What is Benchmarking? - Definition, Types, Process & Examples - Video & Lesson Transcript | Study.com (2022)

Copyright

Instructor: Wren Hawthorne

Benchmarking is used by businesses to compare the key metrics of their operations to those of other companies and remain competitive in the marketplace. Explore the definition, types, processes, and examples of benchmarking, including how a pizza restaurant owner might assess their slice of the market. Updated: 09/23/2021

Benchmarking Defined

Before more recent technology was invented, surveyors would chisel a horizontal mark in a permanent structure, where a tool could be placed in the indention to help create a benchmark with a level rod, helping them and future craftsmen to have a point of reference for building.

In the business world, companies use benchmarking as a point of reference as well. But instead of having physical benchmarks carved in stone, they use benchmark reports as a way to compare themselves to others in the industry. Benchmarking is the practice of a business comparing key metrics of their operations to other similar companies.

You can also think of a benchmark report as a dashboard on a car. It is a way you can quickly determine the health of the business. Much like a dashboard, where you can check your speed, gas level, and temperature, a benchmark report can examine things like revenue, expenses, production amounts, employee productivity, etc.

Benchmarking occurs across all types of companies, including private, public, nonprofit, and for-profit, as well as industries e.g., technology, education, and manufacturing. Many companies have positions or offices in the company that are in charge of benchmarking. Some of the positions include:

  • Institutional researcher
  • Information officer
  • Data analyst
  • Consultant
  • Business analyst
  • Market researcher

Companies use benchmarking as a way to help become more competitive. By looking at how other companies are doing, they can identify areas where they are underperforming. Companies are also able to identify ways they can improve their own operations without having to recreate the wheel. They are able to accelerate the process of change because they have models from other companies in their industry to help guide their changes.

What is Benchmarking? - Definition, Types, Process & Examples - Video & Lesson Transcript | Study.com (1)

An error occurred trying to load this video.

Try refreshing the page, or contact customer support.

You must cCreate an account to continuewatching

Register to view this lesson

Are you a student or a teacher?

Create Your Account To Continue Watching

As a member, you'll also get unlimited access to over 84,000lessons in math, English, science, history, and more. Plus, get practice tests, quizzes, and personalized coaching to help yousucceed.

Get unlimited access to over 84,000 lessons.

Try it now

It only takes a few minutes to setup and you can cancel any time.

Already registered? Log in here foraccess

Back

(Video) QMS PRINCIPLE #4 PROCESS BENCHMARKING (3/6)

Resources created by teachers for teachers

Over 30,000 video lessons& teaching resources‐allin one place.

I would definitely recommend Study.com to my colleagues. It’s like a teacher waved a magic wand and did the work for me. I feel like it’s a lifeline.

Jennifer B.

Teacher

What is Benchmarking? - Definition, Types, Process & Examples - Video & Lesson Transcript | Study.com (6)

Try it now

Back

Coming up next:Productivity, Quality, Profitability and the Role of Managers

Take QuizWatchNext Lesson

Replay

Just checking in. Are you still watching?

Yes! Keep playing.

(Video) Benchmarking for Innovation, Best Practices and Process Improvement

Your next lesson will play in10 seconds

  • 0:01 Benchmarking Defined
  • 2:00 Types of Benchmarking
  • 3:10 Benchmarking Process
  • 4:30 A Real World Example
  • 5:41 Lesson Summary

SaveSaveSave

Timeline

Autoplay

Autoplay

SpeedSpeed

  • Video
  • Quiz
  • Course

What Are Some Different Types of Benchmarking?

Best practices - This is a benchmark report where companies choose to look at a company or companies that they aspire to be like. By choosing companies that are on the leading edge of the industry, they can identify best practices that help improve their own company.

Peer benchmarking - This is a benchmark report where companies choose to look at other businesses very similar to themselves. This allows companies to make sure they are staying competitive with similar businesses.

SWOT - This is a type of benchmarking report where companies gather data by looking at strengths, weaknesses, opportunities, and threats to help understand their climate.

Collaborative benchmarking - This is benchmarking as a part of a group. Many industries have associations they can join e.g., The Association of Information Technology Professionals, and The National Education Association. These collaborative associations allow for members to provide information to the association. The association can then provide benchmarking and best practice reports for the membership.

Benchmarking Process

Step one: Determining benchmark focus - During this phase, the company determines the specifics of the research project. (e.g., which companies will they include in the research and what types of metrics they will compare).

Step two: Planning and research - During this phase, the company puts the resources together to implement the project (e.g., develop surveys, seek cooperation from other companies, and find databases already available).

Step three: Gathering data - During this phase, the data is collected through the methodology determined in the planning and research phase.

Step four: Analysis - After gathering the data, the company uses statistical techniques to examine and create the findings.

Step five: Recommendations - After analyzing the data and areas where the company can improve, recommendations are developed.

Step six: Implementation - After reviewing recommendations, the company implements those that are feasible.

Step seven: Continual improvement - The benchmarking process is a continual one. After implementing the recommendations, companies continue to benchmark and make improvements to stay competitive in the marketplace.

A Real-World Example

As an example, let's imagine that while going to school you take a part-time job at a local pizza parlor. Your boss finds out that you are majoring in business, and he asks you to help him understand how well his business is doing compared to the other local pizza businesses. One of the key questions he has is where he fits among the competition concerning the size of his business.

One of the metrics you decide to benchmark is the average number of pizzas sold daily. You find five other similar pizza businesses within the same town as yours and are able to convince them to participate in your study after promising them a copy of the results. You create a survey, including a question that asks the number of pizzas they sell on a daily basis.

From this data, you are able to share with your boss that his company is at the lower end of production - with three companies selling more pizza daily and one selling fewer pizzas. Luckily, you have also benchmarked hours of operation and are able to show your boss that he closes an hour before most of the competition. By opening an additional hour, he may be able to increase the number of pizzas sold.

Lesson Summary

Benchmarking is an important tool for companies to help them improve and stay competitive in the marketplace. Benchmarking always starts with a research question and ends with recommendations and successful implementation of things that will make the company stronger. Benchmarking is a continual process that, if done properly, will keep companies competitive and successful.

(Video) Digital Accessibility: Benchmarking QM Institutional Policies and Practices in 2020

Benchmarking Terms

What is Benchmarking? - Definition, Types, Process & Examples - Video & Lesson Transcript | Study.com (7)

Terms Definitions
Benchmarking the practice of a business comparing key metrics of their operations to other similar companies
Benchmark report a way you can quickly determine the health of the business
Best practices benchmark report where companies choose to look at a company or companies that they aspire to be like
Peer benchmarking benchmark report where companies choose to look at other businesses very similar to themselves
SWOT benchmarking report where companies gather data by looking at strengths, weaknesses, opportunities, and threats to help understand their climate
Collaborative benchmarking report is a part of a group

Learning Outcomes

When you are done with this lesson, you should be prepared to:

  • Identify the process of benchmarking
  • Describe the metrics comparisons possibly used
  • Explain how this may help a business

To unlock this lesson you must be a Study.com Member.
Create your account

Register to view this lesson

Are you a student or a teacher?

Unlock Your Education

See for yourself why 30 million people use Study.com

Become a Study.com member and start learning now.

Become a Member

Already a member? Log In

Back

Resources created by teachers for teachers

Over 30,000 video lessons& teaching resources‐allin one place.

I would definitely recommend Study.com to my colleagues. It’s like a teacher waved a magic wand and did the work for me. I feel like it’s a lifeline.

Jennifer B.

(Video) Open for (neuro)science tutorial: New from the Allen Cell Types Database

Teacher

What is Benchmarking? - Definition, Types, Process & Examples - Video & Lesson Transcript | Study.com (12)

Try it now

Back

Explore our library of over 84,000lessons

Browse by subject

Enrolling in a course lets you earn progress by passing quizzes and exams.

Track course progress

Take quizzes and exams

Earn certificates of completion

You will also be able to:

  • Create a Goal
  • Create custom courses
  • Get your questions answered

Upgrade to Premium to add all these features to your account!

Upgrade Now

(Video) Data Collection and Analysis Procedure

Upgrade to Premium to add all these features to your account!

FAQs

What is benchmarking and its example? ›

Benchmarking examples are instances of companies or departments measuring their results against other departments or others in their industry, a practice that can help them understand how they're performing compared to their competitors.

What is benchmarking and its process? ›

Benchmarking is a process of measuring the performance of a company's products, services, or processes against those of another business considered to be the best in the industry, aka “best in class.” The point of benchmarking is to identify internal opportunities for improvement.

What is benchmarking and types of benchmarking? ›

There are four main types of benchmarking: internal, external, performance, and practice. 1. Performance benchmarking involves gathering and comparing quantitative data (i.e., measures or key performance indicators). Performance benchmarking is usually the first step organizations take to identify performance gaps.

What is a benchmark simple definition? ›

Definition of benchmark

(Entry 1 of 2) 1a : something that serves as a standard by which others may be measured or judged a stock whose performance is a benchmark against which other stocks can be measured. b : a point of reference from which measurements may be made.

What are the 5 types of benchmarking? ›

  • Internal benchmarking. Internal benchmarking is pretty straightforward. ...
  • External benchmarking. External benchmarking is comparing an internal process to that of a competitor or even several other organizations. ...
  • Competitive benchmarking. ...
  • Performance benchmarking. ...
  • Strategic benchmarking. ...
  • Practice benchmarking.
Oct 14, 2020

What are the 4 steps of benchmarking? ›

The Four Phases Of Successful Benchmarking
  • Phase 1: Current State Assessment.
  • Phase 2: Benchmarking Participant Identification.
  • Phase 3: Comparative Analysis.
  • Phase 4: Strategic Prognosis.
Nov 17, 2017

What is benchmarking PDF? ›

Benchmarking is defined as the comparison of products, services, and processes across divisions that carry out similar operations in the same organization, among competing firms in the same industry, and among firms with similar processes across different industries.

What is benchmarking process and benefits? ›

Benchmarking can allow you to:

Gain an independent perspective about how well you perform compared to other companies. Drill down into performance gaps to identify areas for improvement. Develop a standardized set of processes and metrics. Enable a mindset and culture of continuous improvement. Set performance ...

What is a benchmark study? ›

A benchmark study measures and compares usability metrics against a baseline study. Such studies are typically run on a regular basis (monthly, quarterly, yearly) and evaluate how a user's experience with your product changes over time. How Many Contributors Should Be Used for a Benchmark Study.

What are the three types of benchmarks? ›

Three different types of benchmarking can be defined in this way: process, performance and strategic. Process benchmarking is about comparing the steps in your operation versus the ones that others have mapped out.

What is functional benchmarking example? ›

Functional benchmarking serves as a way to provide information on industry trends. For example, a local coffee shop could compare its brand recognition to those of nearby fitness centers. Alternatively, a luxury hotel could benchmark its customer service quality to that of an airline company.

What is the importance of benchmarking? ›

Businesses can use benchmarking in their operations to measure themselves against internal or external standards. Benchmarking can be used to measure internal progress, performance against competitors and how your processes rank against world-class organizations.

What are some examples of benchmarks? ›

Some of the most popular benchmarking methods include:
  • Peer benchmarking. ...
  • Best practice benchmarking. ...
  • SWOT analysis.
  • Process benchmarking. ...
  • Performance benchmarking. ...
  • Collaborative benchmarking. ...
  • Call center. ...
  • Technology.

What is competitive benchmarking examples? ›

This type of competitive benchmarking seeks to compare the performance of individual employees to that of other, similar employees, whether internal or external. Competitive Benchmark Examples: Sales Quota Attainment, Calls Handed, Number of New Customers Acquired, Lead-to-Close Rate.

What are some examples of internal benchmarking? ›

The most iconic example of internal benchmarking is COMPSTAT. COMPSTAT is the New York City Police Department's (NYPD) accountability process. It is both a management philosophy and a tool for police department managers to identify spikes in crime using comparative statistics (or internal benchmarking).

What is benchmarking and its importance? ›

Benchmarking is the process of looking at your own performance relative to your competition and determining where you want to be. Under the umbrella of that benchmark, you'll set your goals and design a series of small, measurable steps to help you reach them.

Videos

1. What is Benchmarking? Save Supply Chain Costs
(Supply Chain Secrets)
2. Machines Can See 2020 09/06
(VisionLabsChannel)
3. Workshop "Spatial transcriptomics data analysis in Python" - 2.2 (cell2location)
(Single Cell Omics Germany)
4. Statistical Tests: Choosing which statistical test to use
(Dr Nic's Maths and Stats)
5. MMS 197: Major Types of Quantitative Research
(Jeremiah Ramos)
6. How to Develop Key Performance Indicators
(virtualstrategist)

Top Articles

Latest Posts

Article information

Author: Arielle Torp

Last Updated: 01/05/2023

Views: 6264

Rating: 4 / 5 (61 voted)

Reviews: 92% of readers found this page helpful

Author information

Name: Arielle Torp

Birthday: 1997-09-20

Address: 87313 Erdman Vista, North Dustinborough, WA 37563

Phone: +97216742823598

Job: Central Technology Officer

Hobby: Taekwondo, Macrame, Foreign language learning, Kite flying, Cooking, Skiing, Computer programming

Introduction: My name is Arielle Torp, I am a comfortable, kind, zealous, lovely, jolly, colorful, adventurous person who loves writing and wants to share my knowledge and understanding with you.