What Is The Benchmarking Process? Definition and Guide

By Indeed Editorial Team

Updated August 27, 2022 | Published November 5, 2021

Updated August 27, 2022

Published November 5, 2021

The Indeed Editorial Team comprises a diverse and talented team of writers, researchers and subject matter experts equipped with Indeed's data and insights to deliver useful tips to help guide your career journey.

Benchmarking increases the overall quality and productivity of companies and the products they produce. If you're a sales or business development professional, using this process requires strong analytical skills and attention to detail. By using this process, you can enhance customer retention and increase sales. In this article, we discuss the definition of the benchmarking process, provide types of benchmarking, and describe how to create a successful benchmarking plan.

What is the benchmarking process?

This benchmarking process measures the quality and performance of products, services, and processes. The values associated with this process rarely have their own measurements. Instead, you typically compare them to the standards of your own industry. For example, if your products take approximately one hour to produce, you may want to compare that timeframe to others in your industry. This helps you identify whether your processes are as efficient as your competition.

Common areas of improvement to consider when implementing benchmarking include the cost per unit of products you produce, along with the time required to produce those units. You may also want to consider overall customer satisfaction and the performance metrics you want to achieve. Compare your metrics against others to determine which practices can improve upon these points. You can identify the following areas of improvement, depending on your process:

  • Performance: Benchmarking allows you to identify where your competition obtains higher performance. This analysis then provides you with potential areas for improvement in your processes and subsequently encourages increased performance.

  • Strategies: By comparing where your competition experiences more success, you can identify how to improve your overall strategies.

  • Information: You can use the information gathered from your analysis and various comparisons to implement changes. These changes improve and expand upon your products and services.

Related: 5 Types of Benchmarking Examples (Plus How to Use Benchmarking)

Why is benchmarking important?

Benchmarking is important because it helps the company grow and improves internal procedures. Benchmarking is a tool that you can use to develop improvement models that you use in your organization. Here are some benefits associated with this process:

  • Improvements: Benchmarking allows you to improve the company's processes and procedures by measuring the performance and quality of your services, which you can later use to identify areas of improvement.

  • Effectiveness: By using this process, you can also identify the effectiveness of the company's overall performance and how to improve it in the future.

  • Competition: Benchmarking allows you to identify how your competition completes their processes and whether they experience success from those processes. This helps you identify potential methodologies to increase your performance.

  • Lower costs: You can also decrease your overall costs by streamlining your processes and developing more efficient practices.

  • Customer satisfaction: You can experience improved customer satisfaction by creating products and processes that improve the quality of life of your consumers.

Types of benchmarking

Before identifying how to conduct benchmarking, you may want to know which type of benchmarking to develop. Your benchmarking selection occurs while you plan your process. Here are examples of the various types of benchmarking:

Internal benchmarking

Internal benchmarking refers to internal members or teams developing quality practices within processes similar to yours. This form of benchmarking requires you to analyze their processes to determine where the company can improve and become more efficient.

For example, you can compare the processes between two warehousing sites at separate locations to determine their similarity. You then evaluate which site has superior performance and encourage them to share both their processes and procedures with the rest of the company. This increases overall performance and encourages collaboration between employees across the company.

Related: What Is a Performance Improvement Plan? (With an Example)

Competitive benchmarking

Competitive benchmarking refers to the comparison of products, services, and processes between you and your competitors. This type of benchmarking provides you with additional insight into your industry and how you can increase productivity by evaluating your competitors' strengths and weaknesses.

For example, you can compare overall customer satisfaction by comparing your products to those of your competitors. To do this, identify where your competitors get better reviews and analyze the differences required to improve your product's quality.

Related: Best Remote Working Tips to Encourage Productivity

Strategic benchmarking

Strategic benchmarking refers to looking at processes beyond your industry and identifying the best global practices. You can then implement globally recognized practices to make significant improvements. Assess whether these practices can have the same affect where you work as they do for your competitors.

For example, you may identify a need that can improve overall performance. You look beyond your industry by looking at the racing industry and identifying how they improve services and their overall ability to maintain cars. Research in this industry suggests that increased productivity depends on the pit crew's ability to complete clearly defined tasks. By focusing on tasks that have clear goals and objectives, pit crews can increase the speed required to change tires. By understanding this method, you can apply the pit crew's techniques to your own industry.

Related: Goal vs. Objective (Difference, Definition, and Examples)

How to conduct benchmarking

To implement this benchmarking in the workplace, it can be helpful to know how to benchmark. Here is a guide to help you conduct benchmarking:

1. Select your subject

To begin this process, you typically choose which subject to benchmark with other members of senior management and executives. Together, these professionals decide which processes are critical and necessary for the overall success of the company. From here, you can determine the overall prioritization of stakeholders and select which measures to collect.

2. Decide which organizations to benchmark

In this step, you decide whether to benchmark the processes within your own company or whether to choose a competitor. When benchmarking a competitor's organization, it may be more challenging to collect all the necessary data than within your own organization or industry. It may be beneficial for you to benchmark several organizations to obtain optimal data.

3. Document your processes

During benchmarking, you typically identify which areas require improvement by documenting your processes. This allows you to compare your organization's processes to those of your chosen subject. By comparing your organization to another, you can determine where your processes succeed and where your competitors' processes succeed.

4. Collect your data

This step requires you to collect your data and analyze it to ensure you have all the appropriate information. You can gather company information and learn about competitors through research, interviews, and casual conversations within your network. You can also collect data from formal interviews and questionnaires and collect secondary information from sources like websites, reports from various departments, and news articles. When you obtain all the necessary information, you can also conduct meetings with other stakeholders to discuss your findings.

Related: 18 Data Analyst Skills For Success

5. Measure your performance

When you have all of your data collected, you typically review metrics and conduct a side-by-side comparison with your analysis. Consider organizing your performance metrics with diagrams of your top metrics to determine where you can improve. When conducting your analysis, you can identify the causes of the gaps in your processes. From here, you can determine solutions for those gaps and reduce their impact.

6. Create a plan

After your measurements, you can create a plan that helps you implement changes in your processes. When implementing changes, you may benefit from clearly defined goals. Consider the company culture when identifying your goals and creating your action plan. This helps you minimize the potential implications for employees and team members.

7. Implement changes

You may want to monitor employee performance closely to identify whether implemented changes function as intended. When your new processes require adjustments, you can make these adjustments quickly with data collected from monitoring. Consider whether employees understand their jobs and required tasks. If they don't understand their tasks, you can provide them with clear goals and training opportunities. Consider documenting the processes involved to ensure that all employees have access to expectations and instructions. This also ensures that all employees have the same information about implemented changes and can work toward the same goals.

8. Repeat the process

When you successfully implement new processes, you can follow up by discovering new ways to improve company practices. Consider reviewing your revised processes to determine whether you require adjustments or additional benchmarking. If you discover that all implemented processes function properly, you can shift your focus toward other benchmarking processes or areas for improvement.

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