How Does Benchmarking Work?

Benchmarking is a sequential process that begins with an awareness that you have to room to improve certain business processes and ends when you take the steps necessary to do so. Along the way, company or departmental leaders spend time analyzing efforts of successful organizations.

Benchmarking is a process that involves a search for the "best practices" in a particular business process. Companies with strong objectives and a desire for improvement constantly compare their own business processes with those of industry leaders to find opportunities for growth and improvement. Sometimes, a single industry leader establishes the standard, or benchmark, in most business processes. Other times, different companies set the standard for excellence in specific business processes.

Before you can benchmark you need a basic understanding of critical business processes that relate to your business success. Manufacturing, assembly, distribution, marketing, sales and service are examples of broad business activities that you can analyze. You also can break down each into smaller processes, such as the process of retrieving inventory from a distribution center to load and ship to a store. Once you understand these core processes, you can explore companies successful in the processes being reviewed to determine how they do it better, more efficiently or with more overall success.

The point of benchmarking is to compare your process against that of the company setting the standard. You want to identify what equipment, work flows, technology or activities the leader uses to perform a certain process better. You need to find the causes for the gap between your production or efficiency and that of the leader so you know where the opportunities for improvement lie.

Once gaps are identified, company, division or department leaders must consider what people and resources are necessary to achieve the benchmark. They also must outline any changes to work flows or processes and provide any training needed to employees. Next, these strategies are implemented. As efforts are made to fill the performance gap, constant evaluations take place to motivate improvements and maintain awareness of any new achievements by industry leaders in building on best practices.