What Is Internal Benchmarking?

Jim B.
Jim B.
Woman with hand on her hip
Woman with hand on her hip

Internal benchmarking is the process by which a company or corporation looks within the realm of its own business to try and determine the best methods for conducting business. This process is closely associated with the concept of finding best practices, which means that the company is conducting its operations in a way which maximizes the results of its workers’ efforts. Doing this through internal benchmarking is an efficient endeavor since a business has unique access to its own information to determine best practices. It might be useful at times though to look outside the business for benchmarking efforts to make sure that there are no methods left unstudied.

Businesses must find ways to measure the effectiveness of its practices. In some cases, this can be as simple as studying the bottom line and adjusting costs and pricing. At times, however, it might be more useful to look at the operational aspects of the business. This process can show business managers where things are working well and where operations might be lacking. Central to this effort is the practice of internal benchmarking, which is when a company looks inward to find the answers to its problems.

The practice of internal benchmarking begins with setting some level of performance that a company wants a certain aspect of its business to reach. This level is the benchmark, and it is the standard to which the company can aspire. Any part of the business that falls below that standard must find ways to rectify the gap in performance.

Conducting such an analysis through internal benchmarking requires finding those aspects of the business that are performing up to the required levels. For example, a company might be happy with the performance of the accounting department, and it wants to see that performance throughout the entirety of business operations. With that in mind, a thorough study of the accounting department might shed some light on practices that other departments should emulate.

There are certain advantages to analyzing business problems with the use of internal benchmarking. By keeping a critical eye on its own business, managers can have access to every detail of operations, something that wouldn’t occur if they were looking outward. In addition, an internal review might be more realistic in terms of a company’s capabilities and limitations. The downside of taking such a narrow view is that a company might miss out on some methods, which are used by other companies or even competitors, that could improve its own practices.

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