What Is a Benchmark? (And How to Use Them)

Whether you’re trying to get ahead of the competition or improving your personal best, benchmarking is key to achieving your goal. In this tutorial, you’ll learn what is benchmarking and how to use it effectively.

Understanding Benchmarks

There are many benchmark definitions, but in simple terms, we can define benchmarking as:

Benchmarking is the process of measuring a product, service, or process against a competitor, industry standard, or someone who’s considered “best in class.”

In other words, a benchmark is a way of measuring how you or your business is doing in comparison to a certain bar, standard, or ideal. That's a definition of benchmarking in business.

A benchmark gives you actionable information:

"The gap between the two [the baseline and a benchmark] can reveal the areas and possible processes to improve within the company as well as outside in the marketplace..." - Anaezi Modu in her book, Data Points Gold: Create, Curate, and Monetize Your Information Assets.

What are benchmarks for? Benchmarks can serve different purposes. These include:

1. Performance evaluation. Benchmarks help you assess how well something or someone is performing, relative to a comparator or standard.
2. Goal setting. Seeing the gap between a benchmark and your baseline or starting point gives you something to aim for that’s based on data, not arbitrary targets.
3. Decision making. With benchmarks, you can make informed, evidence-based decisions. You can focus on initiatives that have the greatest impact on performance.

Benchmarking gives valuable insights you can use to make informed and strategic choices. It helps you make decisions based on data, rather than assumptions or intuition. If you embrace benchmarking, you’ll be in a better position to grow and succeed.

Types of Benchmarks

There are different types of benchmarks, and it’s helpful to be familiar with them. The most common ones include:

Internal Benchmarks

Internal benchmarks compare one’s current performance with your own historical data. For example: an IT department benchmarking its response times for resolving support tickets against its own past performance. This way, they can see if they’re improving or backsliding.

Competitive Benchmarks

Competitive benchmarks compare one’s performance with that of its competitors. An e-commerce business, for example, may benchmark its website’s conversion rate against its closest competitors’ conversion rates.

“What a business needs most for its decisions—especially its strategic ones—are data about what goes on outside it. Only outside a business are there results, opportunities and threats.” -  Peter Drucker, management consultant and author

Functional Benchmarks

Functional or process benchmarks focus on a specific process or operation. For example: a health care provider can benchmark their onboarding process to shorten the time between a patient’s first call and their first appointment.

Strategic Benchmarks

Strategic benchmarks are levels of performance that are set by industry leaders or those that are best-in-class. Even if they’re Mount Everest compared to you, striving to get closer to the best improves your own performance.

“I tell young entrepreneurs to use the leader in their industry and as a benchmark as they work to create their own brand. Don't look at what your competition is doing—if you emulate the leader in your industry you will achieve a higher level of engagement with consumers and make their buying experience richer.” - Steve Stoute, businessman and record executive

Performance Benchmarks

Performance benchmarks measure the effectiveness and efficiency of a process, system, or operations in an organization. Here's an example: A consulting firm can benchmark its billable hours per employee against industry average to gauge the productivity of its workforce.

How Specific Industries Use Different Benchmarks 

Different industries use different benchmarks, as we’ve seen in the examples above.

• Tech industries rely on benchmarks to assess the performance of both hardware and software.
• The education industry uses benchmarks to measure student performance and teaching effectiveness.
• In retail, benchmarks are used to reduce costs and improve profitability.
• In healthcare, benchmarks are crucial to optimize patient outcomes.

In any industry, benchmarks can also be used to measure client or customer satisfaction.

The Role of Industry Standards in Benchmarking

Industry standards serve as the common reference point for a business or organization within a specific industry. They allow companies to benchmark their performance against their peers. Doing so, they can identify areas where they excel and areas where they fall short.

An example of an industry standard is the ISO 9001. It sets an industry standard for quality management systems. Achieving IS0 9001 certification means the company has met or exceeded industry benchmarks on quality management principles. This enhances their reputation, credibility, and competitiveness in their industry.

Diversity of Benchmarks to Cater to Different Needs

By now you’ve seen that there's a wide diversity of benchmarks. Benchmarks vary by field and industry, and by the specific area it's measuring. Benchmarks are versatile tools that can be tailored to your specific goals.

How to Use Benchmarks

You know what benchmarks are, the different types of benchmarks, and how they cater to different needs and industries. Now you’re ready to learn how to benchmark. Follow this systematic approach to use benchmarks effectively.

1. Define Your Objectives

Clarify your goals. What are you trying to achieve and measure? Identify a clear objective—or several—for benchmarking.

2. Determine the Relevant Benchmarks

Identify the benchmarks that'll help you achieve your goals. Do you need performance, competitive, functional, strategic, or internal benchmarks?

3. Collect and Analyze Data

Gather the data related to the benchmarks you’ve identified in step 2. You may already have all this data internally. Or, you may have to conduct a survey. Other times, you may have to access industry databases.

4. Compare and Analyze

Compare your baseline data with the benchmark data you’ve collected.

• What gaps or areas for improvement do they reveal?
• In which areas do you fall short? 
• In what areas do you exceed the benchmark? Those are the areas you excel in.
• What actionable insights can you glean?

5. Analyze the Root Cause

Dig deeper to better understand the gaps between where you are and the benchmarks. Look at both of these types of factors:

1. internal (inefficiencies, outdated tools, lack of skills, budget etc.)
2. external (market forces, political upheavals, natural and man-made disasters) 

6. Create an Action Plan

Now you see the gaps between your current state or baseline and the benchmarks. You understand the reasons behind those gaps. You're ready to create a plan to address the gaps.

Break it down into smaller steps that aren't overwhelming. Lay everything along a timeline and allocate resources.

7. Implement the Plan

Put your plan into action. Remember to measure the impact of the changes you’re making.

8. Check Often

Keep monitoring your performance and adjust as needed to get closer to the benchmarks. Benchmarking isn't a one-time activity.

Benchmarking Pitfalls to Avoid

Benchmarks are powerful tools. You can use them to get a leg up on your competition and improve performance by leaps and bounds. But misusing benchmarks can lead to expensive mistakes. Keep the following pitfalls in mind so you can avoid them:

Focusing Too Much on the Competition

We’ve mentioned the competition several times in this tutorial, but it’s also possible to become too focused on them. Beware of being too motivated on outperforming your competitors that you neglect other aspects of your business.

Ignoring Context

Benchmarking is helpful. But remember your unique circumstances that may make comparisons irrelevant or pointless. These could include cultural and regional nuances that affect the market conditions you work in.

Short-Term Thinking

Don’t rely only on short-term benchmarks. Keep your long-term strategies in mind, too.

Cherry-Picking Data

Check if preconceived notions are leading you to choose only the benchmarks that support your assumptions. This is called "confirmation bias." Learn more about how to avoid confirmation bias in decision making.

Ignoring Industry-Specific Factors

Account for industry-specific factors, such as regulations, technological advancements, and other developments that can affect benchmarks.

How to Avoid Bias and Ensure the Reliability of Data Sources

Your benchmarks are only as good as the data you use. Here are three ways to get trustworthy data:

1. Use Reliable Sources

Use reputable sources of data. These could include government agencies, established research firms, and industry associations.

If you choose or have to generate your own data, hire a good research company to carry it out for you objectively.

2. Account for Data Variability

Benchmarks can fluctuate over time due to market conditions and other factors. Keep this in mind when choosing, analyzing, and interpreting your data.

3. Update Benchmarks Regularly

Revisit your benchmarks regularly. This not only shows you how the landscape is changing. It also ensures that your data is up-to-date and not obsolete.

Benefits of Using Benchmarks

We’ve covered the fundamentals of benchmarking and the common mistakes to avoid when using benchmarks. You’re ready to enjoy the benefits of using benchmarks effectively. These include:

1. Goal Setting and Performance Improvement

Benchmarks help you set better goals. With benchmarks, you've got tangible metrics to define realistic and attainable goals and to measure your performance towards those goals.

Regular benchmarking creates a feedback loop that lets you adapt and evolve promptly to changing market conditions.

Clear benchmarks can also inspire you and your team. They give your employees definite targets to strive for. Benchmarking also fosters a culture of continuous improvement.

2. Strategic Planning

Benchmarks can help you plan more strategically. They give you a data-driven foundation for decision-making. This means you rely less on guesswork and assumptions. Knowing how your performance measures against the benchmarks is important for strategizing and allocating resources. 

Benchmarks can also help you mitigate risks. When you veer away from benchmarks, this raises red flags. You can then proactively identify and address issues.

3. Continuous Growth

Benchmarks provide you with a self-assessment tool to see your strengths and weaknesses. Identify areas where you excel, so you can leverage your strengths. On the flip side, benchmarks also reveal where you’re falling short. You can then work to address these areas of improvement.

4. Competitive Advantage

Competitive benchmarks let you know where you stand in your market. When you consistently outperform industry benchmarks, you’re established as a market leader. This instills confidence in your prospects and customers.

Benchmarks can also inspire innovation. Trying to align with or even surpass a benchmark can spark creative ideas you’ve never tried before.

Get the Tools to Make Your Business Flourish

Benchmarks are useful tools you’ll want to use if you run a business or organization. You’ll also want to use another valuable business tool: Envato Elements.

With a subscription to Envato Elements, you get thousands of creative assets at your fingertips. You get everything you need to create awe-inspiring and impressive materials.

Explore Envato Elements

With Envato Elements, you save time, because you get unlimited downloads of:

• templates
• graphics
• photos
• videos
• music
• other data visualization tools

You also get professionally designed and rigorously vetted creative tools that make you look like a pro. And with a single license, you can use anything in the Envato Elements library for both personal and commercial use. You get all this for one low monthly subscription.

By incorporating Elements into your business, you elevate your creative development to new heights. Just as benchmarks are essential tools for businesses, Elements is a valuable asset that enhances your branding, marketing, and communications. All that and it streamlines your workflow, too.

Use Benchmarking to Set Your Business Apart

Benchmarks aren't just data. They’re strategic assets that propel your personal and business growth to new heights.

This tutorial helped you understand what is benchmarking and how to benchmark. You also now know their benefits and how to use benchmarks, step-by-step. You also know the common pitfalls to avoid. Harness the power of benchmarks to make better decisions, plan strategically, and continuously improve performance. 

Start using benchmarks to gain a competitive advantage. No matter where you are in the journey, benchmarks can be your secret weapon.

Another secret weapon to supercharge your marketing and communications is Envato Elements. It’s perfect for achieving excellence in creating any document or content for both internal- and external-facing audiences.

Both Elements and benchmarking give you an advantage over your competitors, so you can stand out from the rest. Use them both starting today.