Benchmarking is the act of comparing a business and business strategies against the top businesses in their fields. An interesting fact about benchmarking is that the comparison doesn’t need to be against a business in the same field. Businesses can compare any aspect of their business to a business that has a comparable field. A company looking to overhaul their supply chain will look at different companies that have successful logistics processes, regardless of what their product is.

Step by step benchmarking

1. Initially you will need to determine what areas you want to benchmark. This can be an existing company, a new company, or different aspects of the business. This step is especially beneficial for new businesses to determine what successful businesses in their field do.
2. One of the most essential steps that should be taken is to gather quantitative data about your own business. Without this information there will be little to measure against the industry standards.
3. Determine which companies you want to benchmark against. There may be industry standards that you want to measure your against, recognized industry experts, or you may need to conduct your own research in order to obtain the data needed.
4. Gather the necessary data. This may include working with an agency that specializes in benchmarking, or you may be required to travel and conduct research yourself. The level of involvement is largely reliant on the size of your company and the breadth of your investigation.
5. Compare the information between your benchmark companies and your personal quantitative data to determine where gaps exist. By identifying these gaps companies will be able to identify what changes need to take place.
6. Formulate a plan to put into action in order to make the needed adjustments in order to improve the benchmarked areas.

Why benchmarking is important.

Benchmarking is essential to the long-term success of any business. Innovation is what keeps industry fresh, and keeps the attention of customers. By constantly evaluating existing processes and comparing it to current industry standards, best recommendations, and top of the class companies, businesses can continue to optimize practices and improve on productivity and efficiency. Additionally, the act of benchmarking is important to helping employees understand how the company works. Employees who participate in benchmarking have a better understanding internal structure, they are more likely to be team builders, and are in touch with opportunities to improve the company on a wider scale.

Types of benchmarking.

Benchmarking can occur in a couple of different ways. There is continuous benchmarking and dramatic benchmarking. Continuous benchmarking consists of small steps on a constant basis that allow a company to constantly change. Dramatic benchmarking will affect the entire company, and result in massive changes in the structure of the company. There are also various types of benchmarking. While there are a wide variety of types, there are three common ones that business owners should be familiar with: Process benchmarking, Performance benchmarking, and Strategic benchmarking.

In process benchmarking the company’s goal is to specifically compare practices against the best practices of a benchmark firm. In this situation the company wants to improve cost and efficiency. Performance benchmarking is similar; however, the end goal is to compare their company/product against their competition. With performance bookmarking the company wants to be competitive. Strategic benchmarking looks at how other companies compete with one another, and may not need to be industry specific.