The definition provided by E Demming of benchmarking is “the practice of being humble enough to admit that someone else is better at something…and wise enough to try and learn how to match and even surpass them at it.” In essence, benchmarking is a standard of performance (best practice) against which others aim for. It is an item of comparison and the starting point for improvement by learning from others and then applying that learning to your own situation.
The steps of benchmarking look like this:
In other words, you are constantly reviewing the process and making refinements in order to keep improving. Important questions to ask are:
- PROFIT: How can I improve profitability?
- PRODUCTIVITY: Are my people productive and efficient?
- CASH FLOW: What areas of cash flow can I work on to improve the cash cycle?
- FINANCIAL STRENGTH: Can my business withstand a downturn?
Remember, the key to benchmarking is to compare like against like. Identify a leader in your field, in the same region and operating the same size of business to compare against.