BENCHMARKING

Benchmarking is the process of improving performance by continuously identifying,

understanding, and adapting outstanding practices and processes found inside and outside an
organization. Moving from where we are to where were want to be is the essence of
Benchmarking. It is a process of comparing & measuring own business processes with that of
business leaders anywhere in the world with a view to gaining information & understanding
of their methods & process, & then adopting it in the own organisation for gaining
improvement in performance to a higher level.
What are others performance
levels? How did they get there?

What is our performance

level? How do we do it?

Creative
Adaptation

Breakthrough Performance

Benchmarking focuses on the improvement of any given business process by

exploiting the "best practices" rather than merely measuring the best performance. Best
practices are the cause of best performance. Companies studying best practices have the
greatest opportunity for gaining a strategic, operational, and financial advantage. The
systematic discipline of benchmarking is focused on identifying, studying, analyzing, and
adapting best practices and implementing the results. To consistently get the most value from
the benchmarking process, senior management may discover the need for a significant culture
change. That change, however, unleashes benchmarkings full potential to generate large
paybacks and strategic advantage.
The benchmarking process involves comparing ones firm performance on a set of
measurable parameters of strategic importance against that of firms known to have achieved
best performance on those indicators. Development of benchmarks is an iterative and
ongoing process that is likely to involve sharing information with other organizations
working with them towards an agreeable metrology. Benchmarking should be looked upon as
a tool for improvement within a wider scope of customer focused improvement activities and
should be driven by customer and internal organization needs. Benchmarking is the practice
of being humble enough to admit that someone else is better at something and wise enough to
learn how to match and even surpass them at it.
Good benchmarking exercise produces two types of information; quantitative data
that are used to measure current performance & set future target, & qualitative information on
the design & adoption of Key Success factors that explains how the benchmarked company
became the leader in that function. It has been experienced by the companies that key success
factors almost always point towards: (a) Leadership & (b) involvement & motivation of
people to the process of improvements. Many companies adopt benchmarking process for
strategic planning method to identify key success factors. Benchmarking provides the ways &
means for changing a companys culture & attitude of doing things world class level, &
thereby brings long-term & larger gains.

Types of benchmarking
There are four different types of benchmarking which consist of: internal
benchmarking, competitive benchmarking, functional or industry benchmarking, and process
or generic benchmarking. Before deciding to benchmark, a company needs to determine what
it is they want to benchmark.
i.

ii.

iii.

iv.

Internal benchmarking: This is benchmarking against operations. It is one of the

simplest forms since most companies have similar functions inside their business
units. Determining the internal performance standards of an organization is the main
objective of internal benchmarking. This enables the sharing of a multitude of
information. The benefit of immediate gain comes from identifying the best internal
procedures and being able to transfer them to other portions of the organization.
Competitive benchmarking: This is a type used with direct competitors. Done
externally, competitive benchmarkings goal is to compare companies in the same
markets which have competing products, services, or work processes. An example
would be McDonalds versus Burger King. Under this type of strategy, it is
advantageous to see what a companys related performance is. Only under certain
conditions with direct competitors, information would be easy to reach. Particularly
information in the public domain would be the most accessible. Competitors may
choose to make it very difficult to obtain their priceless information.
Functional or industry benchmarking: This is performed externally against industry
leaders or the best functional operations of certain companies. The benchmarking
partners are usually those who share some common technological and market
characteristics. They also seem to concentrate on specific functions. Because there are
no direct competitors involved, the benchmarking partner is more willing to
contribute and share. A disadvantage can be the cost and scheduling of the already
overwhelmed benchmarked companies.
Generic benchmarking: This focuses on the best work processes. Instead of directing
the benchmarking to the business practices of a company, the similar procedures and
functions are emphasized. This type can be used across dissimilar organizations.
Although it is thought to be extremely effective, it is difficult to implement. Generic
benchmarking requires a broad conceptualizing of the entire process and a careful
understanding of the procedures. Here we look at processes, which may be similar,
but in different organizations, producing different products, for e.g. airline industry &
hospital industry looking at the process of catering their clients.

Key factors for successful benchmarking are: believing that there is a need for change &
improvement from the present level, determining what should be improved or changed to
make impact on companys performance, & developing a vision of what it should be after the
change or improvement.
Benchmarking process:
Benchmarking is a very structured process that consists of several steps to be taken.
These steps are often provided for in a model. It should be noted that even though the process
is very structured, it should not add complexity to a simple idea. Basically, the structure
should not get in the way of the process. There are usually five stages included in the
benchmarking processes, which are discussed below:
1) Planning the exercise: This step involves identifying the strategic intent of the business or
process to be benchmarked. Many times this information can be obtained by looking at
the companys mission statement which summarizes its main purposes. Then selection of

2)

3)

4)

5)

the actual processes to be benchmarked must be chosen. This consists of identifying

various products produced by the benchmarked company and asking your own company
if using this process will create positive results in the organization. Then the customers
expectations must be identified. Finally, the critical success factors have to be determined
in order to benchmark. These factors are links to successful business results.
Form the benchmarking team: Next step is to select overall team members. These
members should be chosen from various areas of the organization. All members should
cooperate and communicate with one another in order to get the best results out of the
benchmarking process. There are three main teams comprising the overall group. The
lead team is responsible for maintaining commitment to the process throughout the
organization. The preparation team is responsible for carrying out detailed analysis, and
the visit team must carry out the benchmarking visit.
Collect the data: This step involves gathering information on best practice companies and
their performances. Before a company identifies best practice companies, they should
first identify their own processes, products, and services. This step will allow a company
to fully realize the extent of improvements available. Site visits are also an important
factor in collecting data because they allow for a more in-depth understanding of the
processes.
Analyze data for gaps: this step involves determining how your company relates to the
benchmarked company. It allows identification of performance gaps and their possible
causes.
Take action: this step involves determining what needs to be done in order to match the
best practice for the process. Not only should determination of changes be made, but they
also should be implemented.

Different companies have their own benchmarking methods, but no matter which method
is used, the major steps involved are as follows: first, measure the performance of the best-inclass relative to critical performance variables such as cost, productivity, and quality; second,
determine how the levels of performance are achieved; and third, use the information to
develop and implement a plan for improvement

Benchmarking Process

Benchmarking process can be grouped under the cycle of:

PlanSearchObserveAnalyse & Adopt. This cycle does not stop
at adoption of a best practice, it goes on & on in search of superior
practice for performance excellence. In plan we select processes
for benchmarking, form teams, document processes, develop
performance measures search means finding benchmarking partner.
In observe we understand & document the partners process,
performance & practice. Analyse step Identifies gaps in
performance & find the root causes for the gaps and in Adopt we
chooses best practice, that adopt to companys conditions, &
implement changes.
Benefits of Benchmarking: Benchmarking is a tool for quantum improvement in
competitiveness of industries. This can only occur if companies understand the need to
change, are willing to change, & have a vision about what should be the outcome after the
change. Benchmarking is particularly useful for bringing the change & validating proposals
for change. Major benefits are:
Adoption of new practices that overcome previous perception of barriers &
take to new heights.
Acquaintance to diverse & innovative approach to break through for quantum
improvements.
Acceleration to the rate of change & improvement.
Creation of a growth conductive climate & environment where all employees
are involved.
System of working through facts & figures.
Achievement of competitive advantage.
Significant benefit is benchmarking is in creating an attitudinal change for managing
the business through diversity by innovative approach to break through practices.
Benchmarking can benefit both the participating companies by sharing information & data,
because it should be appreciated that no one can excel in all activities.