Benchmarking in Business: Definition, Types, and How to Do It

What is Benchmarking in Business?

Benchmarking in business is comparing your company’s performance, practices, and processes to those of industry leaders or competitors to identify areas for improvement. It can be used to measure success, set goals, and develop strategies for growth. There are different types of benchmarking, including performance, internal, external, competitive, and strategic.

Benchmarking can benefit businesses of all sizes, as it allows for a more objective evaluation of performance and can help identify areas for improvement. However, conducting this process accurately and with appropriate data sources is essential to make meaningful comparisons.

Why is Benchmarking in Business Important?

According to SafetyCulture'sFeedback from the Field 2025report, middle managers lose over 5 hours each week on low-value tasks. This time could have been spent driving meaningful operational improvements. Without a clear benchmark to measure against, those inefficiencies are easy to miss and even easier to ignore.

Knowing your numbers only tells you half the story. It's a core part of any continuous improvement framework, and for good reason. With benchmarking, businesses can better understand how those numbers compare to where they were last year, what their competitors are achieving, and what’s feasible.

Here are some examples of how benchmarking gives teams a concrete reference point for performance improvement:

• Improve operational efficiency: By comparing your processes against top performers, you can pinpoint exactly where time and resources are being wasted, rather than guessing.

• Evaluate past performance objectively: There’s less reliance on gut feel due to benchmarking data that can show whether things are actually getting better or just staying the same.

• Identify best practices from competitors: Understanding how others in your industry operate allows you to spot approaches you haven't considered, without having to learn everything from scratch.

• Boost profitability: Closing efficiency gaps and cutting unnecessary costs directly impact your bottom line.

• Improve customer satisfaction: When you benchmark service quality or product performance against industry leaders, you get a clearer picture of where the customer experience can be refined.

Types of Benchmarking

Various types of benchmarking are available and can be used individually or in combination. Below are the different types of benchmarking.

Performance Benchmarking

Performance benchmarking is a common practice for businesses to pinpoint areas for improvement. It involves measuring the performance of various business processes against top performers in the same field. This process also requires collecting and comparing Key Performance Indicators (KPIs) or other quantitative data to measure metrics such as the following:

• Net Promoter Score (NPS)

• Cost-per-unit

• Time-to-market

• Customer retention rates

The analysis includes businesses that excel in any process or operation, not just competitors in specific industries. Operational elements are the focus of performance benchmarking, leading to short-term action items and quick results.

Internal Benchmarking

Internal benchmarking is a process used to compare metrics or practices within a company’s products, departments, or locations. It helps determine the best ways to conduct business moving forward by analyzing the business’ historical data to identify gaps or areas for improvement.

Internal benchmarking can take various forms, such as:

• Conducting employee interviews to gather information on their usage and practices with specific technologies.

• Comparing the output processes and procedures of a high-performing department to another department.

• Analyzing the difference in labor expenses between two locations.

External Benchmarking

External benchmarking compares your business to others regarding products, services, processes, and methods. It provides insight into how your business compares to others in your industry and helps identify areas for improvement. Although it requires additional effort compared to other benchmarking methods, the information gained can be valuable.

Strategic Benchmarking

Strategic benchmarking involves comparing your performance with a top performer, a direct competitor, or any business that has mastered a specific process or operation. This process requires looking beyond your industry and can lead to considering new approaches or thinking differently about longstanding practices.

The findings can assist businesses in altering their procedures and processes. Additionally, the analysis concentrates on a company’s prospects instead of immediate adjustments, emphasizing essential skills and long-term improvement by introducing new products.

Competitive Benchmarking

Competitive benchmarking is a tool used by businesses to identify industry standards and understand their position in the market. It involves analyzing competitors’ products, services, or methods and comparing metrics like NPS or customer satisfaction rates. With this information, businesses can create action plans to improve their performance.

How Mowi Acts on Benchmarking Data

As the world's largest producer of sustainable farm-raised seafood, Mowi needed digitized records they could act on. With SafetyCulture, their team now tracks how performance shifts in real time after every process change, turning inspection data into confident, data-driven decisions across food safety, quality, and legality.

Read success story

Read success story

Conducting a Benchmarking Process Step by Step

Benchmarking involves analyzing your current position, setting goals for where you want to be, and creating a plan to achieve those goals.

It generally follows several stages, as outlined below:

1. Engage Stakeholders

Senior leadership involvement is essential in determining which benchmarks are crucial for the company’s success. Stakeholders should be able to prioritize based on the metrics that are most important to them.

2. Decide Who or What To Benchmark

When benchmarking, it’s essential to consider the source of data and the accessibility of information. Obtaining data from direct competitors may pose challenges, so exploring various organizations and sources may be a practical solution.

3. Document Your Current Processes

Recording current procedures or obtaining pertinent business metrics is a good starting point for accurate benchmarking and analysis. It’ll simplify comparisons to established benchmarks.

4. Collect and Analyze Data

You can start benchmarking by doing research, interviews, and surveys. Look at company websites, reports, and marketing materials for external benchmarking. Be aware of biases, like personal stories or editorializing in news articles. Use internal HR data and time-tracking information for employee performance benchmarking to evaluate productivity and costs.

5. Assess Your Performance Based on What You Collected

Examine the collected data alongside established metrics or processes to reveal discrepancies and identify potential areas for improvement within an individual, team, competitor, or another business.

6. Communicate Next Steps and Implement Changes

After identifying areas of improvement, create a plan with specific objectives, deadlines, metrics, and relevant team members. Document the plans to ensure clear communication and alignment across all employees working toward a common goal.

7. Analyze the Outcomes and Modify Where Necessary

Regularly evaluate the effectiveness of a new project and modify it as needed. If progress is acceptable, contemplate replicating the benchmarking process in other business departments. If challenges emerge, pinpoint them, communicate with relevant stakeholders, and devise solutions to enhance procedures.