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How Your Company Can Go From Good to Great: Benchmarking, Part I
by Jeff Brandenburg

You probably heard of benchmarking even before it became a buzzword in the 1990s. But what exactly is it and can it make a difference in your business? In this two-part article, we will focus on benchmarking and how it can positively impact your company. Part I is a general overview of the process while Part II (which will be featured in the next edition of Grain & Feed Marketing) will delve into the implementation of benchmarking strategies.

In a competitive agribusiness market, owners and operators constantly look for ways to improve their performance from good to superior. But without a clear understanding of how to achieve superior performance, that goal remains frustratingly out of reach for many companies. One solution is to benchmark—to participate in the process of identifying and sharing best practices to improve business processes. Frequently, the actual benchmark —the starting point of future measurement—is made after researching and analyzing competitors, the industry and your own organization’s standings.

“Benchmarking lends itself to all aspects of a business, from revenue to employee retention,” says Steve DeBruyn, Clifton Gunderson’s firm-wide leader of solutions for contractors. “It’s a tool to determine where you are, where you want to go and how to get there.”

Xerox is commonly credited as the benchmarking pioneer. In the early 1980s, the company began comparing its processes to competitors in its industry and successful companies in unrelated fields. In the 1990s, benchmarking became even more widespread and powerhouse brands across the country began incorporating it into their business strategies. Many in the agribusiness industry have also begun realizing the value of benchmarking to increase profits through improvements in productivity and refinement of operations.

Benchmarking Benefits

By measuring your processes against those of other successful companies, you can learn best practices to incorporate into your operations to increase productivity and performance. Benchmarking is typically conducted within organizations in the same industry. However, you can also benchmark with companies in different industries with similar processes.

You can apply benchmarking to your entire operation or a single process, and you can benchmark any kind of process, from payroll and accounts receivable to product development and marketing.

According to the American Productivity & Quality Center, benchmarking can help a company to:

• Improve profits and effectiveness
• Accelerate and manage change
• Set “stretch” goals
• Achieve breakthroughs and innovations
• Create a sense of urgency
• Overcome complacency or arrogance
• Understand world-class performance
• Make better-informed decisions

Because other agribusinesses have likely experienced challenges similar to yours, benchmarking limits costly trial and error process changes; you are seeking to learn from others. There are some important points to keep in mind when benchmarking. The development of the “standard” can be as important as attaining it. Different business activities have different ratios so be certain you are always comparing apples to apples.

“Benchmarking is one of the best ways to determine your company’s comparative strengths and where to improve,” says DeBruyn. “In a tight market, any business can maximize competitiveness by using benchmarking as an edge.”

How to Begin

Benchmarking is a continuous process, so there is no magic point in time to begin. Ideally, you can implement benchmarking strategies when you are beginning short- or long-term planning. For instance, if you have a specific revenue goal, benchmarking helps you determine the best way to achieve it. On the other hand, benchmarking is a valuable step in determining your goals in the first place because it provides a clearer understanding of what is achievable.

Benchmarking starts with a clear understanding of your company’s current processes and measurements. If you are unclear about your own capabilities, you cannot accurately compare yourself to other organizations. Do you want to measure the accuracy of your inventory records? If so, you need to know the difference between your perpetual records and the actual inventory on hand. Do you want to measure how well you manage labor hours? If so, you will need to know how many labor hours you currently spend on a job. Your benchmarking focus will depend on what exactly you want to measure and what metrics you will use. There are a variety of methods to measure your company against others:

• Case Studies – You can research case studies that detail other company processes and measurements. You might find these in business publications and books, at trade shows and conferences and on competitors’ Web sites.

• Trade and Professional Associations – Many industry associations publish trade data and some even offer research services included with membership fees.

• Benchmarking Partnerships – Network with business leaders to find a benchmarking partner. Look for an organization with similar processes and a successful track record. Discuss which processes you are interested in learning about and what information your partner wants. Do not ask for information that you are not willing to share yourself.

• Outside Consultants – You can hire an outside source to gather and share information from a group of organizations. No one but the outside source knows who the information came from, making it less threatening to share information with competitors.

You can also benchmark against yourself by analyzing your most successful and lucrative areas. What did you do in one year that led to better performance in the operation? How did it differ from other, less successful years? If you can identify it, you can begin to strive for that same performance in every aspect of your business by altering processes accordingly.

Benchmarking is a way to help measure success and implement those strategies to other parts of your business. It can be the edge you are looking for to take your company from good to great.

In the next issue, we will discuss the details of implementing a benchmarking process and provide tools for you to use in benchmarking your operations.

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