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Benchmarking in business refers to the process of comparing one's business processes and performance metrics to industry bests or best practices from other companies.
It is important because:
1. It serves as an eye opener to an individual, in that one can be able to determine things they have or have not been doing, which affect productivity within their business.
2. It provides a snapshot of the performance of ones business and helps them understand where they are in relation to a particular standard.
3.It allows organizations to develop plans on how to make improvements or adopt best practice, usually with the aim of increasing some aspect of performance.
Benchmarking enables managers to determine what the best practice is, to prioritize opportunities for improvement, to enhance performance relative to customer expectations, and to leapfrog the traditional cycle of change. It also helps managers to understand the most accurate and efficient means of performing an activity, to learn how lower costs are actually achieved, and to take action to improve a company's cost competitiveness. As a result, benchmarking has been used in many companies as a tool for obtaining a competitive advantage.
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