Published – 19 December 2017 By Gavin Beever
The use of benchmarking and performance indicators in extension helps users better understand and question their situation and generates useful quantitative and qualitative information and data for consideration against any goals or objectives.
For farm businesses, the benchmarks and performance indicators typically cover financial and physical indicators of farm performance and help with farm business decision making. In the field of natural resource management the benchmarks and performance indicators often relate to environmental health.
Trained extension professionals can provide a valuable service to businesses and organisations by facilitating benchmarking and comparative analysis processes and ensuring their relevance, accuracy and correct deployment.
When employing the practice of benchmarking and setting performance indicators, it is very important to set the context and purpose of the activity. Without doing so, there is a risk that the activity can be misguided, incorrectly applied and not focussed on the right areas that could have or be having the most impact.
Definitions
Performance Indicator – “A quantitative or qualitative measurement, or any other criterion, by which the performance, efficiency, etc of a person or organisation can be assessed, often by comparison with an agreed standard or target.” Collins English Dictionary
Benchmark – “A benchmark is something whose quality is known and which can therefore be uses as a standard with which other things can be compared.” Collins English Dictionary
Comparative Analysis – ‘The comparison of a performance indicator derived from one business with the same performance indicator derived for:
- the same business in one or more previous years;
- a similar business or group of businesses (i.e. in same district, region, etc.) where the performance indicator relates to the same time period and/or previous time periods, and/or;
- the industry in which the business is located” (Wilson et al, 2005)
Strategic, tactical and operation levels
The process of assessing performance indicators and benchmarking can take place at a strategic, tactical or operational level of a business or organisation. By being clear on what indicators are to be used at which level and for which purpose gives an important systems approach to the practice.
At the strategic level the performance indicators and benchmarks will help assess overall business or organisation performance (or a major component of it), the direction the business is heading and is it tracking as hoped. Strategic planning is looking at things over longer time scales – annual, two, three, five, ten or even twenty years.
At the tactical level the processes are used to assist with short range planning, assessment and decision making. Typically it may be targeted at keeping things under control, adequately resourced, assessing if risks are being managed and to help set operational tasks. The timeframe is less than a year and may be down to weeks.
Operational planning links the strategic goals to the tasks required to get there. Operational planing relates to the day to day running of a business or organisation and has short term time periods. At this level performance indicators and benchmarking can help with decision making that relates to the general management of the business.
Benchmarking is also used for looking at enterprise performance or the performance of specific practices or tasks (e.g. irrigation).
Benchmarking and learning
When looking at Action Learning Reg Revan’s learning equation is L (Learning) = P (Programmed Knowledge) + Q (Questioning Insight). When a business or organisation reviews a performance indicator and practices benchmarking and comparative analysis, they are looking at results. This process leads to Q (Questioning Insight) and can also assist with “Reflective Observation” as described in the Kolb Learning Cycle.
Experiential Learning as described by Kolb and Action Learning as described by Reg Revans are powerful processes of adult learning and the use of performance indicators, benchmarking and comparative analysis can be very effective at getting individuals, business and organisations to look at key quantitative and qualitative results and ask the right questions of themselves and their business or organisation’s performance.
Repeating the process periodically gives a focus on practicing continuous improvement against the performance indicators and benchmarks, particularly when goals to achieve are set by businesses or organisations in respect to particular performance indicators and benchmarks.
The need for good record keeping
In order to use performance indicators, benchmarks and comparative analysis effectively, the data must be recorded appropriately to ensure accuracy and consistency. Setting up record keeping processes and ensuring records are maintained effectively overtime, is a key to effectively and reliably being able to carry out these practices.
Conjecture
The use of performance indicators, benchmarks and comparative analysis in farming businesses has attracted some polarised views within the agricultural profession, particularly between some agricultural economists and some agricultural consultants and extension professionals.
Much of the debate over the years has centred on the quality and nature of the data being recorded and the flow on effect of using poor data when calculating performance indicators and getting the right balance between the people involved and their objectives for the activities and the corresponding right data and processes. There have also been concerns over inconsistent definitions, calculations and approaches.
Ronan and Cleary (2000), explore this issue well in their paper “Best Practice Benchmarking in Australian Agriculture: Issues and Challenges”.
They conclude that “Best practice benchmarking has a legitimate and valuable place in Australian agriculture” but that a focus on best practice benchmarking is required “that links processes and performance, provides a balance of production, financial, environmental and social indicators and presents information which enables easy, unambiguous interpretation by farmers. It is not a substitute for production economic analysis. It can aid the pursuit of productivity and profits by farmers through richer information about enterprise performance and can provide a catchment of ideas for continuous improvement.”
Content sources and further information
Wilson, R. H., Charry, A. A., Kemp, D R. (2005) Performance indicators and benchmarking in Australian agriculture: synthesis and perspectives Extension Farming Systems volume 1 number 1 – Research Forum, Australian Farm Business Management Network
Kahan, D. (2013) Farm business analysis using benchmarking. FAO. ISBN 978-92-5-107545-6 (print). E-ISBN 978-92-5-107546-3 (PDF).
Ronan, G. and Cleary, G. (2000) Best practice benchmarking in Australian agriculture: Issues and challenges. Australian Agricultural and Resource Economics Society Inc.