Benchmarking is the process of comparing and measuring business processes and performance metrics to industry leaders which will help the organization take action to improve its own structure.

Sam Zurawski, CMA, CPA, Senior Consultant with Backswath Management recently shared insights about the different types of benchmarking, the benchmarking process and what to benchmark, and how the concept of peer groups can benefit a retailer’s business.

Benchmarking improves performance by learning from others, and one of the easiest forms is internal benchmarking from within an organization. This process uses internal data to compare the relative performance of business units, for example a year over year comparison of net income as a percentage of sales.

Competitive benchmarking involves comparing performance with other companies from the same industry, allowing companies to highlight industry best practices. While valuable, this process is more difficult, as it is more difficult to acquire data for privately held companies, and the accuracy of data cannot be completely verified. Finally, strategic benchmarking can highlight best practices from other sectors by examining unrelated industries for factors that might not be reflected such as innovative technological advancements.

“An effective benchmarking process provides for continuous method of measuring and comparing a firm’s business performance against another firm.” Said Mr. Zurawski, “We say continuous process, because when you complete your benchmarking exercise, you may uncover a number of performance gaps. By focusing on two or three corrective measures at one time, you’ll be increasing your odds of success.”

A balanced approach to benchmarking considers four perspectives, the customer, internal business process, financial aspects, and learning and growth. A business must look at what it needs to be good at to provide products and services to customers, how to manage various stakeholders, how the organization can continue to improve, what new products and services it can offer, and what new processes must be developed to implement changes.

The benchmarking process begins with the organization deciding what to benchmark and identifying benchmarking partners, it will then gather and exchange information, analyze, and implement solutions based on the results of the benchmarking.

Peer groups can be a great way of learning from other businesses in your industry through facilitated discussions with groups of similar business owners and executives. These groups are proven to improve business performance, develop performance benchmarks, and provide additional emotional and mental benefits to employees beyond measured performance.

As a member of a peer group you can expect the emotional support of a peer network while innovatively pushing your agriculture business forward, and have fellow members push you out of your comfort zone to challenge your assumptions. Peer groups are also a source of trusted advice from fellow members with no agenda other than helping you. Being challenged, learning leadership skills, accountability, and support make peer groups popular in many verticals from automotive dealers to farm equipment dealers, even expanding to include groups relating to parts, finance, marketing, and many others.