written by | April 25, 2022

Benchmarking - Meaning and Examples

Measuring a company’s success against competitors to discover the performance improvement is called benchmarking. It is necessary to measure as it assesses the company’s progress and what can be done to improve the process.

The benchmarking process can be divided into various types, which helps better understand the success. It is defined as a continuous, systematic process for measuring one’s output and work processes against the most formidable competitors in the respective fields. It is a great way to test the productivity of the industry and improve accordingly, and it also helps you get an accurate picture of where you stand in the industry.

Did you know?

In benchmarking, the numbers are compared. The report does not consider the micro and macro factors that contributed to the success or failure of your competitors.

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What Is Benchmarking?

Benchmarking is defined as the process where you measure the company’s success against the most formidable competitors in the market. It helps you discover the underlying gap in your success and work towards it. It helps improve your company’s performance and enhance its efficiency.

Benchmarking started with reverse engineering or competitive product analysis, and this was done to tear down and evaluate the technical product characteristics.This benchmarking process helps identify the internal opportunities for improvement and breaks down the company's success to compare approaches. It gives you a fair idea of how the business operates and implements changes to yield progress.

The aim of benchmarking is to change the scope of services, match the competitors’ offerings, and install a new and better relationship management system for better communication.

It acts as a common point of reference against which things can be compared and judged. This method requires regular comparison of performances to reduce the gaps and improve the situation. It is a continuous process of improvement that works so that the business doesn't lag. Benchmarking is a great way to make an edge over your competitor and do a thorough self-assessment. Companies choose to benchmark the best companies whose business processes are most effective to identify strategies that they can adopt.

Benchmarking helps you decide and divide between two significant improvement opportunities: continuous and dramatic.

  • In continuous improvement, the aim is to make minor adjustments to reap, which can be incremented to reap sizable advances.
  • On the other hand, a dramatic improvement changes the internal work technique, which is done by reengineering the entire process. 

The Benefits of Benchmarking

Benchmarking helps in organising the focus on the external environment and improving the efficiency of the process. It promotes change by allowing employees to understand the performance of what they are achieving and how they should compare to others to achieve success.

  1. Competitive Analysis

By identifying the problems and working towards them to improve your business, you can strive to enhance the execution of your work. It also allows companies to gain an advantage over their competitors and grow in their respective industries.

  1. Monitor Performance

Benchmarking is looking at the current data and future trends to aim at what you want to achieve. This process needs to be continuous to be successful, and hence benchmarking is an effective way of monitoring the inherent characteristics.

  1. Continuous Improvement

Benchmarking helps you improve every attribute by enhancing some aspects of the business. It is a continuous process that cannot be overlooked over time.

  1. Planning and Setting of Goals

Once the problems have been examined, the next step is to carry out goals and performance metrics to improve the performance. Companies must set up realistic goals that can be fulfilled with constant effort, and it is essential to set goals that motivate the team to work towards progress.

  1. Ownership

When the company figures out where they want to progress, they have to discuss things and make solid decisions. It requires the team to talk to each other and understand their goals. Thus, benchmarking helps make teams take pride in their jobs and the work they do.

  1. Understand Companies Advantages

Benchmarking is not just the process of circling out problems, but it also helps in giving a detailed report of where the company is excelling. It provides a realistic idea of where the company stands and how it can improve. It is a great way to achieve your goals.

Also Read: What is the Importance of a Business Budget?

What Is the Benchmarking Process?

  1. Planning

The benchmarking process starts with planning which includes highlighting what you want to improve. It includes figuring out who you want to benchmark yourself against. Only after finishing this step will you be able to move toward the next steps.

  1. Collecting Information

Once you have planned who you want to benchmark against, the next step is to collect information and process that information against the competitors. Suppose you aim to improve customer service satisfaction and understand the processes involved and how communication is done. You can also get first-hand knowledge by calling and talking to the competitor’s service centre.

  1. Data Analysing

After collecting all the information, it is time to plot the graph again and understand the shortcomings that might be possible. Make sure that you analyse the data objectively. Once you find the difficulties, begin drafting a report and discussing the following steps to perform better.

  1. Action

Once you have prepared a list of the analysed data, it is time to start acting on it. Start exploring information and how you can implement them in a better way for the upliftment of the company. Make sure that the plan you submit is implementable by all the company departments.

  1. Monitoring

The process doesn’t complete just by implementing the actions. But the next step is to monitor the results and determine how successful the plan is. You will also encounter problems that you can’t quickly implement during this state. And hence, this step is crucial to check the results.

Benchmarking Types

  1. Internal Benchmarking: This is the process of looking within the organisation to determine other departments, locations, and projects and find the best practices. It means seeking partners from business units located in different areas.The advantage of this type of benchmarking is that sensitive data and information are more accessible, and the data is available, saving time and resources. But you cannot expect a fundamental change through this process.
  2. External Benchmarking: This process involves seeking information from outside organisations and providing opportunities for learning from those. However, this process takes more time and resources to ensure that the data as the information is credible. This type of benchmarking helps in learning from others and progressing forward.
  3. Generic Benchmarking: This process revolves around comparing organisations with similar strategies. It involves comparing an organisation’s business processes and operations against similar working services. It helps in gaining inspiration from organisations in the industry.
  4. Functional Benchmarking: It is done when organisations look for partners from different business sectors or areas to improve functions and work processes. This form of benchmarking helps in innovation and dramatic improvements.
  5. Competitive Benchmarking: This process revolves around examining the competitors' products, services, and procedures and comparing those with your own. It helps directly compare competitors’ products, methods, and business results. It takes time and detailed analysis and helps protect the company's confidentiality.
  6. Compatible Industry Benchmarking: This involves companies that are not directly competing for the same customer, and this is a general industry benchmarking process.
  7. Strategic Benchmarking: This process focuses on examining the long-term strategies to improve the team's overall performance. It is a much more extensive process that involves comparing high-level aspects.
  8. Global Benchmarking: This benchmarking results from globalisation and advances in IT. It is a benchmarking in which a distinction in international culture, business processes, and trade practice across the company is processed, and a method of improvement is understood and utilised.The benchmarking process can also be done by a careful inspection from the customer side. You can ask them “What they like” or “Where they would want to see some improvements.” It will give you a first-hand review of the services and help you alter things that are not working


Benchmarking is an excellent way for companies to figure out where they have been wrong and alter their mistakes. Taking an analysis of your competitor will help you understand their process and learn from their mistakes. This comparison will help you understand various aspects of working and making informed changes.

But it is necessary to keep in mind that the changes you make resonate with your team. Your team should be able to adapt to the changes and examine what vetter can be done.

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Q: What is benchmarking?


Benchmarking is the process of careful examination of a company’s success rate by comparing it with its competitors.

Q: How is benchmarking done?


Benchmarking is done by comparing the company against its competitors by using metrics.

Q: What is the advantage of benchmarking?


Benchmarking helps you gain a perspective on your own company's performance.

Q: What is the purpose of benchmarking?


Benchmarking is a tool for accessing and comparing the company's performance with its competitors for a careful improvement process.

Q: What are the types of benchmarking?


There are eight types of benchmarking: internal, external, competitive, performance, practice, functional, generic, compatible, and strategic.

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