By Yhordan Serpentini | April 7, 2023
If you’ve ever wondered what the industry standards are for your business or your competitors, or if you want to find new strategies to improve your organization, then benchmarking is right for you. In today’s blog, we will be taking a brief overview of benchmarking, including what it is, what are the different types of benchmarks, how to perform and utilize the strategy, and the benefits of benchmarking your business.
What Is Benchmarking?
Benchmarking, in the business industry, is a term that refers to the process of measuring the performance of your business against your target market competitors, allowing you to identify areas that need improvement, and areas that are performing efficiently and effectively. While every business tends to be unique in its operations, benchmarking can be an effective tool for ensuring that your business and employees are meeting certain standards that are expected by your consumers.
For example, if your business is a chocolate company producing X amount of chocolate in Y amount of time, benchmarking will help you analyze this data and compare it across competitors in the chocolate industry, like Hershey’s, Reeses, or Snickers, to identify if your production quantity-to-time ratio is the average standard—or if it is above average, or below average.
Types of Benchmarks
Benchmarking in itself is an oversimplification of the process, as there are different types of benchmarks that lead to a variety of categories to analyze throughout your business. There are a total of four main types of benchmarking:
- Performance Benchmarking – refers to a process that gathers and compares data on your business’s performance to that of your competitors and your industry standards.
- Internal Benchmarking – refers to the process of analyzing your own company’s performance, strategies, and processes, and comparing it to yourself. In other words, you’re comparing your business to your own business.
- External Benchmarking – refers to the process of analyzing your own company’s performance, strategies, and processes, and comparing it to another organization.
- Practice Benchmarking – refers to the process of gathering and comparing data about how the practices of one or more organizations are conducted through people, processes, and technology.
How To Benchmark
The process of benchmarking is not as complex as it may seem. Although there are four types of benchmarking, they are all able to be utilized uniquely, given that you know how to benchmark. Below is a quick step-by-step guide on how to benchmark your business:
- Identify what area or field to benchmark
- Identify and analyze your competitors
- Explore trends in-depth
- Identify your objectives and goals for benchmarking
- Create a plan to achieve your objectives
- Thoroughly monitor your benchmarking process and results
Benefits of Benchmarking
The goal of benchmarking your business is to improve your organization, including improving your processes, increasing your quality, decreasing costs and fees, and profiting more efficiently. In a similar fashion, many of the benefits that benchmarking can provide are exactly that; improving your processes, practices, and procedures; improving your efficiency; lower costs and fees; improving the quality of your business and product; improving customer service and satisfaction; and overlapping your competitors.
Disclaimer: This blog is not intended for financial advice
Sources:
- Business Victoria. (2022, December 29). Benchmark your business. Business Victoria. Retrieved April 7, 2023, from https://business.vic.gov.au/business-information/marketing-and-sales/increasing-sales-through-marketing/benchmark-your-business#:~:text=your%20business%20performance-,What%20is%20benchmarking%3F,your%20business%20performance%20and%20potential.
- Fallon, N. (2023, February 21). The benefits of benchmarking in business operations. Business News Daily. Retrieved April 7, 2023, from https://www.businessnewsdaily.com/15960-benchmarking-benefits-small-business.html
- Harper, M. (2019, November 13). What are the four types of benchmarking? APQC. Retrieved April 7, 2023, from https://www.apqc.org/blog/what-are-four-types-benchmarking#:~:text=There%20are%20four%20main%20types.
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