Ten Steps To A Positive Benchmark Experience:
“Should I participate in benchmarking?”
Perhaps a better question would be, “Is benchmarking worth my time and effort?” Like any decision, the process involves an evaluation of “what do I get out of it versus what do I put into it.” This trade-off, this ratio, is how the experts define value. Some of the “what we get” is perception and some is reality. Likewise, some of the costs (the “what we put into it”) are hard costs and some are perceived costs – like hassle, extra work, feelings of being judged, or fear of being exposed. Follow these ten steps to get started in the right direction:
- Start simple
- Work with an experienced facilitator (someone who knows what numbers to gather, how to graphically present them, and how to explain both their meaning and implications)
- Get at least a dozen or so others to benchmark against (Farm Futures published a great article on obtaining applicable benchmark data)
- Get over your fear of being exposed
- Be willing to do the legwork (numbers submitted on time; enough detail to be meaningful)
- Leverage computers to crunch the numbers and generate the graphs
- Meet together (this adds to the perceived benefits – like comradery, availability of back story, group discussion and learning)
- Control hard costs (it is difficult to establish direct causality between attending a benchmarking session and a hard dollar of revenue or profit. Therefore, the hard dollars of cost have to be keep to a minimum).
- Commit to the continuous improvement mantra. The best you can get out of benchmarking is this: Specific areas of relative strength and weakness (Perhaps you have done a SWOT analysis and you listed your strengths and weaknesses. You wrote down what you think they are, but do you know? Benchmarking exposes your misconceptions about your operation and it puts a number on how strong or weak you are in an area.) Best Demonstrated Performance in each area as an achievable target for stretch goals (Think about the 4 minute mile: Once that barrier was finally broken, many more were able to achieve the goal).
- Act upon the areas that benchmarking reveals as problems and opportunities. This means:
a. Be sure and understand what you are looking at and its relevance
b. Formulate action plans
c. Implement those plans
d. Assess results (on your own or through annual benchmarking participation)
This list of ten requirements is much easier to type than to satisfy, each of the ten is a legitimate show-stopper for a business. And any true value of participation sits behind significant elapsed time. In other words, even if you perfectly comply with all ten requirements, you still have to commit to multiple years of participating, learning, analyzing, implementing and adjusting before you can expect results.
Because of that lag time, causality will be vague. But you will be better, smarter, more aware, more analytical and more informed.
In a competitive market space, absolutes give way to relative assessments of your performance. So when lenders, landlords and other stakeholders see you, they will see a better, smarter, more aware, more analytical and more informed competitor going up against less aware, less informed, less equipped competition.
Isn’t that where you need and want to be? That is why you benchmark.
What Is The Best Way To Benchmark?
With this understanding, here is what remains: “What is the best way to benchmark?” We believe the best way to benchmark is financial where a consistent accounting standard is applied. This is what happens in the stock exchanges. Publicly traded companies present audited financial statements that allow investors to pick winners and force managers to attend to critical performance metrics.
Doing so also creates a new understanding among participants as to purpose and usefulness of Income Statements and Balance Sheets. These documents are management tools – not compliance reports.
Rule Number 1 is start simple. So, at its simplest, how well do you run your operation and how effectively do you reinvest back into the business? More than anything else, long-term well-being of your business hinges on what the field of players establishes for these two dimensions.
Underperformance on one of these dimensions is a slow death. Underperformance on both of these dimensions is an accelerated demise. We live in a free market and, as such, it really is a relative scale – a performance standard that is set by the players on the field. Where do you stand?
At FamilyFarms Group, we are committed to helping family farms across the nation. Our solutions are specifically tailored to help family agriculture producers succeed throughout the year as well as the coming years ahead. We work with each producer to tailor individualized strategies to ensure effective implementation for success today, tomorrow and for the years to come.
Learn all about the solutions you can count on to help keep your family farm legacy alive.