Funworld September 2010

Why and how to benchmark an area of your facility against other industry leaders

by Neva Richardson-Larson

Benchmarking is the process through which a company measures its products, services, and practices against its toughest competitors, or those companies recognized as leaders in its industry.

It’s an important process, as it helps managers determine if the company is performing particular functions and activities effectively, if its costs are in line with those in the industry, and if its internal activities and business processes need improvement. The purpose behind benchmarking is to measure internal processes against an external standard; furthermore, it’s a way of learning which companies are best at performing certain activities and functions so others can learn from or improve on their techniques.

Some things benchmarking might help you better understand:

• Where costs savings could be easily made in your business.
  
• How the profit level of your business compares with others in the same industry.
  
• Areas of potential revenue growth. For example, you might identify that:
  
• Your percent of total payroll is significantly higher than other similar attractions and reevaluate your hiring and pay practices.
  
• Your inventory costs are higher than competitors’, indicating you might need to reduce waste or negotiate better rates from your suppliers.
  
• Your income per guest is lower than the industry average, meaning you may want to look at price structures and products offered.

Get Started
A few areas to consider when benchmarking your activities and performance:

• Determine which functional areas you are interested in benchmarking.
• Identify the key factors and variables with which to measure those functions.
  
• Select the best in the industry companies for each area to be benchmarked.
  
• Measure the performance of the best-in-class companies for each of the benchmarks being considered.
  
• Measure your own performance for each variable and begin comparing your results with the industry standards.
  
• Review the results, and develop a plan of action to address some of the variances.
  
• Implement these plans by setting specific improvement targets and deadlines; be sure to monitor, track, evaluate the progress, and make changes as needed.
  

How to Use Benchmarking Data
The goal of benchmarking is to identify the weaknesses within an organization and improve them. It may also identify areas where you might be better than the industry. The idea is to incorporate the best-of-the-best industry practices into your operations. Here’s an example of how you could use this data to benchmark an operation within your company:

Your boss has asked you to use the benchmarking process to look into how your organization might improve your food and beverage revenue in 2010. Company XYZ is located in the United States and has attendance of fewer than 500,000 per year.

• The area to be addressed is the food and beverage revenue for 2010.
• The key factors might be the types of food and beverage operations you have in the park and what percent of overall food and beverage they represent.
  
• Your benchmarking is going to be the 2009 IAAPA “Managing Attractions for More Profit” survey (see details below).

The survey says for operations in the United States with fewer than 500,000 per year, the food and beverage operations offered are as follows:

• An International Survey of Operational Performance pg. 31
  

XYZ food and beverage operations offered are:
Full Service 70.5%
Food Carts 29.5%

• In comparing XYZ and the industry it would appear that XYZ is heavy in full-service operations, with a few food carts. The action plan may be to look at converting some of the full-service locations to quick service and expand the food carts. This action might not only increase revenue, but it might also reduce labor costs and cost of goods sold.
  
  
• After more study by XYZ and new revenue projections calculated for food and beverage, the proposed changes are made for the 2010 season. It will be important that XYZ tracks these changes to ensure revenue does increase and labor costs decrease.
  

Get the Data
One of the more difficult steps in this process is obtaining data from the best in the industry. As a member of IAAPA you have access to such information through a survey directed by the IAAPA Financial and Information Technology Committee titled “IAAPA Managing Attractions for More Profit, 2009 edition, An International Survey of Operational Performance” (available at www.IAAPA.org /bookstore). This data was collected through an online survey that was e-mailed to more than 3,000 individuals representing hundreds of unique attractions worldwide. Responses for the 2008 financial year were collected during June 2008 and June 2009. Usable responses were received from 152 attractions.

The analysis of the survey data on amusement/attractions from around the globe provides information every attraction owner or manager needs; the report was designed by attraction operators for attraction operators and presents the most current and relevant information in a format that is easy to use.

Neva Richardson-Larson has more than 30 years’ experience in accounting, finance, and operations, including 20 years in various positions within the hospitality/attraction industry. She is currently chair of the IAAPA Finance and Information Technology Committee.