Benchmarking does more than let you know how to obtain output. It also lets you understand the output of your competitors. This process, which can take on one of four general systems, allows you to implement metrics and the best practices of your industry so that you can start doing things better, cheaper, and faster. Here are some of the key pros and cons of benchmarking to consider if you’re thinking about including this process for your business.
What Are the Pros of Benchmarking?
1. It gives you a performance improvement.
Because you’re looking at the best practices of each business task which must be completed, benchmarking allows you to locate areas where you might be inefficient. You are also able to compare how your performance matches up to the rest of your industry. This gives you the data you’ll need for your organization’s basic survival needs.
2. It inspires creativity.
Many organizations get stuck in the “We’ve always done things this way” trap. As time progresses, standards evolve. Processes improve. It’s not comfortable to be innovative sometimes, but it must be done to stay current with the competition. Benchmarking helps a business provide the measurable goals.
3. It places the focus on change.
Benchmarking forces you to set and then follow a minimum standard of excellence. It is often based on a combination of best practices and competitor standards that have been analyzed in each specific industry. In return, you receive a focus on change that encourages ongoing learning at every level of the organization.
4. It can be done without a big price tag attached to it.
Many benchmarking efforts are relatively easy and cost-efficient, so an organization can get the fast results they need. In return, they can even save money too because information sharing improves, training strategies improve, and there is a higher potential for future discoveries. You can even begin to learn the lessons that other industries have learned and apply them to what you do.
5. It creates a deeper understanding.
Benchmarking helps an organization know itself on a deeper level. It also forms relationships with the competition and helps a company explore what the world is offering for ideas.
What Are the Cons of Benchmarking?
1. It doesn’t really measure effectiveness.
When you’re instituting best practices, you are examining specific efficiencies under a microscopic lens. What you are not doing is measuring how effective your processes happen to be. You know why there are standards in place, but how were those standards attained in the first place? If there are any flaws in the process, you’re going to usually find out the hard way.
2. It is often treated as a solo activity.
Benchmarking is important, but it can’t be the only thing a business does in order to institute change. It is simply part of the process that will help you reach an end goal. If there isn’t a vision in place, leadership that can bring people to that vision, or employees invested into the end goals, then benchmarking isn’t going to do much good. It will simply tell you that you’re failing at what you do.
3. There tends to be a certainly level of complacency.
The biggest trap of benchmarking occurs when a business is able to exceed the standards of their competition. It is very common for businesses in such a position to stop striving for more innovation once they reach that point because there is a feeling like they are the best in the industry. To maintain that status, however, one must continually innovate, and the arrogance of a “win” can stop that from happening.
4. The wrong type of benchmarking might be used.
There are 4 types of benchmarking: internal, competitive, functional, and generic. In broad terms, a business should use a combination of each for the best possible chance at success. Sometimes only one type of benchmarking is used and it isn’t the correct one to meet their goals. You can benchmark internal processes by comparing your products and services to the competition’s products and services.
5. It can foster mediocrity.
The ultimate issue with benchmarking is the perspective behind it. If there is a certain arrogance that says an organization is already the best in the industry, then this bias will influence the data collected.
The pros and cons of benchmarking offer a relatively easy way to improve organizational processes, but it can also be a complex journey depending on what the desired outcome happens to be. How do you feel about benchmarking? If you’ve been involved in this process, what would you say your greatest challenge happened to be? We’d love to hear your thoughts on the matter.