark informally through excellent industry networks, conferences and access to case studies and articles but a professional , continually improving L&D function needs to be supported by more formal benchmarking processes if it is to rise above the flames of current market fires.
With the help and support of industry, we are beginning to see the TM benchmark step up to that challenge. WHilst it is primarily focussed on the way that technology improves learning innovation, this industry collaboration has ensured that the TM benchmark process is current, representative of L&D needs and reflects the full range of challenges we are facing today. As a result the feedback on the 2010 benchmark todate has been incredible – over 70% of those who have been through it say that the process has provided them with new ideas to take their learning agenda forward – and that is before they have received their personalised benchmark comparison and action plan based on best practice.
Organisations are using it to influence change internally – as one participant put it ‘Taking part in this benchmark is a deliberate strategy by our CLO to raise awareness of how far the organisation has to move to join the modern world!’ Others have just been waiting for an industry benchmark for L&D that reflects the modern world – ‘I believe this is the best survey I have spent my time on. The questions were well thought through and I could for once relate them to my organisation that I support’.