How Does Business Benchmarking Help in Boosting Performance

Well, many enterprises today are putting their focus on the practice of business benchmarking as it directly contributes to improving their processes, strategies and performance. But, before explaining how the practice contributes to performance increase, let’s know what is benchmarking. 

Benchmarking is a process of comparing the industry’s best performances metrics against an organisation’s performance to evaluate the gaps and subsequently deduce strategies to fill them. It is a valuable practice used by business to identify gaps in its processes, performance figures, products or services. So, benchmarking is applicable to compare many aspects whether it is revenues, sales, operating costs, productive capacity, employee turnovers, capital accumulation, resources uses, wastes production, and so on. 

Here are the reasons why business benchmarking is a key strategic tool for businesses that help in performance enhancement and lead to continuous growth.

Even though the idea of benchmarking is to compare the business’s own performance with competitors in the industry, the process starts with identifying and measuring its metrics first. A benchmark performance metric is not merely a rank for the business but helps to determine the gap in its performance with respect to that benchmark. Thus, it starts to track the progress towards the business goals and see whether the gap is gradually diminishing. Benchmarking practice thus primarily leads to tracking of a business’s defined goals and objectives to later address the gaps (if identified any).

With benchmarking, businesses seek to find different opportunities for costs optimisation, the common concern for all industries which is always considered as a benchmark parameter.  While some may indulge in measures for resource efficiencies, some may try to reduce wastes production by engaging a waste management consultant. Some even look at logistics and freight management to reduce their distribution expenses. Overall, benchmarking the costs is a great way for a business to check its expenditures by comparing with the cost-effectiveness of other businesses and subsequently, enhance the profitability. 

The practice of benchmarking has an inevitable effect on the people of the organisation, resulting in an improvement in their productive participation. Over a long period of time, each staff gets acquainted with their designated role which results in a lack of motivation or jet-lagged performance. Benchmarking can keep them motivated as it sets new goals/performance metrics for the business to achieve. Since the management of the organisation always held the staff responsible for achieving or not achieving a goal, it sets an obligation for them to perform better. 

Benchmarking is also a useful practise to enhance the quality of the products or services. A company can analyse the products or services of its competitors and decide new attributes in their products or services to outperform them. This will result in significant improvement in their sales and customer satisfaction, and ultimately the bottom-line. 

 

The practice of business benchmarking has today gained a lot of momentum in almost all industries because of the fierce competition. Businesses are keenly looking for one opportunity or the other to outshine their rival firms. Thus, comparing their own operations, strategies or products/services with the best performers in the market in a systematic way will help them define their goals for performance improvement. 

 

Dylan Munro is an expert business benchmarking consultant practising at an eminent consultancy firm for years that helps businesses with effective guidelines to improve their cost efficiency, resources management, freight management and other aspects for profits optimisation. He is also specialised as a waste management consultant and assisted in packaging and wastes reduction.