What Are the 3 Types of Benchmarking?

Benchmarking is an important process for any organization where performance can alter its course significantly. Put simply, benchmarking means comparing the performance of that organization in certain aspects against other entities on the market. Usually, something is set as a common baseline standard for others to follow, making it the benchmark for that aspect of the industry. More generally, regular benchmarking can help you make sure that the processes within your organization are always in line with some common industry trends.

There are several types of benchmarking that you can perform on your processes, and depending on who you ask, the exact number is going to vary slightly. In most cases, three main types of benchmarking are recognized and it’s important to familiarize yourself with them as early as possible in running your organization. With time, you’ll find yourself developing a certain level of intuition for how benchmarking should be optimally handled in your company.

The Three Types of Benchmarking

The different types of benchmarking you can perform are organized according to what aspects of your organization you’re measuring. That is, are you analyzing an internal process and comparing it against other processes within your organization, or are you comparing some part of your performance against other entities on the market?

• Process benchmarking this type of benchmarking is concerned with comparing your own organization’s internal processes against those of other companies on the market, particularly successful ones with a long-running streak of positive results. This can sometimes be made challenging by the lack of publicly available information about those processes, requiring you to carefully pick your sources and ensure that you’re only working with accurate data sets that might not have been polluted. In some cases, you may also find yourself dealing with legal issues that could prevent you from getting the full picture about the way other organizations are operating.
• Performance metrics similar to process benchmarking, performance metrics concerns the specifications of different processes occurring in your organization. However, in this case, you’re looking to compare them against pre-existing, known data sets instead of measuring against your competition. This might be easier to perform since you’ll already have the relevant information available, however it might also make your analysis slightly less accurate, depending on how that information was obtained and how accurate it is at the moment.
• Strategic benchmarking you will also need to adapt your high-level strategy to the way the market currently works. Just because you’re managing things correctly on a micro level doesn’t mean that the organization is working as smoothly as it could with regards to the pursuit of a long-term goal. It’s important to see what other companies on the market are doing in this regard, and what their strategy is. Then, compare that to your own and see how you can adapt your goals to be more realistic with regards to the current market situation.

The three types of benchmarking are actually tightly connected and should rarely be treated as separate entities. It’s important that you develop a deep understanding of what exactly is being compared and evaluated with each type of benchmarking process, and know when to apply each one. In addition, you’ll need to figure out how you can use the results of the three different types of benchmarking and combine them in order to build a more complete data set.

This might take some time, and developing this sort of intuition is a long and challenging process that is also prone to failure. However, ultimately, it will make you a better leader with a more objective view of your operations.

Conclusion

Knowing how to accurately and objectively compare your business against others on the market is a critical skill that takes some time to develop. Understanding the three different types of benchmarking is a fundamental skill for anyone in a position of leadership, and the sooner you take the time to study them, the better you’ll fare in the long run. You’ll also know exactly where your company stands on the market at the moment and how well it compares against its competitors, an important piece of information that can be quite valuable in dictating your long-term decisions.