An introduction to benchmarking

A means of measuring the relative performance of an organisation, by using an agreed set of definitions or criteria across the comparison set. For example, a simple form of benchmarking would the league table of individual countries’ tally of Olympic medals: the agreed definitions here are the gold, silver and bronze medals.  The agreed definitions ensure we are comparing apples to apples – vital if the comparison is to be meaningful! 

Examples of comparisons already being used in the arts include Arts Council England using elements of the annual submission in individual discussions with its National Portfolio Organisations (NPOs) on topics such as income diversification. Indeed, any time discussions about ‘best practice’ move from the use of prose to the use of figures, they are shifting into a benchmarking scenario. 

Benchmarking requires the existence of robust data, and so tends to follow work establishing common measurement criteria and processes.  

It is particularly emerging in:  

• Audience activity 
• Business models, income diversification and cost management 
• The social impact of public funding 

Benchmarking data is useful to all arts organisations to both inform strategic decision-making, and to contextualise and highlight achievements when reporting to funders and stakeholders. 

Benchmarking helps you define what ‘good’ and ‘best’ mean in a particular field of activity so that you can then work out how you stack up against the ‘best in class’, and make informed decisions about what improvements are needed. 

Not benchmarking can be risky, and have real-world consequences. For example, many cultural organisations have recently increased their focus on developing income from private donations. Whilst this type of income certainly has a role to play, a lack of comparison data means some have over-estimated the income that donations might contribute to budget sheets – essentially forecasting donation income based on the gap it needs to fill, rather than what data suggests is realistic. 

Such optimism is dangerous when the future of an organisation is at stake. Pragmatic realism based on good research into the likely successes of different income generating options is preferable! 

Just how different would your senior management team and board meetings be if instead of saying ‘we need to do something about raising donations and sponsorship’ you could start with ‘the average percentage of income achieved from trusts and foundations for an organization of our size, sector and profile is X% of turnover. We are currently achieving Y% from these sources - can we discuss how we get from Y to X in the next 1-2 years?’.  

The latter feels far more confident, more focused and more in control of the factors that are affecting the success or failure of the organisation. This is the crux of the matter.  

Benchmarking your organisation helps you to become clearer, not just about what your strengths and weaknesses are, but the scale of these strengths and weaknesses and thus the size of the mountain to be climbed.  

This helps you prioritise your activities better as you have a quantitative understanding of the difference between make-or-break activities versus nice-to-haves.  

Benchmarking and comparative data will help you:  

• Develop a quantitative understanding of your strengths and weaknesses (versus your peers) 
• Identify areas where improvement is needed and clearly define the scale of the change you wish to make 
• Inform effective plans to diversify income, manage costs and develop audiences 
• Set goals based on progress towards ‘best in class’. 

One way to think of the role of benchmarking when talking to people outside your organisation is to think of it as a way to underline your key messages. In the main, data is not a substitute for fine prose but it does help drive a message home. How much stronger would your message be if instead of saying that you’ve been growing the income you achieve from royalties, you could say that whilst the national average for arts organisations when it comes to income from intellectual property is 1% of turnover you are already achieving 2% and it is set to continue to grow.

This sort of message that communicates your successes is great for communicating with funders both public and private. Such soundbites can be reproduced by funders in their own reports and are very memorable when communicated verbally in presentations etc.

If you rely heavily on a cohort of volunteers then using comparative data to focus their attention on something like, raising income from the café, or increasing the number of people who buy the ticket that includes the donation, is a useful approach. It works because you can show a before and after and therefore the volunteers can see the impact of their actions and can measure the successes more easily.

For some individuals data is the preferred way to receive information. For example, from individuals located in finance departments with less direct access to the arts from the Treasury at a national level through to the finance departments of Local Authorities. These are individuals who are used to interpreting figures to reach their conclusions and find this easier than reading prose explanations. It is therefore very useful to be able to communicate both in prose and in figures – treat it as if you are speaking two different languages and choosing your language depending on who the other party is.

In summary, benchmarking can be used with stakeholders in the following ways:

• Communicating your achievements
• Making stronger funding applications
• Galvanizing volunteers and members around key issues/challenges

It matters who you compare yourself to. If you are running a visual arts organisation that doesn’t have a public space it is unlikely to be wildly useful to compare yourself to Tate as the differences will vastly outweigh the similarities.  

Having said that, there may also be times when you are in an aspirational mood and you decide that a comparison against a group of organisations who are already doing something that you aspire to will be more useful.  

 So how do you choose who to compare yourself to? 

It is worth thinking about who you consider your peers to be. You are aiming for a list of 10-20 organisations who are roughly similar to you in what they do, how big they are, whether they are located in an urban or rural setting and whether they are in London or not. Think of this as your ‘home group’.  

So whilst you may well be interested in the national average, it is just as important that you know how the average for your ‘home group’ varies. For example, a paper published by Common Practice titled Size Matters looks at the differences between the business models of large and small visual arts organisations and takes a cohort of nine small to medium sized London organisations as its ‘home group’. 

Benchmarking is nothing new, many museums and clusters of larger theatres have been doing it for years What is new however is the ease with which such comparisons can now be made and the focus from key funders on using this data to inform funding decisions and report on the impact of their programmes. 

Creative Scotland have been revising their annual data submission form to enable greater access to their data going forward. The work has looked at not only what data is collected but also how it might be made accessible whilst protecting the sensitivity and confidentiality of the data held. 

Both Paul Hamlyn and Esmee Fairbairn foundations have been improving their evaluation approaches to enable them to report in more detail. Paul Hamlyn have published Assessing Impact on the social impact of their programmes. 
 
Plus, of course, here at The Audience Agency we have been facilitating benchmarking of audience data for several years through our Networks programme – find out more  

You’ll need to answer three key questions: 

• What comparisons would be the most useful to your organisation? 
• What data do you have to hand? 
• What data can you get hold of to compare yourself against? 

You do need to know how your business model stacks up vs your peers, you also need to know how you compare when it comes to your largest sources of income and audiences. On that basis we recommend benchmarking your business model first in order to set a baseline for a more detailed comparison of your key income sources, and your on and offline audiences. 

If you have specific plans for either a cost cutting exercise or a new income stream add this to your benchmarking shopping list. 

You may want to look at some key ratios: 

1. Equity ratio – this is the reserves as a percentage of total revenue income and thus an indicator of the resilience of the organisation as a whole 
2. Revenue concentration – how dependent are you on one or two core funders? What is the highest percentage of income from a single source? 
3. Administrative cost ratio – this is the overheads as a percentage of total revenue  
4. Profit margin – this is the surplus or profit as a percentage of total revenue income 
5. Robust revenue model – the percentage of total income that is classified as ‘earned income’ i.e. non-grant income 
6. Intangible assets – is there anything for this line in your balance sheet? What percentage of your net assets or net current assets is it? 
7. Asset utilisation – the ratio of fixed assets to total income 

It should be noted that this list of key ratios is in line with the recommendations of a number of industry specialists including CIDA Co., Mission, Models, Money and Counterculture. 

Now you need to locate your organsation's data. There is a fair chance that you will already have one or more of the following:  

• End of year report and accounts 
• Arts Council (England, Wales, Ireland) or Creative Scotland annual submission data 
• Audience and or box office data 
• Online and social media data 

It is worth working out what period to look at. For accounts information annual data is the place to start but you might want to look at monthly or quarterly data for audiences.

You can either join in with existing benchmarking groups or services or collate your own. If you are new to this, it is probably easier and quicker to join an existing service or group. The two main benchmarking services available across the UK are those provided by The Audience Agency ( for audience comparisons) and MyCake's Culture Benchmark ( for business models). Don't feel obliged to use these however, feel free to build your own comparisons.

Other sources could include: 

• Goal setting (e.g. income development, cost cutting) becomes more pragmatic and realistic as it is informed by better data.  
• Greater clarity within the organisation on how business models in the arts tend to change as the turnover increases or decreases 
• More detailed understanding of how the ‘best in class’ achieve their successes 
• Access to a succinct, fact-based summary of the organisations greatest strengths and weaknesses 
• Greater familiarity within the senior management team of the key ratios and comparison points for the organisation and more regular checking of progress 
• Greater visibility with and respect from funders 

Whilst there is a growing interest in benchmarking amongst the national funders of Arts Council England, Creative Scotland, Arts Council Wales and Arts Council NI, it is really the private trusts and foundations who are leading the way, particularly those whose interests extend across not just the arts but other parts of the third sector. 

The Paul Hamlyn Foundation and Esmee Fairbairn Foundation have have started to look at how the impact of the organisations they fund can be measured and benchmarked. The PHF publication Assessing Impact gives a good indication of the future interests and direction of this funder and can be expected to set the tone for many other funders over the next few years. Meanwhile DCMS is keen for public funders to make their data more accessible and publicly available.