Performance benchmarking is the process by which a company evaluates its own business practices in terms of the standards set by its competitors in the market. These standards are known as benchmarks, and they serve as goals for the company in question to try to attain. The method by which these goals are reached is best practices, and once best practices are identified, the company can go about applying them. Ultimately, performance benchmarking shows a company the areas in which it is doing well, and more importantly, in what areas it is struggling and needs to make improvements.
It is common for a company to get so focused on its own operations and its bottom line that it loses perspective on what others in the same industry are doing. This can be a crucial mistake, since the companies that are performing the best in a particular market are doing so for a reason. If a company can periodically evaluate itself in terms of its competitors, it can be a useful tool in the business world. Sometimes the best way to achieve this is to undertake performance benchmarking.
The process of performance benchmarking is a relatively simple one when broken down to its basics. First, the best performers in a particular market must be identified along with the practices they regularly use to achieve market domination. Following that, the company doing the benchmarking evaluates itself against the benchmarks set by the top companies. Where the company is lacking, attempts must be made to catch up and ideally match the benchmarks set by the others.
In some cases, the information available to companies wishing to partake in performance benchmarking can be found with a little research. The internet is a good source for basic information about competitors and their products. If a company wants to get a little more in-depth with its benchmarking efforts, it may seek out consulting firms that specialize in benchmarking to gain the information for them and prepared detailed reports. Although this can be costly, the knowledge gained from the process can atone for the expenditures.
Once a company gets the results of performance benchmarking, it can make a realistic assessment about where it stands in comparison with others in the market. It can also see where it is lagging behind the standards, and if there are methods it can undertake to close these gaps. The methods that are used to meet the standards of the industry are known as best practices, and it is crucial for a company to identify them and utilize them if at all possible.