Numbers are meaningless without comparisons, such as:
- Comparisons over time (trends)
- Comparisons to a plan, such as budgets or strategic goals
- Comparisons to a benchmark, such as competitors or peers
Well-managed organizations make use of comparisons of all three types. Benchmarking may be the least-used comparative tool, but can be one of
the most powerful. Most nonprofits do some sort of benchmarking to establish staff salaries, and endowed charities often wish to compare their investment allocation and performance to their peers. But there are many other opportunities to compare oneself to others in the same field. Surveys with a wide range of comparative statistics are available from, among others:
American Alliance of Museums
American Association for State and Local History
Council on Foundations
League of American Orchestras
National Association of College and University Business Officers
The Numbers Guy hopes that more trade associations will conduct benchmarking surveys as a service to their members, and that they will keep them up-to-date. Encouragingly, surveys targeting particular issues or fields are often sponsored by the big national foundations, like Ford, Kellogg, Pew and Wallace.
Often management participates in benchmarking surveys, but is reluctant
to share the results with their board because of fears that comparisons will be unfavorable or that the results will be misinterpreted. These fears are well-justified, but can be overcome with careful preparation and thoughtful reflection by all the players. It is worth the effort.
Preparation for the use of benchmarking should include a discussion of the choice of peers with whom one will be compared. If there is no agreement on who constitutes a peer, there is unlikely to be agreement on the meaning of the comparison! Comparisons to aggregate data can also be problematic, since discussions often degenerate into speculation about the composition of the database.
Management and boards are usually more comfortable with comparisons to specific peers or competitors, if that is possible. After all, the object of the exercise is to stimulate a discussion on current performance and strategic choices, and those discussions will be more productive if they start with a forthright analysis of the differences between your organization’s environment and those of others.
Good managers thrive in a competitive environment, and good boards will respond constructively to the challenge of benchmarking.