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Benchmarking exampleBenchmarking 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

  1. Internal benchmarking (benchmark within a corporation, for example between business units)
  2. Competitive benchmarking (benchmark performance or processes with competitors)
  3. Functional benchmarking (benchmark similar processes within an industry)
  4. Generic benchmarking (comparing operations between unrelated industries)
  5. 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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Benchmarking Special Interest Group.

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Forum about Benchmarking.

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Best Practices

The top-rated topics about Benchmarking. Here you will find the most valuable ideas and practical suggestions.

Benchmarking Notes of Caution
1. Be sure apples are being benchmarked with apples only, and not with oranges. Believe me this is not an easy task.

Best Practices or Next Practices?
C.K. Prahalad says best practices take companies only so far. At best they allow firms to catch up with their competitor (...)

Benchmarking for Monopolies?
Reading through the article and the reactions I wonder what benefits a monopoly industry could achieve from benchmarking (...)

Conditions for Successful Benchmarking
Benchmarking is OBTAINED from the observation of other firms that are identified as the best (or sufficiently good) in t (...)

Benchmarking is One Source of Progress
Benchmarking seems to be one source of progress, it is a vision of the way to act to become the best one.
But it is (...)
Airlines Benchmarking
If anybody has review of airlines organization benchmarking, please let me know.. (...)

Hospital Benchmarking
If anyone have review of hospital medical record statistical performance especially in developing countries, please let (...)

Benchmarking and Quality (ISO 9001)
Hello, I am looking for information about the relation between benchmarking and quality. Is Benchmarking useful in a ISO (...)

Expert Tips

Advanced insights about Benchmarking. Here you will find professional advices by experts.

Top 20 Benchmarking Mistakes

Checklist of Things to Avoid
Below follows a list that I assembled of the most crucial benchmarking errors: 1. Not having concrete goals and objecti (...)

How to Avoid Subjectivity in Benchmarking

How to Correct for Environmental Factors
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3 Crucial Elements for Benchmarking

Things to Remember when Planning Benchmarking
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Benchmarking Best Practice
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How to Select the Benchmarking Team

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The Benchmarking Applications and Categories

What can be Benchmarked?
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Avoiding Cognitive Biases During Benchmarking

Classical Example
During World War 2 the statistician A. Wald was assessing the vulnerability of airplanes to enemy fire. All the availabl (...)
Information Sources

Various sources of information regarding Benchmarking. Here you will find powerpoints, videos, news, etc. to use in your own lectures and workshops.

What is Benchmarking?

In this video (with Spanish subtitles) 5 questions about benchmarking are answered: WHAT IS BENCHMARKING? It is an ac (...)

Benchmarking Introduction

Explaining Benchmarking Approach and Process
Introduction into the concept of Benchmarking by Luann Stokke, including the follwoing sections: 1. Benchmarking define (...)

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