What is Benchmark? Benchmark definition, types, and FAQs.

Table of contents:-


What is a Benchmark?

Benchmark is a reference tool to compare your organization’s performance against the best practices in the industry. 

Benchmarking can be used to review the performance of an internal organization and establish potential areas of improvement. 

It can be applied against any product, approach, or function in the business. Benchmarking reveals how well your company is doing by analyzing them against the data from the best practices in the industry.

What are the different types of benchmarking?

There are four types of benchmarking:

  • Performance benchmarking:- This involves collecting and comparing quantitative data. This is identified as the first step for an organization to identify performance gaps.
  • Practice benchmarking:- This involves collecting and comparing qualitative information. This step-by-step analysis is how an activity is conducted through people, processes, and technology. 
  • Internal benchmarking:- This involves comparing data from different departments, units, locations, etc. from within the organization.
  • External benchmarking:- This involves comparing the performance of your organization to other organizations in the same industry.


Q: What is the difference between benchmark and KPIs?

A: While a benchmark has a company comparing its processes, products, and operations with other entities, a key performance indicator (KPI) measures how well an individual, business unit, project, and company perform against their strategic goals.

Q: An example of benchmarking?

A: A retail store can compare its progress by comparing its performance against some of the better performing retail stores to better understand the gap between them.

Q: Why should an organization benchmark?

A: Businesses can use a benchmark in their activities to analyze themselves against some of the best internal or external standards. 
Benchmarking can help measure internal progress, performance against competitors, and how your processes rank against world-class organizations.

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