Industry Insider

APQC Benchmarking: advice based on experience

How to have an impact instead of paralysis

Kyu Cho photo

Kyu Cho


Performance benchmarking with APQC can be valuable input to target setting for cost optimization, enterprise transformation, GBS and other programs. However it’s not an easy process...and it often leads paralysis. Here are 5 typical expectations of APQC benchmarking, and some practical advice to go with it.

Expectation #1 - APQC benchmarking is straightforward and the comparison data is consistent across different KPIs

Advice: Oftentimes APQC benchmarking can lead to disparate performance ratings. Let’s say you are benchmarking the cost per invoice processing, and the benchmark says you are a low performer compared to your peers. To understand why, you look at a few related benchmarks like volume per FTE or average cost per FTE…and on these KPIs you are a middle or top performer. Why and how!?!? That’s because the KPI the data points you are comparing have different pools of companies. One may have more than 200 company data points, and another may have 20. Ok so how do you draw conclusions from mixed messages? Don’t look for a cohesive narrative between benchmark findings because you probably won’t find one.

Expectation #2 - APQC benchmark data alone is sufficient to draw conclusions

Advice - Instead of using APQC off the bat, start with benchmarking yourself internally. That means gathering data at entity, division, region or country level so that you can benchmark across similar parts of your business. That internal comparison without fail always reveals significant performance gaps and therefore opportunities that are much more relatable and achievable. The comparison to your industry peer group can provide valuable insights, if used in context. APQC is a data point, but should not be THE data point.

Expectation #3 APQC benchmark data list is straightforward and manageable

Advice: Our advice to sort out which benchmark data points are needed is the same advice we give when scoping or designing transformation data analytics: Start with defining the objectives of your program ...and how to measure that. Then define what the KEY drivers are ...and how to measure that. That’s also where your benchmark focus should be. The emphasis here is on KEY because APQC has a very long list of benchmark data points (890 in finance domain alone), but only a select few should rise to the level of being benchmarks to measure your KEY drivers. The list of APQC benchmarks is ...long! Focus on what matters.

Expectation #4 - For functional areas like Finance APQC benchmark data is similar across industries or company size

Advice: We strongly recommend that clients invest in APQC benchmark datasets that are 1. Industry specific and, 2. Within a reasonable range of revenue for the peer group. A global company with 40 manufacturing sites has a much different resource and cost profile than a company with five. A combination of industry and revenue will help make the benchmarks as relevant as possible. Also, it is easy to be frustrated and confused when benchmarking the cost of a function or process. With APQC you can benchmark personnel cost alone. If you wish, you can also compare outsourcing cost, system cost, overhead and other costs separately. Keep in mind, though, the personnel and outsourcing costs are usually controllable and measurable, hence APQC data is highly relevant. However, system and overhead costs are usually not directly controllable,thus APQC comparison data will be all over the map. Maximize the impact by focusing on measures that are relevant to you and avoid the confusion.

Expectation #5 - Benchmarking against APQC data is an easy exercise

Advice: APQC data surveys are (predictably) very long and complex. When gathering data it’s nearly impossible to answer the full length of the APQC data survey. If you follow our advice #2 (internal benchmarking) and #3 (focus on what’s important) it will be easy to determine and to prioritize (or cut off) the data gathering for APQC. In case you are not able to gather the minimum threshold for submitting a survey to get APQC benchmark data back, sometimes it is better off to just buy the data points that you need.

We’ve designed our Connected Insight transformation analytics platform to guide our clients in getting the data and develop analytics they need to drive improvements in focus, cost and agility. Our cutting edge platform includes a module for benchmarking with APQC which enables seamless process integration. With Connected Insight you can easily benchmark yourself internally or with APQC in multiple dimensions, empowering you to focus on what matters to your company.