Benchmarkingcan be one of the best ways for businesses to measure and then improveperformance. Benchmarking exists and is used in just about every industry to a significant degree of success. However, thereare risks associated with benchmarking which should be identified if the association is to mitigate them. Perhaps the most significant risk is that the results may not be apparentor provide businesses with a decisivestrategy which means it is open to interpretation.
Anotherrisk is errors. Even if associations are benchmarking carefully collected data, there is still a possibility of mistakes. Errors can cause benchmarking resultsto be skewed. Many times, businesseswould make the right decision based on bad benchmarking results. So, it is upto the association to check and then double check every data point.
Fishing Out Unreliable Data
Itcan be quite challenging for an association to findand remove errors with the data they gather. We can say from personalexperience that auditing the data collectedcan be expensive, time-consuming, not tomention the fact that it can also be pointless at times. However, when it addsto the cost of benchmarking, it can no longer be offered for free. But thenagain how many members will be willing to pay depends on the industry and howmuch they stand to benefit from the final benchmarking results.
Benchmarkingis susceptible to being manipulated whichin turn leads to further manipulation by meansof providing false data. We have seen that if participants believe thatthe benchmarks are wrong, inconsistent or unreliable, they will be moreinclined to offer incorrect figuresdeliberately. Their goal is to appear perhapsto be better than other businesses, butin doing so, they are muddying thewaters.
Onthe flip side, if participants trust thedata yielded by benchmarking, and are interested in learning from the results, they will be more inclined to ensurethat the data provided is of excellent quality. Good data means that benchmarkswill be reliable which further motivates member businesses to provide solid data.
Data Entry Errors aka Clerical Errors
Oneof the most fundamental issues with gathering data via surveys is data entryerrors. The errors can be the fault of businesses who were entrusted to sharetheir data or clerks assigned data entry tasks. So, the errors can either bedeliberate or by mistake.
However,one of the most common causes of errors is the in the interpretationof what is being asked. Take for instancea survey question that asks “How Much Did Your Business Earn in 2018?”. Abusiness that answers that question can either state $20,000 or $26,000. Bothwould be correct since one is the company’s net profit while the other isn’t.So, if the question does not state net profit and define a duration for the earningsreport, it will invite errors as eachcompany will interpret it differently.
Associationsalso need to consider that some businesses may not be able to provide therequired data the way it is needed. One reason for that is that the company isstructured in a certain way where reports for that particular metric aren’t generated. However, if that change inthe way the business is reporting thosefigures is not considered, it will ruinthe final benchmarking results.
Deliberate Errors Entered into the Benchmark
Oneof the reasons to benchmark is to get a solid direction in which way thebusiness should head to progress. However, deliberate errors entered into the benchmark aka data manipulation can causeserious issues. Most times it is the industry’s underperforming organisationsthat tend to manipulate the data in their favour. In doing so, they may appear to be successful when infact they are not only hindering their progress but those of others with incorrectindustry statics.
Identifyingthese businesses and holding them accountable can take time and till then thebenchmarks are incorrect. The industry finds it difficult to progress as aresult. That said all is not lost!
Overcoming Incorrect Benchmarking Survey Data
Ifthe benchmark is designed with a precisegoal in mind, minor data entry and other unintentional errors will not make a significant difference. Reliability of thebenchmarking results improves greatly if everyone knows that the results willbe used to learn and in turn grow.Associations can use benchmarks as a way to show how other businesses have usedthe results to improve. Creating awareness of why it is essential to share correct data, and how it is useful to everyonealso works well.
Anotherway to overcome incorrect data in benchmarking is to use verified information.Sources like annual statements can help to double check and confirm if the data provided by a business isaccurate.
Associationsshould also make sure that each question asked is clearly defined. If requiredexplain why that particular question is being askedas part of the survey so that businesses don’t feel apprehensive sharing theright data. If anything, avoid creating rankings which make smaller or start-uporganisations look bad or underperforming in the industry.
Dealing with Uncommitted Members
Whenmembers are not sufficiently committed to benchmarking programs, you’ll hearobjections against things like data surveys, benchmarking surveys, analysis, etc. If anything, there will be a lack of willwhen it comes to accepting the results.
Oneway to deal with such resistance is to hold the stance of the many reasons tobenchmark. You can reduce resistance by making it clear that benchmarking is atool and as such can be used to help a business grow. It isn’t a way for theassociation or the people related to it to make money or find faults.
Associationscan also help members read the report and draw valuable conclusions. If youwant members to improve then get a team of consultants who can help members.They can also help members fine-tunetheir performance. All of this will help to eliminate friction caused bymembers who are not complying but instead creating hurdles.
Changing Participants
Regardlessof your industry, evolution is guaranteed. New players enter, older ones may exist, andthere may be acquisitions. However, all of this means that each year theparticipants may change. The majority of participants may remain the same, but some may even stop participating. You mayalso have many new participants.
Varyingparticipants make it pointless to compare the benchmarking results from oneyear to the next. However, a benchmark can also berun for participants that have participated each year without fail.Perhaps set the bar at the past five years mark. Now the data can be comparedto see how far the industry hasprogressed, as well as individual businesses.
Conclusion
Mitigating risks associated with benchmarking requires understanding them. Above are by no means the only risks and their consequential solutions. However, they do offer a good starting point for associations who are getting into benchmarking. It can also help fix issues with associations dealing with incorrect benchmarking results.
