Benchmarking, commonly known as learning from best practices, is an effective organizational performance tool that can boost a company’s performance, by enabling a learning experience that relies upon understanding best-in-class practices and implementing them within one’s own organizational structure.
This assessment process is conducted for the sake of improving your firm’s performance to fill the performance gaps between you and your best-in-class competitors or even exceeding their performance level in the long run.
However, as effective as it may seem, benchmarking is a time-consuming and resource-intensive activity that requires a well-defined methodology, an action plan to identify best-in-class competitors, and an implementation strategy. Without these components, the positive effects of a benchmarking study on performance might be reduced.
The What, Why, and Who of Benchmarking
Benchmarking allows companies to focus on their strengths and weaknesses by comparing them to those of their main competitors within their respective industries or even other industries, enabling them to strengthen their position in the market.
When searching for competitors, the focus must be on understanding their best practices. This involves conducting a comparison of performance data, data that is obtained by analyzing our competitors’ similar processes and internal activities and identifying the practices that led to superior performance. Once identified, those practices must be adapted and implemented within the boundaries of your own organization.
Hence, when conducted correctly, the benefits associated with benchmarking can include:
Measuring and comparing your organizational processes against those of another competitor or industry
Discovering performance gaps
Incorporating leading firms’ processes into your own process flow to increase performance and reduce gaps
Future-oriented goal setting and improved resource prioritization
Accelerating continuous process improvements (CPI)
Identifying better opportunities for growth
Learning from industry standards
To show that benchmarking is more than just comparing numbers, let’s consider the following example: in the electric utility sector, an electricity distributor has an average interruption time for residential customers of 105 minutes. Is this value good, acceptable, or bad? It is not easy to find an appropriate answer unless the duration is compared to an objective standard, such as the industry standard of interruption time for electricity distributors in the area.
However, it also depends on the company’s strategy. An interruption time of 105 minutes may be considered a satisfactory value for the company, but someone else might see it as an alarming call for improvement.
The example above relies on the idea that performance represented through the usage of mere numbers can’t provide any meaning when analyzed without a reference—a benchmark, so to speak—as a comparison point.
When conducting a benchmarking analysis, no matter the industry of interest, there are usually three questions that must be answered before initiating the study:
What is to be benchmarked? (e.g. processes, strategies)
Against what or who will your organization be benchmarked? (e.g. KPIs, competitors)
What will benchmarking do to my organization? (e.g. improve performance, analyze performance)
In general, nowadays, performance measurement has become a standard practice for any organization that uses KPIs.
The next step that needs to be taken to improve performance is the implementation of a benchmarking study, wherein your company can compare its own performance with the sector’s point of reference (a benchmark) or simply assess the company’s compliance with respect to industry standards. Doing so helps you learn from others’ best practices and apply them within your own organization.
The Bottom Line
Is benchmarking worth a company’s investment and time? Simply put, yes. It is a potentially powerful tool to promote continuous performance improvement and performance comparison among industry players.
Nevertheless, you must remember that quite a lot of attention and time must be dedicated to defining the initiatives that must be taken and the methodology that will be used, otherwise, the results may be ambiguous.
Given the complexity of designing a benchmarking study and all the related challenges associated with it, The KPI Institute’s training program, Certified Benchmarking Professional, is designed to fill the gaps you might currently have or provide completely new knowledge about the various aspects of how to conduct a benchmarking study.
For more knowledge, feel free to download any of our webinars focused on benchmarking or take a look at our solutions, which span from audit services to framework optimization.
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Editor’s Note: This article has been updated as of March 21, 2025.
Transparency is a fundamental principle in the public sector, characterized by openness, communication, and responsiveness. It demands that public institutions disclose their activities and decisions to citizens, directly impacting their accountability and contributing to improved public administration performance.
In The KPI Institute’s Government Services Index (GSI) 2023 report—a comprehensive compilation of indicators designed to evaluate government service performance based on five key dimensions: Future Readiness, Digitalization, Governance, Society Welfare, and Citizen Experience—the transparency of governments worldwide was assessed within the Governance dimension. According to the findings, Australia holds the ninth position in the Governance dimension and placed sixth in Transparency. A key factor contributing to these rankings is the Commonwealth Performance Framework (CPF), which serves as a central component in the Australian government’s commitment to transparency and accountability.
The Framework for Transparency in Australia’s Public Sector
The CPF is a performance measurement system established by the Australian government to evaluate the government bodies subject to the Public Governance, Performance, and Accountability Act 2013. The framework (see Figure 1) offers a structured approach for planning, measuring, and reporting on the efficiency of public initiatives and operations.
Strategic Planning: Government bodies must formulate corporate plans, outlining their objectives, strategies, and anticipated outcomes. Additionally, the Portfolio Budget Statements aids in resource management, detailing the allocation of resources to government outcomes and programs.
Performance measures embedded within these plans must align with the entity’s purposes or critical activities. These measures should be reliable, verifiable, and unbiased when assessing the entity’s performance. They ideally encompass a mix of qualitative and quantitative indicators, including measures of outputs, efficiency, and effectiveness. Moreover, they should facilitate longitudinal assessments of performance over time.
For example, the Department of Foreign Affairs and Trade’s 2022–23 Corporate Plan provides an overview of the entity’s performance information. The department’s transparency is evident in its clear outline of priorities and objectives, providing a transparent view of planned actions. This transparency is strengthened by the inclusion of delivery targets and various data collection methods. Moreover, regular performance assessments, conducted internally and externally using diverse data sources, further enhance transparency by offering a reliable basis for evaluating the department’s progress.
Additionally, the Department of Foreign Affairs and Trade’s Portfolio Budget Statement 2022-23 reveals the budgeted expenses for the programs specified in the Corporate Plan. The transparent nature of these documents benefits various stakeholders. Senators and Members of Parliament gain insights into the proposed allocation of resources, while the public gains an understanding of the government’s focus. Businesses also receive clarity on trade and investment priorities, and partner countries find opportunities for collaboration. Furthermore, the commitment to incorporating indigenous perspectives into Australia’s international diplomacy is showcased, fostering inclusivity.
Performance Measurement: Measuring performance under the CPF involves developing performance information that allows stakeholders to assess how an entity’s activities support the achievement of its purposes. Performance measures, outlined in the planning documents and spanning at least four reporting periods, provide an extended base for evaluation.
Actual performance results are published annually in Annual Reports. These reports include Annual Performance Statements that assess and analyze the entity’s performance for the reporting period. They detail the entity’s achievement of its objectives against specified targets and provide an analysis of factors influencing performance. This analysis encompasses changes to the entity’s purposes, activities, organizational capabilities, and external environment.
To round out the example, here’s a snippet from the department’s Annual Performance Statement, highlighting the performance results for the fourth priority of Outcome 1 (see Figure 2), as outlined in the Corporate Plan.
Figure 2. Summary of performance results | Adapted from: Australian Government – Department of Foreign Affairs and Trade Annual Report 2022-23
Out of the seven priorities, Priority 4: Deliver an effective and responsive development program stands out as it is the only one that, by far, was able to achieve its goal. Through it, Australia’s development program that promotes health security, stability, and economic recovery became responsive. Moreover, it facilitated timely and effective government responses to humanitarian crises.
Transparent Reporting: Government bodies are required to report on actual results achieved against performance measures outlined in planning documents. These reports include audited financial statements, non-financial performance information, and other pertinent reporting details.
Subsequently, responsible ministers table these reports in parliament for thorough scrutiny and accountability. Following their tabling, these reports are made publicly accessible on the Transparency Portal, the central repository and data store of publicly available corporate planning and reporting information, enhancing transparency and accountability in government operations.
Australia’s success in transparency, as demonstrated through the CPF and reflected in the GSI 2023 rankings, positions the country as an exemplary model of best practice. It showcases Australia’s proactive stance in fostering public trust, informed decision-making, and continuous improvement.
Sustaining and strengthening transparency efforts will foster trust between governments and citizens, drive positive change, and achieve sustainable development goals. By upholding the principle of transparency, governments can build resilient, responsive, and accountable institutions that serve the needs of all citizens.
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Editor’s Note: This was originally published in Performance Magazine Issue No. 30, 2024 – Government Edition.
The success of a business mostly hinges on its organizational performance, which influences outcomes, efficiency, and effectiveness. This begs the question: What, therefore, drives performance to extraordinary heights? The answer often lies in the tools and techniques organizations use to stay adaptable and achieve their goals. Among these, one that stands out is benchmarking.
Benchmarking is recognized as a powerful instrument for fostering development and achieving a competitive edge. It enables organizations to learn from the most successful practices of their colleagues and industry leaders. By leveraging the insights of others, businesses canunlock opportunities for continuous growth and innovation, making benchmarking a cornerstone of sustainable success.
The History of Benchmarking
The origins of benchmarking can be traced back to the1800s, when textile mills started applying methodical comparisons to enhance their operations. Its evolution into a disciplined management tool began in the1980s, when Xerox, under great pressure from Japanese rivals and a decreasing market share, developed a benchmarking program to examine and implement best practices from top companies. This strategy enabled the business to recover its competitive edge, raise performance, and increase efficiency.
The success of Xerox attracted considerable attention to benchmarking as a sensible approach to organizational development. By the 1990s, companies worldwide had embraced it as a means of increasing customer happiness, streamlining product development processes, and raising productivity. It eliminated the need fortrial and error by providing a structured way to learn from others.
Although definitions vary throughout the literature, the fundamental goal of benchmarking is always consistent:learning from the best to drive continuous improvement. Benchmarking is a highlystructured process designed to enhance an organization’s performance by comparing it to the best practices of the market or other competitors.
The primary objective of benchmarking is to identify the most effective practices and subsequently implement them to benefit the organization. This process involves comparing performance data, examining similar activities across organizations, and extracting actionable insights. By identifying best-in-class practices and applying them, businesses can refine their operations, exceed competitors’ performance levels, and achieve long-term success.
Benchmarking not only serves as a roadmap for improvement but also provides valuable insights into whatdrives exceptional performance. This is the most powerful form of benchmarking, as it emphasizes action and is employed to acquire knowledge from the experiences of others. It emphasizes actionable strategies by analyzing specific processes or activities that deliver favorable results. This form of benchmarking fosters learning and enables organizations to adopt proven practices and tailor them to their unique structures and goals, ensuringsustainable growth and competitive differentiation.
The Types of Benchmarking
Different types of benchmarking are tailored to meet specific goals to address the unique needs and challenges of each organization. Selecting the right model is crucial to drive improvement and achieve meaningful growth.
Performance Benchmarkingentails the comparison of performance metrics to evaluate the performance of our organization in comparison to others.
Process Benchmarkinginvolves the comparison of methods and processes to identify opportunities to enhance the operations of our own company.
Strategic Benchmarkingis implemented when an organization is in the process of altering its strategic trajectory and desires to evaluate its strategy in comparison to that of its competitors.
Internal Benchmarking compares the performance of various departments or divisions within the same organization or company.
Competitive Benchmarkingcompares performance and results with the top competitors in the industry to identify areas for improvement.
Functional Benchmarking compares technologies or processes within one’s industry or technological area aimed at becoming a leader in that particular technology or process.
Generic Benchmarkinginvolves comparing processes with the best operators across industries, regardless of the sector, to identify best practices.
Benchmarking demands a commitment to change and should only be pursued by organizations that are open to transformation and focused on achieving improvement. By engaging in consistent and regular benchmarking, organizations can develop concrete, measurable short-term plans rooted in current realities rather than relying on past performance. When executed successfully, it leads to significant enhancements in quality, efficiency, and financial outcomes. Organizations that excel in benchmarking are constantly exploring fresh ideas, adopting the most effective innovations, and striving to meet and exceed the highest standards of performance.
Performance management is an overarching discipline focused on achieving desired performance results. To approach it effectively, organizations should develop the necessary tools and processes to track progress, identify areas for improvement, promote alignment and accountability among stakeholders, and support continuous learning.
The performance management process focuses on data collection and analysis, reporting, review, and recalibration. This process helps organizations identify performance gaps, support informed decision-making, and enhance performance results. Figure 1 illustrates the performance management process, highlighting its key stages and the flow of activities that drive ongoing improvement.
Organizations can utilize a range of tools to support the process. Each tool is structured to serve a specific purpose, with clearly defined features that support its functionality as follows.
Data Collection
Two tools can be used to ensure the accuracy of data collection: an automated reminder systemand a data collection template. The reminder system is a tool designed to send notifications at predetermined times. It helps data custodians stay on track with their reporting responsibilities, minimizing the risk of missed deadlines. These reminders can be delivered through various channels, such as emails, text messages, or app notifications.
Meanwhile, the data collection template helps custodians record information in a standardized format, minimizing errors. It should include sections for the key details of each KPI, including name, reporting frequency, responsible parties, targets, and results.
Moving along the process, the collected data must be processed to help organizations identify performance issues, understand root causes, and even predict future outcomes. Nowadays, there is a wide range of off-the-shelf performance reporting software available to streamline the analysis process. Once the analysis is complete, organizations can communicate the results using performance reports or performance dashboards.
Performance reports are comprehensive documents that provide a detailed presentation of the organization’s activities and results over a specific reporting period. The format of these reports can vary depending on their intended purpose. For example,annual reports are typically text-heavy, but many companies incorporate graphics and images to create visually engaging documents. Hays’ annual report is an example that demonstrates how the use of visuals can enhance performance reporting. By integrating charts and images, the report improves readability, allowing readers to quickly grasp complex information.
Dashboards offer a visual representation of performance data. Their interactive and visual nature allows for quick interpretation of KPIs results and trends. Many performance reporting software include features for creating dashboards, making it easier to monitor and respond to performance in real-time.
Performance Review
With the analysis prepared, performance is then reported and discussed at various organizational levels during performance review meetings. These meetings may take different forms, such as monthly reviews to address operational issues at the departmental level or annual meetings focused on long-term strategic matters among top management and the board. Regardless of the format, performance meetings are an important tool in the performance management process as they enable effective decision-making by leveraging the collective knowledge and experience of the team.
To ensure that all important aspects are addressed duringperformance review meetings, their focus should be clearly established through agendas. An agenda can be structured around key points such as presenting performance results, discussing high-priority issues (e.g. KPIs below performance thresholds), analyzing potential causes and correlations, and identifying and assigning corrective actions for low-performance areas.
Recalibration
The corrective actions identified during meetings can be tracked using a portfolio of initiatives. This is a collection of actions and projects aimed at closing performance gaps and achieving the desired state. This tool enables organizations to monitor the progress of each initiative, establish accountability, monitor resource allocation, and support the prioritization of initiatives.
A portfolio of initiatives typically includes: the objective it addresses, the required resources for implementation (financial, time, and human resources), progress status, and priority levels.
There is a broad range of tools available on the market to support performance management; and given their ease of access, it would be unwise for organizations not to take full advantage of them. By implementing solutions and customizing them to meet the organization’s specific needs, organizations can ensure that the outcomes of the performance management process are insightful and actionable. This approach fosters a data-driven decision-making culture, empowers stakeholders to take informed actions, and ultimately helps the organization achieve its strategic goals and drive sustainable growth.
The balanced scorecard (BSC) is a widely used performance measurement framework for strategic planning. It is so popular, in fact, that The KPI Institute’s latest State of Strategy Management Practice report found that 40% of respondents from Middle Eastern companies were using it. Why is that the case? It’s likely in the name—the BSC offers a balanced perspective of a company’s performance, focusing not just on financial gains but the various aspects of value creation as well. This enables companies who use it to establish sustainable business practices that can meet long-term goals without sacrificing short-term improvements.
What Is the BSC?
In 1992, Robert Kaplan and David Norton dreamed of a better way. Aware of the limitations of traditional practices that focused solely on financial indicators such as return on investment (ROI) to measure a company’s performance, the two designed a tool that incorporated non-financial variables to paint a more holistic, comprehensive picture. Thus, the balanced scorecard was born.
The BSC was further refined by connecting performance metrics directly to strategy, which marked a formal link between strategic goals and performance measurement. In 1996, it became a performance management system (PMS) that effectively integrated the various crucial aspects of an organization—i.e. strategic processes, resource allocation, budgeting and planning, goal setting, and employee learning.
By 2001, the BSC had outgrown its original form, no longer seen as a mere management tool but instead as an all-encompassing strategic management and control system. The BSC has continued to evolve alongside the ever-changing priorities of the business world. In 2021, many companies began integrating environmental and social dimensions into their BSCs to reflect their triple bottom line strategies.
The BSC gives managers a view of the business from four crucial perspectives. Each perspective deals with an integral aspect of the organization and answers a specific question:
Customer Perspective: How Do Customers See Us?
Companies typically have a mission statement that encapsulates how they interact with customers. For example, e-commerce platform Etsy’s mission statement is “Keep Commerce Human.” This sentiment informs the way the company does business, which places importance on leaving a positive economic, social, and ecological impact.
The BSC holds companies accountable to their mission statements by translating them into specific measures that must be followed. For Etsy, one aspect to consider would be the diversity of its workforce, which falls under social impact. To address this, the company has taken measures such as increasing the presence of underrepresented communities in its seller community by interviewing candidates from those backgrounds. This has enabled the company to stay true to its mission and show customers that it walks the talk.
Internal Perspective: What Must We Excel At?
Balance is the primary focus of the BSC—it’s in the name, after all. Thus, the framework doesn’t only take into account the way customers perceive the company, but it also considers what the latter does to shape this perception. This is composed of the various operational and organizational processes that drive the company.
By giving managers an internal perspective, they can identify, track, and measure the processes that yield the most benefits and close the gaps on the ones that fall short.
Learning and Growth Perspective: Can We Continue to Improve and Create Value?
The business landscape is constantly shifting, and in order to keep pace with its changes, businesses must consistently learn and innovate. That is the importance of this perspective, which states that a company’s value hinges on its ability to improve. In any industry, competition can be fierce, which means companies must always find new ways to stand out.
Financial Perspective: How Do We Look to Shareholders?
Among the four perspectives, this is perhaps the most straightforward. Put simply, it indicates if a company is profitable. Although financial performance is no longer the end-all, be-all measure of a company’s success, it still plays a crucial role in determining whether a company is simply surviving or thriving. Shareholders understandably value profitability, and they won’t keep investing in a company that doesn’t produce ROI.
The BSC is by nature a holistic framework, meaning each part is interconnected to the others. This is why it’s important to take a balanced (pun intended) approach when considering the four perspectives. If one side is prioritized over the others, it could lead to the formation or widening of inefficiency gaps that impede business growth and success.
As previously mentioned, the BSC is quite popular. This is due to the myriad of benefits that it brings to organizations that use it wisely. The most obvious benefits of the BSC are twofold. First, it consolidates the seemingly disparate aspects of a business in a single report, leading to increased efficiency in performance reporting and measurement as well as faster decision-making. Second, the BSC helps mitigate suboptimization by making managers consider the entirety of the company’s operational measures, demonstrating whether one objective was achieved at the cost of another.
A more concrete example of the BSC benefiting companies can be seen in how Apple uses the framework. By shifting its focus from innovating its products to also paying mind to customer satisfaction by establishing it as one of the company’s core tenets, the tech giant was able to improve its already stellar reputation by catering to its customers’ desires. Apple also values core competencies, employee commitment and alignment, market share, and shareholder value. Together, these indicators make up the metrics of their BSC.
World-renowned electronic company Philips is also known for its use of the BSC, using a bespoke version of the framework to fit its organizational needs. The company’s focus is on its employees, and it uses the BSC to ensure that each member of its workforce has a clear understanding of the company’s strategic policies and long-term vision.
What Does the Future Hold?
There must be a stronger emphasis on customization as companies realize that there is no such thing as a one-size-fits-all approach to performance management. This aligns with the proliferation of new advancements in artificial intelligence (AI) and machine learning (ML), technologies that must be integrated into the BSC lest the framework fall behind the ever-shifting realities of the business world. Regardless of the future, the BSC appears poised to remain a vital tool for companies of all sizes and in all industries.
Interested in learning more about the BSC? Browse our articles here.
