Cause You Don’t Know What You Don’t Know
Let’s face it, if you’re competing in an open market, you better have some idea of who your competition is and how effective they are in the marketplace. For purposes of this commentary, we’ll assume you know your competition, but as for effectiveness, how do you know if you have no means of comparison? And that’s the point of comparative external benchmarking.
But wait, you say, we already do internal benchmarking and we know our weaknesses; we’re working to address them right now. And that’s great, I say, we all have to pay close attention to efficient internal operations, but that’s not the point. When you self-analyze your own performance (internal benchmarking), you base that analysis on what you already know, and what you have pre-determined to be important based on your limited perspective. In your world, you are working on the right things, but in the rest of the world, there may be more important issues of which you are not aware or areas of performance that are more critical. External benchmarking increases your awareness of these areas and allows you to begin working on these important and possibly game changing parts of your performance.
Trust me when I say I’m not just sitting here throwing stones…I know of what I speak as I have been on your side of the fence. As a client of external benchmarking in a previous life, I have first-hand experience with the downside of internal benchmarking alone. Although a good practice and a great way of measuring the capability of your performance in the areas you measure, you are measuring “your” performance against the gold-standard “you” set, which is great if your organization is a top quartile (Q1) performer. But what if it’s not? And while you can look at studies and available literature to determine what Q1 performance should look like, you will only have a high-level view. By engaging in external benchmarking, you can expand your perspective and truly see how you compare to some of the top performers in the oil and gas industry.
What I’ve Learned About Benchmarking for the Energy Industry
So here’s what I've learned about benchmarking for the energy industry. Before I became involved in external benchmarking, we did a lot of internal benchmarking, and while it was useful, I now recognize that we tended to work on things that we were already good at. Since we had no comparison to external organizations, unknown to us, we were not comparing ourselves to Q1 performance. Without a detailed peer analysis, we were unaware of many internal shortcomings and realized that in some instances, we were working on improving areas that were not necessarily beneficial. As a result, we fell far behind Q1 performers in some key performance areas. When we started using peer comparisons through external benchmarking, we were no longer impacted by tunnel vision in the evaluation of our performance. We gained a completely different perspective on what was achievable and commonly practiced by top-performing organizations. By setting higher standards, we were able to become more competitive.
Driving Real Improvement
It was only through external benchmarking that our organization discovered areas where we could make significant improvements in performance, increase profitability and derive a plan for sustainable long-term improvements. The process allowed us to discover important areas of focus for improvement that only can be derived from external comparative analysis:
- Top-performing organizations are not reactive, but proactive. In fact, they are highly proactive in all areas of performance. How do they achieve that?
- Top-performing organizations focus first on key areas to ensure they use the performance in those areas to drive excellent performance in all areas.
- Top-performing organizations are reliability focused first. Understanding how they use that reliability focus to drive the appropriate amount of spending is a critical learning tool for performance improvement.
- Top-performing organizations use external benchmarking to measure achievement and areas where they can improve.
- Not all top-performing organizations started at the top. Many of them have been on an improvement journey for a long time, often with the help of external benchmarking.
- Top-performing organizations take actions to improve performance and close gaps based on their external benchmarking data. They do not try to develop excuses for shortcomings.
These are just some of the things external benchmarking provided us and I now represent for our clients. External benchmarking helps you see how you compare to others in the global energy industry and drive real sustainable improvements.
Just a short little rant on…We’re too busy! When I hear from an organization that they are too busy to commit to performance improvement through the proven process of external benchmarking, alarm bells begin sounding in the back of my mind and gives rise to concerns. Those concerns are borne of my personal experience as well as a worry for their internal priorities. How can you truly be focused on improving without understanding and utilizing competitor benchmarking tools to set your goals and maintain your internal standards?
If you only focused on the crisis of the moment, with short-term importance overriding all long-term considerations, you will struggle to maintain sustainable growth. External benchmarking can help improve your organization’s level of proactivity by comparing it to that of your top competitors and industry peers.
Wrapping It Up
So why should you externally benchmark? There are many specific reasons:
If you want to improve your organization’s bottom-line performance and profitability, external benchmarking is a key tool to help achieving both.
If you’re looking to increase profitability, reliability, and efficiency, you should consider external benchmarking.
Working with a benchmark company who can essentially become your external benchmarking partner is a great way to create a more thorough, unbiased, and fair standard based on general energy and oil benchmarks, not just your business’ best practices but using best practices that have been created over a period of more than 35 years. Using comparative peer metrics can help your company improve efficiency and profit margins.
Jeff Dudley, Senior Consultant, oversees the International Study of Plant Reliability and Maintenance Effectiveness (RAM Study) for Solomon. He has more than 30 years of industry experience from his work in chemical manufacturing and operations. At the time of his retirement from Dow Chemical Company (Dow) in 2012, Jeff was serving as corporate director of Reliability and Maintenance and was responsible for ensuring reliable operation of all global assets. During his tenure at Dow, Jeff took a leading role with many of the company’s operations, serving in such positions as Global Technology Leader for Engineering Plastics, Global Business Manufacturing Director for Customer and Fine Chemicals, and Business Manufacturing Director of Downpharma & EO/EG. Jeff was awarded Dow’s People Leadership Award in 2003 as well as its Genesis Award for Leadership in 2008.