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Benchmarking is the practice of identifying, understanding, and adapting the successful business practices and processes used by other companies (or even other departments within the same company) to increase your own business success. It is a business strategy that is used by manufacturers and service oriented companies alike. While it may involve learning from one’s competitors, benchmarking is more focused and narrowly defined than competitive analysis.

Competitive analysis can be used in conjunction with benchmarking to identify gaps and provide strategic direction; however, benchmarking itself measures specific performance gaps between a company and its competitors. When used effectively, benchmarking can be a valuable tool in increasing the health of a business. An analyst agrees that, “It is not an unnecessary cost to be avoided, but rather, a tool that when used properly can produce quantum leaps in company performance.” 

Benchmarking relies on the study of general business practices that are not industry specific (generic benchmarking), a specific business or manufacturing functions (functional benchmarking), general industry characteristics (industry benchmarking), strategies in general (tactical benchmarking), or the numerical characteristics of specific products  or processes (performance benchmarking).

Benchmarking is most often implemented by examining other organizations within the same industry. Most businesses regard their businesses as too unique to warrant detailed comparison across industries. They see no valid comparisons, and therefore, do not recognize any meaningful benefit from examining practices outside their own industries. But many analysts believe that companies can learn from the experiences of enterprises from a wide range of industries. After all, new lessons in business efficiency, innovation, and financial success can be found every day in all types of businesses.

Barriers to successful Benchmarking

There are several factors that can hinder a company’s efforts to institute meaningful benchmarking practices. They include: 

Unexamined Core Business Practices

The ultimate quality, price, or reliability of the end product or service that is made available to customers is predicated on many aspects of a company’s operations, and these facets need to be taken into consideration when examining internal processes.

Inadequate People or Technology Resources

A business should make sure that it has the resources (in terms of workforce, technology, or funding) to both launch a thorough benchmarking program and implement its findings.

Unwillingness or inability to accept the legitimacy of business ideas or practices from outside sources

Many employees and organizations are resistant to change, because of general contentedness, fear of the unknown, perceived challenges to their abilities, etc. Resistance can be minimized, however, if owners and managers make it clear that benchmarking is not a faultfinding exercise but rather an established program to help the company grow and prosper in a fast changing business world.

Speed of in-house benchmarking Processes

Effective benchmarking programs are given mandates to conduct their investigation in a timely manner, so that improvements can be implemented quickly.

Inadequate follow-up training

Benchmarking programs can uncover many areas in which companies can improve their performance. But if the company does not provide its work force with sufficient training to implement needed changes in a timely and effective fashion, then the initiative becomes a waste of time and resources. If you find this article useful, please share and subscribe to our newsletter.

Bernard Taiwo
I am Management strategist, Editor and Publisher.