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Benchmarking is a strategy used to assess a company’s performance against industry standards. It helps identify areas for improvement and can lead to innovation and increased sales. Companies must constantly evaluate their practices to remain competitive.
Benchmarking is a frequently used strategy to assess the overall performance level of a company operating in a specific industry. The benchmarks themselves are the standards of excellence in productivity, quality, service delivery and costs that are recognized as ideals within that particular field. The benchmarking process helps a company get an idea of its overall position in the community and makes it possible to identify areas where there is room for improvement.
Establishing a benchmark within an industry or profession does not happen overnight. Often, the reference is created over several years. From that moment on, any new business entering the same field will judge its overall performance against existing industry standards. These standards remain the norm until a competitor exhibits qualities that exceed the standard and therefore raises the bar for all other companies in the industry.
An excellent example of benchmarking can be seen in the field of telecommunications during the second half of the 20th century. Before the deregulation of the US telephone industry in 1984, a company had established itself in terms of products, service delivery and customer service. For emerging companies to compete, it was necessary to at least match these same standards with a lower rate or exceed them while maintaining a rate that consumers would find attractive. The end result is that the general benchmark for telecommunications in the United States began to change as companies vied for the honor of setting the new industry standard.
Internally, benchmarking is one of the most effective strategies a company can use to position itself for growth. Because properly assessing how the company measures up to industry standards depends on being brutally honest about policies, procedures, pricing, and service delivery, companies can get a better idea of exactly where they need to improve to increase market share, or even to maintain the market share they currently command. When used effectively, benchmarking can lead a company to become more innovative, think about its business model in new ways, and even identify new consumer markets that it can target, thus increasing the overall sales generated by the company.
It is important to note that benchmarking is not a process that is done once in a while and then set aside for a few years. Companies that want to remain competitive are constantly in the process of evaluating their practices and procedures against their industry standards, and looking for ways to meet or exceed those standards. In an age where technology is constantly changing the way consumers make decisions about what to buy and who to buy it from, benchmarking has taken on even more importance for companies looking to be in business for years to come.
Asset Smart.
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