Benchmarking is the method that is to check by comparison one’s business processes and performance metrics to certain standard criteria, in particular that of the industry bests and best practices.

The resulting information can then be used to identify gaps in an organization’s processes to achieve a competitive advantage.

For a short history, the term benchmark, or benchmark, originates from the chiseled horizontal marks that surveyors made in stone structures, into which an angle iron could be placed to form a “bench” for a leveling rod, thus ensuring that a leveling rod could be accurate re positioned in the same place in the future.

From the aspect of benchmarking as a tool, it is a process for obtaining a measure – a benchmark. Simply stated, benchmarks are the “what,” and benchmarking is the “how.” It is not to be used as a simple tool though as before undertaking a benchmarking opportunity, note the importance of having a thorough understanding of the company’s guidelines. When making use of benchmarking, a company should not limit the scope to its own industry, nor should benchmarking be a one-time event.

There are two broad types of benchmarking and these are: internal(comparing performance between different groups or teams within an organization) or external (comparing performance with companies in a specific industry or across industries). It is then further specified into three types:  1) Process benchmarking, 2)Performance benchmarking and 3) Strategic benchmarking.

Process benchmarking – the initiating firm focuses its observation and investigation of business processes to identify and observe the best practices from one or more benchmark firms.

Performance benchmarking – allows the initiator firm to assess its competitive position by comparing products and services with those of target firms.

Strategic benchmarking – involves observing how others compete. This type is usually not industry specific, meaning it is best to look at other industries.