benchmarking involves comparing a company’s performance figures against a standardised set of metrics as a way to judge how the company is doing. It may be a one-off process or a regular part of a company’s strategic management overview.
When you were in school and assignments/tests were passed out, you always were interested in how other students performed on an exam.
You may have made, say... an 71 (out of 100). Well... is this good or bad?
So if the people around you made 50's; you felt pretty good. If they made 95's, well.. you didn't feel quite as confident.
You were then interested in what the class average was compared to your grade. And... how students in the university and students historically performed. Without some basis for comparison, it's really difficult to determine how you are performing.
Consider an old fashioned cobbler sitting at a bench making custom shoes and custom shoe laces. Instead of guessing every time how long the laces should be, the cobbler may put marks on the work bench, to measure each time so the laces are consistent.
To me, benchmarking is simply a relevant and valid standard for gauging performance.
Benchmarking is the practice of comparing business processes and performance metrics to industry bests and best practicesfrom other companies. Dimensions typically measured are quality, time and cost.
Benchmarking is used to measure performance using a specific indicator (cost per unit of measure, productivity per unit of measure, cycle time of x per unit of measure or defects per unit of measure) resulting in a metric of performance that is then compared to others.
Also referred to as "best practice benchmarking" or "process benchmarking", this process is used in management in which organizations evaluate various aspects of their processes in relation to best-practice companies' processes, usually within a peer group defined for the purposes of comparison. This then allows organizations to develop plans on how to make improvements or adapt specific best practices, usually with the aim of increasing some aspect of performance. Benchmarking may be a one-off event, but is often treated as a continuous process in which organizations continually seek to improve their practices.