What Is Benchmarking?

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.


Purpose of Benchmarking

The overriding purpose in benchmarking is of course to improve the competitive position of a company. However, unlike other quality and management tools, benchmarking achieves this objective through:


Knowing Yourself

Benchmarking provides an opportunity for a company to take stock and gain a better understanding of the efficiency and effectiveness of its business processes. An analysis and understanding of its strengths and weaknesses will also have been made. The company will, therefore, be in a better position to exploit its advantages and to improve upon its weaknesses.

 

Knowledge of the Industry Leaders or Competitors

An external focus is provided through the benchmarking process. The reason is that benchmarking requires an understanding of, and a comparison with, companies that are clearly superior Furthermore, such understanding and comparison will be a powerful driving force for positive change within the company.

 

Incorporating the Best

Learning from those that are better is the core of the benchmarking process. It is through such learning that companies identify and seek to incorporate best practices into their own operations. In this regard, the test' in benchmarking is a relative term. It refers to business practices that are significantly superior compared to one's own. This means that the identified 'best' practices could indeed be world-class, but more often, may not be.

 

Gaining Superiority

Through careful benchmarking investigations and a process of continually incorporating the best practices into its business operations, the organisation will gain a clear lead over others in the marketplace.

 

The Benchmarking Process

In general, the benchmarking process consists of four phases, each of which requires the completion of a number of action steps. The following provides a brief description of these phases as well as the key questions that need to be addressed in each of these phases.

Phase One: Planning

This phase is designed to develop the plan for conducting the benchmarking investigation. The key questions that have to be addressed are:

  • What is to be benchmarked?
  • Who will be the benchmark partners?
  • What is the method of data collection?

 

This phase will form the basis for the entire benchmarking investigation and consequently, every effort should be made to complete this phase as thoroughly as possible.

 

Phase Two : Analysis

In this phase, the data collected in the benchmarking study is analysed so as to provide a basis for comparison. The key questions in this phase are:

  • What is the performance of the benchmark partners?
  • What is our performance compared to them?
  • Why are they better?
  • What can we learn from them?
  • How can we apply the lessons to our organisation?

 

Phase Three: Integration

The objective of this phase is to develop goals and integrate them into the benchmarked process so that significant performance improvements are made, The key questions in this phase are:

  • Has management accepted the findings?
  • Do our goals need to be modified based on the findings?
  • Have the goals been clearly communicated to all involved parties?

 

Phase Four : Action

In this phase, the action plans needed to achieve the goals decided upon in phase 3 will be developed. Recalibration of the benchmarks is also a step of this phase. The key questions that need to be addressed are:

  • Will the plans allow the achievement of the stated goals?
  • How will progress be tracked?
  • What is the schedule for recalibration of the benchmarks?

     

The above elements are captured and formalised in the ten-step benchmarking process model of Xerox (See Figure 1). However, getting started in the benchmarking process requires one additional step which is not included as an intrinsic part of the model. This step, Step Zero, is a preparatory step which is designed to place benchmarking activities on a firm footing.

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