BENCHMARKING
A benchmark may be defined as a standard or a point of reference against which things may be compared and by which something can be measured and judged.
Benchmarking helps an organization to get ahead of competition. The organizations can possess a large amount of information that help them in taking strategic and other important decisions. Companies that translate this information to knowledge and use it in their planning and decision making are the winners.
The scientific studies conducted by Frederick Taylor in the latter part of the nineteenth century represent an early use of the benchmarking concept. However, the term got popularity much later in the seventh decade of twentieth century. Initially, the concept evolved in companies operating in an industrial environment. Over a period of time, it covered other spheres of business activity. In recent years, different commercial and non-commercial organizations are discovering the value of benchmarking and are applying it to improve their processes and systems.
What is Benchmarking?
In simple words, benchmarking is an approach of setting goals and measuring productivity based on best industry practices. It developed out of the need to have information against which performances can be measured. For example, a customer support engineer of a television company attends a call within forty-eight hours . If the industry norm is that all calls are attended within twenty-four hours, then the twenty-four hours can be a benchmark.
Benchmarking is not panacea for all problems. Rather, it studies the circumstances and processes that help in superior performance. Better processes are not merely copied. Efforts are made to learn, improve and evolve them to suit the organizational requirements. Further, benchmarking exercises are also repeated periodically so that the organization does not lag behind in the dynamic environment.
Benchmarking is a process of continuous improvement in search for competitive advantage. It measures a company’s products, services and practices against those of its competitors or other acknowledged leaders in their field. Xerox pioneered this process in late 70’s by benchmarking its manufacturing costs against those of domestic and Japanese competitors and got dramatic improvement in the manufacturing cost. Firms can use benchmarking process to achieve improvement in diverse range of management functions like:
Maintenanace operations
- Assessment of total manufacturing costs
- Product development
- Product distribution
- Customer services
- Plant utilization levels
- Human resource management
Steps in Benchmarking Process
- Identifying the need for benchmarking: This step will define the objectives of the benchmarking exercise. It also involves selecting the type of benchmarking.
- Clearly understand existing business processes: This step will involve compiling information and data on performance. This will include mapping processes. Information and data are collected by different methods such as interviews, visits and filling of questionnaires.
- Identify best processes: Within the selected framework, best processes are identified. These may be within the same organization or external to it.
- Compare own processes and performance with that of others: While comparing gaps in performance between the organization and better performers is identified. Further, gaps in performance are analysed to seek explanations.
- Prepare a report and implement the steps necessary to close the performance gap: A report on the Benchmarking initiatives containing recommendations is prepared. Such a report includes the action plan(s) for implementation.
- Evaluation: A business organization must evaluate the results of the benchmarking process in terms of improvements vis-à-vis objectives and other criteria set for the purpose. It should also periodically evaluate and reset the benchmarks in the light of changes in the conditions that impact its performance.
