Benchmarking gives your organisation context for setting better goals and objectives within the company.
However, benchmarking isn't always straightforward and isn't always especially productive. How exactly is benchmarking supposed to work? And what are the biggest mistakes holding your organisation back?
What Is Benchmarking?
Benchmarking is the process of choosing industry metrics and performance statistics so that you can measure and compare your own business's performance against them. For example, you might know that businesses in your industry have an average conversion rate of 1% for landing pages associated with PPC; with this knowledge, your 0.5% conversion rate might motivate you to make further improvements, or your 2% conversion rate might give you confidence that you're doing things right.
Benchmarking can be extremely valuable for analysing your own performance, determining your strengths and weaknesses, tracking progress, and even celebrating milestones. But if you want to get the most value out of your benchmarking systems, it's important to avoid some crucial mistakes.
The Biggest Mistakes Businesses Make With Benchmarking
These are the biggest mistakes that businesses make with benchmarking.
1. Not knowing the big picture objective. Sometimes, business owners and data analysts get fixated on specific, granular details rather than zooming out and looking at the big picture. Before you practice benchmarking for your organisation as a whole or any individual component within it, you should understand the context of your big-picture objective. What, specifically, are you trying to accomplish, and how is benchmarking going to help you?
2. Tracking too many KPIs. There are key performance indicators (KPIs) for almost every conceivable department or business function. However, not all of them are going to be valuable to your organisation, and they certainly aren't all equally valuable. If you track too many KPIs, they begin to lose meaning, and you lose the ability to optimise your processes for any individual function. One of your earliest priorities should be narrowing down the list to only the KPIs that matter most for achieving your biggest objectives.
3. Relying on generic, universal KPIs. Similarly, it's a bad idea to rely on generic, universal KPIs. A quick Google search will help you discover a long list of vital KPIs for any industry and application, but it's a bad idea to simply copy and paste that list for your own benchmarking needs. Instead, think about how each of them is relevant to your organisation and its goals, and only include the items that objectively fit.
4. Choosing the wrong peers. Some businesses make the mistake of choosing the wrong peers. They look at global averages rather than averages for their specific industry, or they don't drill down to a specific application when seeking data. This is going to lead to unrealistic expectations and poor guidance overall. You should seek to get data from the most similar peers possible.
5. Not vetting your sources. It's also important to vet your sources. Just because you found an industry benchmark online doesn't mean that benchmark is the gospel truth. Some organisations are more trustworthy and reliable than others, and it's typically worth triangulating your information so you can further validate it.
6. Failing to consider context. When looking at benchmarks, you need to consider the context. How was this data gathered? How might your organisation be different?
7. Comparing apples and oranges. Never try to compare apples to oranges when benchmarking. For example, don't compare one of your seasonal metrics to an annual metric that applies to your industry.
8. Measuring imprecisely. Benchmarking is only going to be effective if you're deliberate and careful about your own internal measurements. Try to analyse your own data as precisely as possible.
9. Measuring too infrequently. The world is in a constant state of flux, especially in today's technologically advanced age. What was relevant a few years ago may no longer be relevant today, and yesterday's benchmarks will quickly expire. If you only examine industry benchmarks once a year or every few years, you're not measuring frequently enough.
10. Getting lost in the numbers (instead of focusing on action). It’s rewarding and kind of fun to use benchmarks to track and compare your progress, but it’s easy to get lost in the numbers. Instead, it’s better to focus on insights that are actionable. In other words, your analysis needs to be focused on motivating concrete, objective actions. If you're not meeting expectations set by data, what, specifically, are you going to do about it?
Benchmarking can be as simple or as complicated as you make it. But as long as you avoid these fatal mistakes, it should be a net positive for your organisation. Keep measuring and tracking the data points most relevant to your organisation, and never stop improving.
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