Skill level: Intermediate


Benchmarking is the process of researching and identifying industry best practices to enable organizational leaders to establish performance goals and quality improvement projects. Based on company-to-company comparisons of processes and practices, organizations can identify the “best of the best” in order to attain or maintain a competitive edge.

Benchmarking may be internal, industry, functional, or generic:

  • Internal benchmarking is the comparison of processes or operations within an organization.
  • Industry benchmarking is the comparison of processes or operations against industry leading competitors.
  • Functional benchmarking is the comparison of processes or operations against like processes or operations in similar industries (e.g., comparing the application process for a loan at a bank and insurance application at a life insurer).
  • Generic benchmarking compares processes or operations across non-related industries.  For example, a generic benchmarking study might compare the billing process of a hospital with the billing process of a telecommunications company.

Typically, generic benchmarking results in the greatest opportunity for improvement since comparisons are made without regard to any specific industry. This helps team members to begin thinking of their process differently and often leads to dramatic results.


  • Gain or maintain competitive advantage
  • Often leads to paradigm shifts

How to Use

  • Step 1.    Determine internal processes and operations to be benchmarked.
  • Step 2.    Determine company to benchmark or benchmarking data source to use as comparison.
  • Step 3.    Identify data to be collected, then gather and collect data.
  • Step 4.    Identify the gap (deficiencies).
  • Step 5.    Project future performance based on trends at both the benchmarking competitor and the internal process or operation under study.
  • Step 6.    Communicate results and recommendations for change.
  • Step 7.    Establish new goals for the process or operation.
  • Step 8.    Create implementation action plans.
  • Step 9.    Implement changes and monitor results.
  • Step 10.  Assess and recalibrate benchmarks.

Relevant Definitions

Not Applicable


ABC Insurance Company believes its cycle time from application to policy issuance is too long, resulting in lost sales. A process improvement team undertakes identifying and documenting the steps of the processes involved and decides to benchmark against other insurance companies with comparable revenues.

The team learns that the industry leader, XYZ Insurance, has a 60 percent shorter cycle time. Identifying the gaps between the two companies, the team concludes that the primary difference is that XYZ determines the medical underwriting requirements at the time an application is signed while in the presence of the client. The company can then schedule exams at that time.

However, ABC takes the application, keys it into the system, and mails the application to an underwriter who determines the medical exam requirements. This adds an average of three days to the process and up to five days when weekends are involved. The delay is further extended because another department has to contact the applicant, communicate the requirements, and schedule the medical exams.

The team determines that ABC will continue to lag the leaders until it redesigns the process and installs new software that will enable capability similar to that of XYZ Insurance Company.

After communicating the results to senior management, the team receives approval to evaluate and install new software, redesign the process, and train ABC sales agents. Cycle time is reduced 65 percent, the underwriting staff is reduced by 50 percent, and sales increases 35 percent.


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