Making the best of benchmarking
12 September 2017
Posted by: Olivia Palmer
Benchmarking is a way of comparing your organisation with similar organisations. It helps you compare statistics and control costs whilst more sophisticated benchmarking can cover process design and business strategy.
Every business can use benchmarking, as Richard Ellithorne, Membership Services Director at the Builders Merchants Federation (BMF) explains to Louise Clarke.
Benchmarking involves looking at and questioning what you are doing and identifying opportunities for improvement and change.
“It’s a measurement of the quality of an organisation's policies, products, programmes, strategies, etc., and their comparison with standard measurements, or similar measurements of its peers,” says Richard.
The objectives of benchmarking are to:
1. determine what and where improvements are called for,
2. Analyse how other organisations achieve their high performance levels, and
3. use this information to improve performance.
Benchmarking is particularly useful for trade associations. Whatever size your association is you can benchmark your performance against other associations in the sector you represent.
To do this Richard recommends the following Key Performance Indicators:
Net Membership Growth and membership Churn Rate
- Subscription % of Total Income
- Commercial Contribution % of Total Income
- Other Income % of Total Income
- Gross Margin % of Commercial Income
Expenditure Analysis: Employment % of Subscriptions
- Employment % Total Income
- Overheads % of Total Expenditure
- Surplus/Deficit % Total Income
- Reserves – months of expenditure
“You can’t manage what you can’t measure!,” he explains. “Associations need to know where they are in their market place. At the BMF, for example, we know we are the fourth largest trade association in construction. We’ve got 80% of the turnover of our sector. Our members’ combined turnover is worth £27 billion. Key facts and figures like this are very important. You should know out of the top 50 or 100 companies in your sector, how many are in your membership.”
The BMF is assisting the Trade Association Forum with a series of benchmarking surveys it is doing with its members. The following benchmarking indices are being covered over several surveys:
Sample and Segmentation Analyse responses to the benchmarking survey by size – subscription income, staff numbers, membership numbers – constitutional form, location and longevity as well as regional and international coverage.
Leadership & Strategy Look at the processes for planning and setting strategic direction; at specific issues in the operating environment affecting trade associations and at specific challenges and opportunities arising from the recession change of government. What are the lobbying goals?
Sector Context Look at both competition and collaboration among trade associations and the perceived scope for rationalisation of sector representation.
Governance Look at the structure, composition and processes of governing bodies.
Management and Staffing Look at the age and background of those appointed as chief executive, at approaches to recruitment and training of other staff, use of standards such as Investors in People and the nature of IT provision.
Member Services Look at the types of services offered by associations and the financial objectives for these services and perceptions of the quality of services.
Membership & Subscriptions Look at patterns of membership gains and losses, subscription structures and levels, the contribution of associate member subscriptions and estimates of market penetration.
Financial Data This section looks at sources of income and patterns expenditure, policies on profits and reserves, levels of reserves and authorisation limits.