Benchmarking is the process of identifying "best practice"
in relation to both products (including) and the processes by which those
products are created and delivered. The search for "best practice" can taker
place both inside a particular industry, and also in other industries (for
example - are there lessons to be learned from other industries?).
The objective of benchmarking is to understand and evaluate
the current position of a business or organisation in relation to "best
practice" and to identify areas and means of performance improvement.
The Benchmarking Process
Benchmarking involves looking outward (outside a particular business,
organisation, industry, region or country) to examine how others achieve their
performance levels and to understand the processes they use. In this way benchmarking
helps explain the processes behind excellent performance. When the lessons
learnt from a benchmarking exercise are applied appropriately, they facilitate
improved performance in critical functions within an organisation or in key
areas of the business environment.
Application of benchmarking involves four key steps:
(1) Understand in detail existing business processes
(2) Analyse the business processes of others
(3) Compare own business performance with that of others analysed
(4) Implement the steps necessary to close the performance
gap
Benchmarking should not be considered a one-off exercise. To be
effective, it must become an ongoing, integral part of an ongoing improvement
process with the goal of keeping abreast of ever-improving best practice.
Types of Benchmarking
There are a number of different types of benchmarking, as summarised
below:
Type
Description
Most Appropriate for the Following
Purposes
Strategic
Benchmarking
Where businesses
need to improve overall performance by examining the long-term strategies
and general approaches that have enabled high-performers to succeed.
It involves considering high level aspects such as core competencies,
developing new products and services and improving capabilities for
dealing with changes in the external environment.
Changes resulting
from this type of benchmarking may be difficult to implement and take
a long time to materialise
Re-aligning
business strategies that have become inappropriate
Performance
or Competitive Benchmarking
Businesses
consider their position in relation to performance characteristics
of key products and services.
Benchmarking partners are drawn
from the same sector. This type of analysis is often undertaken through
trade associations or third parties to protect confidentiality.
Assessing
relative level of performance in key areas or activities in comparison
with others in the same sector and finding ways of closing gaps in
performance
Process
Benchmarking
Focuses 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 often results in short term benefits.
Achieving
improvements in key processes to obtain quick benefits
Functional
Benchmarking
Businesses
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.
Improving
activities or services for which counterparts do not exist.
Internal Benchmarking
Involves
benchmarking businesses or operations from within the same organisation
(e.g. business units in different countries). The main advantages
of internal benchmarking are that access to sensitive data and information
is easier; standardised data is often readily available; and, usually
less time and resources are needed.
There may be fewer barriers
to
implementation as practices 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.
Several
business units within the same organisation exemplify good practice
and management want to spread this expertise quickly, throughout the
organisation
External
Benchmarking
Involves analysing
outside organisations that are known to be best in class. External
benchmarking provides opportunities of learning from those who are
at the "leading edge".
This type of benchmarking can take up significant
time and resource to ensure the comparability of data and information,
the credibility of the findings and the development of sound recommendations.
Where examples
of good practices can be found in other organisations and there is
a lack of good practices within internal business units
International
Benchmarking
Best practitioners
are identified and analysed elsewhere in the world, perhaps because
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
Where the
aim is to achieve world class status or simply because there are
insufficient"national" businesses against which to benchmark.
