Measuring up

I'm not surprised you are baffled. Everyone seems to want to promote their own schemes, the links between them (where they exist) are unclear, and the whole subject has become rather jargon-ridden.

Fortunately things are not as complicated as they first seem. The ultimate goal of both performance measurement and benchmarking is business improvement. Whichever you choose will give you a better understanding of your business and help you make better business decisions, but they are not magic wands… you need to act on the results.

The difference between performance measurement and benchmarking is that benchmarking involves comparing your performance with others'. Benchmarking adds another dimension to performance measurement as it will give you insights into your competitors' performance as well as your own, and can help you set your own improvement targets. For benchmarking to be meaningful, firms need to compare like with like.

As you are just starting out on your performance measurement journey, I would recommend that you adopt a set of these defined indicators. You will be working to standard definitions that will make it straightforward to benchmark later if you want.

This leads to the next question – what should you measure? For a balanced view of the business you should monitor a range of indicators, typically including customer measures such as satisfaction; financial measures such as profitability; and business process measures such as quality. Bearing in mind that you are going to have to act on the results, don't try to measure too many things to start with. Select a few key areas and concentrate on these. If you know, for example, that you have a problem with predicting cost and time on projects, start with these. If you're not sure which part of your business to focus on you can use one of the national benchmarking schemes as an initial health check.

As you have discovered, there is a confusing number of benchmarking schemes available. To simplify matters you can divide them into three types: self-assessment, questionnaire based and benchmarking clubs.

Self-assessment schemes allow you to calculate your performance using a set of standard indicators and compare the results against published data. The construction industry KPIs are the best example of this. Each year, CBP publishes KPI data including: all construction; respect for people; environment; construction consultants; m&e contractors; and construction products industry.

Questionnaire-based schemes involve you providing data (usually via a website) and receiving a feedback report that shows you how you compare with others. Some of these schemes also give you pointers for improvement, and some need the input of a consultant to help you collect and submit data and interpret results. Examples of this type of scheme include Escahouse (run by ECA and HVCA) and Benchmark Index (run by Winning Moves for the DTI).

Finally benchmarking clubs are where firms share performance data, usually anonymously. The better clubs also run meetings and workshops so that members can learn from each other. Examples of benchmarking clubs include BSRIA's Business Performance Forum and various specialist clubs set up by Building Software.