Is benchmarking important? Well, yes and no. Benchmarking is useful for identifying possible weaknesses in an agency and for comparing it with a group of other agencies. Using benchmarks for other purposes, however, can cause problems.
For example, many agencies use benchmarks to set strategy and consider “best practices” benchmarks to be goals they should strive to surpass. However, if agency managers do not understand the statistic to which they are comparing their agency's performance, they may set strategies that send them heading north when they need to go south.
Currently, a popular benchmark for agencies is revenue per person. This benchmark, though, has limited value because it is directly related to agency size-the larger the agency, the larger the per-person revenue. For large agencies, increased revenue often does not translate into higher profit margins. I analyzed all publicly traded brokers to learn if a relationship exists between revenues per person and profit margins, and found no correlation. I don't see the value of steering an agency toward a revenue-per-person benchmark if doing so doesn't improve profits.
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