Benchmarking in Six Sigma involves a company analyzing its performance rather than measuring it against the standard set by the industry they work in or a world-class company in another industry. It typically focuses on processes and operations within one area of the company.
Benchmarking does not mean directly comparing an operation against a competitor. For benchmarking, it’s about comparing one aspect of an operation against a best-in-class operation.
For example, a medical clinic might measure its customer service performance based on key metrics, then measure those same metrics at a retail company known as a standard-setter in customer service. They then can easily see where they fall short and strive to make improvements in those areas.
The key steps involved with benchmarking include:
Measure current practices: Teams determine an area where the company is underperforming. They then measure key performance indicators to see where they currently stand.
Research best practices: After measuring their own performance, businesses then measure those same key metrics in whatever operation or process they want to improve (for example, handling customer complaints or generating new sales leads)
Collect data: Teams analyze how companies achieve a high standard in the key metrics. This often requires touring the world-class organization’s operations or meeting with people from the organization.
Compare performance: Teams then compare their operations with those of the world-class organization, finding areas where they can make improvements. These changes will help them achieve a higher standard in the key performance metrics.
Benchmarking typically occurs within one of the following areas.
Competitive benchmarking: A focus on competitors within the company’s own industry with a goal of establishing the standards set by industry leaders.
Strategic benchmarking: Going outside the company’s industry to analyze how world-class organizations meet a higher standard.
Internal benchmarking: In larger companies, one area that has achieved a high standard will share its best practices with other areas of the operation.
