What is Benchmarking?
•Benchmarking is the process of comparing the business processes and performance metrics including cost, cycle time, productivity, or quality to another that is widely considered to be an industry standard benchmark or best practice. Essentially, benchmarking provides a snapshot of the performance of your business and helps you understand where you are in relation to a particular standard. The result is often a business case and "Burning Platform" for making changes in order to make improvements.
•Benchmarking can be simply defined as a continuous process to find and implement best practices that will lead to superior performance. As the definition implies, benchmarking is a process that will make a company s operations lean, and improve quality and productivity
In the quest for increased competitiveness, companies often ask themselves the question, "How are we doing?" Asking this question leads logically to the next question, "Compared to what?" To fully answer this second question involves an examination of a company's own operations, and subsequently comparing the operations with those of other organisations identified to be leaders in the field. Such comparisons are at the heart of benchmarking.
There are three major reasons for an organisation to embark upon benchmarking. These are:
•Benchmarking provides an objective evaluation of a company's business processes against similar processes in other organisations
•Benchmarking serves as a vehicle to source for improvement ideas from other organisations
•Benchmarking broadens an organisation's experience base by providing insights into systems and methods that work and those that don't. It therefore supports the notion of a learning organisation.
The benchmarking process can be applied to all facets of a company's business, be it in products, services or business processes. However, the focus of most benchmarking projects is on business processes because the effective management of these processes, including quality, speed, and service, is of vital importance to achieve superior performance and he more competitive.
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 first book on benchmarking, written by Kaiser Associates, offered a 7-step approach. Robert Camp (who wrote one of the earliest books on benchmarking in 1989) developed a 12-stage approach to benchmarking.
The 12 stage methodology consisted of 1. Select subject ahead 2. Define the process 3. Identify potential partners 4. Identify data sources 5. Collect data and select partners 6. Determine the gap 7. Establish process differences 8. Target future performance 9. Communicate 10. Adjust goal 11. Implement 12. Review/recalibrate
Types of Benchmarking
Depending on the objectives and scope of benchmarking, different types of benchmarking processes can be distinguished depending on what is compared and to whom it is being compared.
Let take a good look at this.
Benchmarking of What?
•Performance benchmarking is a brief evaluation process that compares company performance measures against a standard or target that has been established, or performance data of other organisations.
•Process benchmarking analyses and compares the methods and practices of a participating company's processes in order that another company can learn from the best and improve their own processes. In effect, it involves the identification of best practices that lie behind superior performance.
•Strategic benchmarking is an in-depth analysis aimed at identifying fundamental areas for improvement, i.e. a company's strengths and weak points. Information concerning other company's strategic choices is collected in order to improve a company's own strategic planning and positioning.
Benchmarking against Whom?
•Internal benchmarking is the comparison between a company's different departments, units or subsidiaries, including those based in different countries.
•Competitive benchmarking entails the direct comparison of a company's own performance against its competitors. This is easier in some respects because many external factors that affect performance are similar between the benchmarked companies, but it may be more difficult because of the competitive relationship between the companies, which can make data collection difficult.
•Functional benchmarking involves the comparison of processes against non-competitor companies within the same industry or service area that share common technological or market characteristics. Compared to competitive benchmarking, it is easier to find benchmarking partners, since the relationship between companies is not one of direct competition.
Generic benchmarking focuses on the comparison of a company's own processes against best processes, irrespective of industry or service sector. It studies innovative methods or technologies with the aim of identifying technologies that will lead to breakthroughs. This is particularly relevant for environmental benchmarking because best environmental practices are rarely industry-specific.
Benefits from Benchmarking
•Improving communication
•Professionalizing the organization / processes, or for
•Budgetary reasons
•In outsourcing projects
Cost of Benchmarking
There are costs to benchmarking, although many companies find that it pays for itself. The three main types of costs are:
•Visit costs - This includes hotel rooms, travel costs, meals, a token gift, and lost labour time.
•Time costs - Members of the benchmarking team will be investing time in researching problems, finding exceptional companies to study, visits, and implementation. This will take them away from their regular tasks for part of each day so additional staff might be required.
•Benchmarking database costs - Organizations that institutionalize benchmarking into their daily procedures find it is useful to create and maintain a database of best practices and the companies associated with each best practice
Limitation of Benchmarking
•Benchmarking is a tough process that needs a lot of commitment to succeed.
•Time-consuming and expensive.
•More than once benchmarking projects end with the 'they are different from us' syndrome or competitive sensitivity prevents the free flow of information that is necessary.
•Comparing performances and processes with 'best in class' is important and should ideally be done on a continuous basis (the competition is improving its processes also...).
•Is the success of the target company really attributable to the practice that is benchmarked? Are the companies comparable in strategy, size, model, culture?
•What are the downsides of adopting a practice?
