The process of determining who is the very best, who sets the standard and what that standard is, is called Benchmarking.
Benchmarking improves performance by identifying and applying best demonstrated practices to operations and sales. Managers compare the performance of their products or processes externally with those of competitors and best-in-class companies and internally with other operations within their own firms that perform similar activities.
How Benchmarking works:
• Select a product, service or process to benchmark• Identify the key performance metrics• Choose companies or internal areas to benchmark• Collect data on performance and practices• Analyze the data and identify opportunities for improvement• Adapt and implement the best practices, setting reasonable goals and ensuring companywide acceptance
Companies use Benchmarking to:
• Improve performance. Benchmarking identifies methods of improving operational efficiency and product design• Understand relative cost position. Benchmarking reveals a company's relative cost position and identifies opportunities for improvement• Gain strategic advantage. Benchmarking helps companies focus on capabilities critical to building strategic advantage• Increase the rate of organizational learning. Benchmarking brings new ideas into the company and facilitates experience sharing
Companies benchmark because they have to measure their performance against their competitors in business. If a company didn't do this they wouldn't have a goal to reach or not aspire to reach.
Jorge Chávez is Senior Editor at Mijo! Brands of Mexico.