How do businesses select benchmarks for comparison?

Businesses select benchmarks for comparison based on their industry standards, competitors' performance, and their own historical data.

Benchmarking is a process that involves identifying, understanding, and adapting outstanding practices from organisations anywhere in the world to help an organisation improve its performance. The selection of benchmarks is a critical step in this process and is typically based on a few key factors.

Firstly, businesses often look at industry standards. These are the norms and guidelines that are generally accepted in a particular industry. They provide a useful starting point for comparison as they represent the average or typical performance in the industry. For example, a retail business might look at the average sales per square foot in their industry as a benchmark.

Secondly, businesses often benchmark against their competitors. This involves comparing their performance against that of their direct competitors. This can provide valuable insights into how well they are doing in the market and where they might need to improve. For example, a business might compare its customer satisfaction ratings with those of its competitors.

Lastly, businesses also use their own historical data for benchmarking. This involves comparing their current performance against their past performance. This can help them track their progress over time and identify any trends or patterns. For example, a business might compare its current sales figures with those from the same period in the previous year.

In addition to these, businesses may also consider factors such as their strategic objectives, customer expectations, and regulatory requirements when selecting benchmarks. The key is to choose benchmarks that are relevant, measurable, and achievable, and that will help the business improve its performance in areas that are important to its success.