To the uninitiated, benchmarking just sounds like a fancy way of saying “tracking metrics and progress.” That of course is wrong, but without education, nobody could be blamed for assuming that. In an article for the Balance, F. John Reh with Art Petty provides a useful overview of what benchmarking really is and why it is valuable to business.
Benchmarking is about comparison, internally or externally. Benchmarking is typically “the process of comparing your own organization, operations, or processes against other organizations in your industry or in the broader marketplace.” The point is to see where you stand relative to the competition and/or like-sized businesses, and you can then take action on how to improve the business according to the results you uncover. Alternatively, you can also benchmark how individual aspects within your own business compare to each other, but the final intent is the same—to identify and take action on improvement areas.
For benchmarking to be successful, it cannot occur just for its own sake. There must be explicit goals in mind so that the right focus for benchmarking can be set. But properly conducted, benchmarking can provide clear strategic value:
Looking beyond your own industry for best-in-class performance for particular processes or functions is an excellent way to challenge your firm to rethink long-standing assumptions and practices. For example, Southwest Airlines famously analyzed the processes, approaches, and speed of automobile racing pit crews to gain ideas for improving their airplane turn-around time at the gate. The outcome of this benchmarking study is reported to have helped Southwest reconfigure their gate maintenance, cleaning, and customer loading operations, and to have saved the firm millions of dollars per year.
Basically, there is never a downside to benchmarking when the resources are available to conduct it. The sky is the limit for improvement opportunities.
For specific examples of how benchmarking can assist a business, you can view the original article here: https://www.thebalance.com/overview-and-examples-of-benchmarking-in-business-2275114