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Definition of Benchmarking

Benchmarking is simply comparing one company with either another or an industry 'average'.

Benchmarking examples

For example a company could measure a ratio such as sales per employee or overheads per employee with another company.

Benchmarking considerations

There's two important things to think about:

1) Who do you compare against? Do you benchmark against the best or the average

2) What do you do about it? There's no point in benchmarking unless you can make some changes to improve afterwards.

Levels of benchmarking

There's different levels of benchmarking for example you can do strategic benchmarking which looks at high level ratios or operational benchmarking which could look at detailed cost data. You can also do more qualitative benchmarking, for example looking at the decision making process.

Access to benchmarking data

There's also the challenge of access to benchmarking data. This is published within some industries. There are benchmarking consultants who will not only undertake and source benchmarking data but give advice on what to benchmark.

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