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Advanced Performance Management · Performance improvement models and techniques

Benchmarking and Best Practice for ACCA APM

Updated 11 October 2026 · Fact-checked

Benchmarking compares your performance, processes or practices with a standard, such as another unit, a competitor, a best-in-class firm in any industry, or a strategic leader. You identify the gap, find why it exists, adopt better practice and monitor results. Types are internal, competitor, functional and strategic.

Understand Benchmarking and Best Practice

Benchmarking is a continuous process of measuring your products, services and processes against a reference point, then using what you learn to improve. The reference point is often called best practice. Best practice is the method that gives the best known results, not the method that is merely common.

The logic is simple. You cannot tell if a performance level is good unless you compare it with something. A call centre that resolves 70% of queries first time may be strong or weak. The benchmark tells you which.

There are four types you must know.

  • Internal benchmarking compares units within the same organisation, such as branches or divisions. Data is easy to get and it is cheap. But it can only find the best of your own units, so it may miss better practice outside.
  • Competitor (competitive) benchmarking compares you with direct rivals. It shows how you stand in your market. Data is hard to get, and rivals will not share it freely. You rely on published accounts, industry bodies, reverse engineering and customer surveys.
  • Functional (generic) benchmarking compares a function or process with the best in any industry, such as a bank studying a courier firm's delivery tracking. Partners are more willing to share because they are not rivals. Ideas can be new, but they may not transfer easily.
  • Strategic benchmarking compares long-term strategies, business models and choices with those of successful organisations. It is used to shape direction, not fix a process.

Benchmarking is also split into metric benchmarking (comparing numbers and KPIs) and process benchmarking (comparing how work is done). Metrics show the gap. Process study explains it. Closing the gap needs the process view.

Used well, benchmarking supports continuous improvement. Used badly, it becomes copying. It tells you where others are, not where you should be, and the best practice of one firm may not fit your strategy, culture or customers.

Key rules to remember

Performance gap
Gap = Benchmark performance − Own performance
For measures where lower is better, such as cost or defect rate, reverse it: Gap = Own − Benchmark. State the direction clearly.
Percentage gap
Gap % = (Benchmark − Own) ÷ Benchmark × 100
This form is for measures where higher is better. For lower-is-better measures, such as time, cost or defect rate, use Gap % = (Own − Benchmark) ÷ Benchmark × 100. Use the same base throughout. Dividing by your own figure gives a different percentage, so say which base you use.
Benchmarking cycle
Plan → Collect data → Analyse gap → Set targets → Implement → Monitor and repeat
A memory aid for the process, not a fixed ACCA model. Use it to structure answers.

How to solve Benchmarking and Best Practice questions

Use this method for any question on benchmarking, whether it asks you to recommend, evaluate or criticise.

  1. 1Read the requirement and note the verb: explain, recommend, evaluate or discuss limitations. This sets the shape of the answer.
  2. 2Identify what is being benchmarked in the scenario: a process, a cost, a service level or the strategy.
  3. 3Choose the benchmarking type that fits and say why. Match data access, cost and the kind of improvement sought.
  4. 4Calculate or describe the gap using the data given. Show direction and size, and note any measures where lower is better.
  5. 5Explain likely causes of the gap by looking at processes, people, systems and resources, not just the numbers.
  6. 6Recommend actions to close the gap and link them to the organisation's strategy and context.
  7. 7Add limitations and risks: comparability, data quality, cost, resistance, and copying instead of innovating.
  8. 8Finish with how you would monitor progress, using KPIs and repeat reviews.

Quickest way: Type, gap, cause, action, limit

When to use it: Use when time is short and the question asks for advice on a benchmarking proposal in a scenario.

  1. Name the type that fits and give one reason from the scenario.
  2. Quantify the gap in one line if numbers are given.
  3. Give two likely causes tied to the scenario facts.
  4. Give two actions that close the gap.
  5. Add two limitations specific to this case, not generic ones.

Common mistakes in Benchmarking and Best Practice

  • Listing the four types with textbook definitions and nothing else.

    Students memorise definitions and assume that earns marks.

    Fix: Apply each type to the scenario. Say which suits the organisation and why, using its data and industry.

  • Confusing functional with competitor benchmarking.

    Both look outside the organisation.

    Fix: Competitor means direct rivals in the same market. Functional means the best performer of a process in any industry, often a non-rival.

  • Stopping at the gap figure.

    Calculation feels like the complete answer.

    Fix: Explain causes and give actions. A gap shows a problem, not a solution.

  • Assuming benchmark equals target.

    Benchmarks look like ready-made goals.

    Fix: Say the benchmark must be adjusted for scale, strategy, customers and cost structure before it becomes a target.

  • Giving generic limitations only, such as 'it is costly'.

    Students recall a standard list.

    Fix: Tie each limitation to the case: for example, rivals will not share data, or the best firm has a different business model.

  • Treating best practice as one fixed standard.

    The term suggests a single right way.

    Fix: Note that best practice changes and depends on context. Comparing with the best invites copying and may weaken differentiation.

Worked examples

Example 1

A retail bank has 40 branches. Average time to approve a personal loan is 5 days at the group level. Branch X approves in 2 days, and the slowest branch takes 8 days. A rival bank advertises approval in 1 day. The board asks you to recommend which type of benchmarking to use first and to state the gap for the group against the rival. (Assume the figures are comparable.)

Show the solution
  1. Group performance is 5 days. Rival benchmark is 1 day. Lower is better, so Gap = Own − Benchmark = 5 − 1 = 4 days.
  2. Using the benchmark as the base, the lower-is-better formula is (Own − Benchmark) ÷ Benchmark × 100 = (5 − 1) ÷ 1 × 100 = 400%. So own time is 400% above the benchmark (5 days is 500% of the 1-day benchmark). Using own time as the base, 4 ÷ 5 × 100 = 80%, so an 80% cut in own time is needed to match the rival. These are the same gap on two different bases, so state the base used.
  3. Recommend internal benchmarking first. Branch X already achieves 2 days. If the group matched Branch X, the average would fall by 3 days (from 5 to 2). Data is cheap and easy to get, the process is the same, and the staff can share methods quickly.
  4. Explain that competitor benchmarking is useful next, to check the 1-day claim. However, the rival's figure is advertised, may exclude checks, and its process details are not available.
  5. Suggest process benchmarking inside the bank: compare how Branch X handles documents, credit checks and approvals with slow branches, then roll out the better practice.
  6. Note limitations: branches differ in customer mix and loan size, so approval time alone may not be comparable. Faster approval must not weaken credit quality, so also track default rates.

Answer: The gap to the rival is 4 days (5 − 1). Own time is 400% above the benchmark (5 days is 500% of 1 day), and an 80% cut in own time is needed to match the rival. Start with internal benchmarking against Branch X (2 days), then use competitor benchmarking to test the 1-day claim, while tracking default rates alongside speed.

Example 2

A manufacturing company has a warehouse that picks 60 orders per labour hour with 3% picking errors. A firm in another industry, an online grocer, achieves 90 orders per labour hour with 0.5% errors. The operations director wants to adopt the grocer's methods. Evaluate this proposal.

Show the solution
  1. Identify the type. Comparing a warehouse process with a firm in a different industry is functional benchmarking.
  2. Productivity gap: 90 − 60 = 30 orders per hour. Own productivity is 33.3% below the benchmark (30 ÷ 90 × 100). Equivalently, own productivity must rise 50% (30 ÷ 60 × 100) to match it. These are the same gap on two different bases.
  3. Error gap: own error rate is 3% and benchmark is 0.5%, so Gap = 3 − 0.5 = 2.5 percentage points. Lower is better.
  4. Strengths: the grocer is not a rival, so it may share methods. Its process is highly refined and may bring fresh ideas such as layout, scanning and batch picking.
  5. Weaknesses: the grocer handles small, standard items. The manufacturer's goods may be bulky or varied, so the methods may not transfer fully. Investment in technology may be needed and the cost must be weighed against savings.
  6. Recommend a visit and process mapping, adopt the elements that fit, pilot them in one zone, and measure orders per hour and error rate before wider rollout.

Answer: This is functional benchmarking. The gaps are 30 orders per hour (own productivity is 33.3% below the benchmark, and must rise 50% to match it) and 2.5 percentage points in errors. The proposal is worth pursuing but only after adapting the methods to the manufacturer's goods, piloting them and checking the costs against the benefits.

Exam tips

  • Always link the type of benchmarking to the scenario. Marks go to application, not definitions.
  • When numbers are given, calculate the gap and state its direction. Then spend most of your time on causes and actions.
  • Include a balanced view. Examiners often ask for advantages and limitations, so give both with case-based points.
  • Use professional skills marks: show scepticism about data comparability and give a clear, reasoned recommendation to the reader named in the requirement.
  • Do not suggest copying a benchmark blindly. Say it must fit strategy, scale and culture.

Practice questions from Performance improvement models and techniques

Benchmarking and Best Practice in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Benchmarking and Best Practice: frequently asked questions

What is the difference between internal and competitive benchmarking?

Internal benchmarking compares units within your own organisation, so data is easy and cheap to get. Competitive benchmarking compares you with direct rivals, so it shows your market position but data is hard to obtain. Internal finds your best unit. Competitive shows how you rank against the market.

Which type of benchmarking gives the most new ideas?

Functional benchmarking often does, because you study the best performer of a process in any industry. Partners are more open to sharing as they are not rivals. The risk is that their methods may not suit your context.

What are the main limitations of benchmarking in the APM exam?

Key limitations are poor comparability of data, difficulty getting competitor information, cost and time, and the risk of copying instead of innovating. A benchmark may also be the wrong target if your strategy differs. Always tie the limitations to the case.

How do I answer a benchmarking question with numbers?

Calculate the gap and state the direction, remembering that lower is better for costs and errors. Then explain possible causes and suggest actions. Finish with limitations and how you would monitor progress.