Looking in the mirror. (internal benchmarking)(includes related article on implementing internal benchmarking)

Most senior executives view external benchmarking as an indispensable management tool. Finding out how their companies stack up against industry leaders provides a yardstick by which to measure performance and, equally important, role models to emulate. For some it has become an obsession to which they devote enormous resources.

But external benchmarking, despite its benefits, is overrated. Many companies are spending countless dollars and man-years seeking something that's right under their noses. By looking in the mirror and appreciating the divergence of performance within their own organizations, they can benchmark to make these internal differences apparent and to help uncover opportunities for capitalizing on their unique strengths. The simple truth is a company's own best practices are usually superior to the best company's average practices.

Internal benchmarking will yield solutions that leverage existing knowledge and create more tangible value than external benchmarking. Six factors make this possible:

* It's easier to gather the data. External benchmarking relies on competitive data that isn't readily available. When the data is available, it may be neither accurate nor timely. Moreover, it allows a comparison at only one point in time and does not provide a way to continually improve performance. With internal benchmarking, the data is always right at your fingertips.

* The comparisons are more relevant. They are more relevant because they relate to your business. You are not comparing yourself to a business that, in truth, is not the same as yours.

* It's easier to take action on the results. External benchmarking will identify differences between your company and competitors, but it won't tell you why you are different. Internal benchmarking lets you take that next step and, through a series of interviews and best practice sharing, really understand what behaviors are driving those differences.

* It allows you to set sound targets. Performance targets are no longer viewed as arbitrary and unrealistic. A process is in place. Individuals across the organization are involved. The goals seem achievable because someone in the company is already achieving them. Buy-in increases; …