Business owners looking to improve the performance of their businesses typically explore a variety of options to identify those areas where the largest opportunities for improvement are, along with the best options for driving the changes identified.
The first step is to measure and understand your company’s current performance. The second is to set a standard or goal for comparison in order to assess how well you are performing.
One sound approach is to find out how other companies in your industry are doing and this is often possible by viewing annual survey results published in industry trade journals. Industry-focused consultants should be able to provide more detailed information and explanations regarding results for the ‘typical company your size in a given area,’ along with identifying key metrics and results for high-performing organizations.
This approach of using high-performing companies as a basis for comparison ― whether in overall revenue growth and financial performance or focused more narrowly on a particular function or business process ― is called benchmarking.
Benchmarking is when you compare the operation of your business to other, similar businesses in order to establish a performance level you then strive to obtain. It starts with identifying business processes that are measurable and that exist in other companies. Business processes refer to the set of steps involved in completing a particular function in your business. Examples include:
- The job intake process from the initial phone call through closing after having obtained the customer’s commitment
- The operations steps required to complete a water mitigation or mold remediation job
- The invoicing process from job completion through mailing of the final invoice to the customer.
Industry-specific data should provide the performance levels for high-performing organizations with regard to this process or metric, along with what specific steps are included. This level of performance is typically chosen as the benchmark.
Once you have established a benchmark you can examine how your performance compares and determine where opportunities for improvement exist. Such benchmarking allows you to distinguish the business areas that are doing well from those that need improvement and to focus on the latter.
Identify the processes in your business needed to achieve your business goals. Typical processes include those within the major functions of the business: Operations, sales and finance. Define metrics within these processes that can be used for measurement and comparison. We refer to these as Key Performance Indicators.
Survey your industry ― or work with companies who have a broad base of experience with companies like yours ― to identify the best performers. Understand the levels of performance they have achieved on the metrics associated with your critical business processes. This will establish your benchmarks.
Compare your company’s performance to that of the high-performers in the industry. Make sure the data used for your organization is comparable to the data for a particular benchmark. Identify those measures where a significant gap exists and focus your initial efforts in that area. Look at the factors that influence the data you have gathered and identify factors that you can control. This process is not only about improving your company’s performance so you match the benchmark companies. It is about identifying the opportunities for improvement that will have the greatest impact and explaining the differences between your company’s performance and the benchmark. Typical results will show the following:
- Areas where you are performing at or near the benchmark level
- Metrics where there is a significant gap between your company’s performance and the results for high-performing organizations
- Measures where your company is performing below the benchmark and where there is a valid explanation for why the difference exists.
The third category described above are those where your organization’s performance does not meet the higher-performing companies’ standards and there is a logical, and acceptable, reason why you will not reach the benchmark. One example might be fuel costs for your business. Let’s say the benchmark for a high-performing cleaning and restoration contractor show that fuel costs represent 2 percent to 3 percent of revenue. However, your business is located in a more sparsely populated area and you cover a significantly larger geographic market than most contractors. Your fuel costs run 3 percent to 4.5 percent of revenue. In this case, your results represent an efficient operation in your market and you should not expect to achieve the industry benchmark performance.
The middle category is where you should focus your efforts. Just like in overall business planning and execution, the key to success is keeping the number of things on which you are working at any one time to a manageable number. Select the areas that will have the greatest impact on your business, where the opportunity for improvement is highest and where you believe you can deliver meaningful change.
The next step is to determine who in your organization is responsible for the business process on which you are focusing, engage them in defining the expectations and timing for improved performance, and hold them accountable for defining and implementing the actions that will be taken to achieve the desired results.
Given the local or regional scope of most cleaning and restoration contractors, you might consider soliciting other contractors with whom you have a relationship for their input and ideas on actions they believe will help to improve your performance.
The benchmarking approach is a proven strategy that has been successfully applied across a broad range of product and service providers with companies large and small. Following the saying “why reinvent the wheel,” it makes perfect sense to look to those who have proven to be successful in order to determine where opportunities exist for performance improvement and then tap the experience and resources of others in your industry for ideas and solutions that will result in the positive change you are seeking.
Tom Cline has a 28-year background in sales, marketing and operations. He is currently a business development advisor for Violand Management Associates (VMA) where he works closely with business owners and their key management staff as both a business consultant and an executive coach. To learn more about VMA's services and programs visit www.Violand.com or call (330) 966-0700.