Benchmarking typesBroadly, benchmarking breaks down into two types:
Internal: comparing one area of the organisation against another
External: comparing the business to another company; this can be a competitor or an entirely different industry
Advantages of benchmarkingBenchmarking done well identifies opportunities for your business to improve performance, practices and processes. These may include customer satisfaction, employee engagement, reducing recruitment costs, staff attrition or streamlining production. External benchmarking helps you learn more about your industry and competitors.
Disadvantages of benchmarking
No two organisations are the same: Your company has a unique culture, perspective and challenges. Benchmarks heavily generalise across companies of different sizes, maturity and cultures; they are too general a way to assess the performance of your business accurately.
Data is not easy to find: Some companies don’t want to share their information with a benchmark provider, and aggregator sites (e.g. TripAdvisor, Glassdoor, Checkatrade) that rely on feedback may not be sufficiently reliable or available for your industry. You may have to resort to using data that’s generic or not industry-specific to you – this won’t give you great insights.
You might pick a bad benchmark: An average, uninspiring comparison group not only stifles innovation, it can be used to justify middling performance by your business simply because you’re better than that benchmark.
No context: You may have the benchmark data that tells you what a competitor has achieved, but there’s no information about how they’ve achieved it. You won’t be able to pinpoint areas for improvement without this insight.
Survey compromise: Benchmarking surveys are limited to asking the questions that are included in an existing benchmark. These will not be 100% aligned to your organisation’s unique needs.
Different measurements: Different companies have their own ways of doing things, and therefore, of measuring the outcomes. Measurements may be skewed by circumstances affecting only one industry or company that are irrelevant to your business.
Benchmarks are backwards-looking: Benchmarking tells you only what’s happened in the past. It doesn’t take account of what’s happening in the real-time here and now or give an indication of future performance and results.
Benchmarks focus outwards, not inwards: You’re spending time and resources looking outwards at what others are doing, rather than channeling it inwards towards your own organisation and employees.
You may be signing away your data: When you subscribe to a benchmark provider, it’s likely you’ve given them permission to add your response data to their database. This will eventually become their intellectual property. Do you want this to happen?