It is important for companies to improve their performance and accomplish their goals. But to achieve this improvement, they need to find which areas need upgrading. This is where Benchmarking comes in.
What Is Benchmarking?
Benchmarking is a process of comparing the performance of a company’s products or services, against those from another business known as the best in the industry. By gathering information about the process of competitors it will give you a great idea of where your business needs improvements. Once you make the necessary improvements, you could have a better chance of a competitive advantage.
There are two types of benchmarking: internal and external benchmarking.
Types of benchmarking
Internal benchmarking
Internal benchmarking also called practice benchmarking is a process of comparing your company to itself. In other words, internal benchmarking is comparing similar operations within the company which could be defined and measured. The idea of internal benchmarking is that learning from the company’s own structure could lead to continuous improvement and increase efficiency.
External benchmarking
Benchmarking is used to ensure that a business operation is performing at a level that meets standards defined as internal or external best practices.
External benchmarking is a way of comparing a company’s performance against an external standard to identify best practices and areas for improvement. The most important part when performing external benchmarking analysis is to ensure that you are comparing organizations that are similar in terms of size, industry, geographic location, etc. Then you can observe specific performance indicators and compare them side by side.
Besides benchmarking there is another method that would motivate employees. By giving them measurable targets to achieve which is called KPI (key performance indicator).
What are the differences between benchmarking and KPI?
Although both benchmarking indicators and KPIs may have similarities, they measure different things. But to understand the difference between these terms, we must find out what KPI means.
KPI (key performance indicator) is a specific measurement used to determine the effectiveness of goals set within the company. KPIs offer insight into aspects determining a business’s success. On the other hand, benchmarking is a comparison between one company and another in the same industry.
The benefit of using KPIs and benchmarks is vital to a company’s growth and success. However, businesses should set goals based on industry criteria.
