What is Benchmarking, and Do I Even Need It?
In the world of business, it may seem that there are too many innovative tools to keep track of and follow. Because of this, the process of “benchmarking” proves to be an effective tool that you should educate yourself on. When used properly, benchmarking helps you and your business to continue to grow in the years to come. But what is “benchmarking?” To put it simply, benchmarking is the process of measuring the performance of a company’s products, services, or operations against those of another business that is considered to be the best in the industry. In other words, benchmarking allows you to utilize these comparisons so you can identify new opportunities and strategies.
“Benchmarking is not always about comparing yourself to other companies. It is also collecting internal data within your own company and comparing these reports daily,” said Kimya Cajchun, Director of Events and Benchmarking at ACCA. “This is insider information that is available for you to uncover. If it is done right, it provides you with knowledge about trends and interests.”
For benchmarking to be successful, it must be conducted and implemented as a structured systematic process. If done incorrectly or applied on a random basis, benchmarking will not provide you with the data and analytics that you are looking for. In this article, we will be discussing the key benefits of benchmarking and the common mistakes to avoid while also providing implementation strategies.
Understand the Benefits
The benefits of benchmarking are endless. However, the most important benefit is gaining the opportunity to truly understand your company and how it functions.
“Benchmarking is your roadmap to success,” said Larry Taylor, HVACR Advisor and Coach. “It’s just like any other trip. If you do not have a plan or a path, you will get nowhere.”
Through benchmarking, you will be able to understand your company better, while also identifying the presence or lack of growth patterns.
“Without benchmarking, I don’t think you can really know how your company is functioning and see whether it’s doing really well or not,” said Cajchun. “You have to know your numbers, and you can’t do that without knowing how your company functions.”
When you truly understand how your company functions, you can understand what aspects are working for you and what are not. Through benchmarking, a thorough analysis helps you identify specific trends and patterns that you have never noticed before. By looking at this type of data, you can gain a better picture on what specific behavior will lead to the growth of your business, and what will not.
“Benchmarking is critical to my company,” said Dan Weis, President of Weis Comfort Systems in Fenton, MO. “If you want to get better, you have to count on and use benchmarking strategies.”
In addition, the HVAC industry is one that continues to evolve. Through benchmarking, you are given the opportunity to identify your company’s competitive advantage. When you are given the opportunity to study your competition, you can begin to understand your competitor’s strategy for success while also pinpointing what sets your company apart from others in the HVAC industry.
Be Aware of Common Mistakes
While benchmarking is indeed a very useful tool, it comes with some disadvantages that you must be aware of. The most common mistakes made when it comes to benchmarking include lack of initiation, lack of context, measurement discrepancies, false comparisons, and unreliable data.
Out of all these common mistakes, a lack of initiation is the most consequential. By not utilizing benchmarking tools, you are preventing yourself and your company from possible future growth.
“Even if it is painful to compare your company to others in the industry, it is the first step to improving your performance,” said Sean Robertson, Vice President of Membership and Business Operations at ACCA. “I like to see benchmarking as a great opportunity to get your books in order and answer your key questions.”
Additionally, the lack or excessive use of context can be considered a downside as it can make it difficult for you to identify important areas that could help you improve your business.
“Minimizing the complexity of your data can still be important,” said Cajchun. “You can still get valuable information out of it.”
Since most companies do not measure the same way, this can also make comparisons difficult and lead to measurement issues.
“You can’t compare your costs to someone who is in a completely different financial situation than you are,” said Taylor. “We tend to compare too many companies in the bucket and come up with a number, but it is important to compare your company with organizations that are most similar to you.”
You may also encounter competitors who do not want to share their data, which could lead you to comparing data from a company that is outside of your industry or relying on the most convenient data that is available.
“Benchmarking is better when you involve your peer groups,” said Robertson. “Inviting other contractors that you know and work with can really bring your company great success.”
Lastly, finding reliable data can be difficult because you may encounter data that is outdated and irrelevant. In addition, there could be companies that are not honest with their data, which can also affect your numbers.
“There’s a lot that goes into benchmarking,” said Weis. “The biggest mistake that they [contractors] can make is to make themselves look better and be dishonest. We want there to be honesty and transparency, as it is the best way to apply benchmarking.”
Start on the Right Path
The most interesting component of benchmarking is the flexibility of it all. At certain times, benchmarking feels like a tool that can be tailored to help businesses of all sizes. If you are a small business, do not let this intimidate you. In fact, starting small may be the best move when using benchmarking.
“At the very least, your expenses and revenue must align. Keep track of that,” said Cajchun. “Start small and set up somewhere that you can expand but be ready for the many options that will come.”
As you are developing your benchmarking process, make sure to acquire all the important details such as developing your own key performance indicator (KPI).
“It’s really more important to have a complete picture that includes the details,” said Weis. “Oftentimes, people like to skip these details because they are uncomfortable.”
Another great option to consider is joining the ACCA MIX Group program. The ACCA Management Information Exchange (MIX) Group program allows contractor-to-contractor networking and information exchange that can help your business succeed. The groups are composed of non-competing ACCA contractor members and when meeting, the primary goal is to improve every company through honest feedback from non-competing peers.
“The ACCA MIX Groups can really get your benchmarking to a whole other level,” said Robertson. “These contractors will really dissect how your company operates and will help come up with specific plans on how you can improve and be better.”
“When you’re in a MIX group, you are giving someone the power to hold you accountable other than yourself,” said Taylor. “You will be able to understand each other’s businesses and gain a lot of information that can help you and your business.”
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