What are the Five Types of Benchmarking? [2024]

Benchmarking is a powerful tool that enables organizations to identify opportunities for growth and improvement. By measuring and comparing key business metrics and ratios, benchmarking helps companies pinpoint areas to enhance performance, efficiency, and overall competitiveness. Here are the five key types of benchmarking that organizations like yours can use:

1. Internal Benchmarking

Internal benchmarking compares metrics or processes across different departments, units, or geographies within the same organization. It’s an ideal starting point for organizations looking to standardize operations and uncover areas where best practices are already in use.

What you need: At least two business areas that share comparable metrics or processes.

What you get: A baseline understanding of where the organization currently stands. This type of benchmarking is particularly useful in large organizations where one part of the business may be outperforming another.

2. External Benchmarking

External benchmarking compares your organization’s metrics or practices against competitors or peers in the industry. This type of benchmarking provides a broader perspective, helping you identify where your company stands in the market and where improvements can be made to stay competitive.

What you need: One or more external organizations willing to share performance data or processes. You may also need a third party to facilitate this exchange of information.

What you get: An objective comparison of your organization against others, which provides insight into best practices and potential performance improvements. External benchmarking can be challenging but delivers immense value by identifying gaps that wouldn’t be visible through internal measures alone.

3. Functional Benchmarking

Functional benchmarking goes beyond industry boundaries and looks at best practices within a specific function, such as Finance, HR, or Operations. Companies often turn to functional benchmarking to identify innovative strategies that can be applied to get remain competitive.

What you need: A focus on a particular business function and access to functional benchmarking data. CompanySights, for instance, provides specialized functional benchmarks that help organizations compare key metrics like headcount for most business functions.

What you get: Insights into how different industries manage similar functions, allowing you to adopt best practices that drive efficiency and innovation in your own operations.

4. Process Benchmarking

Process benchmarking involves a detailed comparison of specific processes, such as customer service or supply chain management, across organizations. By understanding how top-performing companies execute these processes, you can identify ways to streamline your own operations.

What you need: Standardized process mapping techniques and access to information on comparable processes in other organizations.

What you get: A clear view of how best practices in process management can be applied to improve your organization’s efficiency and effectiveness.

5. Performance Benchmarking

Performance benchmarking is often the first step in any benchmarking initiative. It involves gathering and comparing quantitative data such as key performance indicators (KPIs). This type of benchmarking helps you identify performance gaps and set realistic goals for improvement.

What you need: Access to standardized performance data and tools to extract and analyze that data.

What you get: A clear understanding of your organization’s performance relative to others, which serves as a foundation for decision-making and strategic planning.

Ready to Benchmark?

Get started today with CompanySights – The benchmarking data provider designed to help you gain the competitive edge. With data from 10,000+ companies our external and functional benchmarks will make your organization’s next strategic move the right one.