Benchmarking is the practice of comparing business processes and performance metrics to industry bests and best practices from other companies. It is a strategic process that allows you to measure your companys success against other companies in your industry. Benchmarking is used to measure performance using a specific indicator, resulting in a metric of performance that is then compared to others. The dimensions typically measured are quality, time, and cost. Benchmarking is appropriate in nearly every case where process redesign or improvement is to be undertaken so long as the cost of the study does not exceed the expected benefit. There are different types of benchmarking, including financial benchmarking, performance benchmarking, and product benchmarking.
The benefits of benchmarking include improving employee understanding of cost structures and internal processes, encouraging team-building and cooperation in the interests of becoming more competitive, and enhancing familiarity with key performance metrics and opportunities for improvement company-wide. Benchmarking helps employees understand how one small piece of a company’s processes or products can be the key to major success, just as one employee’s contributions can lead to a big win.
The benchmarking process involves measuring the performance of a company’s products, services, or processes against those of another business considered to be the best in the industry, aka “best in class” . The point of benchmarking is to identify internal opportunities for improvement. By studying companies with superior performance, breaking down what makes such superior performance possible, and comparing those processes to how your business operates, you can implement changes that will yield significant improvements.
The benchmarking process typically involves the following steps:
- Identify what to benchmark
- Identify the best-in-class companies to benchmark against
- Collect data on the performance of the companies being benchmarked
- Analyze the data to identify performance gaps
- Determine the reasons for the performance gaps
- Develop and implement an action plan to close the performance gaps
- Monitor progress and adjust the action plan as needed
- Repeat the process on a regular basis to ensure continuous improvement.
In summary, benchmarking is a process of measuring the performance of a companys products, services, or processes against those of other companies to identify internal opportunities for improvement. It involves comparing performance metrics to industry bests and best practices from other companies, and it can be used to measure quality, time, and cost. The benchmarking process typically involves identifying what to benchmark, identifying the best-in-class companies to benchmark against, collecting data, analyzing the data, developing and implementing an action plan, monitoring progress, and repeating the process on a regular basis to ensure continuous improvement.
