There are two types of formal benchmarking:. Performance benchmarking ; this involves comparing the performance levels of organisations for a specific process. Higher performance levels of other organisations are normally called benchmarks and the ideal benchmark is one that originates from an organisation recognised as being a leader in the related area.

Best practice benchmarking : this is where organisations search for and study organisations that are high performers in a particular area of interest. The processes themselves of these organisations are studied rather than just the associated performance levels, normally through some mutually beneficial agreement that follows a Benchmarking Code of Conduct.

Therefore best practice benchmarking involves the whole process of identifying, capturing, analysing, and implementing best practices. There are several best practice benchmarking methodologies. One of which is the TRADE Best Practice Benchmarking Methodology. Most large and successful organisations use best practice benchmarking as a tool to continually learn and improve.

The resource needed o carry out a best practice benchmarking project properly and in a way that maximises the learning to be gained from the experience can be considerable, hence it is used more frequently within large organisations. A key reason for the development of the BPIR. com was to offer help to all organisations large or small who may not have the necessary resources or knowledge to undertake best practice benchmarking project.

Therefore the BPIR. com has been designed to assist in every step of a benchmarking process. On the other hand, comparative or competitor benchmarking is not affected to the same degree by resources, and is used by organisations of all sizes, the most basic form of this practice is simply knowing your main competitors product price, something that is a prerequisite to staying in business.

Indications are that the use of benchmarking worldwide continues to grow since Robert Camp wrote the first book on benchmarking in Support for this comes from. Today, it is accepted that to become a world-class organisation and sustain this success it is a necessity to have a fully deployed benchmarking strategy that enables informal and formal benchmarking to flourish.

com demonstrating how benchmarking has achieved outstanding financial and stakeholder-related benefits for organisations. Case studies on 11 successful benchmarking projects are available here.

There are some issues that both inhibit organisations actively involved in benchmarking and prevent others from attempting active involvement.

The BPIR. com has been developed to address these challenges. Benchmarking helps your business establish an internal or external standard to measure itself against for the purposes of continual improvement. A business can use benchmarking to measure numerous areas of their operations against internal and external standards.

The three primary types of benchmarking are explained below. Internal benchmarking is all about improving your business by comparing it to historical data. According to Boydas, internal benchmarking can help eliminate waste of both time and money in a business. Internal benchmarks that businesses should focus on may include things like employee performance and effectiveness, as well as how employees make use of the tools provided by the business.

As the name suggests, competitive benchmarking is about setting certain goals based on what your competitors are doing. If you study the practices and standards of similar businesses to match — or ideally exceed — the industry status quo, your business can gain a competitive edge.

Competitor benchmarks can impact parts of your business like employee salaries , services provided to customers and even employee morale , said Maida Zheng, senior advisor at The Logos Consulting Group.

One step beyond competitive benchmarking is strategic benchmarking, in which a business seeks to emulate specific performance standards of world-class organizations. This may involve cross-industry inspiration, like when Southwest Airlines modeled its maintenance, cleaning and boarding processes after the time-bound, defined tasks of a well-oiled NASCAR pit crew.

Business benchmarking can be used to measure progress and growth in many key operational areas. The most common types are internal, competitive and strategic benchmarking.

Benchmarking can help you improve multiple areas of your business operations, simply by measuring progress and giving you a clear goal to strive for. In its simplest form, benchmarking involves determining where you are, where you want to be and how you plan to get there. Here is a brief overview of the stages of the benchmarking process most businesses follow.

Benchmarking begins with identifying what you want to measure. Once you know what you want to measure, begin speaking with employees, competitors, customers and other business stakeholders who may be involved or impacted.

Initiate one-on-one or group conversations or collect survey responses from these parties to gain valuable feedback that will inform your benchmarking process. You should also conduct research on where other companies or departments currently stand.

Use your research and gathered data to figure out where your current performance sits compared to other companies or departments and determine an appropriate and realistic goal for improvement. Lay out your data in an easy-to-digest format e. Defining success and an action plan upfront gives you a clear path to hitting your benchmarks.

But they are different. You can use benchmarking to put your own KPIs into context and to set targets for your KPIs. Both — KPIs and benchmarks — are used to identify opportunities for improving performance, which may be where the confusion arises. Broadly speaking, benchmarks break down into two core categories: internal and external.

Internal benchmarking compares performance, processes and practises against other parts of the business e. Different teams, business units, groups or even individuals.

For example, benchmarks could be used to compare processes in one retail store with those in another store in the same chain. External benchmarking, sometimes described as competitive benchmarking, compares business performance against other companies.

Benchmarking, whether internal or external, is used in three key ways. They are:. Each of these different ways of benchmarking have one key goal in mind: to identify gaps in performance and uncover opportunities to improve, whether that means making processes more efficient, reducing costs, increasing profits, boosting customer satisfaction, or whatever.

Ultimately, what drives companies to benchmark is the need or want for improvement. So whether you want to simply compare your internal performance, catch up to a competitor, better understand and track your peers, or become a market-leader in your industry, benchmarking can be an incredibly useful tool.

The complete solution requires you to set clear strategic goals, identify your critical business questions, design KPIs that help you answer those questions and track performance against your goals, and compare performance using benchmarking.

But, when viewed as part of the complete performance management picture, benchmarking provides a useful way to glean valuable performance-boosting insights. Or browse the KPI Library to find the metrics that matter most to you. In our contemporary world, the pressures of the professional sphere often encroach upon our personal space, giving rise to stress and an overwhelming sense of dread.

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View Book. Written by. Bernard Marr.