What You Need To Know To Maximize Benchmarking For Success

By Aleya Harris

Any business that wants to attract more customers, grow its revenue, and build on past successes has to work on continually improving itself. The problem is that when you only look inward at your own processes and experience, it’s easy to lose perspective. Benchmarking gives businesses objective, external reference points against which to measure themselves.

Simply put, benchmarking is the act of comparing your organization to similar ones in the same or related industries. The objective is to find areas where your own processes and operations can be improved in order to reduce expenses, boost revenue, and increase customer satisfaction.

There are four types of benchmarking:

1. Internal benchmarking, where you compare a business process to a similar one inside the same organization.
2. Competitive benchmarking, where you compare a product or process to an analogous one from a direct competitor.
3. Functional benchmarking, where you compare a process to a functionally similar one outside your own industry.
4. Generic benchmarking, where the broad concepts of a process are compared to an unrelated but similar process outside your own industry.

With any type of benchmarking, the end goal is to find areas where your own processes and operations can be improved in order to reduce expenses, boost revenue, and increase customer satisfaction.

How to Identify Processes That Benchmarking Can Improve

There are various ways to identify areas of your business where benchmarking might lead to improvements. Some are obvious: processes that were set up on an ad hoc basis and later formalized; processes that generate a high number of problems or customer complaints; or processes that run over budget. Feedback from workers and customers can also direct you to problem spots in your business operations.

How to Develop a Benchmarking Plan

Because virtually any process can be benchmarked, the exact way to go about it varies. However, these are the basic steps to formulating an action plan for benchmarking:

1. Define the process, product, or service to be subjected to benchmarking.
2. Define what data is going to be measured.
3. Select the data set you’ll be comparing against.
4. Collect data on both the benchmarking subject and the comparison set.
5. Assess the data to identify differences between the sets.
6. Analyze the data to identify the root causes of those differences.
7. Define an improvement initiative that will address those root causes.
8. Implement the improvement initiative.
9. Measure the results and repeat the process if necessary.

While these are a great starting point, it is important to create a plan to fit your specific goals.

Data: The Key to Successful Benchmarking

When benchmarking, it’s helpful to track data frequently and recalibrate when needed. It’s always possible, especially when you’re not comparing direct analogues, to be led into incorrect conclusions by misleading, incomplete, or poorly chosen data.

If the benchmarking process is not providing useful information that you can act upon, refer back to your original objective. Having those specific goals in mind can help guide the process of selecting data, tracking it, and course-correcting your benchmarking to maximize its success.