Benchmarking is used for appraising and developing
organizational capability through detailed comparisons with other firms.
Benchmarking is about comparing the methods you use for a particular
process with those of other firms. By examining what they do, you may get
ideas of how you can improve your processes. The benchmarking firm does
not have to be in the same industry; indeed it is often better if they are
not, as this reduces the chances of any conflicts of interest or accusations
of creating a cartel arrangement.
Five stages:
All benchmarking activities tend to go through five stages. These are:
1) Identify the activities or functions that you want to improve.
2) Determine some measure for the functions and construct an internal
baseline.
3) Identify companies that are world class in those activities or
functions.
4) Approach the company and analyse how they do it.
5) Use the learning to redesign your own processes.
Types of Benchmarking:
Strategic Benchmarking is used where organisations
seek to improve their overall performance by examining the long-term
strategies and general approaches that have enabled the high-performers
within their industry to succeed. It involves considering high level
aspects such as core competencies, new product and service development
methods, value chain / supply chain analysis, and capacity for dealing
with environmental change. The proposed changes resulting from this type
of benchmarking may be difficult to implement and the benefits are likely
to take a long time to materialise. It is also important to realise that
by trying to play catch up, you will always be behind the market leaders.
Performance Benchmarking or Competitive
Benchmarking is used where organisations consider their positions
in relation to performance characteristics of key products and services.
Benchmarking partners are drawn from the same sector. However, in the
commercial world, it is common for companies to undertake this type of
benchmarking through trade associations or third parties to protect
confidentiality.
Process Benchmarking is used when the focus is on
improving specific critical processes and operations. Benchmarking
partners are sought from best practice organisations that perform similar
work or deliver similar services. Process benchmarking invariably involves
producing process maps to facilitate comparison and
analysis. This type of benchmarking can result in benefits in the short
term.
Functional Benchmarking or Generic
Benchmarking is used when organisations look to benchmark with
partners drawn from different business sectors or areas of activity to
find ways of improving similar functions or work processes. This sort of
benchmarking can lead to innovation and dramatic improvements.
Internal Benchmarking involves seeking partners from
within the same organisation, for example, from business units located in
different areas. The main advantages of internal benchmarking are that
access to sensitive data and information are easier; standardised data is
often readily available; and, usually less time and resources are needed.
There may be fewer barriers to implementation as practises may be
relatively easy to transfer across the same organisation. However, real
innovation may be lacking and best in class performance is more likely to
be found through external benchmarking.
External Benchmarking involves seeking outside
organisations that are known to be best in class. External benchmarking
provides opportunities of learning from those who are at the leading edge,
although it must be remembered that not every best practice solution can
be transferred to others. In addition, this type of benchmarking may take
up more time and resource to ensure the comparability of data and
information, the credibility of the findings and the development of sound
recommendations. External learning is also often slower because of the
‘not invented here’ syndrome.
International Benchmarking is used where partners are
sought from other countries because best practitioners are located
elsewhere in the world and/or there are too few benchmarking partners
within the same country to produce valid results. Globalisation and
advances in information technology are increasing opportunities for
international projects. However, these can take more time and resources to
set up and implement and the results may need careful analysis due to
national differences. |
