Benchmarking

Benchmarking is a way to gauge how your firm is performing. In “Benchmarking Your Way to Stellar Performance,” Jo Anne Corbitt defines benchmarking as “a continuous process for evaluating the products, services and work processes of organizations which are recognized as representing the best practices for their industry. It is a comparison of performance against an agreed-upon standard. . . . the search for those best practices that will lead to the superior performance of a company.” Xerox Corporation originated the concept of benchmarking in the 1970s in response to the competitive challenges of the Japanese.

Corbitt outlines four steps in the benchmarking process:

• Commit time, money, and personnel to the process
• Benchmark the firm’s performance against industry standards (i.e., IREM’s Income/Expense Analysis reports)
• Benchmark the firm’s performance against industry indices (i.e., The National Council of Real Estate Investment Fiduciaries Index, released quarterly)
• Ensure continuous efforts, including training and education

Benchmarking has three components:

• Internal benchmarking—Reviewing a firm’s existing practices
• Competitive benchmarking—Comparing a firm’s performance with its competitors
• Best-in-class benchmarking—Comparing the performance of specific job functions with the performance of the same functions in other industries

CEL & Associates, Inc. has developed a tool for measuring performance in real estate management. The system, called REACT, uses self-administered questionnaires to gather data from tenants, owners, and real estate managers throughout the industry. The data from the questionnaires are compiled, quantified, and compared within and across categories.

Companies can use benchmarking to discover what they do well (and continue it), what their competitors do well (and implement it), and what constitutes best practices for each job function (and do it). Benchmarking is valuable in other ways:

• It helps a company keep abreast of technological developments in other industries that may enhance operations in their own.
• It sparks the creativity of the personnel asked to implement the benchmarked findings in their daily work.
• It also establishes professional relationships that have future benefit.