BENCHMARKING

ABSTRACT
Benchmarking is a process by which you can find
answers to questions regarding the performance of
your business, such as how your business is doing
compared to other businesses, whether you are gauging
your performance based on the most appropriate
measures, and whether you are using the best
practices. By means of benchmarking, you can collect
data that will help you answer these questions, and that
will show you what you can achieve and how you can
achieve it. Benchmarking is a systematic and ongoing
process of identifying and understanding the best
practices and processes of other businesses and
organizations, in order to adapt and use them in your
own business, to improve your performance. It is a
continuous learning process, starting with what is
happening around you and extending to the best
practices in all parts of the world. The idea behind
benchmarking consists of defining specific performance
standards in areas such as production costs, cycle
times, and the prices charged. In its beginnings,
benchmarking was used as a means of systematizing
information related to competitors in a certain sector of
an industry, but it soon became obvious that
benchmarking could be used only not only to
understand and compare with competitors, but also to
understand the behavior of any organization, including
those in other industries, whether large or small, public
or private, local or global.
KEYWORDS
Benchmark, improvement, measure, compare, adapt.
1. BENCHMARKING
Benchmarking is a topic of general interest in quality
management. Thus, our discussion here goes beyond
the use of benchmarking in project management alone.
Benchmarking is a popular method for developing
requirements and setting goals. In more conventional
terms, benchmarking can be defined as measuring your
performance against that of best-in-class companies,
determining how the best-in-class achieve those
performance levels, and using the information as the
basis for your own companys targets, strategies, and
implementation. Benchmarking involves research into
the best practices at the industry, firm, or process level.
Benchmarking goes beyond a determination of the
!industry standard.! It breaks the firms activities down
to process operations and looks for the best-in-class for
a particular operation. "or e#ample, $ero# corporation
studied the retailer %% Bean to help them improve their
parts distribution process. Benchmarking goes beyond
the mere setting of goals. It focuses on practices that
produce superior performance. Benchmarking involves
setting up partnerships that allow both parties to learn
from one another. &ompetitors can also engage in
benchmarking, providing they avoid proprietary issues.
Benchmarking projects are like any other major project.
Benchmarking must have a structured methodology to
ensure successful completion of thorough and accurate
investigations. 'owever, it must be fle#ible to
incorporate new and innovative ways of assembling
difficult-to-obtain information. It is a discovery process
and a learning e#perience.
(
1.1. Types of Benchma!"n#
)rocess benchmarking - the initiating firm focuses its
observation and investigation of business processes
with a goal of identifying and observing the best
practices from one or more benchmark firms. *ctivity
analysis will be required where the objective is to
benchmark cost and efficiency+ increasingly applied to
back-office processes where outsourcing may be a
consideration.
Financial benchmarking - performing a financial
analysis and comparing the results in an effort to assess
your overall competitiveness and productivity.
Benchmarking from an investor perspective
e#tending the benchmarking universe to also compare
to peer companies that can be considered alternative
investment opportunities from the perspective of an
investor.
Performance benchmarking - allows the initiator firm
to assess their competitive position by comparing
products and services with those of target firms.
Product benchmarking - the process of designing new
products or upgrades to current ones. This process can
sometimes involve reverse engineering which is taking
apart competitors products to find strengths and
weaknesses.
Strategic benchmarking - involves observing how
others compete. This type is usually not industry
specific meaning it is best to look at other industries.
Functional benchmarking - a company will focus its
benchmarking on a single function in order to improve
the operation of that particular function. &omple#
functions such as 'uman ,esources, "inance and
*ccounting and Information and &ommunication
Technology are unlikely to be directly comparable in
cost and efficiency terms and may need to be
disaggregated into processes to make valid comparison.
1.$. %ROCED&RE
There is no single benchmarking process that has been
universally adopted. The wide appeal and acceptance of
benchmarking has led to various benchmarking
methodologies emerging. The most prominent
methodology is the -( stage methodology by ,obert
&amp .who wrote the first book on benchmarking in
-/0/1 .The -( stage methodology consisted of -. 2elect
subject ahead (. 3efine the process 4. Identify potential
partners 5. Identify data sources 6. &ollect data and
select partners 7. 3etermine the gap 8. 9stablish
process differences 0. Target future performance /.
&ommunicate -:. *djust goal --. Implement -(.
,eview;recalibrate. The following is an e#ample of a
typical shorter version of the methodology<
1.Identify your problem areas - Because
benchmarking can be applied to any business process
or function, a range of research techniques may be
required. They include< informal conversations with
customers, employees, or suppliers+ e#ploratory
research techniques such as focus groups+ or in-depth
marketing research, quantitative research, surveys,
questionnaires, re-engineering analysis, process
mapping, quality control variance reports, or financial
ratio analysis. Before embarking on comparison with
other organi=ations it is essential that you know your
own organi=ation>s function, processes+ base lining
performance provides a point against which
improvement effort can be measured.
.Identify other industries that have similar
processes - "or instance if one were interested in
improving hand offs in addiction treatment he;she
would try to identify other fields that also have hand off
challenges. These could include air traffic control, cell
phone switching between towers, transfer of patients
from surgery to recovery rooms.
!.Identify organi"ations that are leaders in these
areas - %ook for the very best in any industry and in
any country. &onsult customers, suppliers, financial
analysts, trade associations, and maga=ines to
determine which companies are worthy of study.
#.Survey companies for measures and practices -
&ompanies target specific business processes using
detailed surveys of measures and practices used to
identify business process alternatives and leading
companies. 2urveys are typically masked to protect
confidential data by neutral associations and
consultants.
4
$.%isit the &best practice& companies to identify
leading edge practices - &ompanies typically agree to
mutually e#change information beneficial to all parties
in a benchmarking group and share the results within
the group.
'.Implement ne( and improved business practices -
Take the leading edge practices and develop
implementation plans which include identification of
specific opportunities, funding the project and selling
the ideas to the organi=ation for the purpose of gaining
demonstrated value from the process.
$. AS%ECTS O' BENCHMARKING
$.1. Why Benchma!(
Benchmarking is practiced<
- *s an enabler for achieving and maintaining
high levels of competitiveness.
- *s a measurement of business performance
against the best of the best through a
continuous effort of constantly reviewing
processes and methods.
- *s a process which can characteri=ed by a
standard and variables.
- *s a continuous process of measuring products)
services and business practices against the
toughest competitors and those organi=ations
recogni=ed as industry leaders.
- To emulate the by continuously implementing
change and measuring performance.
$.$. The Bene)*s Of Benchma!"n#
The benefits of competitive benchmarking include<
- &reating a culture that values continuous
improvement to achieve e#cellence.
- 9nhancing creativity by devaluing the notinvented-
here syndrome.
- Increasing sensitivity to changes in the e#ternal
environment.
- 2hifting the corporate mind-set from relative
complacency to a strong sense of urgency for
ongoing improvement.
- "ocusing resources through performance
targets set with employee input.
- )rioriti=ing the areas that need improvement.
- 2haring the best practices between
benchmarking partners.
$.+. Some Dan#es Of Benchma!"n#
Benchmarking is based on learning from others, rather
than developing new and improved approaches. 2ince
the process being studied is there for all to see, a firm
will find that benchmarking cannot give them a
sustained competitive advantage. *lthough helpful,
benchmarking should never be the primary strategy for
improvement. &ompetitive analysis is an approach to
goal setting used by many firms. This approach is
essentially benchmarking confined to ones own
industry. *lthough common, competitive analysis
virtually guarantees second-rate quality because the
firm will always be following their competition. If the
entire industry employs the approach it will lead to
stagnation for the entire industry, setting them up for
eventual replacement by outside innovators.
$.,. C"*"c"sm Of Benchma!"n#
*s with any new concept there are those who are in
favor of the idea and those who oppose
or critici=e it. Benchmarking should not be used as is a
way to set goals. Those who are responsible for
meeting specific goals must understand all of the
processes that are required to make the goal a reality.
?ne of the criticisms of benchmarking is that it can be
considered as spying on the competition .Bo#well,
-//51. This is not truth. Benchmarking is not spying on
the competition but keeping up with what they and the
rest of the industry are doing. In @apan, benchmarking
is a part of their manager>s job descriptions .Bo#well,
-//51. This is one of the ways that the @apanese are
able to keep up with and surpass others in industries
such as automobiles, motorcycles, electronics, etc.
5
+. -ERO- COR%ORATION
Benchmarking can be called the management tool that
revived $ero#. $ero# defines benchmarking as the
Acontinuous process measuring our products, services,
and practices against our toughest competitors or those
companies recogni=ed as leaders .)arker, -//71. The
$ero# of today is not the $ero# of the si#ties and
seventies. 3uring that time period the organi=ation
e#perienced market erosion from competitors,
primarily @apanese. These competitors were marketing
higher quality products in the Bnited 2tates at the same
price or lower as $ero#. $ero# found that the @apanese
were able to assemble quality products at a low price.
This was hard for $ero# to grasp because they were the
first to develop the photocopy and their name had come
to be synonymous with photocopies. 'ow could the
@apanese be beating them at their own gameC $ero#
found that they had to regroup. In doing this they used
reverse engineering and made competitive
benchmarking a fundamental part of their operations by
the early eighties. $ero# began to study other
organi=ations within and out of their industry. By -/04,
$ero# had bench marked more than (4: process
performance areas in their operation. They looked at all
aspects of their business. Identifying the best processes
used by others, $ero# adapted them for their own use.
This is how they regained their core competency and
strategic advantage in the photocopying industry
.Brogan, -//51.