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What is benchmarking?

These factors include:. Labor productivity "norms" may change quickly, especially following the introduction of competition or rapid growth in demand for services. In summary, the key to choosing and using benchmarks for labor adjustment is in selecting operations and measures that are as comparable as possible. The development of regional, national, and international benchmarking and information-sharing groups is likely to improve the availability, quality, and relevance of data.

Comparative benchmarking provides valuable information on potential levels of overstaffing, even if it is best used in combination with other analyses. See box 3. Given the difficulties in comparing labor productivity in terms of output per employee, one alternative approach is to focus more on benchmarks involving output per unit cost of labor or labor costs as a proportion of total operating costs. In the rail sector, even comparisons of partial labor productivity measures are difficult because of differences in topography, traffic mix, technology, level of past investment, international trade disruptions, industrial geography, and so on.

Use benchmarking to improve your business | Business Queensland

Basic measures such as ton-kilometers, passenger-kilometers, locomotive-kilometers, revenue ton—kilometers are, more often than not, estimates based on tons of freight or passengers multiplied by average length of haul or trip. The difficulty in calculating passenger- kilometer estimates is particularly great on railways with many urban commuters.

Examining staff costs wages plus benefits as a percentage of total operating revenue reveals that, in a number of railways, staff costs alone exceed total revenues from users and are often the largest single cost category. This may be a better way to evaluate labor productivity than using a ratio of staff to traffic units passenger kilometers plus freight kilometers because it factors in differences between labor unit costs in different countries, which might be a reason for some railways legitimately being more labor intensive than others.

In some sectors labor costs are relatively low as a proportion of operating costs or capital costs. In an analysis of 77 electricity-generating plants in 28 industrial and developing countries, the average shares of cost were 10 percent for lubricating oil and materials and 13 percent for labor, but 48 percent for fuel and 29 percent for capital Diewert and Nakamura , based on a data set.

Benchmarking tips

Figure 3. In a few cases the PPI investor may not be very concerned about staff numbers, perhaps because there is little overstaffing or because low wages make labor a small proportion of overall costs. More commonly, however, overstaffing means low labor productivity and high staffing costs. Low wages do not necessarily mean relatively low staff costs. In their analysis of water utilities, Tynan and Kingdom found large differences within developing countries. Average staff costs as a proportion of total operating costs were 39 percent in developing-country utilities compared with 29 percent in industrialized-country utilities.

Even where labor productivity is poor, other factors play a part.

Performance Management and KPIs

For example, high water tariffs in Conakry, Guinea, were only partly the result of low labor productivity by regional standards. High debt-servicing costs, considerable amounts of bad debt, low collection rates, and a high percentage of expatriate staff were other factors Brook and Smith Labor Toolkit: Framework and Overview. Key Elements of a Labor Program. Box 3. A "benchmark" is a comparative measure. Table 3. Benchmarks change constantly as technologies and work practices change.

Process Management Resources and tools to help your organization develop and implement sustainable business management processes. Knowledge Management Resources and tools to help you at every stage of KM strategy and implementation. Advisory Services Workshops and customized consulting services from our process and knowledge management experts. Recently Added Resources.

Why benchmark a publishing organization? (Part 1 of the 2014 benchmarking video series)

Explore the Resource Library icon--arrow--right. The Benchmark Data You Need View the benchmark data you need right now, or submit data about your organization into one of our performance assessments to receive a report that compares your organization's performance to top, median, and bottom performers. Benchmarks on Demand Assessment Surveys.

Once you have identified your key business drivers, you need to find the best way of measuring them. Again, your priority here should be to look for as close a link as possible with those elements of your performance that determine your success. For example, you may decide that customer service is a strategic priority for your business and to therefore start measuring this. But there are many ways of doing so. None of these is necessarily better than any other. The challenge is to find which specific measure or measures will enable you to improve your business.

This type of measurement unit is often referred to as a key performance indicator KPI.

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The two key attributes of a KPI are quantifiability i. See the page in this guide on choosing and using key performance indicators. There are standardised performance measures that have been created which almost any business can use. Examples include balanced scorecards, ISO standards and industry dashboards. Key performance indicators KPIs are at the heart of any system of performance measurement and target-setting. When properly used, they are one of the most powerful management tools available to growing businesses.

The purpose of performance measurement is ultimately to drive future improvements in performance.

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There are two main ways you can use KPIs to achieve this kind of management power. The first is to use your KPIs to spot potential problems or opportunities. Remember, your KPIs tell you what's going on in the areas that determine your business performance.

Benchmarking and improving construction productivity

If the trends are moving in the wrong direction, you know you have problems to solve. Similarly, if the trends move consistently in your favour, you may have greater scope for growth than you had previously forecast. The second is to use your KPIs to set targets for departments and employees throughout your business that will deliver your strategic goals. For more information about using target-setting to implement your strategic plans, see the page in this guide on how to set useful targets for your business. As with most areas of your business operations, the more detailed and well structured the information you keep about your KPIs is, the easier it will be to use as a management tool.

Computer-based management information systems are available for this purpose. Getting on top of financial measures of your performance is an important part of running a growing business. It will be much easier to invest and manage for growth if you understand how to drill into your management accounts to find out what's working for your business and to identify possible opportunities for future expansion.

Most growing businesses ultimately target increased profits, so it's important to know how to measure profitability. The key standard measures are:. There are a number of other commonly used accounting ratios that provide useful measures of business performance. These include:. Bear in mind that even though you are likely to use an increasing number of financial measures as your business grows, one of the most familiar — cash flow - remains of fundamental importance.

Cash flow can be a particular concern for growing businesses, as the process of expansion can burn up financial resources more quickly than profits are able to replace them. Finding and retaining customers is a crucial task for every business. So when looking for areas of your business to start measuring and analysing, it's worth asking yourself if you know as much as possible about your clientele. Looking at things from your customers' perspective can help you avoid getting sidetracked as you consider your options for growth.

Feedback is key - the more you know about what your customers think and want, the easier it will be to cater for growing numbers of them. Look for as many ways of capturing this information as possible, including:. Software for customer relationship management CRM can be a powerful tool for capturing and analysing information about your customers and the products and services they purchase. CRM also enables you to push up service levels by ensuring that all customer-facing staff have ready access to each customer's history.

Selling more to existing customers might be the easiest way of increasing sales, but most businesses aiming for significant growth will need to find ways of reaching new groups of customers. As your business grows the number of people you employ is likely to increase. To keep on top of how your staff are doing, you may need to find slightly more formal ways of measuring their performance.

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  • Informal meetings and more formal appraisals provide a very practical and direct way of monitoring and encouraging the progress of individual employees. They allow frank exchanges of views by both sides and they can also be used to drive up productivity and performance through setting employee targets and measuring progress towards achieving them. Regular staff meetings can also be a very useful way of keeping tabs on wider developments across your business. These meetings often give an early indicator of important concerns or developments that might otherwise take some time to come to the attention of your management team.

    What Is a KPI?

    Looking at employee performance from a financial perspective can be a very valuable management tool. At the level of reporting for the overall business, the most commonly-used measures are sales per employee, contribution per employee and profit per employee. These measures shouldn't be thought of as an alternative to the broader appraisals outlined above, but can flag up issues that might later be explored in more detail in those meetings.

    Expressing employee performance quantitatively is easier for some sectors and for some types of worker. For example, it should be quite easy to see what kind of sales an individual sales person has generated, or how many units manufacturing employees produce per hour at work. But with a bit more effort, these kinds of measures can be applied in almost any business or sector.

    For example, using timesheets to assess how many hours an employee devotes each month to different projects or customers under their responsibility gives you a way of assessing what the most profitable use of their time is. Benchmarking is a valuable way of improving your understanding of your business performance and potential by making comparisons with other businesses.

    It is usually helpful to compare yourself against businesses in the same sector. But your market position and your objectives, among other things, will affect the specific comparisons you want to make.