Definition: to run a financial analysis and compare the findings to other firms in order to assess a company's competitiveness, productivity and efficiency.
Benchmarking is the process of comparing a firm’s performance criteria and business processes to other businesses within their trade.
Quality,
expenses, and time are the most frequent divisions to be considered.
Improvement projects that stem from benchmarking can result in firms running better, faster, and cheaper.
Benchmarking in practice
Most commonly, benchmarking is used to evaluate an organization's performance by focusing on one or more particular indicators.
This could include cost per unit, defects per unit, productivity, or otherwise. Their results are then compared to the standards of the best firms within their sector.
Comparison to "best practice"
Benchmarking is a process that is often utilized by strategic management. They evaluate the various aspects of their firm's practices and compare them to the practices of the “best practice” firms.
Usually these “best practice” firms are from within the same industry.
The information gained from such a comparison allows firms to develop new and better plans for how to make improvements or adopt certain best practices.
Benchmarking is most often an on-going process in which companies continuously seek to improve their practices.