Benchmarking is the ongoing process of comparing an organization’s practices and performance measures with those of its most successful competitors. Many companies use benchmarking to manage change and observe organizational performance. Successful managers should routinely measure itself against policies, products and strategies of others or a common standard. Performance metrics are the basis on what comparisons are made. Grasping how the overall industry functions in relation to its own organization fosters methods to improve performance and discover new opportunities.
There are three general benchmarking methods, including internal, strategic and competitive. The most common form of benchmarking is internal benchmarking. It is utilized when an organization has set guidelines that regulate best practices. Present and past performance is compared to guidelines on several levels.
- Understand how well and organization performs compared to competitors
- Discover new areas for opportunity
- Substantiate assumptions
- Prioritize opportunities for improvement
- Observe performance and manage change
Organizations who wish to analyze long term objectives for the future should consider incorporating benchmarking. Benchmarking is ideal for organizations who want to obtain a greater understanding of their standing in the industry by measuring their performance against others. This entails incorporating a defined set of goals and continuously monitoring performance against competitors.