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Weight benchmarks of multi-component companies by revenue

Many companies operate in more than one market segment. Nevertheless, benchmark surveys treat them as if they operate in only one, in only one industry. How can benchmarkers accurately categorize General Electric, MetLife or Johnson Controls, to name only three companies that have varied operations?

One methodology asks the companies in a benchmark survey to identify their various revenue components. Then, weight the data according to how large a particular component’s revenue bulks in the overall revenue of the company. A company that is 40 percent manufacturing would have its metrics count for more in a manufacturing industry cut than another company where manufacturing accounts for only 20 percent (See my posts on weighting factors of Nov. 24, 2005 regarding the determinants of bonuses; March 25, 2005 and May 31, 2005 regarding client satisfaction scores; Aug. 30, 20065 regarding grid analyses for decisions; Nov. 15, 2005 and Aug. 20, 2006 regarding outside counsel performance; and Nov. 30, 2005 regarding weighted averages generally.).

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