Measure performance and set targets

Measurement against other businesses - benchmarking

Benchmarking is a valuable way of improving your understanding of your business performance and potential by making comparisons with other businesses.

Who to benchmark against

It is usually helpful to compare yourself against businesses in the same sector. But your market position and your objectives, among other things, will affect the specific comparisons you want to make.

For example, a small business in a crowded sector may want to benchmark itself against average performance levels in the sector. But a business targeting rapid and significant growth may choose comparisons with an established market leader.

You can also benchmark internally within your business. For example, comparing absenteeism rates between departments may enable you to spread good working practices from the best-performing areas of your business.

What to benchmark

In general, the same rule applies to benchmarking as to choosing which performance measures to use. You should focus on those areas that drive business success in your sector - your key drivers. See the page in this guide on deciding which key performance indicators to measure.

How to benchmark

You should have ready access to all the figures for your own business, so the main challenge with benchmarking is often the process of finding external data for your comparisons.

There are a number of sources for this kind of information:

• your trade association is a useful starting point, as these organisations often collate sector-wide statistics
• commercial market reports may provide greater detail, although these can be costly

Using your benchmarking data

Benchmarking data should be used in the same way as any other performance measurement data you generate - to drive improvement in the way your business operates.

Typically this will involve setting targets to help you reach the benchmark values to which you aspire. For more information on target-setting, see the page in this guide on how to set useful targets for your business.

Subjects covered in this guide

• Introduction
• The importance of measurement and target-setting
• Deciding which key performance indicators to measure
• Choosing and using key performance indicators
• Measurement of your financial performance
• Measurement and your customers
• Measurement and your employees
• Measurement against other businesses - benchmarking
• Measurement in the manufacturing sector
• How to set useful targets for your business
• Here's how KPIs help me achieve my business goals

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