Use benchmarking with a balanced scorecard for your company
By combining business benchmarking with a balanced scorecard companies can improve commercial performance and drive operation efficiencies. This approach factors in both the performance against objectives and external influences that may affect it.
What is a balanced scorecard?
Most businesses will be using a balanced scorecard whether the realise it or not. It is a performance management report used by leaders and managers to track the strategic and operational performance of their teams.
Essentially it is keeping track of how the business or teams is performing against KPIs. However, this does not tell the full story of how well a company is performing as it does not take into account external factors. This is where benchmarking can help.
What is business benchmarking?
Business benchmarking is typically a process by which you determine success in relation to your competitors. However it can be more than this and some companies compare themselves against other industries and the economic environment. For example an estate agent might compare themselves against their local competition, and also the various statistics available for the overall housing marketing such as the Nationwide Price Index. It might also want to look at consumer spending indices to understand the general confidence in consumer spending.
When companies benchmark they can improve performance, and operate cost effectively.
How do you use benchmarking with a balanced scorecard?
You will need look at your company’s data and compare with your competitors in the industry. This will give you a general understanding of your performance matches up against your immediate competitors. However you will also need to compare against the economic climate, for example retail budget chains might out-perform high street stalwarts during economic downturns.
You should also measure your performance against other industries. Focus on how your company’s growth compares to the worlds leading businesses. Understanding how these businesses are succeeding can help you to make strategic decisions. For example your company might be able to learn from businesses such as Uber, Just Eat or Air BnB. How does their model succeed compared to your own? Why does their proposition resonate with customers? What are the synergies between them and your firm? and what strategic and operational learning can you take?
When benchmarking alongside a balanced scorecard you can compare and evaluate your company with the other companies, to help your business grow. So it is important to use the information, not just collect it for reporting purposes. At one firm I helped it seemed that they were benchmarking against their market just so they justify a decline in revenues, all the businesses in the industry were doing badly. When they looked at other businesses outside of their industry they saw how digitisation could help improve performance. This kick started a similar journey for them which improved performances despite a market downturn.
It is vital to not only monitor performance (using a scorecard) but to also benchmark against various businesses and factors as it can help make huge improvements to performance.