Benchmarking is the process of discovering an industry’s best standard of performance in a particular organization as seen by another company or competitor. Most of the businesses that don’t use benchmarks believe that they are their own companies and thus don’t need to emulate other organizations.
That’s why it’s important to emphasize that benchmarking doesn’t refer to blindly copying or emulating what your competitors are doing. On the contrary, it means learning and understanding acceptable industry standards and an organization’s standing in regards to that standard.
Through benchmarking, an organization can learn the current processes and technology followed in a particular business environment. This is aimed at boosting productivity in your business while reducing cost.
For example, if you discover that your competitor is using a particular machine or technology to make work easier, you might consider adopting it to lower the cost of production while making your manufacturing plant more productive.
Opportunity To Prioritize Areas Of Improvement
While most businesses understand the significance of developing continuously, some of them fail to succeed because they’re unsure about where to start.
Therefore, through benchmarking, it’s easier to identify improvement opportunities which are the areas where the gap between your standard and that of the industry is widest.
In the long run, the process of prioritizing areas that need improvement and how to execute the project is more streamlined.
Benchmarking Increases Accountability In Your Operations
It’s important to ensure that your employees are held accountable for their performance. The process of setting yearly precedents can be challenging without embracing the right internal and external benchmarks.
When you benchmark performance reports or projects, you start getting a better understanding of what should be considered “good” performance. In other words, the benchmarks will be an instrumental tool for measuring effectiveness in your products and even personnel.
Better Understand Your Performance By Comparing With Competitors
Benchmarking helps you get a better understanding of your performance. You can do this by comparing your processes and products with those of your close competitors.
For example, it might benefit you to understand the industry standards. Especially, if you keep struggling with improving your new product introduction defect rates year-over-year. The intelligence you gather will have a major impact in terms of warranting reallocation of resources or new investment opportunity.
Compare The Performance Of Different Product Lines Within Your Company
You don’t have to perform a competitive intelligence analysis to make it a benchmarking process. Many established organizations benchmark the performance of their various product lines or facilities that have similar KPIs, metrics and processes.
Furthermore, such an analysis can give you a better understanding as to why a particular product line is underperforming.
Benchmarking helps businesses stay in sync with their target market’s specific needs. For example, it’s hypothetically believed that the turnaround time (TAT) for any bank customer’s complaint should be at least four hours.
But, if other banks decide to make sure the turnaround time is less than two hours, the scenario changes. Therefore, any bank offering the four hours TAT could be operating at 50% below the benchmark.
Some other organizational interests that attract benchmarking standards include employee engagement, sales, customer service and work environments.