Benchmarking is the process of comparing a company’s products, services, and practices against those of competitors or other industry leaders. Its objective is to analyze how other companies achieve their high levels of performance, to identify areas and means of performance improvement, and to use the information retrieved to make improvements. In addition, benchmarking has a motivating function as the comparison with the best in the industry can spur the company to perform even better. Therefore, benchmarking can be used to catch up with the top companies, but also to create competitive advantages. In order to add real value for the company, benchmarking should be done continuously and systematically.
The benchmarking process consists of four phases: planning, data collection, analysis, and implementation. The planning phase includes the analysis of the company’s strengths and weaknesses as well as the selection of benchmarking criteria. Data about the benchmarking partner may be collected from both internal and external sources, such as commercial databases, chambers of commerce, or government organizations. In situation of direct competition, access to information may be restricted making data collection more difficult. Once all data and information on the benchmarking partner has been collected, it needs to be analyzed and compared to the company’s own data. Finally, based on the analysis, potentials for improvement are identified and action plans for implementation developed.