Benchmarking is a method to establish a standard for measuring performance, typically against a competitor or against a competitor’s best performance. The process can be of a qualitative, descriptive, or quantitative nature. It is a critical tool for competitive advantage and growth. Benchmarking can be used to determine how well an organization is performing.
Benchmarking can be used to inform strategic planning, improve processes, drive organizational culture, and enable a future-proof business. It can be highly useful for benchmarking one’s own performance or the performance of others. Benchmarking provides a competitive edge by providing knowledge, direction, and inspiration for continuous improvement.
There are basically four types of benchmarking. They are;
1. Performance Benchmarking
Performance benchmarking is a standardized method to compare and contrast the performance of one system against another. It is the first step that companies take to recognize performance gaps. Performance benchmarking involves the collection and comparison of quantitative data. For this, an organization needs standard measures or KPIs (key performance indicators) and a means of exacting, collecting, and interpreting that data. Performance benchmarking helps organizations to obtain data that acquaints decision-making.
2. Practice Benchmarking
Practice benchmarking is a great way to ensure that you are meeting your targets and that you are improving at a consistent rate. It is the process of collecting and comparing quantitative and qualitative information about a company, organization, or other entity’s performance relative to other entities. The goal is to extract information from the process to be able to make improvements to not only the process but also to operations. Practice benchmarking has been proven to be a very useful tool in helping companies to improve their processes and to become more efficient. Through practice benchmarking, processes can be improved, when organizations compare their processes to best practices from other companies.
3. Internal Benchmarking
Internal benchmarking compares metrics and practices from different units, departments, geographies, programs, product lines, etc., within the organization. For internal benchmarking, organizations need at least two areas, in the organization only, that have shared metrics and practices. Internal benchmarking is a beneficial starting point to know the prevailing standard of business performance.
4. External Benchmarking
External benchmarking analyzes metrics and practices of one company to one or many others. For this benchmarking, the organization needs one or more organizations to participate. Also, a third party may be needed to facilitate data accumulation. This strategy can be highly valuable. However, it often requires notable time and effort. Through external benchmarking, organizations can attain an understanding of their organization’s prevailing state. This allows setting baselines and intentions for improvement.
Final Words
Benchmarking is all about being humble enough to acknowledge that other organizations are better at certain things and being smart enough to know how to match or even surpass that organization.
To know more about benchmarking, attend the Compliance Prime webinar.
