Finance - Top Tips - Benchmarking



This document is designed as a quick reference guide to benchmarking.

This will enable you to gain knowledge of a particular skill, task or process.

This means you can quickly find the key information that you need and refer to it on an ongoing basis whenever you need to refresh your knowledge.



Benchmarking is the process of identifying best practice in relation to both performance and the processes by which we arrive at these performances.

The search can take place both internally and externally not only in our industry but in other industries as well (for example what can we learn from both John Lewis Partnership and Tesco’s).


The object of benchmarking is to understand and evaluate our current performance in relation to best practice and identify areas where we can improve our performance.


Logged in as: Adam Bramwell

Finance - Top Tips - Benchmarking

What you need to know

The Benchmarking Process…

Benchmarking involves looking outward (outside a particular business, organisation, industry, region or country) to examine how others achieve their performance levels and to understand the processes they use. In this way benchmarking helps explain the process behind excellent performance. When the lessons learnt from a benchmarking exercise are applied appropriately they facilitate improved performance in critical areas of an organisation or key areas of the business environment.


There are four key steps to benchmarking they are:


1.   Understand in detail existing processes – what are we doing or not doing that is giving us this level of performance.


1.   Analyse the process of others – what are they doing to achieve their performance?


1.   Compare our performance /process with that of best practice – so what is the difference between us.


1.   Implement steps necessary to close the gap between the two performances – what have we got to do to differently to increase our performance.


There are various ways you can get the information you need i.e. test/mystery shopping, customer exit surveys etc. Benchmarking should not be considered as a one off exercise. To be effective it must become an ongoing, integral part of a continual improvement process



Logged in as: Adam Bramwell

Finance - Top Tips - Benchmarking

What you need to know

Types of Benchmarking:


Strategic Benchmarking

Where businesses need to improve overall performance by examining the long term strategies and general approaches that have enabled high performers to succeed. Strategic benchmarking involves considering high level aspects such as core competencies, developing new products and services and improving capabilities for dealing with changes in the external environment. Changes resulting from this type of benchmarking may be difficult to implement and take a long time to materialise.


Performance or Competitive Benchmarking

Businesses consider their position in relation to performance of key products and services. Benchmarking partners are drawn from the same sector. This type of analysis is often undertaken through trade associations or third parties to protect confidentiality.


Process Benchmarking

Focuses on improving specific processes and operations. Benchmarking partners are sought from best practice organisations that perform similar work or deliver similar services. This type of benchmarking often results in short term benefits.


Functional Benchmarking

Businesses look to benchmark with partners drawn from different business sectors or areas of activity to find ways of improving similar functions or work processes. This sort of benchmarking can lead to innovation and dramatic improvements.


Internal Benchmarking

Involves benchmarking businesses or operations from the same organisation (e.g. business units in different areas/countries). The main advantages of internal benchmarking are that access to sensitive data and information is easier; standardised data is often readily available; and usually less time and resources are needed. There may be fewer barriers to implementation as practices may be easy to transfer across the same organisation. However, real innovation may be lacking and best in class performance is more likely to be found through external benchmarking.


External Benchmarking

Involves analysing outside organisations. External benchmarking provides opportunities of learning from those who are at the “leading edge”. This type of benchmarking can take up significant time and resource to ensure the credibility of data and information, the credibility of the findings and the development of sound recommendations.


International Benchmarking

Best practitioners are identified and analysed elsewhere in the world, perhaps because there are too few benchmarking partners within the same country to produce valid results. Globalisation and advances in information technology are increasing opportunities for international projects. However, these can take more time and resource to set up and implement and the results may need careful analysis due to national differences.