The purpose of benchmarking is to help an organization understand their operations by comparing to their own year over year results, industry standards and/or competitors. No business ever compares exactly the same because they are all different in some way(s). The point of benchmarking is to understand the differences from competition, leverage strengths, minimize weakness and outperform competition.
The focus of conversation around benchmarking should be continuous improvement and excellence in everything a business impacts: profit, people, and planet. The purpose of a business is to make money. People are a business’s most important resource plus tribally owned enterprises operate like family owned businesses where unhappy employees often generate negative political pressure. Taking care of the planet is a universal value but often more pronounced in tribally owned enterprises because environmental stewardship is a core community value.
Industry reports and market study are two ways to set benchmarking. Any type of business can be benchmarked. It is important to choose benchmarks that are useful in helping an organization conduct meaningful conversation from board of directors, management, and general employees. Example:
Forest Products Average dollars per million board feet
Convenience Stores Revenue per square foot
Fish Processing Percentage of gross revenue paid to fishermen
Percentage net income after operations
A common stumbling block in benchmarking often occurs when management resists benchmarking by saying “we are different and here is why.” This is natural reaction but a wise organization will collectively-push past this objection and become better. It is helpful when an organization (board of directors and management) admits they are entering new territory and support each as they drive forward-together.
Risk exists when a board of directors is unclear with management about the balance of outcomes: profit, people, and planet. The important thing to remember is balance. Take for example the message an enterprise board of directors who communicate to their management team of convenience store operators:
- Make profit
- Generate tax revenue for the Tribe to support government services to benefit the people
- Reinvest profit into people (Tribal and non-Tribal) through training and employment advancement
- Do no harm to the environment
A convenience store’s annual business plan may include a revenue-per-square-foot benchmark where the store can compare their ratio to the general convenience store market. This benchmark is a tool. If management concentrated on selling coffee at $3* of profit per transaction instead of cartons of cigarettes at $30* then the ratio would likely compare less-well and then there would be an opportunity to educate management on his or her focus to sell the higher gross profit margin product (*The numbers supplied are hypothetical and for comparative purposes). Benchmarking is one of a toolbox-full of best practices an organization can perform to maximize outcomes in profit, people, & planet.