Do you know where your association stands in comparison to other associations in your arena? It’s important for association leaders to know how their organization matches up with others to be able to make informed, strategic decisions for the future. Using a process called benchmarking, you can perform a comparative analysis of your financial data against the median data of a group of roughly comparable associations either by mission, industry, classification or size. When paired with other key performance indicators, benchmarking can help uncover additional insights into your organization’s performance, specifically against that of your peers.
In this article, we identify factors that should be taken into account when conducting a benchmarking analysis, as well as limitations to keep in mind throughout the process.
When starting your analysis, begin with the premise that you are unique in your vision but that your strategy in achieving that vision can potentially be more successful if you adapt your action plan after reviewing your peers’ combined results. For example, if your peers are modifying the structures of their member dues, you can either benefit or be left behind by not doing the same (with all other factors being equal). If all your peers have higher salaries and benefits, you could potentially lose talent if you do not adjust your compensation structure accordingly.
There are two factors that should be incorporated to yield an effective analysis: selection of peers and context of the evaluation.
Selection of Peers
The selection of the peers depends on the context, or purpose, of your analysis. In most cases, your selection pool will consist of associations within the same industry, geographic area or reach or size. If consolidated peer data is not available, our suggested group size is around three to four peers, as this will result in a more stable benchmark. We also recommend using the same geographic area or a similar sensitivity to funding as the basis to benchmark in order to capture more accurate data. For example, an association located in New York City should not be compared to associations in the Midwest because of the difference in cost of living.
Context of the Evaluation
The context of the evaluation is both the basis and goal of your analysis. Think about what you are trying to accomplish with the analysis. Is it to test the success of implementing a new initiative? Or perhaps to analyze a course correction due to declining performance? The context should drive the peers against which you compare your association, as well as the data to be analyzed.
Though a benchmarking analysis can be informative and yield beneficial insights, it likely won’t give you the full picture. Below, we discuss some limitations to keep in mind as you go through the process:
- Selecting the peer group can be subjective and might not be representative of the whole.
- It can be difficult to find cost efficient, accurate and/or up-to-date financial data on which to base your analysis.
- Because only certain financial data and results are publicly available, it’s possible that you will work with incomplete information when conducting your analysis. We recommend taking this information with a grain of salt, as there may be many other programs and activities in play that would change the results for the associations you choose for your pool.
Despite these limitations, we still recommend conducting a benchmarking analysis and evaluating the data in conjunction with other key performance indicators. If you’d like to learn more about benchmarking for your association or would like to talk with one of our dedicated not-for-profit experts, reach out to us today.