Benchmarking is the process of comparing a business’ metrics to industry standards or the best practices of other companies., that is, comparing your company’s performance and progress against the leaders in your field. The term “metrics” refers to a set of numbers that give us information about a particular process or activity, such as customer satisfaction scores or production costs.
Benchmarking is like using a compass in the wilderness; it helps businesses, organizations, and even governments determine how well or badly they are doing.
Learning from the best
It is an effective method of finding the best possible strategies to perform a task or process, essentially learning from the best.
According to the American Society for Quality (ASQ), benchmarking involves measuring products, services, and processes against those of organizations recognized as leaders in one or more operational areas. Doing this offers valuable insights into how your organization compares to similar ones, even if they operate in a different business sector or serve a different customer base.
Benchmark vs. benchmarking
The term “benchmark” refers to a level of quality that is used as a standard when comparing other things. For example, a company may use the customer satisfaction scores of the industry leader as a benchmark to evaluate and improve its own service levels.
Benchmarking is the process of measuring performance against standards, while a benchmark is the actual standard or point of reference used for comparison.
Why is benchmarking important?
Imagine you are competing in a race, but you have no idea what position you are in or how fast your competitors are running. Benchmarking tells you where you stand. In the business world, it tells you how your company compares to others.
By analyzing your metrics, you can identify areas where you can improve.
Different types
There are several types of benchmarking:
- Internal benchmarking – comparing practices within the same organization.
- Competitive benchmarking – comparing a business to others in the same field.
- Funtional benchmarking – looking into another industry to find what’s working best for them.
- Generic benchmarking – a broader level comparison across various sectors.
Benchmarking process
The process usually involves four key steps:
- Understanding in detail existing business processes.
- Gathering and analyzing other business’ processes
- Comparing your own business’ performance with those of other companies.
- Implementing the steps necessary to improve and close the performance gap.
Benchmarking is an ongoing process of self-improvement; it is not a one-time task. It is about continually looking outwards for new ideas and internally for areas to apply them.