How to Benchmark in 8 steps

Find areas to improve by comparing your organization internally, with its competitors, or with other industries.

Benchmarking is the process of finding a benchmark, a point of comparison, whether that is a goal to be achieved or a reference against which to compare yourself.

It is a way of finding the best performance possible in an area that you’re interested in measuring and improving, be it in your organization, in one of your competitors, or in a completely different industry. You can use this information to identify gaps in your organization’s processes to achieve a competitive advantage.

There are different types of benchmarking, according to an organization’s particular goals. The main types are:

Internal Benchmarking: compares a commercial process with another similar process within the same organization, to identify best practices within the business.

Competitive Benchmarking: a direct comparison of a product, service, process or method with an organization’s competitors. This form of benchmarking gives you the opportunity to know yourself and your competition; or even combine forces to face a common competitor.

Functional Benchmarking: It is a comparison with similar or identical practices within equal or similar areas, but in a different industry. For example, the process of selecting customer orders, maintaining parts controls, logistics, etc. can be similar across several categories or industries. Functional benchmarking identifies practices that are superior in their functional areas in any industry where they may be found.

Each type of benchmarking has different uses, and addresses different problems. None of them is better than the others.

Here is a list of 8 vital steps involved in benchmarking. These steps should be adapted depending on the policies of your business, the availability of resources and the project or process with which you are dealing:

1. Understand current lags in performance: with this you can decide which areas or aspects of your organization require benchmarking, and what type.
2. Align your team: seek the approval and/or cooperation of any relevant people, to make sure you get the right resources to make process quick and efficient.
3. Document objectives and scope: establish results you’re looking for, and define the scope and duration of the benchmarking process.
4. Document the current process/product: Up-to-date knowledge of the status quo ensures you won’t waste time collecting data that already exists; that your benchmarks are not random or unfocused, or not comparable with your data; or that you chose an inferior example to compare, skewing the results.
5. Establish metrics: You must define what is being measured, using what indicators; what should and should not be included in the measurement; and how they will be calculated. Setting examples of typical metrics is also very useful. For a comparison to be possible, the metrics must be compatible, whatever the type of benchmarking.
6. Collect data: Depending on the chosen metrics, you’ll need to develop a plan to gather data to calculate metrics. If desk research is not enough, it may be necessary to design a quantitative research project, hire outside experts, or request access to organizations from industries outside of yours, depending on the type of benchmarking you need. Be clear about what information you are looking for.
7. Interpret and evaluate the information: With your eyes on the objectives you have already set, process your benchmarks to remedy performance lags or find best practices. Evaluate the relevance and viability of the benchmarks to make sure the process is useful.
8. Apply lessons learned: Modify your organization to match what you discovered.

Like many innovation processes, benchmarking is iterative. Once you’ve completed these 8 steps, you can repeat them, either to improve another area of your company, or to refine the same one that you have already compared.