Benchmarking

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Benchmarking is comparing a business's performance, processes or costs with those of competitors, industry averages or recognised best performers, to identify gaps and opportunities for improvement.

Benchmarking answers the question: how are we doing compared with others? It can be applied to financial measures, such as profit margins, cost per unit or return on capital, and to operational measures, such as delivery times, customer satisfaction or staff productivity.

For example, a hospital might find that its average cost per patient is 20% higher than similar hospitals. Investigating the difference might reveal longer stays or higher supply costs, pointing to specific areas to improve.

Benchmarking can be internal, comparing different branches or divisions of the same company; competitive, comparing with direct rivals; or functional, comparing a process, such as invoicing, with leading companies in any industry.

It works best when comparisons are genuinely like for like. Differences in size, location, business model or accounting methods can make benchmarks misleading. The goal is to understand why a gap exists, not simply to copy others.

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