Managing Cash Flow

Benchmarking Strategies 125
BENCHMARK AGAINST STAKEHOLDER
EXPECTATIONS.
Strategic Concepts
Benchmarking results provide the company—owners, management, and employees—with
data necessary for effective resource allocation and the strategic focus
for the organization. The benchmarking process provides for those objective
measures to determine the success of the company’s internal goals, objectives, and
detail plans, as well as external and competitive performance measures.
Benchmarking the company’s performance against stakeholder expectations
enables the company to pursue its program of continuous improvement and the
road to excellence. Effective benchmarking encompasses both internal and external
needs. Some examples of internal and external benchmarks for the organization
include the following:
• Increased sales: in total, by product line, and by product
• Earnings per share
• Total assets
• Return on investment
• Return on assets
• Gross profits
• Net profits
• Debt/equity ratio
• Stock price
• Dividends
• Cash flow changes
• Survival and growth
• Internal excellence (positive changes)
• Competitive excellence: quality, timely, cost, responsive
• Supplier excellence: preferred vendors
• Employer excellence: employee participation, empowerment, and so on
Whereas owners may be most concerned with short-term benchmarking criteria
such as stock market price and earnings per share, other stakeholders may be
more concerned with longer-term criteria such as real earnings growth, customer
satisfaction, and ongoing positive cash flow. There should be a meaningful balance
between such short-term and long-term goals of diverse stakeholders for the
benchmarking process to be most successful. Benchmarks for organizational
growth include the following:
• Cost reductions: short-term pain for long-term gain
• Price increases: may create more competition