Services & Fees

Benchmarking and KPI’s

Which indicators are you tracking to ensure useful insight into the performance of your business?

What can we do?

For the technologically minded, there are a staggering array of solutions to the problem of benchmarking and performance monitoring by KPI. We offer one software package that alone provides more than fifty pre-selected KPIs, as well as the facility to create your own. The whole package merges seamlessly with existing cloud accounting software, so the extra effort required for you to access this valuable information is precisely zero. The information is available in real time, so as soon as your ledger is updated or your bank balance changes, your KPIs will change too. These packages will generally present their information in stylish, interactive and easy to read formats, including dashboards, and are designed to allow modelling such that you can ask the ‘what if’ question and receive immediate feedback.

Aside from demonstrating, advising and guiding you through the implementation of a specific software package, the huge variety of solutions available, and the importance of selecting the right indicators to ensure value, one of the best ways in which we can help you may be in choosing which KPIs are going to be right for your business. It’s here that our experience as entrepreneurs really comes into its own. We have first-hand experience of a wide range of industries, and an extensive network of contacts in those that we don’t know so well. After an initial meeting, we will easily adapt to your market and your style of working, and quickly be able to advise you about appropriate indicators, arrange benchmarking visits and even collaborations with leaders in your industry where this is appropriate.

If the thought of all this technology is overwhelming, don’t worry. We haven’t lost track of traditional methods of measuring performance either. Our speciality is the collection of holistic data and the implementation of strong workflow and information gathering systems, however you choose to handle your books. Give us a call to discuss your specifics.

  • Internal or External
  • Financial or Non-Financial
  • Industry Specific
  • Visible and Available
  • Real-Time
  • Simple
  • Impactful
  • Individual or Team specific
  • Department or Company Focussed

Further Reading

Benchmarking is the process by which an organisation can compare its performance with its competitors, industry leaders and/or with some other measure of ‘best practise’. It is an essential process in the running of most medium and larger companies and can yield large benefits even for smaller operations. Key Performance Indicators (KPIs) are the units of measurement used to carry out this process. A discussion of the process of benchmarking, and the variety of different KPIs that can prove useful, as well as how to go about choosing them, follows:

Benchmarking

Benchmarking literally means comparing your own operation against a pre-determined standard. The target for this analysis may be results, or the processes by which those results are produced. Common dimensions studied are cost, quality and time, but any measurable dimension of a company can be used (customer satisfaction, for example). Specific Performance Indicators – items like defects per thousand units or total lead time per thousand units – are the tools with which these dimensions are measured. Indicators that are considered particularly important for the analysis of a specific company are known as Key Performance Indicators (see below).

Virtually any aspect of a business operation can be a target for benchmarking. The techniques are so widespread that common processes have been developed and documented for approaching each one. Common targets are:

  • Process – How long does it take to execute a particular stage of production? How much does it cost? What is the rate of errors?
  • Performance – A measure of competitiveness when compared with rival firms.
  • Product – How does your product compare with the market leading version? What improvements can be made to a new model? This technique is used particularly in industries with expensive, complicated products, such as the automotive industry where ‘reverse engineering’ is common.
  • Energy – Looking at resource consumption in detail.
  • Investment Potential – Using the benchmarking process to establish the suitability of your company for investors, particularly when compared with other companies in your sector.
  • Finance – An overview of all your financial indicators to globally assess profitability.
  • Strategic – This allows companies to look at how others maintain a competitive advantage, and may involve looking at completely different industries.

There is no single methodology for benchmarking, although key texts in the field by Camp and Kaiser Associates offer 12 and 7 point plans respectively. Some broad principles distilled from these include:

  • Identify Problem Areas – These will be specific for each company and choosing the right areas for investigation will determine the difference between a successful and unsuccessful benchmarking operation. It is essential that the area chosen represents a true area of weakness within the company if the process is to be productive. Often, companies will opt to undertake an extensive period of research before deciding which aspects of their operation to benchmark, but it may be enough to speak with customers, staff or managers in an informal way.
  • Identify Other Industries with Similar Processes – Often, seeing the same task conducted in a completely different way can be very useful in focussing an observer onto the key aspects of the process, rather than on features that are a product of the existing work environment. Human Factors training in medical emergencies, for example, is, to a large extent, informed by the way that the aviation industry trains pilots to avoid accidents.
  • Identify Leaders in these Areas – This may involve speaking with industry experts, consumers and other stakeholders in these industries.
  • Collect Information about these Processes – Both from your own and the target organisations. The latter may involve direct surveys and external research by third party consultants, which often helps to minimise the loss of confidential information. Larger companies are often happy to engage in visits to share best practice and process information, and even to engage in a collective benchmarking project.
  • Implement Change – The benchmarking process is only effective if it results in change that increases productivity, efficiency and/or profitability. The loop can then be closed effectively by assessment of the impact of the new changes.

Key Performance Indicators (KPIs)

KPIs are widely used to measure the performance of a business, either as part of a benchmarking process or as a standalone monitor of performance. Virtually any data-driven aspect of a company can be used as a performance indicator, as long as that indicator is seen to be important to the overall functioning of the company, or at least the department. Key Performance Indicators, therefore, are the most important of all performance indicators.

As with the process of Benchmarking, choosing the right KPIs to measure is critical to the success of the exercise, and the definition of the ‘right’ KPI will be different for each industry, business and department. A Benchmarking Process in itself (see above) might well help to reveal the best KPIs for a particular process. A few common targets are discussed below:

Broadly speaking, KPIs can be divided as follows:

  •  Quantitative (concerned with numbers) or Qualitative (concerned with spectra or binary distinctions)
  • Leading (predictive) or Lagging (historical, descriptive)
  • Whether concerned with Input, Process or Output
  • Directional (concerned with improvement or regression) or Static (giving a snapshot in time)

Beyond these broad distinctions, it is necessary to select specific indicators to reflect the activity being analysed. Some of the common KPIs for different industries are given below:

Sales and Marketing

  • Number of new customers
  • Types of enquiry with breakdowns by age, demographic, etc.
  • Attrition – rate of loss of existing customers
  • Breakdown of the value of particular customers
  • Accounts payable by particular customers
  • Debt Age – the length of time that particular customers have owed you money

Manufacturing

  • Cycle Time – Time to produce a product from beginning to end
  • Cycle Time Ratio (CTR) – This is given by the equation SCT / RCT where SCT is standard, theoretical or ideal Cycle    Time and RCT is the actual or Real Cycle Time
  • Utilisation – Actual vs Potential earnings from the use of assets
  • Rejection rate – A quality control measure

IT

  • Uptime
  • Mean time between failures
  • Lead time on repairs
  • Unplanned unavailability
  • Labour Costs, planned and unplanned
  • Lead Time to Project Delivery

 

The timeframe of a KPI analysis cycle will also vary according to the needs of a business in a similar way to the frequency of leading indicators like Cashflow and Profit/Loss Projection. For companies with a lean management approach or for those keeping a close eye on their performance in a phase of growth or instability, daily or even minute-by-minute reporting can be necessary, whereas a longer timeframe of weeks or months may be sufficient for others.

Traditional Accounting

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Benchmarking and KPI’s

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