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.

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 benchmarking‟s full potential to generate large

paybacks and strategic advantage.

The benchmarking process involves comparing one‟s 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 company„s culture & attitude of doing things world class level, &

thereby brings long-term & larger gains.

What is our performance

level? How do we do it?

What are others‟ performance

levels? How did they get there?

Breakthrough Performance

Creative

Adaptation

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. 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.

ii. Competitive benchmarking: This is a type used with direct competitors. Done

externally, competitive benchmarking‟s goal is to compare companies in the same

markets which have competing products, services, or work processes. An example

would be McDonald‟s versus Burger King. Under this type of strategy, it is

advantageous to see what a company‟s 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.

iii. 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.

iv. 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 company„s 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 company‟s mission statement which summarizes its main purposes. Then selection of

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 customer‟s

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.

2) 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.

3) 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.

4) 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.

5) 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-in-

class 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:

Plan–Search–Observe–Analyse & 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 partner„s 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 company„s 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.