NEW ORLEANS — The definition of benchmarking is, in a nutshell, a company comparing and contrasting key metrics against internal and external metrics.
The purpose of benchmarking is to not only look at how a business, like a laundry and linen service, is performing, but also to try and improve that performance.
Kevin Martlage, senior consultant for .orgSource, a business management consultant based in Riverwoods, Ill., shared his expertise on benchmarking during the Clean Show session Consistent Benchmarking for Competitive Analysis here in June.
“Benchmarking can take a lot of different forms, and you can take a lot of different approaches to it,” says Martlage. “If you look at benchmarking, you can go across the industry that you’re in and there’s a lot of different information out there.
“You can’t just say I’m going to do benchmarking and it’s going to be the same for everybody. It has to be very specific with what you’re trying to do and what you’re trying to compare when you’re trying to adjust.”
Martlage says that a laundry can go through the benchmarking steps Xerox developed, but in order to make the process as valuable and productive as possible, there are some key things that have to be done. This includes determining the key performance indicators (KPI) that will be monitored and conducting a group benchmarking analysis.
A laundry also has to be sure the data being collected is accurate, both internally and externally.
“How do you know the data you’re getting is accurate; that’s the big question,” Martlage says. “There may be trust. I know that person, and I know they’re not going to steer me wrong. You may not know what the answer is, but you have to have some way of making sure that the data is accurate.”
In addition, to making sure accuracy is there, he says a company needs to ensure diversity of the data.
“You don’t want to just base your analysis on what this person said or this company said,” Martlage points out. “You may want to get two or three different companies and then compare their answers to make sure that you have a diverse look at those metrics that you’re looking at.”
The laundry also has to have a commitment to the process. As he mentioned earlier, changes have to be sustainable. The process won’t be effective if the plan and action is forgotten. Critical success factors must be identified.
Martlage goes on to say that an organization has to build trust not only with its internal team, but also with the industry.
“It has to be very transparent,” he says. “It’s okay for somebody to say this is how I came up with this, this is how we do it. I want to be very transparent with you that maybe this metric isn’t as accurate as it could be, but you know what, it’s what we’re using right now and can we work together to collaborate on making that accurate?”
LINEN INDUSTRY EXAMPLE
Martlage then looked at benchmarking in terms of the laundry and linen services industry. As an example, he put forth the following situation, focusing on one metric: PPOH.
A laundry and linen service has three locations. Over a four-year period, location one has a slight increase in PPOH. Location two remains fairly stable but with a small dip at times. The third location has continuously been on a decline over the four-year period.
Focusing on the last two years of the period, location one saw an increase in PPOH and location three saw a decrease. The question is why.
“At this point, we can be very emotional and call that manager up and say what the heck is going on,” Martlage says. “Or, we can take a benchmarking approach, take that emotion out of it and let’s get to the facts and see what it is we need to be focusing on to help drive that number in the opposite direction.”
Using the benchmarking strategy, the company goes into the planning stage. It’s already identified the metric to examine (PPOH). It’s identified who the best performers are in the organization (location one). And then the company determines its data collection method and collects the data.
“So, if you start to analyze it, what’s causing that performance gap identified?” says Martlage. “This could be a situation where we’re calling the heads or the department managers or whatever, and we’re going to talk about what’s causing this performance gap.
“You don’t want to sit there and go, ‘How come you can’t be more like location one,’ but you’re going to go in and say we have an issue across the corporation and how are we going to adjust that, and what we do need to do to fix it?”
The operation also determines an acceptable performance level that needs to be obtained.
Next, the company starts the integration process.
“We’re going to communicate the findings of the executive team and necessary personnel,” shares Martlage.
“We’re going to determine the functional goal that’s necessary to reach the desired goal. How are we going to get there? We’ve identified that maybe 120 PPOH is where we want to be as a corporation, and how are we going to get there? And we’re going to set our 2020 goals at 130 PPOH. That’s the goal we’re trying to get everybody to get to.”
The next step is to develop action plans to achieve the goal.
“So, we’re going to say the action plans for location one are going to be completely different for location three, but we’re all going to be working as a team trying to get to that goal,” he says. “So, you’re going to be working with those individual locations about how you’re going to get there. We’re going to implement those actions, and then we’re going to recalibrate those actions.”
At this point, Martlage says it’s important for a laundry to remember that it has to build trust and a culture of improvement in the business.
“If we can talk about it from the very beginning and bring in all the stakeholders necessary and bring in the people that we think may be important and affected by this, it’s going to help because they’re already going to know that we’re going to be looking at this on a weekly basis or a monthly basis,” he points out.
“You’ve got to build that trust. You’ve got to be transparent about it. ‘I’m not here to talk about you losing your job. I’m here to talk about moving the organization forward, and here’s how we’re going to do it. Do you agree with that? Any ideas on how we can do that? I need your help to help me figure out how to get it moving in the right direction. Let’s do that, right?’”
As the practices are integrated into the process, Martlage says the company achieves maturity, integrating necessary changes and documenting those processes, and then calibrating to ensure the performance is sustainable and continues.
“Do you want this to be sustainable?” he asks. “You don’t want to spend the time and effort to do this and the make these changes and do all this, and you forget about it. It has to be sustainable because you don’t want to be two years from now talking about hey what happened? We had a good year and then it was over.”
To end the example, Martlage looks at results of the three locations. The goal was 130 PPOH, and locations one and two reach the goal. Location three doesn’t, but it shows significant improvement. Is that failure? Not at all.
“We’re going to be monitoring that over the next year; let’s keep that going,” he says. “You got 115. Can you get 120, 125 by next year? We’ll call it good. We just can’t have you going back down.”
Martlage goes on to say that in this linen scenario, a positive result was achieved by one group coming together with teamwork and collaboration to impact one metric with one action plan.
“Now take that and let’s say my corporation and your corporation work together to drive that number,” he says. “We’re now building those alliances across the industry to help provide appropriate transparency into an industry or company.”
Also, from this benchmarking exercise he says the company is going to determine strategic direction and next steps.
“You’re coming through this and doing benchmarking on PPOH, and that can maybe go into your strategic plan for your organization or your corporation about it being a key metric that we’re going to focus on,” Martlage points out.
“It could have marketing implications. It could have production implications. It can help to develop industry standards.”
The key objectives of benchmarking are performance improvement and understanding, Martlage reiterates. Benchmarking can help identify opportunities and determine and set goals. It can be used as a method of discovery. It can help a company prioritize.
“They can help you determine different product offerings,” he says. “I know in the association world we do a lot of surveys to find out what our members want to see, what our customers want to see.
“How do we compare to other people that are offering those products? It can help you determine that you may start offering X. It can help you with process implementation and compliance.”
Finally, Martlage reminds everyone that benchmarking for competitive analysis is only successful if the data being collected and analyzed is credible, diverse and relevant to the overall goals of the organization and the industry.
“It needs to be relevant to what you’re doing,” he concludes.
Miss Part 1 on the definition of benchmarking and key objectives? Click HERE to read it.
Hitting the ‘Mark’ in Laundry/Linen (Part 1), March 26, 2019
Hitting the ‘Mark’ in Laundry/Linen (Conclusion), March 28, 2019