Benchmarking is the process of comparing one’s business processes and performance metrics to best practices from other companies. Dimensions typically measured are quality, time and cost. In the process of best practice benchmarking, management identifies the best firms in their industry, or in another industry where similar processes exist, and compares the results and processes of those studied (the “targets”) to one’s own results and processes. In this way, they learn how well the targets perform and, more importantly, the business processes that explain why these firms are successful.
In 2008, The Global Benchmarking Network commissioned a survey that showed:
- Mission and Vision Statements and Customer Surveys are the most used (by 77% of organizations).
- SWOT analysis (strengths, weaknesses, opportunities, and threats) (72%).
- Informal Benchmarking (68%).
- Performance Benchmarking was used by 49%.
- Best Practice Benchmarking by 39%.
There is no single benchmarking process that has been universally adopted.
An example of a typical benchmarking methodology:
- Identify problem areas.
- Identify other industries that have similar processes.
- Identify organizations that are leaders in these areas.
- Survey companies for measures and practices.
- Visit the “best practice” companies to identify leading edge practices.
- Implement new and improved business practices.
The most cost effective method to gather benchmarking data is usually purchasing it from industry bodies (if possible). Businesses that want to improve their performance need to be continually benchmarking their practices.