How can you use benchmarking to identify areas of overspending in your company?

1 What is benchmarking and why is it useful?

Benchmarking is a systematic and continuous way of measuring and evaluating your company's performance against industry standards, best practices, or competitors. It can help you answer questions such as: How does your company compare to others in terms of profitability, productivity, quality, customer satisfaction, or innovation? What are the gaps and strengths in your processes, practices, and resources? How can you close the gaps and leverage the strengths to achieve your goals and objectives? Benchmarking can help you identify areas of overspending by revealing how much you spend on different activities, functions, or resources compared to others and how those expenses affect your outcomes and results.

2 How to choose the right benchmarking method and source?

When benchmarking, there are different types and sources that can be used depending on your purpose, scope, and availability of data. Internal benchmarking compares your performance, processes, and costs within your own company, while external benchmarking looks at other companies in the same industry, sector, or market. Functional benchmarking looks at other companies that perform similar functions or activities regardless of their industry, sector, or market. Best practice benchmarking compares your performance to the best performers or leaders in the field. Sources of benchmarking data include internal data such as financial statements and surveys, external data from industry associations and research firms, and direct data collected through surveys and interviews. It is important to choose the method and source that best suits your needs, objectives, and resources. Additionally, make sure that the data you use is reliable, valid, relevant, and comparable.

3 How to conduct a benchmarking analysis?

Conducting a benchmarking analysis requires defining objectives and scope, identifying benchmarking partners, collecting and analyzing data, and implementing and monitoring improvements. To begin, you need to determine what you are trying to achieve with benchmarking and which key performance indicators, processes, and costs you want to compare. Additionally, you must identify the companies you want to compare yourself with and how to access their data or collaborate with them. Furthermore, it is necessary to gather, verify, and normalize the data from your benchmarking partners and yourself. After measuring and comparing the data to identify the gaps and opportunities, you can use the findings to develop action plans for improvement. Finally, you should track and evaluate the results of your improvements.

5 What are the challenges and best practices of benchmarking?

Benchmarking is not a one-time or easy process. It requires time, effort, and commitment from your team and stakeholders, and can involve challenges such as data availability and quality, data confidentiality and ethics, and data interpretation and application. To overcome these challenges, you should define clear objectives and scope, choose relevant benchmarking partners and sources, collect and analyze data systematically and objectively, and implement and monitor improvements continuously and collaboratively. Benchmarking can be a powerful tool to help identify areas of overspending in your company and find ways to improve them. By following the steps, methods, and best practices of benchmarking, you can compare your performance, processes, and costs with other similar or best-in-class companies. This can help you reduce costs, increase efficiency, and improve profitability.

6 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?