ARTICLES

Benchmarking:

Benchmarking is defined as the process of measuring products, services, and processes against those of organizations known to be leaders in one or more aspects of their operations. Benchmarking provides necessary insights to help you understand how your organization compares with similar organizations, even if they are in a different business or have a different group of customers. Benchmarking can also help organizations identify areas, systems, or processes for improvements—either incremental (continuous) improvements or dramatic (business process re-engineering) improvements. Established companies use certain types of benchmarking to optimize productivity, improve marketing, or break into a new market. Whereas start-ups use other benchmarking types to form a go-to-market strategy or prepare detailed competitive analyses about their industry.  

The seven most significant types of benchmarking:

• Competitive benchmarking:

  compares how well (or poorly) an organization is doing concerning the leading competition, especially to critically important attributes, functions, or values associated with the organization’s products or services. For example, on a scale of one to four, four being best, how do customers rank your organization’s products or services compared to those of the leading competition? If you cannot obtain complex data, marketing efforts may be misdirected and design efforts misguided. 

• Strategic benchmarking:

  means comparing your strategy to other successful companies’ strategies to determine the differences and identify opportunities. Knowing what high-performing companies do can help you optimize your business strategy and identify areas where you can excel.

• Performance benchmarking:

  is the process of measuring and analyzing an organization’s performance of products, services, operations, and other business processes against other companies, competitors, or industry leaders. It helps businesses identify and understand areas for improvement. This process helps companies benchmark and measure several metrics such as time-to-market, cost-per-unit, net promoter score (NPS), and customer retention. Performance benchmarking provides insights into how other brands compare to one, even if their audience or industry differs.

• Digital benchmarking:

   covers everything from keywords to conversion and ROI (return on investment) and can be applied to any data point. The overall goal is to assess your digital activity’s impact on your overall business performance and how it matches up to direct competitors.

• Practice benchmarking:

  takes a more qualitative approach. It aims to evaluate how things are done in your company and pinpoint areas to optimize. The first step is mapping internal processes. You can compare different workflows inside your business to see which yields better results and set standards for teams and employees. 

• Internal benchmarking:

  is a process in which a company or an organization looks within its own business to try and determine the best practice or methodology for conducting a particular task. The aim is to find the best practice available to get the job done with minimum effort or resources.

• External benchmarking:

  is a way of measuring performance against an outside standard. Generally, benchmarking is used to ensure that a particular business or a part of its operations is functioning at a level that meets targets set by internal or external best practices. When benchmarking looks at external best practices, it uses industry standards or performance standards set by industry leaders as guidelines for internal performance.

How are these standards applied?

Plan

• Define a tightly focused subject of the benchmarking study. Choose an issue critical to the organization’s success.

• Form a cross-functional team. During Steps 1 and 2, management’s goals and support for the study must be firmly established.

• Study your process. Know how the work is done and measurements of the output.

• Identify partner organizations that may have best practices.

Collect

• Collect information directly from partner organizations. Collect both process descriptions and numeric data, using questionnaires, telephone interviews, and/or site visits.

Analyze

• Compare the collected data, both numeric and descriptive.

• Determine gaps between your performance measurements and those of your partners.

• Determine the differences in practices that cause the gaps.

Adapt

• Develop goals for your organization’s process.

• Develop action plans to achieve those goals.

• Implement and monitor plans.

Why are these standards applied?

• Competitive Analysis:

  By identifying areas you wish to improve on in your business and benchmarking your existing performance against competitors, your business can strive to enhance your execution. Using benchmarking this way has allowed businesses to gain strategic advantages over competitors and grow industry averages.

• Monitor Performance:

  Benchmarking involves looking at current trends in data and projecting future trends depending on what you aim to achieve. To know you have been successful, benchmarking needs to be a continuous process. Monitoring performance is an inherent characteristic of it.

• Continuous Improvement:

  As well as monitoring performance, continuous improvement is an essential attribute of benchmarking. This is because the aim of benchmarking is to improve a certain element of a business. This improvement should not merely be something that improves once and is forgotten, but something that improves over time and is continuous.

• Planning and Goal Setting:

  Once benchmarking has been carried out, goals and performance metrics are set to improve performance. These goals are new, more competitive targets for a company but they must be achievable. If plans are unrealistic to achieve, teams become demotivated and plans are destined to remain unfulfilled.

• Encourage Ownership:

  When companies look at their processes and metrics, they need to ask hard questions to get all the answers they need. This includes talking to everyone in the business and understanding their roles. By asking these questions and gaining a better understanding of everyone’s role, ownership of processes and performance is encouraged. This means that employees will take pride in their job and the work they do. This pride leads to better performance and higher-quality results.

• Understand Your Companies Advantages:

  Benchmarking identifies where your company is right now compared to where you want it to go. If you are looking at improving any process in your business, benchmarking is a way of looking at how you can excel and become more successful by outlining the steps needed to achieve your goal.