Benchmarking in project management is a technique you can use to improve project planning by identifying performances that create the level of quality and value desired and targeting that level for your project.
In this article, we cover benchmarking approaches to drive continuous improvement, and how to apply them effectively to meet targets, optimize efficiency, and exemplify your project management expertise.
We’ll also provide tips for answering questions centered around benchmarking for the PMP certification exam.
What is Benchmarking in Project Management?
According to the Project Management Book of Knowledge PMBOK 6th Edition, “Benchmarking involves comparing actual or planned products, processes, and practices to those of comparable organizations to identify best practices, generate ideas for improvement, and provide a basis for measuring performance.”
It is a strategic process that compares a project’s performance to standards and best practices using metrics and data analysis to measure efficiency and identify areas for improvement.
Benchmarking enables you to define goals based on comparable projects or industry standards and helps determine realistic targets and performance expectations.
The core methodology involves:
- Establishing benchmark metrics and key performance indicators
- Collecting benchmarking data on those metrics
- Analyzing the data to find gaps
- Implementing changes to meet benchmarks
Types of Benchmarking in Project Management
There are three main types of benchmarking used in project management:
1. Internal Benchmarking
This compares metrics across projects within your organization.
For example, you could benchmark your software development projects against each other on cost, schedule, quality, and resource utilization metrics to reveal your strengths and weaknesses.
2. External Benchmarking
In external benchmarking, you compare your project metrics to industry best practices and standards.
This gives an objective view of performance versus competitors. You may need to work with consultants to access industry benchmark data.
3. Competitive Benchmarking
Here you directly compare your project performance against competitors or peers in the market.
For example, benchmarking your customer satisfaction scores against the competitor average. This type of benchmarking focuses on your competitive positioning.
Benchmarking best practices recommend combining internal, external, and competitive data to get a comprehensive view.
The blend of benchmarking approaches provides the most robust comparison to set meaningful performance targets and maximize continuous improvement.
The onus lies on you and your team to evaluate your unique business objectives to determine the optimal benchmarking mix for your project management needs.
When to Use Benchmarking in Project Management
Benchmarking in project management is not just about measuring success but about continuous improvement and achieving excellence. The ideal situations to use it include:
1. To Boost Project Performance
If your projects are not reaching their full potential, benchmarking can be your guide whenever you seek to improve project performance.
It provides a framework for identifying areas of improvement and implementing changes.
2. To Create Company-Wide Standards
Through internal benchmarking, you can establish company-wide standards. This process allows you to compare and evaluate projects that are similar in size and scope.
It’s an effective way to ensure consistency across your projects and to set expectations.
3. To Compete in the Market
How do your projects stack up against the competition? External benchmarking and competitive benchmarking provide the answers.
These methods help you understand how your projects compare against external entities and industry standards.
What to Benchmark in Project Management
When establishing a benchmarking framework, carefully select the right metrics and key performance indicators (KPIs) to monitor.
Project Management Benchmarking Metrics
Useful KPIs to benchmark fall under these categories:
Schedule Metrics
Important schedule metrics to benchmark include project duration, timeline variance, and milestone achievement.
Project duration tracks the total time from project initiation to closure to benchmark the overall timeline.
Timeline variance measures delays or advancement against the originally planned dates to indicate potential schedule issues.
Milestone achievement monitors the completion of key scheduled events throughout the project lifecycle.
Cost Metrics
For cost metrics, budget variance compares budgeted costs to actual costs incurred to signal potential over or underspending issues.
Cost performance index calculates the ratio of budgeted costs to actual costs as an efficiency indicator.
Earned value quantifies the volume of completed work compared to the project plan to measure productivity.
Quality Metrics
To benchmark quality, defect rates count quality issues identified in requirements, design, or the actual solution.
Rework measures the degree of correcting mistakes inefficiently. Customer satisfaction surveys gather subjective feedback on quality according to end users.
Resource Utilization
Important resource utilization metrics include labor hour variance to track budgeted hours versus actual hours to manage capacity, equipment utilization to compare actual usage against availability, and materials volume to monitor actual materials consumed against estimates.
Risk Management Metrics
For risk management indicators, track issues encountered to show risks that have materialized with impact, risk mitigation success to measure the effectiveness of risk planning, and contingency draws to monitor tapping into reserves.
Scope Stability Metrics
Requirements changes can signal uncontrolled scope creep. Benchmark specification revisions to indicate frequent adjustments showing instability.
The specific metrics used depend on the project’s objectives and industry standards. However, benchmarking standardized KPIs consistently over time provides the most value.
How to do Benchmarking in Project Management
Here are the main steps to follow for effective benchmarking in project management:
1. Identify Goals and Metrics
First, determine the goals of your benchmarking initiative and select the right KPIs to monitor progress towards those goals.
The metrics should connect to business objectives and cover key performance areas like cost, schedule, quality, risk, resources, and scope.
2. Determine Benchmark Sources
Next, decide where you will source benchmark data from. This may include internal historical project metrics, published industry standards, consultant databases, competitors’ public data, or surveys.
Often a combination of internal, external, and competitive data provides the richest analysis.
3. Collect Benchmarking Data
With sources identified, collect current benchmarking data for the selected metrics at set intervals.
For internal data, mine historical project records. For external data, research industry reports or hire consultants who compile comparative data.
4. Set Realistic Targets
Analyze the benchmarking data gathered and set realistic quantitative targets to aim for based on findings.
For example, improving cost performance by X% or reducing project duration by Y days. These targets guide improvement efforts.
5. Identify Performance Gaps
Compare current project performance data to the benchmark targets to identify gaps.
Analyze where your project metrics fall short of the benchmarks set. These gaps highlight improvement opportunity areas.
6. Develop Action Plans
Based on the most critical gaps found, develop action plans to close them through process enhancements, training, tool adoption, or other interventions.
Continual benchmarking helps monitor success over time.
7. Retain Historical Data
Retain benchmark data in systematic records to enable analysis of performance trends over time.
Historical data provides the most meaningful insights when consistently benchmarked.
Importance of Benchmarking in Project Management
Benchmarking delivers immense value throughout the project lifecycle when fully embraced.
It enables data-driven decision-making to meet strategic goals in the following ways:
1. Sets Realistic Targets
Benchmarking enables project teams to set realistic quantitative targets based on comparable data points from previous projects, competitors, or industry standards.
Rather than developing plans from scratch, benchmarking allows organizations to calibrate project scope, budgets, timelines, and requirements to align with proven results.
2. Provides Warning System
During project execution, continuous benchmarking acts as an early warning system.
By closely monitoring performance metrics against benchmarks, teams can identify when results are falling short of targets.
This data-driven insight triggers corrective actions through process improvements before major issues escalate.
3. Drives Continuous Improvement
Benchmarking facilitates organizational learning by instilling disciplined data gathering, gap analysis, and taking corrective measures.
It creates an embedded culture of inspection, evaluation, and improvement which incrementally enhances project teams’ performance over time.
4. Defines Objective Measures
Benchmarking provides objective, data-driven measures of project success based on credible external standards, rather than vague assumptions.
This way, teams have clarity on performance expectations.
5. Delivers Competitive Advantage
Like professional athletes, benchmarking helps elevate project execution to achieve high performance.
Organizations that ingrain ongoing benchmarking gain tremendous competitive advantage through optimized processes, decision-making, and outcomes over time.
Advantages and Disadvantages of Benchmarking
Using benchmarking in your project has its advantages and drawbacks which need to be considered.
Advantages of Benchmarking in Project Management
Implementing benchmarking in project management provides many benefits:
- Drives improvement by identifying gaps between current and desired performance.
- Instills an analytical, metrics-driven culture focused on continuous improvement.
- Sets realistic targets for performance rather than arbitrary goals.
- Improves resource allocation by focusing on priority gaps and opportunities.
- Boosts motivation through competitive data and measurable progress.
- Enables informed decision-making based on trends rather than assumptions.
- Reduces risk by signaling issues early before they escalate.
- Increases accountability through objective performance data.
- Facilitates organizational learning and capabilities over time.
- Provides competitive advantage by elevating project execution.
Disadvantages of Benchmarking in Project Management
While impactful, benchmarking in project management also has some potential limitations:
- Obtaining accurate competitive data can be challenging.
- Benchmarking takes time and commitment to sustain.
- Complex processes are difficult to accurately benchmark.
- Focusing too much on benchmarks can stifle innovation.
- Not having control over external benchmarks set by others.
- Diminishing returns after addressed gaps close over time.
- Data interpretation can be influenced by bias.
- Must balance benchmark targets with realistic expectations.
- Consistent participation across the organization is critical.
- Gaming of benchmarking metrics can erode trust.
Challenges of Benchmarking in Project Management
While benchmarking delivers tremendous value, implementing it poses some key challenges:
- Lack of structured benchmarking process and governance
- Insufficient expertise in metrics, data collection, analysis
- Obtaining reliable competitive benchmarking data
- Choosing the right KPIs to monitor
- Getting participation and adoption across the organization
- Sustaining benchmarking practices over the long-term
- Interpreting benchmarking findings objectively
- Balancing competition with realistic goals
- Linking benchmarks to meaningful action plans
- Technology limitations to capture, visualize, and analyze benchmarking
- Budget constraints to fund benchmarking initiatives
- Organizational resistance or lack of leadership commitment
With proper change management, organizations can overcome these hurdles. But benchmarking takes time to perfect. Start small, seek quick wins, and scale practices over time.
Leverage project management software to streamline data capture and analysis. And secure executive sponsorship to fuel continuous improvement through benchmarking.
Best Practices for Project Management Benchmarking
To maximize the value of benchmarking, adopt these best practices:
- Get Leadership Commitment: Secure executive sponsorship to fund initiatives, drive adoption, and hold teams accountable to benchmarks.
- Start Small: Pilot benchmarking on a few critical metrics before expanding the model. Build expertise and processes gradually.
- Define the Strategy: Document a structured benchmarking methodology aligned to business goals. Outline metrics, data sources, and analysis framework.
- Choose Quality over Quantity: Keep the number of KPIs manageable. Prioritize the most influential performance metrics.
- Use Technology: Leverage project management software to automatically track benchmarks and create dashboards.
- Make it Continuous: Benchmark consistently at set intervals vs. one-off projects. This reveals trends over time.
- Retain History: Maintain databases of benchmark data to enable analysis of progress.
- Triangulate Data Sources: Use a blend of internal metrics, external standards, and competitive data for a balanced perspective.
- Customize Carefully: Tailor benchmarking model to your organization’s maturity level and needs, based on industry research. Avoid reinventing the wheel.
- Communicate Insights: Share benchmark reports, celebrations, and lessons learned across teams to drive improvement.
- Incentivize Participation: Integrate benchmarking into performance management to motivate adoption.
- Govern Diligently: Prevent the gaming of metrics with audits, ethical standards, and anonymous reporting.
With robust processes, tooling, and leadership commitment, organizations can ingrain benchmarking into their management DNA and reap the performance dividends.
Benchmarking Project Example
Let’s take the example of a company that initiated a project to build a cloud-based customer portal with improved quality and faster delivery than past projects.
With benchmarking practices to achieve this goal established by the program manager, internal benchmarks were set based on metrics from earlier releases.
Defect rates averaged 2.5 issues per story point, and the initial release scope was 280 story points completed in 18 weeks.
The manager supplemented internal data with external benchmarks from industry research. Top performers delivered over 20 story points per sprint and release cycles took less than 16 weeks.
An initial baseline assessment revealed the team completed only 16 story points per sprint with 4 defects per story point. The cloud portal delivery took 22 weeks which fell short of all benchmarks.
To address gaps, the manager prioritized improving velocity through expanded test automation, reducing rework by instituting peer code reviews and implementing value stream mapping to optimize flow.
This became the team’s benchmark-driven improvement roadmap.
Over the next 6 months, structured benchmarking and progress tracking led to excellent results:
- Story points per sprint increased to an average of 25
- Defect rates declined to 1.5 per story point
- The release cycle compressed to just 14 weeks
This example demonstrates how disciplined benchmarking against historical, external, and aspirational standards can drive project improvements and exceed expectations.
Project Management Benchmarking Tools
Effective benchmarking in project management requires capabilities to systematically capture performance data, analyze metrics versus benchmarks, and visualize insights.
Having the right tools is vital to your success in doing this. Some of the key tools include:
Project Management Software
Platforms like Trello, Asana, and Wrike provide integrated benchmarking features to capture metrics, analyze performance vs targets, and create visual reports.
This enables real-time tracking during project execution rather than manual data gathering.
Business Intelligence Tools
Solutions like Power BI, Tableau, and Google Data Studio help visualize benchmarking data through interactive dashboards.
These tools simplify communicating insights across the organization.
Specialized Benchmarking Systems
Dedicated benchmarking software like ClearPoint and Service Performance Insight allows in-depth data modeling, forecasts, gap analysis, and reporting providing robust analytics capabilities.
Benchmarking PMP Exam Tips
For the PMP exam, you must have a good idea of the various project management ITTOs (Inputs, tools, techniques, and outputs).
Benchmarking is one of the techniques that is used in a variety of project management planning processes.
In the Plan Quality Management process, benchmarking helps establish the standards of quality for the project by referencing other successful projects or industry norms.
For the Identify Risks process, benchmarking can reveal potential risks by identifying significant deviations from industry standards.
Benchmarking can also serve as an input to the Plan Cost Management process, providing a basis for developing the project’s cost estimates.
Similarly, it is an input of Plan Procurement management by providing information on the performance and practices of potential vendors.
Remember, in the PMP exam, understanding the concept of benchmarking, its place in the PMBOK processes, and its role in quality, risk, cost, and procurement management is essential.
Summary
Benchmarking in project management can be very beneficial when used properly. By continuously measuring performance against internal, external, and competitive data points, teams gain clarity on progress and improvement opportunities.
When ingrained organizationally, benchmarking fosters a culture of metrics-driven decision-making and continuous improvement to boost outcomes over time.
With robust processes and leadership commitment, project benchmarking can elevate your PMO to high performance. So, approach it as an ongoing journey to maximize impact.
