One of the truths about our lives is that comparisons will never end. When a child is growing up it is all but natural for parents to monitor how their kid is developing in relation to his peers. Give it a few more years and once the pressures of academics set in (particularly in the Asian context), parents are wholly obsessed on metrics largely developed and accepted by society at-large to measure and monitor their child’s so-called progress in life. Once the child is at a certain age he doesn’t need his parents to do the aforementioned comparisons and analysis anymore, he does it for himself! And so the saga continues into professional careers and Keeping up with the Joneses is a reality for most of humankind.
On a recent sunny morning in Dubai I had a delightful discussion with the CFO of a leading multinational who wondered out loud – if individuals are benchmarking themselves all the time then why aren’t more organizations doing so? After all it stands to reason that an organization, when defined as a collection of individuals moving toward a common purpose, deserves to not only establish and track its progress towards its True North but also objectively understand how well the progress is taking shape and at what cost (not just talking $ here). Benchmarking is certainly a precursor to any meaningful transformation initiative.
Given the nature of leading consulting firms’ hands-on work with client companies across industry verticals, geographies, size and management backgrounds, consultants have a unique vantage point when it comes to benchmarking metrics, processes and organizational structure, amongst other measurable parameters. In a world where ‘world-class’ is often juxtaposed with jargon for mission, vision and values, the results of a focused benchmarking exercise (where the problem statement is clearly defined) along with relevant analysis will more often than not yield a window for organizational introspection, improved prioritization of strategic initiatives and continuous improvement.
If we were to focus our attention on the finance domain for the sake of illustration, there are three broad drivers of performance for a company’s finance function, as put forth by our friends at The Hackett Group, a leading consultancy that has completed over 13,000 business benchmarking studies:
The secret sauce then is to examine each of these drivers and the underlying data points to understand gaps and compare the finance function’s ability to execute efficiently (associated costs and productivity) and effectively (service quality and value to the business).
While benchmarking is certainly not some kind of novel concept that needs overt familiarization, it is most certainly an approach that many organizations have ignored either due to a lack of verifiable external data points or the knowledge / bandwidth required to undertake this type of focused work. Indeed, the level of cross-functional buy-in required to hiring the services of an experienced consulting firm to conduct a successful benchmarking exercise followed by objective analysis and internal prioritization of initiatives is often times a deterrent.
This is as good a time as any for business leaders in general and CFOs in particular who understand the value proposition of benchmarking as a means to measure the how in their organization’s progress to move forward with this bold exercise. After all, only the paranoid can survive…and thrive.