Measure performance and set targets
Benchmark your business performance
Performance benchmarking involves systematically measuring and comparing your business' performance to that of other businesses, often in the same industry or sector.
What is benchmarking in performance management?
It is a valuable way of identifying best practices that other businesses, including your competitors, utilise to enhance their performance. By benchmarking against them, you can find areas for improvement or adapt specific best practices to increase one or more aspects of your own business performance.
By carrying out performance benchmarking, you should aim to answer the following questions:
- Who is the best performer in your sector/industry?
- What makes them the best?
- What lessons can you learn from them?
- What actions can you do to improve performance?
You can carry out a benchmarking exercise as a one-off event or as a continuous process.
Types of benchmarks in performance management
A benchmark describes the 'best in class' performance that a specific business process or activity has achieved. Benchmarks can be:
- internal - comparing internal operations within the same company (eg evaluating absenteeism rates across the business, or one site or team against another)
- external - against a specific competitor for a specific product, service or activity
- generic - comparing same/similar functions or processes, regardless of industry/sector
When choosing the specific benchmarks for your business, you should focus on those areas that drive business success in your sector - your key drivers. These will typically be similar to your key performance indicators.
Find businesses to benchmark against
It is usually helpful to compare yourself against businesses in the same sector. However, 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.
See also competitor analysis.
Find external benchmarking data
The most common challenge with benchmarking is finding external data for your comparisons.
There are a number of sources for this kind of information. You can:
- research competitors and markets with Invest Northern Ireland
- contact your trade association - they often collate sector-wide statistics
- use commercial market reports - they offer great detail, but can be costly
Using your benchmarking data
You should use benchmarking data in the same way you use any other performance measurement data you generate - to drive improvements in the way your business operates.
Typically this will involve setting business targets to help you reach the benchmark values to which you aspire. See how to set business performance targets.