How Benchmarking Supports Cost Optimisation and Strategy

•  Ambiguously defined scope and performance objectives - Key to a successful benchmarking analysis is to define clear and unambiguous objectives for evaluating and comparing performance. A poor understanding of the scope of the analysis, performance metrics that are critical for success, and ambiguous or poorly defined data can jeopardise the accuracy of the analysis and the validity of its recommendations. 
• Outdated data - The business environment is constantly changing. Using the latest data available for benchmarking prevents the analysis from making a comparison to market conditions that are no longer relevant. It enables companies to make informed decisions based on the present state of the market, anticipate future changes more accurately, and implement strategies that are truly aligned with the latest industry dynamics.

• Little comparability and consistency in data and methodologies - It is crucial to ensure that the benchmark data used in the analysis is comparable to the business. Selecting a benchmark that has little relevance or is defined or measured in a different manner to the business will result in erroneous results and insights generated. It is important to also use a consistent methodology to ensure reliability and comparability in results. Employing an inconsistent methodology will usually yield inconsistent results.

• Focused on too many benchmarks rather than those that drive performance - There are often many benchmarks available, however very few of these are the key benchmarks to focus on. Through linking key performance metrics with detailed activities in the business, deep insights can be generated that focus on addressing core challenges in the business.

• Poor contextualisation of the variance between the business and best-in-class - Obtaining the variance in performance between the business and the benchmark is not the aim of a benchmarking analysis. The objective is to take action based on such variances to improve performance. Contextualising why there is a variance is an important step in understanding how the business could approach change to improve performance.
• Subjectivity, bias, and not involving the right people - It is important to remain objective during each iteration of the analysis. Bias and reverse-engineering can lead to a loss of credibility in the entire analysis. It is important to involve a cross-functional team in order to get a well-rounded perspective that ensures all relevant areas are considered.

Fit for Growth provides a strategic approach to cost transformation and revenue growth by aligning expenditure to your strategy.