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GRAY STONE ADVISORS' BLOG
Aviation Performance Benchmarking: A Key to Success in BizavPrint This
No doubt you've heard the buzzwords "best in class" hundreds of times. It often sounds a bit over-the-top to hear a company or an organization refer to itself as the best at something.
Unless, of course, it really is.
How do you know if your business aviation operation is really a top performer? And how would you go about demonstrating this success to your parent company's senior executive team?
Understanding where your team ranks among its industry peers can seem like a complicated puzzle to solve. But you must be assessing it. It's a sure bet that if you haven't yet been asked to show your performance with respect to your peers, you will be. To be ready, here's a simple guide to conducting the benchmarking process in business aviation.
By Steve Brechter, Gray Stone Advisors
What is Aviation Performance Benchmarking?
The Oxford Reference Online describes benchmarking as, "The process of identifying best practice in relation to products and processes, both within an industry and outside it, with the object of using this as a guide and reference point for improving the practice of one's own organization."
Quite a mouthful. But when you boil it down, it's all about defining what it takes to make you a top performer and then understanding what your peers across the industry are doing—and how you rank in comparison.
For instance, you may think that your "dispatch reliability" is high, but is there someone out there whose rate is higher? And even though you might be meeting your budget, is there someone who's doing everything that you're doing, but for a lower spend? CEOs frequently talk to other CEOs, so these days you've got to have ready answers.
Why is Benchmarking Necessary?
Now more than ever, it's important to demonstrate relative performance. Let's face it, the 10-power magnifying glass under which flight departments now find themselves is the result of a global corporate focus on cost and efficiency. We in business aviation manage a significant asset base and we need to show that we are managing it effectively—as well or better than anyone else. Every asset employed must create value.
So where do you start?
First Define What's Most Important
The first step in benchmarking is to define the key value points and determine what's most important to measure. This is the most important step. To make that determination, you must be totally aligned with your parent company and understand what they expect from you and your business aviation operation.
Many begin with the operating budget and the expectation of favorable budget performance to plan. A simple cumulative line chart of the "budget plan" vs. "actual spend" shows the status clearly. Immediately, you (and senior management) can tell where your budget stands with respect to internal corporate expectations.
Other types of "activity based" measures might include "on-time arrivals" or "deadhead rate." Be clear on what you're measuring and why it's important.
The latest thinking in metrics (and benchmarking) is the concept of "value creation." We assist many business aviation operations in determining the specific elements of value as perceived by the parent company. "Value creation" is expressed in many ways for business aviation. Some companies value the number of "client-facing opportunities" created by business aviation, others the number of "deals closed through the use of corporate aircraft."
These value points vary from company-to-company, so take the time to get aligned with corporate and know what's important to your senior leadership.
Then Reach Out
But how do you answer the inevitable question of your standing against industry peers? You've now got to examine what others are doing. That's the essence of benchmarking.
In this case, you won't be evaluating yourself solely against internal corporate targets, so you've got to identify the key measurements by which to compare yourself to others.
Participating in industry roundtables is a great way to identify benchmarking partners who are similar to you in terms of mission, size, number of aircraft, basing, etc. Once you assemble the peer group, establish a commitment to confidentiality as there's often private company data shared.
Once agreed-upon measures are established, you must ensure that everyone in the benchmarking group is measuring each attribute the same way. For instance, when measuring "dispatch reliability," you may consider an aircraft as "dispatchable" if it is on the line and ready for hand-off to Flight Operations two hours prior to launch. Others may use a one-hour interval. Clear definitions are vitally important.
It's also important to level the playing field. You need to ensure that all comparisons are relevant. You'll likely need to normalize the data among the peer group by flight hours, number of aircraft, etc., to get an apples-to-apples comparison of your performance against others.
Once you've gotten your benchmarking data back from the peer group, depict it in a graphical format and look for differences between your business aviation organization and the others. There will undoubtedly be metrics that are both favorable and unfavorable to yours.
The key is to understand what makes the results from certain peer organizations favorable to yours. Such cases are likely driven by best-practices. For instance, one of your peer's "maintenance labor-spend per technician" metric might be lower than yours. It's time to understand how they manage it. Future roundtables are an excellent platform to share best-practices which will beneficial to all. That's what benchmarking is all about.
We've just begun to scratch the surface, but hopefully you see how effective business aviation performance benchmarking is done. It can actually be a lot of fun—and even more satisfying to circle back to the senior executive team and objectively demonstrate that you truly are in the "best of"category!