Benchmarking means comparing your performance or processes with others to find gaps and learn how to close them. The three main types are internal (within the organisation), competitive (against rivals) and best-in-class (against the best performer in any industry). Xerox pioneered it from 1979.
Types of benchmarking
| Type | Compare with | Pros | Cons |
|---|---|---|---|
| Internal | Other departments, branches or sites in the same organisation | Data is easy to get and comparable | Limits ideas to what the organisation already does |
| Competitive | Direct rivals, for example two supermarket chains | Shows where you stand in your market | Rivals rarely share data; may only reach parity |
| Best-in-class (functional or generic) | The best performer at a process in any industry, for example an airline studying a Formula 1 pit crew for turnaround speed | Can lead to breakthrough improvements | Harder to translate across industries |
Two further terms describe what you compare: performance benchmarking compares results (costs, margins, satisfaction scores); process benchmarking compares how work is done.
What to benchmark
- Financial: gross and operating margin, return on capital employed, cost per unit, revenue per employee.
- Customer: satisfaction and net promoter score, complaints, repeat purchase rate.
- Operational: cycle time, defect rate, on-time delivery, stock turnover.
- People: staff turnover, absence, training hours.
Benchmarking in ACCA SBL
Benchmarking sits in performance analysis (syllabus area C and G). Typical tasks give you data for the organisation and a rival or industry average and ask you to assess performance. Score well by:
- Calculating the key comparisons from the exhibits, not just describing them.
- Explaining why gaps exist, using case facts.
- Questioning whether the comparison is fair (different size, location, accounting policies). That earns scepticism marks.
- Recommending practical actions to close the most important gaps.
Worked example
A heritage charity like Historic Places (March 2025 pre-seen) could benchmark cost per visitor and visitor satisfaction across its own 350 sites (internal), compare membership income per member with a rival heritage charity (competitive), and study a leading theme park's online booking and queue management (best-in-class).
Benchmarking and other performance tools
Benchmarking tells you where you stand. The balanced scorecard and the Baldrige excellence framework (both in Chapter 3 of the book) help decide what to measure and how to improve. Use the value chain to find which activity explains a gap.
Advantages
- Gives targets based on what others actually achieve
- Spreads good practice
- Challenges complacency
Limitations
- Comparable data can be hard to find
- Risk of copying practices that do not fit
- Tends to aim for parity, not innovation
- Past data may already be out of date
FAQs
What is benchmarking in business?
Comparing an organisation's performance, processes or practices with others, inside the organisation, with competitors or with the best performers in any industry, to find gaps and learn how to close them.
What are the main types of benchmarking?
Internal (between departments or sites), competitive (against direct rivals), and best-in-class, also called functional or generic, which compares a process with the best performer in any industry. Process and performance benchmarking describe what is compared.
Where did benchmarking come from?
Xerox is usually credited with pioneering formal benchmarking from 1979, and Robert Camp's 1989 book on benchmarking at Xerox popularised the method.
What is the difference between a benchmark and a KPI?
A KPI measures your own performance. A benchmark is the comparison point, such as a competitor's or the industry's figure, that tells you whether your KPI is good.
What are the limitations of benchmarking?
Good comparative data can be hard to get, organisations may copy practices that do not fit their context, and it tends to aim for parity rather than innovation.