Benchmarking

What is Benchmarking?

Benchmarking is the systematic process of measuring an organization's performance, processes, or practices against a standard of reference. That reference might be an internal historical baseline, a direct competitor, an industry average, or a best-in-class organization from a different sector entirely.

The concept originated in manufacturing during the late 1970s when Xerox studied Japanese competitors to understand why their unit production costs were dramatically lower. Since then, benchmarking has expanded to virtually every business function, from customer service response times to accounts payable processing costs to travel and expense management efficiency.

What distinguishes benchmarking from simple comparison is its structured methodology. A proper benchmarking exercise defines specific metrics, identifies appropriate comparison partners, collects data using consistent methods, analyzes the performance gap, and creates an action plan to close it. Without that structure, comparing numbers across organizations produces misleading conclusions because differences in company size, industry, geography, and accounting practices distort raw figures.

Types of Benchmarking

Benchmarking takes several forms depending on what an organization wants to learn and whom it compares against.

• Internal benchmarking: Comparing performance across departments, offices, or time periods within the same organization. A company with ten regional offices might compare per-trip travel costs across locations to identify which offices consistently book more cost-effective itineraries.
• Competitive benchmarking: Measuring performance against direct competitors. This type is harder because competitors rarely share operational data voluntarily. Companies typically rely on industry surveys, public filings, and benchmarking consortia like the Global Business Travel Association (GBTA) for comparison data.
• Functional benchmarking: Comparing a specific function with organizations in different industries. A logistics company might benchmark its expense forecasting accuracy against a retail chain's approach, since both manage large volumes of distributed spending.
• Strategic benchmarking: Analyzing the strategies and business models of market leaders to identify fundamental differences in approach rather than just differences in metrics.
• Process benchmarking: Focusing on a specific workflow (such as invoice processing or travel booking) and comparing its speed, cost, and error rate against a peer or best-practice standard.

How Does Benchmarking Apply to Travel and Expense Programs?

Travel and expense (T&E) is one of the largest controllable cost categories for most companies, making it a prime target for benchmarking. GBTA's Business Travel Index reports that average per-trip spending rose to $1,128 in 2025, up 35% from $834 the prior year [1]. Without benchmarks, a finance leader has no way to know whether that figure reflects market-rate pricing or program inefficiency.

T&E benchmarking typically covers four dimensions:

GBTA and ASTA's 2025 benchmarking study found that companies with moderate or high travel management enforcement spend about 62% more on T&E per employee than companies with no enforcement at all [2]. That counterintuitive finding reflects the fact that more enforcement correlates with more travel activity (not waste), since managed programs make travel easier to approve and book.

Best Practices for Business Benchmarking

Benchmarking produces actionable insights only when the methodology is sound. Five practices distinguish useful benchmarking from misleading comparisons.

Define metrics before collecting data. A benchmarking exercise that starts with "let's see how we compare" produces confusion. Start by selecting 3-5 specific KPIs tied to business objectives. For a T&E program, that might include average domestic airfare, hotel night cost, expense report processing time, and policy compliance rate. Navan's travel benchmarking data lets finance teams compare their program against aggregated industry averages across these specific metrics.

Normalize for company characteristics. Raw spend comparisons between a 500-person software company and a 50,000-person manufacturer reveal nothing useful. GBTA's benchmarking model accounts for revenue, employee count, number of corporate locations, and operational intensity to produce peer-adjusted estimates [2]. Any internal benchmarking effort should control for similar variables.

Benchmark processes, not just outcomes. Knowing that your average hotel rate is 15% above the industry median tells you there's a gap. Understanding that the gap exists because your policy doesn't require advance booking tells you how to close it. Process benchmarking examines the steps, approvals, and tools involved to explain the "why" behind outcome numbers. Tracking T&E KPIs like booking lead time and approval cycle time often surfaces the root cause.

Establish a regular cadence. A one-time benchmarking exercise provides a snapshot. Quarterly or semi-annual reviews reveal trends and show whether improvement efforts are working. The T&E industry changes constantly: airfare pricing, hotel rates, and expense analytics capabilities all shift with market conditions.

Act on the findings. Benchmarking without follow-through is an academic exercise. Every benchmarking cycle should produce a short list of changes (policy updates, process adjustments, tool configurations) with owners and deadlines.

When Should You Consider Alternatives to Benchmarking?

Benchmarking is valuable for established processes with measurable outputs, but it has limitations that organizations should recognize.

• Benchmarking against the wrong peer group can be worse than no benchmarking at all. A mid-market company comparing its T&E program to a Fortune 50 enterprise will find metrics that are structurally different for reasons unrelated to performance.
• Highly innovative or unique processes may not have relevant benchmarks. If a company is pioneering a new approach to cost center allocation, there may be no comparable standard to measure against.
• Over-reliance on benchmarks can suppress innovation. When organizations focus exclusively on matching industry averages, they may miss opportunities to fundamentally rethink a process rather than incrementally improve it.

In these situations, goal-based performance management (setting internal targets based on business objectives rather than peer comparisons) can complement or replace external benchmarking.

Related Terms

• Expense Report: The document employees submit to itemize business expenditures for reimbursement, providing the raw data that feeds T&E benchmarking metrics.
• Corporate Travel Policy: The set of rules governing how employees book and expense business travel, which establishes the compliance standards benchmarking measures against.
• Variable Expense: A cost that fluctuates with business activity volume, making it a natural candidate for benchmarking against industry norms.

Sources

[1] GBTA, "Business Travel Index Outlook 2025: Annual Global Report and Forecast," July 2025. https://gbta.org/es/global-business-travel-spending-to-reach-1-57-trillion-in-2025-amid-trade-policy-uncertainty-and-economic-risk-according-to-new-gbta-forecast/

[2] GBTA and ASTA, "ROI of Travel Management: Company View Benchmarking Report," November 2025. https://gbta.org/wp-content/uploads/2025-GBTA-x-ASTA-ROI-Company-View-Benchmarking-Report_-FINAL-Nov-2025.pdf