Great champions do not train thinking only of themselves. They study their opponents, review their races and know their strengths and weaknesses, as well as their emotional reactions. Comparing yourself with someone stronger is not a humiliation: it is the starting point of every improvement.
In alpine skiing, forerunners descend the course before the competitors to prepare the track. For the selected young athletes, this is an important opportunity to compare their performance with that of the competitors under identical conditions. A good coach is not content with knowing how long their athlete took: they compare their times with those of the best in the race, split time by split time.
The final time is not enough.
Knowing that you finished two seconds behind the winner tells you very little. Split times, on the other hand, tell you where: on the steep pitch, in the turn before the flat section, on the way out of the bump. That is where the following week’s training is focused.
And the benchmark is the winner, not the average of the competitors. Comparing yourself with those in the middle of the rankings is reassuring. Comparing yourself with the best makes you grow.
Reclassified financial statements are our stopwatch.
In the previous piece, we talked about the compass: the plan is the course, and management control is the tool that tells you whether you are following it. But the compass tells us whether we are heading in the right direction, not whether we are moving as fast as the others. That is why we also need a stopwatch.
For a company, the split times are found in the financial statements. Those of direct competitors are filed with the Business Register and can be obtained for a modest fee. Taken as they are, however, they are of little use: to be compared, they must be reclassified using the same criteria we apply to our own for internal use. Same track, same stopwatch. Only then do the figures become consistent and comparable.
It doesn’t take a great deal of effort. All you need is three or four carefully selected competitors, a few hours of work a year and a simple framework: an income statement based on gross margin and a balance sheet that separates the capital invested in operations from financial capital. For smaller competitors, the financial statements will be less detailed, but the main line items are always there. This is a key phase in the growth process: the goal is not absolute precision, but understanding where we stand so that we can decide where we want to go.
The split times of business management.
Each indicator is a section of the course: value added as a percentage of revenue, the weight of personnel costs, operating margin, days to collect receivables, inventory turnover and return on invested capital.
Let’s take an example. Two companies with €10 million in revenue: ours collects its receivables in 95 days, the best competitor in 60. Thirty-five days’ difference is worth almost a million euros tied up in receivables, which the competitor can use to invest, while for us it is a drain on resources. The income statement alone would never have shown this.
Comparison is done together, as between athlete and coach.
The figures tell us where we are losing time, not why. That is why they need to be brought into comparison sessions with colleagues: the sales team knows the payment terms used in the market, purchasing knows how competitors’ suppliers work, and production can explain a different level of personnel costs. These are concrete aspects, each of which someone can interpret correctly; put together, they give a complete picture.
This work brings out weaknesses, but also strengths. There are sections of the course where we are faster, and these too must be recognised and protected. The coach knows this: an athlete who sees only their own mistakes loses confidence, while one who also knows their strengths knows where to start again from.
The companies that truly improve are neither those that settle for their results nor those that chase competitors without knowing how or where to act. They are those that, like a good coach, choose the best benchmark and work one section at a time.
This is the third piece dedicated to the Management Control face of the Rubik’s cube: after J. Harrington’s model for mapping activities and the plan that supports growth, here is another piece to measure ourselves against the best and make better decisions. In the next piece, we will see how comparison with leading companies can guide the reorganisation of logistics.
In your company, do you know which section of the course you are losing time on compared with the best competitor?
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Kenning Consulting accompanies small and medium-sized businesses in building a growth plan supported by management control tools tailored to their development stage.