The mistake of avoiding benchmarking
Have you ever said, “we don’t bother with benchmarking, that’s for followers; we want to be market leaders! Let them benchmark against us!”
If you are one of those people who think that comparing yourself to your competitors is not what innovative and successful companies do–well, you would be mistaken. I was that person for years. Then I realized that it wasn’t me doing the benchmarking as much as it was my employees and customers who were benchmarking the organization. They are constantly assessing their choices and taking action when the time is right for them. So if you think about benchmarking from their perspective, you will want to get a move on. You need to know what they see.
Bottom line, it’s not only important to compare your own performance against yourself, year-over-year, but it’s equally important to know how your organization is performing against your peers. Your business doesn’t operate in isolation from others–your employees move around, your customers come and go (and hopefully come back again)--so, you need to know how you compare in key performance indicators like representation, recruitment and compensation and in social responsibility covered in your ESG program.
The value of benchmarking
Here are seven benefits you may not have thought about when looking through the eyes of your employees and customers:
1. Improves performance and results
Benchmarking kicks competition into overdrive for people and their companies, and as a result, performance improves. This is based on Social Comparison Theory where humans naturally want to do better than their last score, or better than the other person, department, or company–whatever the case may be.
2. Identifies strengths and weaknesses
Benchmarking allows an organization to objectively evaluate its performance against industry standards or top competitors. This helps identify areas where the organization excels (strengths) as well as areas that need improvement (weaknesses).
3. Drives continuous improvement
By highlighting performance gaps compared to best practices, benchmarking motivates organizations to continuously enhance processes, products/services, and overall operations to achieve excellence and stay competitive.
4. Enhances competitiveness
Understanding where an organization stands relative to rivals provides insights into how to differentiate itself and gain a competitive edge in the market.
5. Fosters innovation
Studying best practices from industry leaders exposes an organization to new ideas and strategies that can inspire innovation in its own processes, products or business models.
6. Aids strategic decision-making
Benchmarking data gives organizations a factual basis for making strategic choices like prioritizing investments, setting realistic goals, or identifying opportunities for growth.
7. Increases customer satisfaction
Process improvements and strategic moves guided by benchmarking ultimately lead to better products/services and greater value delivered to customers.
Convinced? In essence, benchmarking provides organizations with an objective, data-driven approach to understand their current state, learn from others' successes, set ambitious goals, and implement changes to optimize performance - benefiting competitiveness, innovation and customer satisfaction.
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