Peer Benchmarking: #1 Tool for Improving Your Business

The reality is, humans have a hard time figuring out what is possible.

The interesting thing is, the art of the possible is about envisioning the future, but humans really only move into the future by peeking into the past. It's just the way we work.

By way of explanation, to envision what is possible we rely almost exclusively on two things:

Our own past performance

Others' past performance

Virtually every development on earth is incremental. Evolution is incremental.

In sports, records are broken every day - in tiny increments. To break a record, the athlete's challenge does not require him/her to create a new reality. The athlete is not required to deliver a never-before-in-history performance. The bar is set much lower - simply edge current reality by a hair.

Consider as well that each of us is heavily influenced by psychological barriers that, by their very nature, are not real. They exist only in the mind.

Take the 4-minute mile as a case in point. Though generations of runners clipped second after second off the 4-minute-mile record without interruption - and steadily approached the 4-minute-mile mark - there was a widely accepted belief that it was not humanly possible to run a mile in fewer than 4 minutes. And so, as world-class milers approached the 4-minute-mile mark, the pace slowed. The only explanation for this is the psychological barrier. Self-doubt, if you will.

Runners came closer and closer to the mark, and then it happened. In 1954, Roger Bannister finally posted a time that began with a 3 (3 minutes and 59.4 seconds) and, in the ensuing months, the rest of the field burst through with their own times under 4 minutes.

So goes the business world. Business people are obsessed with learning the accomplishments of others. Why? Because we are unsure of whether we can do such and such until we see that someone else has.

If you can, then maybe I can. And when we meet someone who accomplished X, Y or Z, we're further emboldened. Why? He/she doesn't look any more special than me!

Peer Benchmarking is about looking at what other companies similar to yours are doing. If you, as a business owner, can match the best of your peers in key categories such as inventory turns, collection rates, gross profit margins, labor productivity, etc., then you will secure your place in the 20% that enjoy all the spoils. Where do you find peer data? Try your industry, trade association or the Risk Management Association (formerly known as Robert Morris Associates).