The ten most common errors in benchmark analyses

Benchmarking is far from a new thing. The concept, which was considered innovative at business schools 20-30 years ago, is now used quite commonly, at least in certain cases. In a dynamic economic reality where product life cycles are getting shorter, competition is intensifying, and new ways of fighting for clients are appearing, everyone is watching what everyone else is doing and asking themselves the same question: “How are they coping under the circumstances?” This is the foundation of benchmark analysis; however, it isn’t difficult to make mistakes that would make the whole process less effective. Which mistakes are the most common?

[1] Not preparing the process

Understanding the need to observe the business environment and improve one’s own company by comparing it with the market leaders isn’t benchmarking in itself. In this process, we can identify several key steps that occur in each case. Practically any one of them could cause problems - problems which must be overcome for the whole process to be successful.

It’s critical not only to define the purpose of the benchmark analysis, but also to build a realistic plan of action. This cannot be achieved without a committed team that will supervise the actions taken and authorise the solutions developed in a specific way. It’s worth considering supplementing your team with external consultants - their objectivity can be a great added value. It’s also extremely important to inform your entire staff about the project. If you don’t, your employees may resist any changes - or even sabotage them - regardless of how significant they actually are.

[2] Focus on reducing costs

Benchmarking should help you improve how your company functions, but that doesn’t automatically mean reduced costs. This is a mistake made by managers whose main goal is to cut costs, and who are using the benchmarking project to justify those cuts.

That would be a complete misunderstanding of benchmarking. It may turn out that implementing the best market practices requires additional investments, including investments your company simply cannot afford.

On the other hand, remember that over any significant period of time, the benchmarking project itself could lead to higher expenses, especially those related to collecting data. So if it’s really only about cutting costs, it’s better not to get benchmarking involved.