wealtheducation-what_is

What is Benchmark?

In the financial industry, benchmarking can be simply defined as a continuous process to find out and compare between investment portfolios.

For example, If a certain Unit Trust or Mutual Fund mirrors the S&P 500 index. That unit trust or mutual fund would want to compare its investment performance against the S&P 500. If its performance is below the said index, then it is said to have underperform the said index. If its performance is above the said index, then it is deem to have over perform the said index.

In businesses, benchmarking can be simply defined as a continuous process to find and implement best practices that will lead to superior performance. As the definition implies, benchmarking is a process that will make a company's operations lean, and improve quality and productivity.

In the quest for increased competitiveness, companies often ask themselves the question, "How are we doing?" Asking this question leads logically to the next question, "Compared to what?" To fully answer this second question involves an examination of a company's own operations, and subsequently comparing the operations with those of other organisations identified to be leaders in the field. Such comparisons are at the heart of benchmarking.