In the classic golf-themed comedy Caddyshack, Judge Smails (played by actor Ted Knight) asks Ty Webb (Chevy Chase), one of the top golfers at the stodgy Bushwood Country Club, what his score was that day. When Webb replies, “Oh, Judge, I don’t keep score,” Smails asks, “Then how do you measure yourself with other golfers?” Webb’s reply: “By height.”
Witty quips from fictional characters aside, think about that for a moment. How do you measure your business success relative to your peers and competitors? Are you arbitrarily “keeping score,” or are you measuring and analyzing key performance indicators (KPIs) that directly impact your business success?
As a leader in the professional cleaning industry, chances are you’re applying the latter. However, it’s important to underscore the significant role that analytics and benchmarking play in improving business management and performance. Recognizing this importance, ISSA has committed to enhancing its member value by developing new analytics and benchmarking initiatives.
Setting the Stage
In 2015, ISSA staff conducted a comprehensive strategic planning process. Everyone on staff interviewed a number of members across all categories of membership to better understand the challenges you face in your businesses, along with your perception of the value ISSA provides. One of the resonant themes we heard was that members are in need of more industry data and tools to facilitate business-performance analysis.
Based on this feedback, staff took a closer look at ISSA’s existing portfolio and noticed a gap that the association could fill. As a result, ISSA incorporated data analytics as a core strategic initiative. The goal of the initiative is simple: to become the gold standard for industry data by providing focused solutions to each classification of membership.
So whether you’re a distributor, building service contractor (BSC) in-house service provider, or manufacturer, ISSA is committed to delivering benchmarking, analytics tools, and market insights that can help you become better informed and enhance your business. For the purposes of this article, we’re going to focus on benchmarking specifically, so let’s take a closer look how it can work for you.
Benchmarking is a term we hear frequently, but what exactly does it mean as it relates to your business or operation? For simplicity’s sake, let’s work with the definition from the business bestseller The Reengineering Revolution: A Handbook. In the book, authors Michael Hammer and Steven A. Stanton define benchmarking as: “…The systematic process of searching for best practices, innovative ideas, and highly effective operating procedures that leads to superior performance.”
Further, benchmarking allows us to see the big picture to, identify inefficiencies, create realistic targets for improvement, and ascertain competitive advantages.
In taking a closer look at the definition, one phrase sticks out: systematic process. Benchmarking is not a one time activity. To derive the most value from benchmarking and ultimately achieve superior performance, a business should consistently measure its activities relative to best practices, make improvements, measure again, and so on.
With that in mind, let’s dive into the benchmarking tools ISSA has in place for you now, along with some initiatives that are in the works.
Distributors, Wholesalers & Manufacturers
Distributors in the cleaning industry continue to face pressures associated with operating profitably in a highly competitive marketplace. As margins shrink and competition continues to increase, identifying inefficiencies and implementing improvements can have a profound impact on a distributor’s business. Evaluating financial and operational KPIs is critical, and as mentioned earlier, it’s a continual process. ISSA has established two key programs to help distributors excel in today’s environment.
Distributor Performance Dashboards (DPD) is an online benchmarking platform that provides apples-to-apples comparisons of a firm’s financial and operations data to typical and high-performing ISSA-member distributors, and also to its buying group peers, if applicable. ISSA developed DPD in partnership with several other industrial distribution associations to create a suite of analytical dashboards that cover a range of distribution processes. The program launched this summer, and several distributor members are already taking advantage of it.
To participate in DPD, distributors complete the confidential DPD Profitability and Operating Performance Survey, which includes entries from the company’s balance sheet, income statement, and sales and operations data. Once the distributor uploads and vets the data in the DPD website, the aggregate data is calculated and made available to all participants.
Analysis in DPD begins with the executive summary, which provides a high-level overview of critical KPIs, such as strategic profit ratios, expenses as a percentage of sales, gross profit margin, personnel productivity, and sales analysis, which outline the distributor’s overall performance. This initial dashboard functions as a “business health checkup.” From there, users can review more granular metrics in separate dashboards that focus on specific components of those executive-level KPIs. For example, if your company appears to be lagging behind the top performers’ median operating profit margin, you could look to factors such as payroll, occupancy expenses, and other operating expenses to see how you stack up to the top performers with similar sales volumes and product sales mixes.
DPD is an annual program, which means the data corresponds to the prior fiscal year. The next participation window for 2016 data will open in spring 2017; watch for an email update for details, or visit www.issa.com/dpd to learn more.
Distributor Efficiency Analytics and Learning (DEAL) is a new program that combines learning and analytics and benchmarking to help distributors, wholesalers, and some manufacturers reduce warehouse facility and fleet expenses.
As companies face stiff financial pressure and waste 10 percent to 30 percent on these operating costs, DEAL’s analytics component can help identify opportunities for improvements across multiple facilities as well as compare its operations to other companies with similar attributes on a national level.
After a company identifies opportunities for improvement, DEAL’s prescriptive learning platform—ongoing webinars, in-person seminars, and e-learning opportunities—teaches best practices from the U.S. Environmental Protection Agency’s ENERGY STAR and Smart Way transportation programs. And, once those adjustments are in place, DEAL’s analytics portal tracks how much the company improves, and these companies earn awards recognizing these gains. To learn more about the DEAL program, visit www.issa.com/deal.
Just like in distribution, the BSCs market is highly competitive with shrinking margins, which further underscores the need for BSCs to analyze their performance to identify and maintain competitive advantages.
To help facilitate benchmarking for BSC members, ISSA’s BSC Council has developed a BSC Benchmarking Survey, which ISSA will launch to all BSC members by email distribution in the first quarter of 2017. This survey will including number of key attributes including financial, staffing, operations, and sales to gain insight into BSC operations.
BSCs that participate in the survey will gain free access to ISSA’s BSC Benchmarking Report, which will summarize the results, highlight key findings, and help BSCs compare their business to their fellow ISSA members. ISSA plans to publish this report in spring 2017.
Additionally, to help BSCs and chemical distributors, manufacturers, and wholesalers track trends and economic data within the industry, ISSA has published the Baird/ISSA Chemical and Hygiene Services Survey in partnership with global financial services firm Robert W. Baird & Co. since July 2012. This series of quarterly reports provides insight into revenue trends, profitability, and forward outlooks from ISSA members in North America. The reports are available to ISSA members exclusively at www.issa.com/bairdsurvey.
In addition to the programs outlined above, ISSA has several other programs and market studies under development to satisfy all classes of membership. Examples include sales performance benchmarking by member class, additional business dashboards, and a quarterly report that highlights trends in the commercial flooring surfaces industry by building type to help manufacturers, distributors, and cleaning service providers anticipate equipment and service needs. Stay tuned as we release new programs throughout the year.
This article originally appeared in the February 2017 edition of ISSA Today. If you have any questions about the programs outlined in this article, please contact ISSA Market Research & Analytics Director Jonathan Adkins at email@example.com; phone 800-225-4772.