Economics/Business

Benchmarking definition/role/categories/step-by-step guide/benefits

Benchmarking is the evaluation of relevant information from other companies in order to compare results and optimize processes with the experience of other businesses. Benchmarking definition

How many times have you talked to the person about a problem in your life and they gave you a very important insight to overcome the situation? This is the moment when you do a “personal benchmarking” .

All kidding aside, benchmarking for the human resources industry is critical to spreading successful experiences that help improve the entire company .

Many people see this practice of exchanging information as a kind of “plagiarism” of the actions that other companies are taking. 

However, this view is quite limited and needs to be deconstructed, after all, what better way to learn if not through the experience of other businesses?

Not only that, it ‘s a great way to be always up-to-date on best practices so that the day-to-day of HR — and of the entire company — is increasingly effective in its strategic role. Benchmarking definition

What is benchmarking?

benchmarking means a reference point . In other words, it is a strategy in which companies compare their products, processes and services in order to answer a question that plagues several managers:

The teams involved in benchmarking perform data collection, analysis and interpretation in order to create market intelligence that can bring powerful insights to the optimization of business processes.

For this process to be effective, it is important to have a clear view of HR’s key performance indicators (KPI) , such as absenteeism , turnover , organizational climate, etc.

Thus, the comparison between companies is much more tangible as well as practical to improve these KPIs.

Especially in HR, it is not necessary that the companies that compare these data are from the same niche, after all, it is about people management , an area that can meet specific business demands, but with practices applied in general.

And speaking of management, understand below how benchmarking can improve your company’s strategy in this regard.

What is the role of benchmarking?

The importance of benchmarking is precisely in the comparison , being something completely natural.

It is through the benchmarking process that the HR team understands which solutions are applied in the market and is supplied with new ideas to customize and apply internally .

Many believe this is a practice limited to large organizations, however, this is a big fallacy.

All you need is indicators and willingness to exchange experiences to make a productive benchmarking process . Even self-employed professionals can make this comparison in order to optimize their products and services. Benchmarking definition

It is with this exchange ratio – much of the time reciprocal – that companies can identify areas where it is possible to apply improvements and optimize results .

Furthermore, it is also possible to understand the results that the company can achieve, helping to create more realistic goals, applying innovative strategies and tracking progress over time .

This experience comparison technique is especially suitable if your company is stagnant , that is, it is not growing as expected.

Often, as managers, we see our neighbor’s grass a little greener and we don’t understand why. 

What are the benchmarking categories?

The benchmarking methods are many and it is important to know them before you start planning. See the main ones.

Competitive Benchmarking

Looking at the competition and understanding what they are doing is important to any business. 

After all, it is interesting to follow the results of the main competitors . It is not always simple to do this type of analysis, after all, companies do not reveal their KPIs on the internet. 

Still, it is important to get an idea of ​​the main results of competitors such as revenue and growth .

With a thorough study of the competition, it is possible to find ways to stand out and gain even more space in the market.

Always remember that benchmarking is an ethical activity and should not be confused with industrial espionage, which is a crime . Benchmarking definition

That way, you get an idea of ​​how the competitor company is expanding.

Functional Benchmarking

This type of comparison focuses on specific actions developed by companies , regardless of their area of ​​expertise.

Organizations that do not compete for the same customer niche tend to be more open to exchanging information that is often sensitive to their operation.

Here, HR can understand, for example, how other companies conduct online training , which actions have the greatest impact on the organizational climate , etc.

The possibilities are countless and it is worth bearing in mind that the objective is not to “copy-paste” the processes of other companies, but to learn with other ways of doing them.

Internal Benchmarking

As you can already imagine, internal benchmarking aims to compare processes carried out in the company itself , whether between different sectors or even between branches.

Here, the main intention is to encourage internal communication so that there is an exchange of experience among employees , increasing their engagement through the comparison of processes and their respective results. Benchmarking definition

This is an excellent way to identify bottlenecks, publicize processes that worked and even standardize the organization’s operations , something especially important for companies with more than one unit.

Cooperative Benchmarking

In this benchmarking model, different companies agree to come together to exchange information and cooperate in order to find the best practices applied in each of them.

These companies are not always competitors and this relationship is based on the exchange of information about the relevant indicators for what is being analyzed.

Among the information, it is common to share how certain processes are done and how to motivate employees to increase their productivity. 

Generic Benchmarking

The generic way of benchmarking is broader , as its name implies. 

In it, companies seek to understand how other businesses carry out similar processes, without them needing to be in the same market niche or even enter into a cooperative relationship.

It is an observation technique in which employees seek to identify points of improvement in their own processes.

The step-by-step guide to benchmarking

It’s time to get your hands dirty. 

Below, you will find a very instructive step-by-step guide to benchmarking without the headaches.

Afterwards, we will talk a little about the pillars of this exchange, ensuring that it is safe and productive for the companies involved. Benchmarking definition

1. Start with planning

The kick is to understand what will be the benchmarks for comparison between companies . That way you leave a definite purpose. 

Regardless of your objective, it is important to look at the company critically , identify what its main problems are, and then move on to benchmarking.

During this planning, it is important to map all relevant indicators for the company and the actions taken from them, such as a benefit system to reduce the turnover rate , for example.

2. Collect data

When you already know what data is relevant to your company, it’s time to perform the data extraction .

At this stage, benchmarking can take two forms: determining where this data will be collected and actively pursuing the information, or exchanging it directly with the company involved.

There is also internal benchmarking, in which data is obtained through the exchange of experience between teams or units.

3. Analyze the data

Now that the data is in your hand, it’s time to find the main differences between other companies and yours .

If you have access to the entire investigated process, you can perform a deeper analysis and create hypotheses to identify why the results are different . Benchmarking definition

Keep in mind that each company is unique, so it’s not because it works for another that it will work for yours as well. 

Remember to identify the differences between the businesses to understand why a particular strategy works in one business and the other it doesn’t. 

4. Propose changes

With hypotheses, it is possible to start running tests and analyzing the results.

As you read, benchmarking is not a copy and paste action . From a detailed analysis of the data obtained, it is possible to plan scenarios on how to improve your company’s processes to achieve better results .

Here, it is common to acquire new tools , try new ways of doing your processes and even automate some functions.

The principles of benchmarking 

Benchmarking has 3 pillars: reciprocity , comparison and adaptation .

Exchanging information should be a two-way street , after all, which company will offer your data with nothing in return? 

As such, this is as much a relationship of reciprocity as it is one of trust , as all shared data must be for the sole purpose of learning and studying. 

Disclosure of any information obtained in this process is unethical.

The comparison is essential to draw conclusions and propose adaptations in the company , keeping in mind that not all processes can be replicated. Benchmarking definition

What are the benefits of benchmarking 

There are a number of advantages associated with benchmarking as a business routine . See the main ones below.

continuous improvement mindset

When all sectors, not just HR, have an organizational culture of always looking for improvement, benchmarking is a natural part of that process .

After all, is one of the best ways to learn about market news by exchanging experiences with other professionals and companies?

It is important that the data collected in the benchmarking, as well as the actions derived from it, are duly registered in documents that are constantly updated and disseminated in the company .

Constant update

Another important point of benchmarking is the updating of professionals with market practices .

Having this knowledge is extremely important to the continuous improvement mindset.

Always keeping an eye on the competition

One of the great advantages of having a culture of benchmarking is to always be on the lookout when competitors do something new .

This may not be a specific advantage for HR, but it is always recommended to accompany reference companies in their people management actions. 

Decreases errors

You even learn by making mistakes, but it’s better when the mistake belongs to others and your company understands the lesson . During the exchange of experiences, it is possible to analyze several aspects, including actions that failed. Benchmarking definition

Thus, avoiding repeating mistakes made by other companies is a way to preserve your financially.

Benchmarking Tips: Points of Attention

Before putting it into practice, we have set aside some tips to ensure that this benchmarking process will really benefit your company .

  • have at least three companies to always monitor ;
  • never copy and paste methods. Adapt them to the reality of your organization , understanding the motivations behind them;
  • avoid focusing only on the competition . There are thousands of other companies with interesting strategies and stories;
  • benchmark constantly, this is not a one-time activity ;
  • have clear goals before starting this process. This will guide conversations and search for data, avoiding the collection of irrelevant information;
  • not tracking KPIs to assess the outcome of changes is a mistake you can’t make!

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