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.
In their 1985 paper “Of Strategies, Deliberate and Emergent,” Henry Mintzberg and James A. Waters describe strategic planning as a continuum. There is deliberate strategic planning on one end and emergent strategic planning on the opposite.
Deliberate strategic planning represents a structured, systematic approach to strategy development that emphasizes a planned, intentional, and coherent process whereby organizations set clear objectives and design strategies to achieve them. This approach presupposes a stable environment where goals and actions align closely.
On the other hand, an emergent strategy is more adaptive, arising from patterns of action rather than premeditated plans. While emergent strategies thrive on flexibility and responsiveness, deliberate strategies emphasize clarity, predictability, and alignment with long-term objectives.
Despite the growing popularity of emergent strategic planning, the deliberate approach remains vital for corporations aiming for sustainable success. One of its core strengths lies in the distinct roles it ascribes to top management and middle managers. In the deliberate process, top management acts as architects of the strategy, setting overarching goals and ensuring alignment with the organization’s vision, while middle managers focus on operationalizing these strategies and managing their implementation.
As outlined by J. Scott Armstrong in his paper on the importance of value planning in making strategic decisions, deliberate strategic planning unfolds in four distinct phases, with each phase contributing to securing stakeholder commitment. Before diving into these phases, it is important to recognize that historical data serves as one of the cornerstones of the process. Organizations rely on their data repository to provide past performance metrics and external trends.
Top management can utilize historical data to identify patterns, trends, and benchmarks, which they can then use to design actionable plans. Meanwhile, middle managers can use this data to refine tactical operations, ensuring that daily activities align with strategic objectives. Having a robust data architecture not only allows a company to more accurately analyze what has happened but also to forecast future trends, mitigate risks, and design strategies grounded in evidence rather than conjecture. With this foundation, organizations can proceed through the deliberate strategic planning phases with clear direction.
Defining Long-Term Objectives: The first phase involves defining the company’s long-term goals or ultimate objectives. These goals must align with the aspirations and priorities of various stakeholders, such as employees, investors, and customers. Tools like stakeholder analysis can identify key interests and concerns, while SWOT analysis evaluates the organization’s strengths, weaknesses, opportunities, and threats. Furthermore, in later stages of this planning process, the use of SMART criteria—specific, measurable, achievable, relevant, and time-bound—ensures the clear statement and actionability of goals. By integrating these tools, companies create a foundation for a cohesive strategic vision that resonates across all stakeholder groups.
Generating Strategies: The second phase centers on generating strategies and alternative approaches to achieving these long-term goals. Companies must consider comprehensive strategies that incorporate slack resources—such as additional time, finances, or facilities—to account for uncertainty and enhance the plan’s flexibility. Generating alternative strategies is a crucial practice that bolsters adaptability. Techniques such as brainstorming sessions, unstructured group meetings, and scenario planning encourage creativity and provide contingency options. This phase ensures that the organization has a repertoire of well-thought-out strategies ready to deploy, even in dynamic or unpredictable environments.
Evaluating Strategies: After developing strategies and alternatives, the third phase evaluates their feasibility in relation to the first phase’s objectives. This evaluation process ensures that the proposed strategies are realistic, effective, and aligned with the company’s mission. Methods such as checklists, the Delphi technique, and the Devil’s Advocate approach provide structured ways to scrutinize strategies. For instance, a checklist can ensure that all critical factors, such as resource availability and market conditions, are considered. The Delphi technique harnesses internal expert consensus, whereas the Devil’s Advocate method identifies potential flaws or risks. This rigorous evaluation phase narrows down the list of strategies to those most likely to succeed.
Strategy Monitoring and Implementation: The final phase involves systematically monitoring the results of implemented strategies. Companies should establish a feedback system with clearly defined intervals—such as quarterly or semi-annual reviews—to assess performance and make necessary adjustments. This system must account for changes in external factors, such as economic, technological, geopolitical, and social shifts, as well as internal factors like evolving strengths, weaknesses, and competitive actions. Key performance indicators (KPIs) serve as a critical tool for monitoring progress, enabling organizations to measure outcomes against predefined benchmarks. Integrating KPIs into the company’s performance management system and linking them to the organizational incentive system ensures accountability and motivates stakeholders to align their efforts with strategic goals.
Securing Stakeholder Commitment
A deliberate plan significantly enhances a company’s ability to secure stakeholder commitments throughout the process. A well-structured plan not only communicates the company’s long-term objectives but also fosters a sense of ownership among stakeholders. For instance, engaging stakeholders in the development of alternative strategies allows them to voice their concerns and align their interests with the organization’s goals.
Similarly, an accurate feedback and monitoring system ensures transparency, showing stakeholders how their contributions influence outcomes and incentivizing them to remain invested in the strategy’s success. This is especially crucial in large corporations where the different parts of the organization must work in alignment with the organization’s objective.
Strategic Foundation
Deliberate strategic planning remains an indispensable tool for organizations, offering clarity, structure, and alignment in an increasingly complex business environment. While emergent strategies provide flexibility and responsiveness, deliberate strategies establish a solid foundation that guides decision-making and ensures consistency.
Technology such as big data further enhances this process by equipping organizations with more comprehensive and timely datasets to generate actionable insights, maintain advantages, and refine strategies with greater precision. Furthermore, many companies could benefit from leveraging both approaches, enabling top management to define clear objectives while empowering all levels of management to adapt and innovate. This integrated approach ensures that organizations remain resilient, adaptable, and primed for success in the face of evolving challenges.
Democratizing strategy planning refers to the process of involving various stakeholders of all organizational levels in the strategy formulation process. In the traditional approach, strategy planning is a top-down process formulated by selected stakeholders like the senior management and key decision makers. So, to make the process more inclusive and participatory, democratizing strategy planning comes into account.
One of the main advantages of democratizing strategy planning is that it increases employee engagement. Thomas, K. W. (2009) discussed in his paper “Intrinsic Motivation at Work: What drives employee engagement” that when employees feel that their voice is heard within the organization, they are more likely to feel connected and invested in the organizational success, which increases their motivation, commitment, and job satisfaction, and that means a lot for them as they feel more valued in the organization.
Another advantage of democratizing strategy planning is that it enhances ownership and accountability, which will be reflected in improved employee engagement, as employees who participate in the strategy planning feel a stronger sense of ownership and responsibility, which leads to extra accountability and willingness to go the extra mile in achieving the organizational objectives as per the psychological ownership theory, which emphasizes on the role of psychological ownership in influencing employee attitude and behavior which lead them to be more engaged, motivated and committed to their organization.
To implement democratized strategy planning, having and securing the leadership buy-in is crucial to its success, so it is necessary to present the benefits and potential of increasing employee engagement and fostering innovation in the organization.
After getting leadership buy-in, we need to define a clear scope of where employee inputs would be more valuable, which is recommended to be initiative-specific in the beginning to avoid any potential analysis paralysis. In addition, it is vital to develop a precise feedback mechanism to capture different stakeholders’ diverse perspectives and ideas and recognize and reward participation.
This process will take time to be implemented correctly without any issues, so it is essential to mention that continuous improvement is critical to reach a practical approach. To read more comprehensive articles on strategy, click HERE.
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Editor’s Note: This article was originally published on November 30, 2023 and last updated on September 17, 2024.
Khalid Alharbi boasts over 20 years of experience in partnering with business unit executives to develop strategic plans, direction, market analysis, partnership, growth guide, and operation excellency. He leads large and complex projects to achieve key business objectives and promote digital transformation. He is pursuing a career in engineering, project management, sales and strategy planning.
As a Strategic Planning and Performance Manager, Aubrey Phillips engages both people and data to optimize departmental efficiency. She has demonstrated leadership by spearheading interagency teams responsible for the development of Pinellas County’s COVID-19 dashboard and relief programs. Aubrey holds a bachelor’s degree in political science and environmental studies from New College of Florida, along with an advanced Geographic Information Systems certificate.
Khalid Alharbi boasts over 20 years of experience in partnering with business unit executives to develop strategic plans, direction, market analysis, partnership, growth guide, and operation excellency. He leads large and complex projects to achieve key business objectives and promote digital transformation. He is pursuing a career in engineering, project management, sales and strategy planning.
As a Strategic Planning and Performance Manager, Aubrey Phillips engages both people and data to optimize departmental efficiency. She has demonstrated leadership by spearheading interagency teams responsible for the development of Pinellas County’s COVID-19 dashboard and relief programs. Aubrey holds a bachelor’s degree in political science and environmental studies from New College of Florida, along with an advanced Geographic Information Systems certificate.