What is benchmarking?

Darryl Bachmeier
Mar 23, 2019

It is difficult to understand how well you are performing unless you measure. Benchmarking allows you to determine how well you are performing by comparing your numbers to an average of others. It is used often in sales and operations. Benchmarking forces management to look beyond its own company and see what others are doing. Benchmarking is a proactive discovery method.

You can compare your business externally with industry data or internally by comparing different teams, locations and departments. For industry data, it is best to compare against companies of the same type within the same industry. What may look good in one industry may be horrible in another.

You look for what makes others perform better and model your company to theirs. You look at which processes work and which do not. You can even look at individual products.

It starts with knowing what are key performance metrics, what are the things you need to measure. Management must agree on the metrics and how they are measured. Measurements must be applied in the same way every time otherwise the results are not useful. You need to collect data over time to see changes in these metrics. You can collect your own data, gather free data or purchase data.

Benchmarking allows your business to follow best practices of the industry. Benchmarking can be used to find areas that need improvement, improve efficiency, produce better products and services, allow the company to gain competitive advantage, improve quality, reduce costs, streamline work flow and improving customer service.

Once all measurements are in place and the results have been reviewed look for the best return on investment to invest in areas that will have the most benefit. Implement improvements and repeat the process for continuous improvement. Any adjustments from what you learn will show in your performance measures. Some adjustments may take time to have an impact.

In order for the benchmarking process to truly work in an organization, management must support it and the organization must be open to change and continuous improvement. Management can help by setting goals and targets for the organization to meet. It is important to remember why the benchmarking process is done. Do not get stuck at only looking at the negative weak points it is important for leadership to acknowledge the strengths of the company.

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