The success of a business mostly hinges on its organizational performance, which influences outcomes, efficiency, and effectiveness. This begs the question: What, therefore, drives performance to extraordinary heights? The answer often lies in the tools and techniques organizations use to stay adaptable and achieve their goals. Among these, one that stands out is benchmarking.
Benchmarking is recognized as a powerful instrument for fostering development and achieving a competitive edge. It enables organizations to learn from the most successful practices of their colleagues and industry leaders. By leveraging the insights of others, businesses canunlock opportunities for continuous growth and innovation, making benchmarking a cornerstone of sustainable success.
The History of Benchmarking
The origins of benchmarking can be traced back to the1800s, when textile mills started applying methodical comparisons to enhance their operations. Its evolution into a disciplined management tool began in the1980s, when Xerox, under great pressure from Japanese rivals and a decreasing market share, developed a benchmarking program to examine and implement best practices from top companies. This strategy enabled the business to recover its competitive edge, raise performance, and increase efficiency.
The success of Xerox attracted considerable attention to benchmarking as a sensible approach to organizational development. By the 1990s, companies worldwide had embraced it as a means of increasing customer happiness, streamlining product development processes, and raising productivity. It eliminated the need fortrial and error by providing a structured way to learn from others.
Although definitions vary throughout the literature, the fundamental goal of benchmarking is always consistent:learning from the best to drive continuous improvement. Benchmarking is a highlystructured process designed to enhance an organization’s performance by comparing it to the best practices of the market or other competitors.
The primary objective of benchmarking is to identify the most effective practices and subsequently implement them to benefit the organization. This process involves comparing performance data, examining similar activities across organizations, and extracting actionable insights. By identifying best-in-class practices and applying them, businesses can refine their operations, exceed competitors’ performance levels, and achieve long-term success.
Benchmarking not only serves as a roadmap for improvement but also provides valuable insights into whatdrives exceptional performance. This is the most powerful form of benchmarking, as it emphasizes action and is employed to acquire knowledge from the experiences of others. It emphasizes actionable strategies by analyzing specific processes or activities that deliver favorable results. This form of benchmarking fosters learning and enables organizations to adopt proven practices and tailor them to their unique structures and goals, ensuringsustainable growth and competitive differentiation.
The Types of Benchmarking
Different types of benchmarking are tailored to meet specific goals to address the unique needs and challenges of each organization. Selecting the right model is crucial to drive improvement and achieve meaningful growth.
Performance Benchmarkingentails the comparison of performance metrics to evaluate the performance of our organization in comparison to others.
Process Benchmarkinginvolves the comparison of methods and processes to identify opportunities to enhance the operations of our own company.
Strategic Benchmarkingis implemented when an organization is in the process of altering its strategic trajectory and desires to evaluate its strategy in comparison to that of its competitors.
Internal Benchmarking compares the performance of various departments or divisions within the same organization or company.
Competitive Benchmarkingcompares performance and results with the top competitors in the industry to identify areas for improvement.
Functional Benchmarking compares technologies or processes within one’s industry or technological area aimed at becoming a leader in that particular technology or process.
Generic Benchmarkinginvolves comparing processes with the best operators across industries, regardless of the sector, to identify best practices.
Benchmarking demands a commitment to change and should only be pursued by organizations that are open to transformation and focused on achieving improvement. By engaging in consistent and regular benchmarking, organizations can develop concrete, measurable short-term plans rooted in current realities rather than relying on past performance. When executed successfully, it leads to significant enhancements in quality, efficiency, and financial outcomes. Organizations that excel in benchmarking are constantly exploring fresh ideas, adopting the most effective innovations, and striving to meet and exceed the highest standards of performance.
Performance management is an overarching discipline focused on achieving desired performance results. To approach it effectively, organizations should develop the necessary tools and processes to track progress, identify areas for improvement, promote alignment and accountability among stakeholders, and support continuous learning.
The performance management process focuses on data collection and analysis, reporting, review, and recalibration. This process helps organizations identify performance gaps, support informed decision-making, and enhance performance results. Figure 1 illustrates the performance management process, highlighting its key stages and the flow of activities that drive ongoing improvement.
Organizations can utilize a range of tools to support the process. Each tool is structured to serve a specific purpose, with clearly defined features that support its functionality as follows.
Data Collection
Two tools can be used to ensure the accuracy of data collection: an automated reminder systemand a data collection template. The reminder system is a tool designed to send notifications at predetermined times. It helps data custodians stay on track with their reporting responsibilities, minimizing the risk of missed deadlines. These reminders can be delivered through various channels, such as emails, text messages, or app notifications.
Meanwhile, the data collection template helps custodians record information in a standardized format, minimizing errors. It should include sections for the key details of each KPI, including name, reporting frequency, responsible parties, targets, and results.
Moving along the process, the collected data must be processed to help organizations identify performance issues, understand root causes, and even predict future outcomes. Nowadays, there is a wide range of off-the-shelf performance reporting software available to streamline the analysis process. Once the analysis is complete, organizations can communicate the results using performance reports or performance dashboards.
Performance reports are comprehensive documents that provide a detailed presentation of the organization’s activities and results over a specific reporting period. The format of these reports can vary depending on their intended purpose. For example,annual reports are typically text-heavy, but many companies incorporate graphics and images to create visually engaging documents. Hays’ annual report is an example that demonstrates how the use of visuals can enhance performance reporting. By integrating charts and images, the report improves readability, allowing readers to quickly grasp complex information.
Dashboards offer a visual representation of performance data. Their interactive and visual nature allows for quick interpretation of KPIs results and trends. Many performance reporting software include features for creating dashboards, making it easier to monitor and respond to performance in real-time.
Performance Review
With the analysis prepared, performance is then reported and discussed at various organizational levels during performance review meetings. These meetings may take different forms, such as monthly reviews to address operational issues at the departmental level or annual meetings focused on long-term strategic matters among top management and the board. Regardless of the format, performance meetings are an important tool in the performance management process as they enable effective decision-making by leveraging the collective knowledge and experience of the team.
To ensure that all important aspects are addressed duringperformance review meetings, their focus should be clearly established through agendas. An agenda can be structured around key points such as presenting performance results, discussing high-priority issues (e.g. KPIs below performance thresholds), analyzing potential causes and correlations, and identifying and assigning corrective actions for low-performance areas.
Recalibration
The corrective actions identified during meetings can be tracked using a portfolio of initiatives. This is a collection of actions and projects aimed at closing performance gaps and achieving the desired state. This tool enables organizations to monitor the progress of each initiative, establish accountability, monitor resource allocation, and support the prioritization of initiatives.
A portfolio of initiatives typically includes: the objective it addresses, the required resources for implementation (financial, time, and human resources), progress status, and priority levels.
There is a broad range of tools available on the market to support performance management; and given their ease of access, it would be unwise for organizations not to take full advantage of them. By implementing solutions and customizing them to meet the organization’s specific needs, organizations can ensure that the outcomes of the performance management process are insightful and actionable. This approach fosters a data-driven decision-making culture, empowers stakeholders to take informed actions, and ultimately helps the organization achieve its strategic goals and drive sustainable growth.
The balanced scorecard (BSC) is a widely used performance measurement framework for strategic planning. It is so popular, in fact, that The KPI Institute’s latest State of Strategy Management Practice report found that 40% of respondents from Middle Eastern companies were using it. Why is that the case? It’s likely in the name—the BSC offers a balanced perspective of a company’s performance, focusing not just on financial gains but the various aspects of value creation as well. This enables companies who use it to establish sustainable business practices that can meet long-term goals without sacrificing short-term improvements.
What Is the BSC?
In 1992, Robert Kaplan and David Norton dreamed of a better way. Aware of the limitations of traditional practices that focused solely on financial indicators such as return on investment (ROI) to measure a company’s performance, the two designed a tool that incorporated non-financial variables to paint a more holistic, comprehensive picture. Thus, the balanced scorecard was born.
The BSC was further refined by connecting performance metrics directly to strategy, which marked a formal link between strategic goals and performance measurement. In 1996, it became a performance management system (PMS) that effectively integrated the various crucial aspects of an organization—i.e. strategic processes, resource allocation, budgeting and planning, goal setting, and employee learning.
By 2001, the BSC had outgrown its original form, no longer seen as a mere management tool but instead as an all-encompassing strategic management and control system. The BSC has continued to evolve alongside the ever-changing priorities of the business world. In 2021, many companies began integrating environmental and social dimensions into their BSCs to reflect their triple bottom line strategies.
The BSC gives managers a view of the business from four crucial perspectives. Each perspective deals with an integral aspect of the organization and answers a specific question:
Customer Perspective: How Do Customers See Us?
Companies typically have a mission statement that encapsulates how they interact with customers. For example, e-commerce platform Etsy’s mission statement is “Keep Commerce Human.” This sentiment informs the way the company does business, which places importance on leaving a positive economic, social, and ecological impact.
The BSC holds companies accountable to their mission statements by translating them into specific measures that must be followed. For Etsy, one aspect to consider would be the diversity of its workforce, which falls under social impact. To address this, the company has taken measures such as increasing the presence of underrepresented communities in its seller community by interviewing candidates from those backgrounds. This has enabled the company to stay true to its mission and show customers that it walks the talk.
Internal Perspective: What Must We Excel At?
Balance is the primary focus of the BSC—it’s in the name, after all. Thus, the framework doesn’t only take into account the way customers perceive the company, but it also considers what the latter does to shape this perception. This is composed of the various operational and organizational processes that drive the company.
By giving managers an internal perspective, they can identify, track, and measure the processes that yield the most benefits and close the gaps on the ones that fall short.
Learning and Growth Perspective: Can We Continue to Improve and Create Value?
The business landscape is constantly shifting, and in order to keep pace with its changes, businesses must consistently learn and innovate. That is the importance of this perspective, which states that a company’s value hinges on its ability to improve. In any industry, competition can be fierce, which means companies must always find new ways to stand out.
Financial Perspective: How Do We Look to Shareholders?
Among the four perspectives, this is perhaps the most straightforward. Put simply, it indicates if a company is profitable. Although financial performance is no longer the end-all, be-all measure of a company’s success, it still plays a crucial role in determining whether a company is simply surviving or thriving. Shareholders understandably value profitability, and they won’t keep investing in a company that doesn’t produce ROI.
The BSC is by nature a holistic framework, meaning each part is interconnected to the others. This is why it’s important to take a balanced (pun intended) approach when considering the four perspectives. If one side is prioritized over the others, it could lead to the formation or widening of inefficiency gaps that impede business growth and success.
As previously mentioned, the BSC is quite popular. This is due to the myriad of benefits that it brings to organizations that use it wisely. The most obvious benefits of the BSC are twofold. First, it consolidates the seemingly disparate aspects of a business in a single report, leading to increased efficiency in performance reporting and measurement as well as faster decision-making. Second, the BSC helps mitigate suboptimization by making managers consider the entirety of the company’s operational measures, demonstrating whether one objective was achieved at the cost of another.
A more concrete example of the BSC benefiting companies can be seen in how Apple uses the framework. By shifting its focus from innovating its products to also paying mind to customer satisfaction by establishing it as one of the company’s core tenets, the tech giant was able to improve its already stellar reputation by catering to its customers’ desires. Apple also values core competencies, employee commitment and alignment, market share, and shareholder value. Together, these indicators make up the metrics of their BSC.
World-renowned electronic company Philips is also known for its use of the BSC, using a bespoke version of the framework to fit its organizational needs. The company’s focus is on its employees, and it uses the BSC to ensure that each member of its workforce has a clear understanding of the company’s strategic policies and long-term vision.
What Does the Future Hold?
There must be a stronger emphasis on customization as companies realize that there is no such thing as a one-size-fits-all approach to performance management. This aligns with the proliferation of new advancements in artificial intelligence (AI) and machine learning (ML), technologies that must be integrated into the BSC lest the framework fall behind the ever-shifting realities of the business world. Regardless of the future, the BSC appears poised to remain a vital tool for companies of all sizes and in all industries.
Interested in learning more about the BSC? Browse our articles here.
What truly drives organizational success is not just a brilliant strategy or a cutting-edge technology. It also lies in the collective talent and potential of employees. To optimize organizational performance, organizations can develop and enhance human capital through capacity building. The University of California, Davis defines capacity building as “the process by which people and organizations obtain, improve and retain the skills, knowledge, tools, equipment and other resources needed to do their jobs successfully.”
Today, one concrete sign of the growing recognition for nurturing human capital is the increased attention to wellness programs. A powerful connection exists between capacity building, employee well-being, and organizational performance, fueled by both theoretical frameworks and empirical evidence. Two main theories provide a foundation for understanding this relationship:
Human Capital Theory: This theory posits that employees are a treasure trove of skills and knowledge, waiting to be unleashed and nurtured to increase organizational productivity and success. By investing in capacity-building, organizations enhance their human capital, leading to improved performance.
Organizational Support Theory: This theory proposes that when employees perceive their organization as supportive, their commitment to their jobs increases, their performance improves, and their stress and strain are reduced.
From the empirical perspective, a robust body of research supports the link between capacity building and organizational performance. One study demonstrated strong evidence that implementing capacity-building programs positively impacts talent development, employee resilience, and career development, leading to improvement in overall organizational performance. Further reinforcing this connection, another study examined the responses of 710 manufacturing small and midsize enterprise (SME) owners and found that organizational learning is crucial for both performance and success.
Extending this research to a specific context, in the United Arab Emirates (UAE), a study revealed that investing in employee training is crucial for sustainable success. However, talent attraction and retention alone do not significantly impact organizational performance. This connection underscores that while having skilled employees is important, the true driver of long-term success lies in the continuous development of those employees through effective training programs rather than merely focusing on hiring and keeping talent.
Finally, a case study of Metropolitan International University revealed that capacity-building programs have significant positive links with critical performance outcomes such as innovation, customer satisfaction, productivity, and retention.
The positive correlation between capacity-building initiatives and organizational performance is supported by compelling data.
Training programs play a crucial role in enhancing workplace dynamics, significantly impacting productivity, job satisfaction, and employee retention. Research from eLearning provider TalentLMS indicates that 80% of employees believe training directly boosts their productivity, while 75% find it beneficial for their engagement and overall job satisfaction. Furthermore, the retention power of training is evident, as 76% of employees are more likely to remain with a company that prioritizes continuous training. This sentiment is echoed by 86% of HR managers, who recognize training as a vital factor in fostering employee retention. Collectively, these insights underscore the importance of investing in training initiatives to cultivate a motivated and committed workforce.
In addition, training fosters performance enhancement among employees. Fifty-one percent believe it increases their confidence and 41% assert that it improves their time management skills. Beyond individual performance, training also strengthens employees’ connection to their organization and reinforces their sense of purpose. Notably, LinkedIn’s Workplace Learning Report 2024 shows that 80% of employees find learning experiences fulfilling and meaningful in their roles, while 70% feel a deeper connection to their company through the availability of training opportunities.
Implementing Effective Capacity-Building Programs
Effective capacity-building programs demand thorough planning and execution. This is exemplified by the U.S. Centers for Disease Control and Prevention (CDC). Their implementation shows that before initiating capacity-building efforts, it is essential to assess existing skills, structures, and resources to ensure a solid foundation for development. Once this assessment is complete, connecting relevant partners with expertise in the program can help identify capacity gaps, informing future development and potential partnerships. Building qualities such as trust, mutual respect, and commitment among all members of the organization is crucial for fostering a collaborative environment.
CDC’s roadmap for state program planning also shows that implementing a variety of engaging multimodal learning programs—including lectures, discussions, simulations, and case studies—can cater to diverse learning styles. Additionally, integrating technology through online learning platforms and interactive simulations can facilitate more dynamic engagement. Finally, it is important to monitor the impact of these training initiatives on specific goals, using key performance indicators (KPIs) such as productivity, quality, and employee engagement to evaluate effectiveness and drive continuous improvement.
Indeed, capacity building is essential for organizations to thrive in today’s global market. By investing in it, companies can enhance performance, achieve goals, and gain a competitive edge. Research consistently demonstrates a strong correlation between capacity building and organizational success, as evidenced by improved employee engagement, productivity, and overall performance.
Impact investors aim to achieve measurable financial returns while maintaining positive social and environmental impacts. Recent empirical research has shown that value investors consider Environmental, Social, and Governance (ESG) practices in their investment decision-making processes, although the emphasis on these indicators varies across industries.
However, impact investing is not a new concept. In fact, it could be traced back to 1928 when the first screened investment fund was established in the United States. As environmental awareness grew, the concept of responsible investing gained more traction within the investment community. This trend continued to evolve until the rise of Stakeholder Capitalism Theory in the 1950s and 1960s, which advocated maximizing value for all stakeholders, including customers, employees, suppliers, and local communities.
During the ’60s and ’70s, socially conscious investors began avoiding funds with investments in industries like tobacco or weapons. Presently, many companies are embracing balanced performance goals known as the Triple Bottom Line (TBL). Some investors are even willing to pay a premium for companies demonstrating positive ESG impacts, indicating a growing preference for environmentally and socially responsible investments.
Given the varying ESG priorities across sectors, there is no one-size-fits-all strategy or performance measures to be adopted by companies that want to attract and retain value investors and their equity capital. To illustrate this, former Forbes staff writer Kathryn Dill said, “Certain indicators are prioritized over others across industries. For example, safety rankings are not particularly important to banks, as the financial sector work doesn’t pose physical danger. But safety performance is an important measure of sustainability in the transportation industry, where physical well-being can be at stake”. Henceforth, strategists and performance management professionals may need to emphasize specific aspects of ESG based on their investors’ preferences, as shown in the figure below:
Energy Sector: Due to the energy industry’s inherently high carbonated emissions and the amount of waste generated and water used, strategists within this sector should focus on initiatives related to lowering CO2 Emissions, material use, waste production, and water usage. To measure this, they may use KPIs such as % CO2 reduction, $ Material waste, and # Water usage reduction, respectively. In this regard, the environmental aspect of ESG takes precedence.
Consumer Sector: Similar to the energy sector, there is an emphasis in the consumer sector related to reducing emissions, material use, and waste production as part of the environmental dimension of ESG. However, this is in addition to the need for further focus on decent labor practices—falling under in the social dimension of space of their ESG strategy—which could be measured using the # Labor Satisfaction Index.
Financial and Insurance Sectors: In these sectors, organizational culture, diversity, and inclusion matter with regards to the environmental dimension. Meanwhile, governance structures, advocacies, and business ethics matter in the governance dimension. The potential KPIs used in these industries may include: # Culture Profile Index, % Employees trained in business ethics and compliance, # iNPS, and # CGI.
Pharmaceutical and Medical Sectors: Strategists in these sectors need to worry about community impact and labor practices, which fall under the social dimension. They must also focus on business ethics in the governance dimension. Candidate KPIs here may include # Culture Profile Index and $ CSI spending.
All the strategic themes and underlying indicators proposed above should only be considered guides at best. A better approach is for companies to communicate with their communities and involve stakeholders in their policies, decisions, and operations to cultivate a fully supportive investment strategy implementation system.
In conclusion, performance management professionals should collaborate closely with strategists to align sustainability objectives and KPIs with strategic initiatives through cascading and appropriate KPIselection techniques, regular measurement frameworks such as the strategic scorecard, and implementation of performance improvement best practices such as regular performance review meetings which are all crucial to ensure that the company remains on track with its sustainability goals relevant to today’s investment community.
**********
About the Author
Tarig Malik is a seasoned Strategy and Performance Management Professional with extensive expertise in enhancing strategic, operational, and individual performance. Holding multiple certifications (SPP, C-BSC, C-OKR, C-KPI), Tarig leverages a strong academic foundation and practical experience to drive continuous improvement and foster a performance-oriented culture across various organizations.
