Benchmarking

Benchmarking is a technique that allows your organisation to compare itself to other organisations performing the same task. It is a way of examining other possible ways of doing things. These may be more efficient and are sometimes better than the way you are performing tasks. It can help you to better understand your customers, because often the first step with benchmarking is to ask them where they are dissatisfied.

What is it used for?

Benchmarking is usually used to assess whether changes are needed in order to improve business performance. It can also be used for strategic change aimed at enabling you to compete more effectively. If you can identify why your competitors are more successful than you in certain areas, you can imitate what they do to build up your success too.

How do I use it?

The first step is to identify areas that are not working so well for your organisation. These may not be immediately obvious; indeed, they may even be blind spots for you. One of the best ways to understand where things are not working so well is to ask your customers. Tools such as surveys or focus groups can help you to see what is going wrong. You could also talk to your suppliers or other stakeholders who may have an insight to the problem areas.

Once you know what the problems are, you can investigate how other companies handle the same problem.

Tip

You don’t have to stick to the industry that you are in – in fact you may find more creative solutions by thinking laterally. Different industries often have the same types of problem, so it is worth taking a broad approach and looking at companies that are in different industries but that have similar processes.

When you carry out your comparison, you want to do it so that you can learn from the results and implement best practice processes in your company. To do this, it is essential to benchmark yourself against companies that are leaders in the areas where you want to improve. Then you can

  • Visit the companies that have the excellent processes
  • Perform surveys in the companies (some businesses will want to do this mutually, so that both benefit).

With the information that you glean about how other companies do things, you can then consider how these practices could be best implemented in your organisation, taking the most positive elements of each, with the aim of raising your company’s performance.

What are its limitations?

Benchmarking is an extremely beneficial management tool if used effectively, though there are limitations.

Cost

Benchmarking can be costly, especially in terms of time, but also financially. Staff involved in benchmarking will be spending time away from their usual tasks. Costs can run up if companies being benchmarked are out of town and if overnight stays are involved for your staff.

Transferability

Just because the company that you benchmark is successful in doing things in a certain way, it does not automatically follow that you will be too. There may be other factors at play and you need to consider whether a particular process will work for you in your situation.

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