Benchmarking involves comparing a company’s processes, profits, and practices with other companies in the same industry using financial, operational, product, and strategic data. The baseline for comparison varies by industry, and some companies use Management by Objectives to turn benchmarking data into achievable goals.
Benchmarking means comparing a company’s processes, profits and practices with other companies in the same industry. The point of comparison is called the benchmark and is also known as the industry standard. Business leaders sometimes use benchmarks as goals or as a means of evaluating the company’s progress. Benchmarking data types include financial, operational, product, and strategic data.
Financial benchmarking data comes from comparing financial information such as sales, earnings, investment capital and retained earnings. This type of benchmarking informs a business leader about the overall financial health of the industry. If the industry struggles with sales, the business leader doesn’t worry too much about a drop in revenue. On the other hand, a decline in the company’s sales in a high-growth sector would be of greater concern.
Operational benchmarking data involves manufacturing processes and employee productivity. Data can report how quickly other companies produce products. Industry standard training sheets may list employee efficiency as units produced per employee per hour or some similar form of comparable data.
Information collected for product data may include lists of product features and descriptions of product performance. This type of benchmarking data is very industry-specific. For example, an automobile company might collect benchmark data for speed and endurance from similar cars, while a washing powder manufacturer might compile benchmarks for the ability of competing products to remove stains.
Strategic benchmarking data stems from long-term organizational goals and marketing advancement. Compared to other types of data, strategic data can be more difficult to measure and analyze because it deals with plans and potential. Business leaders trying to benchmark against strategic data can compare similarities between strategic objectives and marketing plans.
Some companies use a strategic management system known as Management by Objectives (MBO). This involves turning benchmarking data into achievable organizational goals and then breaking them down into departmental and individual employee goals. MBO creation is not just about benchmarking data, the management style also provides a basis for further comparison and analysis, both within the company and with other companies in the industry.
The baseline for benchmark comparisons is derived from various business elements and the required information varies by industry. For example, companies that offer stock to investors are required to publish certain financial information, which includes sales and earnings reports. Some business websites list best practices for operations and strategic planning. Product, package, and trade magazine websites often list product data, which can be used for product comparison purposes.
Asset Smart.
Protect your devices with Threat Protection by NordVPN
