What is Benchmarking?

When you benchmark your company’s performance, growth, and quality against your competitors, you compare apples to apples. You can compare your company to the norm and plot a course for improvement if you think there’s room for improvement, whether increasing efficiency and productivity, decreasing expenses, or bringing in more money.

“It’s highly important for leaders… to know what the industry is offering, what’s changing, and the new systems and technologies they need to adopt to stay on top of the game,” said Sahin Boydas, founder and CEO of RemoteTeam.com. “Leaders who don’t keep an eye on benchmarks eventually fall behind the competition. Ignoring your business environment always has consequences.”

Any company worth its salt should strive for continuous improvement, the endpoint of benchmarking. One way to get forward is to compare your company to others in your industry. Using benchmarking, your company may set internal and external standards to improve upon over time.

Types of Business Benchmarking

When benchmarking, a company can compare a wide range of operational metrics to internal and external standards. What follows is an explanation of the three main kinds of benchmarking.

Internal benchmarking

Improving your company by comparing it to past data is the essence of internal benchmarking. Internal benchmarking is an excellent tool for finding and sharing the most effective practices within an organization, whether comparing different divisions or branch locations.

If you ask Boydas, internal benchmarking is the key to a company’s time and money savings. Things like employee performance and effectiveness and how employees utilize the resources offered by the organization are examples of internal standards that firms should prioritize.

“One of the most effective ways to build resilient teams” is to monitor internal benchmarks, according to Boydas. “The utilization of benchmarking data enables businesses to pinpoint the best methods for maximizing employee talent, streamlining tasks for the benefit of both employees and management, and determining which aspects of organizational processes can be eliminated.”

Competitive benchmarking

As the name implies, setting goals about what your competitors are doing is all about competitive benchmarking. To stay ahead of the competition, it’s a good idea to research what other companies in your field are doing and try to mimic their methods.

According to Maida Zheng, a senior adviser at The Logos Consulting Group, benchmarks set by competitors can affect all aspects of your organization, including staff wages, customer services, and morale.

Understanding what your competitors are doing is not just plain sense, but critical to stay ahead and create the most appealing work environment for your staff,” Zheng added. “When workers see room for advancement, both financially and in terms of their skill set, and when they see that their employer is either matching or surpassing the competition, they will know that they should remain with that company.”

Strategic benchmarking

When a company goes beyond competitive benchmarking to adopt strategic benchmarking, it aims to mimic top-performing companies’ actions to improve performance. For example, Southwest Airlines drew inspiration from a NASCAR pit crew’s organized, time-bound procedures to streamline its boarding, cleaning, and maintenance procedures.

Essential Point to Remember
Many essential operational elements can be measured through business benchmarking. Internal, competitive, and strategic benchmarking are the three most prevalent kinds.

Benefits of Benchmarking in Business

For benchmarking to be effective, it is essential that companies consistently assess their core operations to track their progress toward goals. It’s not a one-and-done deal. Here are some things that businesses can achieve when they regularly benchmark:

• Keep improving internal operations. Benchmarking your processes and procedures, especially against internal standards, can help your team become more efficient and productive year after year.
• Understand what’s working and what isn’t. A deep, thorough analysis of your business’s past performance will allow you to identify trends and patterns that you may not have noticed as they were happening. This data will give you a clear picture of what behaviours and practices improve overall business results and which don’t.
• Reduce costs by increasing efficiency. Benchmarking is most often used to improve performance through efficiency. Cutting out waste in your processes, be it monetary costs or time and effort spent, will help you streamline your operations and ultimately help you retain more of your revenue.
• Focus on practices and offerings that promote customer satisfaction and loyalty. Gathering customer feedback and data (either your own or your competitors) will give you greater insight into what they like and don’t like and what you can do to keep earning their business in the future.

Typical Benchmarking Process

Simple benchmarking entails taking stock of your current situation, setting goals for improvement, and mapping out a path to get there. The steps that most companies take while conducting benchmarking are outlined here.

Plan out what you want to benchmark

Finding out what you want to evaluate is the first step in benchmarking. Whether it’s compensation, revenue, team building, or some other area for improvement, you need to identify the actions you will benchmark and the important indicators you’ll use to monitor your success.

Research to collect relevant data

Start talking to people with a stake in the company, whether employees, rivals, customers, or anyone else, after you know what you want to measure. To gather helpful feedback for your benchmarking process, start one-on-one or group conversations with these parties or ask them to complete a survey.

Find out how other businesses or divisions are doing right now. For example, if you’re interested in salary benchmarking, you can find out what other organizations pay for comparable positions by visiting sites like Glassdoor and Payscale. If you want to establish your standard for evaluating your company’s performance, it helps to know the average for your industry or department.

Analyze the data to assess where you are and where you want to be

Get a feel for how you’re doing compared to other businesses or divisions, then use that information to set reasonable and attainable improvement objectives. To better understand where you stand about your goals and how much work you have ahead of you, organize your data in a way that is easy to understand (e.g., using graphs or charts).

Develop an action plan

During this benchmarking stage, you and your stakeholders will formulate a plan of action to achieve your objectives. Setting goals and developing a strategy in advance will help you achieve them more efficiently.

Use popular goal-setting frameworks such as SMART (specific, measurable, achievable, relevant, and time-bound) or HEART (habit-forming, emotional, actionable, realistic, and time-bound) as a starting point. If your benchmarking objective is to “increase sales,” you can divide it into more manageable chunks with due dates: “Reach out to five new prospects per week over the next quarter. “

Monitor your progress

See how your team is doing about the objectives laid forth in your strategy at regular intervals. Keep track of your metrics consistently, whether weekly, monthly, quarterly, or annually. Your plan works if you are achieving your goals, so keep going. If that’s not true, you might also need to reevaluate and adjust your strategy.

Despite the generalizability of these procedures, your firm might benefit from creating a custom benchmarking process according to its particular objectives. Depending on your present situation and desired outcome, some processes may be more complex or call for outside assistance.

In Conclusion
Before benchmarking, determine what metrics you want to monitor, take stock of your existing situation, and establish what constitutes success. Next, make a strategy and check in with yourself often to see how things are going.

Example of Benchmarking

Feeling lost when it comes to starting your benchmarking process? To illustrate how it could benefit your company, here is a made-up scenario.

For example, let’s pretend that an organization’s IT and customer care departments use a ticketing system. From what the COO can tell from the dashboard data, the IT department closes 80% of tickets in three days, much quicker than the customer service department.

She investigates the methods used by the IT department to attain its outcomes and starts a benchmarking procedure for resolved tickets. The COO finds out that whenever an IT ticket is received, the head of the department gives it to the team member who knows it best, whereas customer service tickets are given to whoever is available.

By committing to assigning tickets based on expertise, the customer service team takes a page out of the IT and aims to halve their average ticket close time by the end of the subsequent month. After implementing this procedure for a few weeks, the customer care representatives can close more issues each week and meet the IT team’s benchmark for closure time.

How to make Benchmarking Work for your Business

The first step for any company interested in starting a benchmarking program is to involve its staff. To achieve your benchmarking goals, you must be able to adapt to change, and your entire team must understand and support those who are coming.

“Remember that everyone can contribute creative ideas, not just upper-level management,” Zheng advised. “Develop a system that  employees to contribute to the company’s growth and success, and recognize their efforts when their ideas are implemented.”

Zheng added that the best way to nurture and cultivate creativity is to make sure everyone has a chance to speak and have their opinion.  Anyone can have a brilliant idea; sometimes, the lowest-level employee suggests the most practical way to enhance a process.