While companies frequently measure their own performance, it is not necessarily a reliable indicator of how well the organisation operates relative to other companies in their industry. Business process benchmarking is a methodical approach to comparing processes against industry practices and performance criteria to identify where an organisation is lagging, where opportunities exist, and what improvement targets are realistic. Businesses can leverage performance improvement consulting to translate the findings and insights from benchmarking into tangible action that enhances efficiency and performance.
How do you define Business Process Benchmarking?
Business process benchmarking is a process that compares business processes, metrics, and results with those of other businesses in the industry or with recognised best practices. Its aim is not only to find out which one performs better, but to get to the bottom of why.
Businesses can measure the following areas against the benchmark:
- Operational efficiency
- The time required to produce or deliver a product/service.
- Cost management
- Customer service performance
- Employee productivity
- The number of errors and quality
- Innovation, technology and process automation.
This comparison will help leadership teams to understand the current position of their organisation and where there is a need for improvement.
Why Benchmarking Matters
If there are no “outside” benchmarks, a business can think of a process that is inefficient as being acceptable because it has been used for years. Benchmarking is an alternative to this assumption, thus adding an outside view on performance.
It can assist organisations:
- Identify inefficient or outmoded processes
- Set concrete performance goals
- Gain insight into successful industry practices
- Prioritise improvement opportunities
- Boost customer and employee satisfaction
Benchmarking should not be about swapping out any good practice for another organisation’s. Each business is unique in terms of customers, resources, systems, and priorities for business strategy.
Identifying Performance Gaps
The value of benchmarking is that it helps to identify the difference between what you’re doing and what you want to be doing or the industry standard. With these gaps identified, organisations can examine the root causes of these gaps.
For instance, unmet expectations for speed of service can be caused by too many approvals, lack of integration, low staff training or poor workflows. These underlying issues can be explored by performance improvement consulting to help organisations identify what changes are likely to make the most impact.
A gap analysis should therefore be geared both toward measurable outcomes and the processes that create them.
Creating an improvement plan from benchmarking
The value lies in the use of benchmarking results, and implementation of action based on those results. Once a business identifies performance gaps, they then need to create actionable improvement programs that have ownership and timeframes.
A good improvement plan could consist of:
- Redesigning inefficient workflows
- Automating repetitive activities
- Conducting the necessary audits and standards checks
- Improving employee capabilities
- Implementing meaningful performance metrics
- Improving technology and data systems
Performance improvement consulting can assist organisations to organise these initiatives and integrate them with the bigger business goals.
Making Benchmarking an Ongoing Process
Industry standards and customer expectations are evolving. A process that works well now may not work well in the future, as a result of changes in technology, competition, or market conditions.
Benchmarking should not be a one-off activity for this reason. Periodic review to track KPIs and benchmarking against evolving industry practices are options available to organisations.
A culture of continuous benchmarking can encourage businesses to identify and address improvement opportunities before they become significant issues.
Conclusion
Business process benchmarking provides an objective means for organisations to gain insight into the industry best practices. It enables the identification of gaps, setting realistic targets and identifying opportunities for operational improvement. But comparison isn’t the end of it. It’s important for businesses to turn benchmarking into action. Companies can use benchmarking insights to develop a focused improvement plan and establish a foundation for ongoing performance improvement.
Frequently Asked Questions
Q: What is business process benchmarking?
Business process benchmarking is the practice of comparing an organisation’s processes, performance metrics and results with industry practices or relevant performance standards. It helps businesses understand where they stand and identify areas for improvement.
Q: What is the difference between benchmarking and performance measurement?
Performance measurement looks at how a business is currently performing. Benchmarking adds an external comparison by assessing performance against relevant industry practices or performance criteria.
Q: How can benchmarking improve operational efficiency?
Benchmarking can show where processes take longer, consume more resources or produce weaker outcomes than relevant benchmarks. This information can help businesses focus improvement efforts on specific operational weaknesses.
