The importance of tracking key performance indicators in business can simply not be understated. Most business owners already understand that KPIs are incredibly important for the success of their company. In a business setting, tracking key performance indicators will help you figure out how your company is doing, and whether you need to make any adjustments in your business model.
Then, most businesses also adopt the SMARTER framework for setting up appropriate goals. Unless your goals are realistic, attainable, and measurable, it’s going to be difficult for you to track the performance of key indicators. However, what about the different types of benchmarking? Here’s why that’s important.
What Is Benchmarking?
Before we get started, it’s important to focus on what benchmarking really is. In essence, benchmarking is a simple way to measure the performance of your business and the success of your teams in general. By comparing the processes of the organization to another organization, or even one department with another, you can figure out how you are doing.
Benchmarking is essential for determining the norms of the industry, and it will help you figure out how your company is doing. Similarly, you can also compare processes from one department to another, and then figure out whether one department is lacking in efficiency or productivity.
As you can understand, benchmarking is essential for the growth of your business. It is going to help you create a standard for performance that you can then emulate and introduce to different departments. Businesses all over the globe use benchmarking in order to figure out how they are performing.
Types of Benchmarking
There are six different types of benchmarking, and each of these are going to help you figure out a different element of work. In the following paragraphs, we shall talk about the most common types of benchmarking in use.
- Internal Benchmarking
This one is extremely simple to understand. You take a task and compare it with another similar task or process that is being performed in the company. Basically, all it takes is the simple ability to determine the metrics for different systems. This is going to help you figure out whether the KPIs are on track and assess them properly.
This is an extremely effective form of benchmarking as it can help in setting standards that are adopted throughout the company. More importantly, it also helps figure out whether the standards are being met, and it’s going to trim problems and make the environment more productive.
- External Benchmarking
As the name suggests, external benchmarking is all about comparing the processes of your company with another organization, most probably a competitor. This is slightly more complicated because you are going to have to access industry data that might not be readily available. Obviously, a competitor won’t be willing to talk to you about their internal processes.
However, you should know that if possible, implementing external benchmarking in your company could yield a variety of benefits. You can easily understand how your business is doing on a bigger scale, and it will also help you identify different points of weakness that you can overcome.
By evaluating and assessing your company’s performance with that of your competitors, you will be able to figure out what you are doing wrong, and how you can overcome these issues.
- Competitive Benchmarking
Competitive benchmarking is often considered to be an offshoot of external benchmarking. This type of benchmarking primarily focuses on comparing internal systems and processes to those of your competitors. Again, this form of benchmarking is incredibly important for a variety of reasons.
First of all, it helps you identify what you are doing wrong and what another competitor is doing right that they are able to succeed in the same industry as you. This is also going to help you figure out how to increase consumer satisfaction by following and tracking different metrics, and then comparing them with the competition.
- Performance Benchmarking
Performance benchmarking is focused primarily on the performance of the business. This involves tracking different KPIs and metrics in the business in order to compare different outcomes with modern-day standards. The focus is on making sure that the company continues to update their standards and improve their performance regularly instead of getting complacent.
The focus of performance benchmarking lies solely on the improvement of different business functions over a specific period of time. The underlying assumption is that with the passage of time, more efficiency in performance is going to allow benchmarks to rise, and the company must adapt to that increase accordingly.
- Practice Benchmarking
Then, you have practice benchmarking. Practice benchmarking relates to the processes and the practices adopted by the business. The procedures and controls within the business are responsible for analyzing business data and figuring out how teams and departments are making use of different technologies in order to achieve their goals.
One of the most common ways to start benchmarking practices is to set up process mapping. This will help you figure out any gaps in the performance of your business and plug them.
- Strategic Benchmarking
This is a form of external benchmarking that focuses on a strategic analysis of competitors and how they rose to success. The focus lies on figuring out the kind of strategies employed by these businesses. For instance, what is the reason behind the success of a competitor’s marketing campaigns?
By benchmarking different things, a company can come up with a unique strategy that emulates the success of other competitors and then implementing these techniques and processes within their company.
The Importance of Feedback in Benchmarking
When it comes to benchmarking, one of the worst mistakes that you can make is to undermine the importance of feedback. Feedback, especially that of your employees and your customers, can give you important insights into how your business is performing.
For instance, if the customers believe that the customer support team is doing a good job, you know that they are handling complaints and queries on time. Similarly, if you believe that sales are low as compared to the previous quarter, you can then focus on implementing new strategies to help enhance the growth of your team.
These are just a few simple things that can help you improve benchmarking in your teams and improve the overall standard of business in your company.