Benchmarking

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Internal, competitive, functional, generic and collaborative benchmarking. Explanation of Benchmarking.

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Benchmarking example Benchmarking is a systematic tool that allows a company to determine whether its performance of organizational processes and activities represent the best practices. Benchmarking models are useful to determining how well a business unit, division, organization or corporation is performing compared with other similar organizations. A benchmark is a point of reference for a measurement. The term 'benchmark' presumably originates from the practice of making dimensional height measurements of an object on a workbench using a gradual scale or similar tool, and using the surface of the workbench as the origin for the measurements.

Business benchmarking is related to Kaizen and competitive advantage thinking.

use of Benchmarking. Benefits

Improving communication
Professionalizing the organization / processes, or for
Budgetary reasons
In outsourcing projects

Traditionally, performance measures are compared with previous measures from the same organization at different times. Although this can be a good indication of the speed of improvement within the organization, it could be that although the organization is improving, the competition is improving faster...

Five types of Benchmarking

Internal benchmarking (benchmark within a corporation, for example between business units)
Competitive benchmarking (benchmark performance or processes with competitors)
Functional benchmarking (benchmark similar processes within an industry)
Generic benchmarking (comparing operations between unrelated industries)
Collaborative benchmarking (carried out collaboratively by groups of companies (e.g. subsidiaries of a multinational in different countries or an industry organization).

Typical steps in a benchmarking process

Scope definition
Choose benchmark partner(s)
Determine measurement methods, units, indicators and data collection method
Data collection
Analysis of the discrepancies
Present the results and discuss implications / improvement areas and goals
Make improvement plans or new procedures
Monitor progress and plan ongoing benchmark.

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.

Limitations 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?

Book: Christopher E. Bogan, Michael J. English - Benchmarking for Best Practices -

Book: Peter Bolstorff, Robert Rosenbaum - Supply Chain Excellence -

Book: Joe Zhu - Quantitative Models for Performance Evaluation and Benchmarking -

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Recent User Comments

    			 
              - Iran
  	       
  		     Benchmarking in Sailing
  	  		 "I'm trying to do benchmarking in sailing, it's the first time that my country is working in this project therefore I need some useful information in this matter. Is there anybody who can help me?"
  			   
    	  		 0

    			 
              - US
  	       
  		     Benchmarking is a Reference Point
  	  		 "The way I see it, benchmarking is a reference point that is used as a comparison to everything that follows. If there is a new process in manufacturing and an audit it to be administered, then the first one becomes the benchmark to where all others are compared. In addition, when a benchmark is to be set you should make sure that whatever it is has the desired outcome. If a process is put into place for the first time the outcome is mere theory. Therefore, until the planned results occur then and only then can a reference point be applicable i.e. the benchmark. As for Sun Tsu also said, "To win 100 victories in 100 battles is not the acme of skill. To subdue the enemy without fighting is the acme of skill."
  			   
    	  		 0

    			 
  			   Stanley Stringer - USA
  	       
  		     How should I put together a Peer Group?
  	  		 "How do I determine the right companies to compose a Peer Group... Does anybody have an approach or criteria?"
  			   
    	  		 -1

    			 
  			   Dickens - Zambia
  	       
  		     Benchmarking in Community service
  	  		 "I would like to know how best benchmarking can be used in community service by various related companies"
  			   
    	  		 1

    			 
  			   Sylvie - France
  	       
  		     Benchmarking and Quality (ISO 9001)
  	  		 "Hello, I am looking for information about the relation between benchmarking and quality. Is Benchmarking useful in a ISO9001 quality certification process? Thanks for your comments that will help me."
  			   
    	  		 6

Best User Comments

    			   
    			     Leon - Netherlands
  	         
  				   Advantages Generic Benchmarking
  				   "Comparing processes between unrelated industries (Generic Benchmarking) offers the following two advantages for a firm:

1. Possibility to implement a leading practice from another industry into its own industry and gain a competitive advantage (instead of merely eliminating a disadvantage)

2. Easier to get access to data / work together if firms are unrelated."
    			   
        	  		 5

    			   
    			     William - USA
  	         
  				   Benchmarking Quotes
  				   "Nice quotation related to Benchmarking:

If you know the enemy and know yourself, you need not fear the results of a hundred battles.

Sun Tzu c. 544—496 BC, Militairy Strategist and author of The Art of War."
    			   
        	  		 5

    			   
    			     Sylvie - France
  	         
  				   DANTOTSU
  				   "A Japanese word related to benchmarking is: DANTOTSU. It means: The way to be the best out of the bests."
    			   
        	  		 3

    			   
    			     Leon - Netherlands
  	         
  				   Major Benchmarking Mistakes
  				   "Below follows a list that I assembled of the most crucial benchmarking errors:

1. Not having concrete goals and objectives

2. Not establishing the baseline (Going out to make benchmarking visits before a thorough analysis of own processes has been made)

3. Poor realization of improvement plans

4. Transfers of benchmarking personel

5. Too broad benchmarking scope / object

6. Too narrow consideration of potential benchmarking partners

7. Benchmarking tourism

8. Treating benchmarking as a one-off project instead of ongoing continuous process

9. Confusing benchmarking with participating in a survey (improvement plan and action missing)

10. Picking a topic that is too intangible and difficult to measure
"
    			   
        	  		 3

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Benchmarking Education & Events

More Management Methods, Models and Theory

12manage for:

	● Colin (Downey)	Putting together a Peer Group	"You should benchmark using the industries you are in or companies of the same size. It will depend on what your are benchmarking: price, service, product or internal culture, etc. You will also need to workout what it is you expect to find i.e. your benchmarking point. Also consider if they work the same way etc."
	● Angel Zhang (China)	Finding peers in utility industry	"When a firm is moving from a regulated market into a deregulated market, what are the same peers looking for the so called best practice?"

● André Lopes (Portugal)	ISO 9001	"Yes, if you select companies who already have certification in ISO9001."
● Zafar Dar (Pakistan)	Quality Certification Process and Benchmarking	"Yes, benchmarking is one of the important steps if you are qoing to implement TQM in your organisation as you have to define targets for quality improvement in products or services. ISO 9001 provides you framework for a Quality Management System that will only certify your own systems and procedures. It also provides you guidelines for continual improvement. But benchmarking is not a requirement of ISO as such."
● (USA)	ISO9001	"Yes, benchmarking is setting a reference point so to speak. Therefore, as it was stated above choose a company that is already certified and use their example. For protocols do an initial audit but make sure they are correctly followed. Then some time later do another audit on that same set of protocols and compare how they had been followed during the time between audits. The first becomes the benchmark. In addition, doing this will check how well training is accomplished."

	● Thomas Campbell (USA)	Top 25 Benchmarking Mistakes	"I found some more in a presentation by Norma Jo Greenlee of the U.S. Patent and Trademark Office - let's try to make at least a top 25 of benchmarking mistakes: 11. Not examining own process (~2) 12. Take "Feel Good" trip that isn't needed (~7) 13. Lack of team commitment 14. Not performing enough upfront research 15. Not going outside of own industry (~6) 16. Poor preparation of site visits 17. Failing to ensure adequate management commitment 18. Poor communication during the benchmark study"
	● Joanne Friedman (Canada)	Benchmarking Errors	"My list: 19. Goals and Objectives do not align with a desired business outcome 20. Selection criteria for benchmarking are out of context to desired goals 21. Benchmarks that do not translate across business processes or business operations 22. Models and methods used to evaluate benchmarks are based on a single criterion 23. No executive champion or support from the outset"