So you’ve decided to venture into the world of Peer Benchmarking and are looking for some inspiration! Excellent. The following is a how-to guide for launching your own benchmarking program.
- What will you be benchmarking?
- Who will participate in the benchmarking?
- When will you produce the benchmarks?
- Where will you use the benchmarks?
- How will you use the benchmarks?
Or, maybe you’re here because a decision maker told you to “make it happen”. We’ve been there too.
Either way, you came to the right place!
Starting a peer benchmarking program can appear daunting, but with the right planning and execution it can be an incredibly rewarding endeavor. Before you just plunge into the deep, though, there are some critical questions you’ll want to answer that will shape your path forward.
What will you be benchmarking?
Make sure your benchmark goals are clear – qualitative or quantitative?
The amount of data available to organizations is growing rapidly – and their general ability to process it is not improving. So the first question you must answer is: which key metrics do you want to benchmark?
Make sure your benchmark goals are clear on their nature – whether they are qualitative or quantitative. Qualitative research relies on sentiment analysis, opinions, and personal/organizational perspectives, while quantitative analysis relies on categorical or numerical data. Both have intrinsic value, but understanding your goal in the benchmarking will help you choose the right metrics.
For example, posing the question “what’s your favorite fruit” is distinctly qualitative, while posing the question “which fruit do you purchase most often” is distinctly quantitative. Both have interesting and meaningful answers which could be worth benchmarking, but they tell you very different things.
Qualitative benchmarking largely relies on confidence indices, arrays, and/or distributions to provide benchmarking insights. Quantitative benchmarking, on the other hand, leverages summary and advanced methods (means, medians, modes, standard deviations, and more!) to compare individual responses against the group benchmarks.
The best metrics and KPIs to track for benchmarking follow the SMART framework:
- Specific: the benchmarks must be meaningful across organizations with different structures, so these metrics must be as specific as possible to ensure an apples-to-apples comparison.
- Measurable: peer benchmarking metrics are most effective where the data to power them is already being created and stored by your team.
- Achievable: choose metrics which will be a continued focus for you, your organization, and your peers for a meaningful period of time.
- Realistic: peer benchmarking is not the place for “aspirational” metrics which are not meaningful to decision makers. Select metrics that will provide the greatest insight into your performance relative to peers.
- Timely: peer benchmarking is most effective in trend analysis over time; look for metrics that change more than once or twice a year for maximum effectiveness.
If you are still unsure what specific metrics to benchmark, consider reviewing some of our standard benchmarking templates:
- Financial Benchmarking
- Compensation Benchmarking
- Operations Benchmarking
- Sales Benchmarking
- SaaS / Software Benchmarking
- Marketing Benchmarking
- Cost Benchmarking
Who will participate in the benchmarking?
Once you have established the key metrics for your benchmarking, you may have a much better idea of who you would like to participate in the program.
In a large organization with many divisions, or in a Private Equity or Venture Capital firm, it’s rare that business metrics beyond a few core financials are shared between groups. If that lack of communication is the catalyst for the benchmarking, you may want to consider limiting your benchmarking Group to internal Members only.
In many other cases, it may be more beneficial to look externally to peers and competitors in your industry to join the benchmarking program. If you’re part of a professional association or media organization, you may be the only independent organization which can benchmark data from your members and audience, which is a great position for you!
When will you produce the benchmarks?
Timing is everything – the best insights in the world are meaningless if they arrive after the deadline for a decision. When building your peer benchmarking program, think carefully about the metrics you’ve chosen and the most ideal time for those insights. For example, financial benchmarks are most effective at the beginning of a monthly/quarterly reporting period, while sentiment analysis can be most effective in a particular industry centered around a major event or economic shift.
Timing is everything – the best insights in the world are meaningless if they arrive after the deadline for a decision.
If you are building a peer benchmarking program as a data monetization platform, also be sure to consider your industry’s specific timelines. If annual events are a catalyst for sales and operational performance, ensure that you have the benchmarks available before and after these events for optimal success.
When planning the benchmarking calendar, it’s critical to consider your data pipeline. Be sure that Members have a sufficient window to collect and provide data, but that the window is not so long that benchmarking insights are stale on delivery.
Where will you use the benchmarks?
You have a plan for the metrics to collect, your targeted Group Members, and you have a good idea on the general timeline for when benchmarks will be collected and produced. Now you must decide where you will store the data and how you will share the benchmarks.
There are many applications which can be used to collect, store, and share benchmarking insights, but our recommendation is to find a strong pre-existing benchmarking platform. Good peer benchmarking software handles all of the technical details on your behalf, including hosting, secure data storage, access control, data visualization, and regulatory compliance.
Be especially mindful of the compliance requirements within your industry and regarding the types of data you wish to share, and across which national and regional jurisdictions.
How will you use these benchmarks?
Peer benchmarking programs can also be part of a data monetization strategy.
The finish line is in sight! You now have a framework for what you will benchmark, who will provide inputs, when it will be produced, and where it will be collected and stored. Now for the most important question – how will you make it valuable?
Peer benchmarking can be used as a way to set organizational goals. It can be as easy as tracking your performance against a goal to have the highest sales profitability, or as complex as using quarterly metrics to ensure your business stays in the top quartile for compensation for a role in your industry. These types of internal applications of peer benchmarking are the most common for Members of peer benchmarking Groups.
For organizations with a diverse organizational structure, peer benchmarking can be applied as an internal tool for assessing key metrics. Private Equity firms can leverage peer benchmarking within their business divisions to monitor non-financial performance trends and provide insights back to their businesses with limited resource allocation. Venture Capital firms can use peer benchmarking on critical KPIs to help founders isolate areas for improvement and create a value-add service for their business development teams to complement their capital.
Peer benchmarking programs can also be part of a data monetization strategy. The aggregate benchmarks and their trends should tell a compelling story – if not, you need to revisit the early metric-selection questions. So why not monetize that story? Depending on the size of your benchmarking group, marketers may be very interested in access to the aggregated benchmarks and their trends. If not through advertising, are the insights meaningful enough that contributing members would consider purchasing access to the data? If so, why not use it to develop a subscription revenue stream built on your benchmarking program?
So What’s Next?
Now that you have answered these questions, you are ready to start building your peer benchmarking program! To find out more about the ways Baromitr can help you accomplish the mission, feel free to contact us.