What is Benchmarking?

Benchmarking is a fundamental consulting tool used in nearly every engagement. Internal benchmarking compares performance across a company's own divisions or locations. Competitive benchmarking measures against direct rivals. Functional benchmarking looks at best practices from any industry for a specific function (e.g., studying Amazon's supply chain even if you're in healthcare).

Effective benchmarking requires apples-to-apples comparisons. You must normalize for differences in scale, geography, product mix, and business model. Simply comparing raw metrics can be misleading—a company with higher costs per unit might actually be more efficient when you account for its premium product positioning.

In case interviews, benchmarking data often appears as exhibits showing competitor comparisons. The key is to identify which metrics are meaningful, what gaps exist, and what is driving those gaps. Strong candidates go beyond identifying the gap to recommending specific actions to close it.