When companies want to improve, they first need to have an accurate means of measuring performance.  Without accurate measurement, determining process improvement is not feasible.  Measurement establishes a baseline against which the organization can determine the degree of improvement that has been made.

However, improvement alone may not be enough.  If an organization doesn’t know what the standard is it cannot compare itself against it. For example, if an organization obtains a customer satisfaction rating of 80%, but its competitor receives 90%, they will lose ground in the long run.  Benchmarking is the key to understanding how an organization measures up against others.

Benchmarking is the process of determining how an organization stacks up against industry leaders by measuring its performance across a series of standard metrics and then comparing the performance against other best-of-breed organizations within the same industry or service line. Companies may measure and compare policies, practices, philosophies, and other performance measures.

Benchmarking is usually part of a larger process re-engineering or quality improvement initiative such as Six Sigma or Total Quality Management.