Industrial Engineering

Benchmarking Made Easier


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Benchmarks can tell us how we stack up

In my work, i’m often asked for benchmarks. As an IE, the term benchmark means a standard of comparison. Benchmarks can tell us how we stack up compared with other organizations that may have business functions similar to ours. There is more to benchmarking than meets teh eye. First, we have to define the terms that we are benchmarking. For example, what is full-time equivalent, and how do we calculate it? A full-time equivalent is usually used for calculations to convert worked hours into the number of full-time employees required to achieve those hours.

Since salaried staff are paid the same amount regardless of the number of hours worked, most benchmarks will use paid hours for salaried staff instead of actual hours worked. A clear definition is the essential basis to benchmarking. There are different types of benchmarks as well. Financial, operational, satisfaction and quality are a few that come to mind. Each has many potential sources for data.

This bring me to the next layer of the benchmarking onion. Choosing a company to benchmark is just the first step. Next you have to select a compare group for the organization. Considering multiple compare groups is another strategy, especially for organizations contemplating new markets or service lines.

The fourth step is interpretation. Once the data has been defined, a system selected , and a compare group identified, the data is received. While interpreting the data doesn’t require a degree in statistics, it does require a bit of thought and understanding of what went into the data. As an example, an organization may set a goal to be above the “90th” percentile in all “key” metrics.

Not only we need to know where we currently stand, how we compare to others, and the goal we want to accomplish, we also have to create a plan to get there. At this point, finding who is performing well and contacting those organizations are good ways to figure out how they are doing it.