BENCHMARKING

Definition:

Benchmarking is the process of identifying best practices in relation to both products and or process by which those products are created and delivered. The search for best practices is both internal and external in terms of industry. The objective of benchmarking is to understand and evaluate the current position of a firm in relation to best practices and to identify areas and means of performance improvement.

The Benchmarking process involves four key steps;

1. Understanding in detail existing business processes

2. Analyze the business process of others

3. Compare own business performances with that of others as analyzed.

4.  Implement the steps necessary to close the performance gap.

TYPES OF BENCHMARKING

Strategic Benchmarking:- Where business need to improve overall performance by examining the long term strategies and general approaches that have enabled high performance to succeed. It involves considering high level aspects such as core com potencies. Developing new products and services and improving capabilities for dealing with changes in the external environment. Changes resulting fromthis type of Benchmarking may be difficult to implement and take a long time to materialize.

Performance or Competitive :- Business consider their position in relation to performance characteristics of key products and services. BBenchmarking partners are drawn from the same sector. This type of analysis is often undertaken through trade associations or third parties to protect confidentiality.

Process Benchmarking: - Focuses on improving specific critical process and operations. Benchmarking partners are sought from best practice organizations 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.

Functional Benchmarking: - Business look to benchmark with partners drawn from different business sectors or areas of activity to find ways of improving similar functions or work process. This sort benchmarking can lead to innovation and dramatic improvement.

Internal Benchmarking: - involves benchmarking business or operations from within the same organization for example business units in different countries. The main advantage of internal benchmarking is that access to sensitive data and information is easier; Standardized data is often readily available; and normally less time and resources is needed. There may be fewer barriers to implementation as practices may be relatively easy to transfer across the same organization.

External Benchmarking: - it is the analysis of outise organizations withing the same industry that are known to be best in class. External benchmarking provides opportunities of learning from those who are at the leading edge. However external benchmarking is time consuming and requires resources to ensure the comparability of data and information, the credibility of the finding and the development of sound recommendations.

International Benchmarking: - Best Practitioners are identified and analyzed elsewhere in the world, perhaps because there are too few benchmarking partners within the same country to produce valid results. Globalization 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.

Role/Importance of Benchmarking

1. Benchmarking helps re-align business strategies that have become inappropriate

2. 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.

3. Achieving improvements in key process to obtain quick benefits

4. Improving activities or services for which counterparts do not exist.

5. Several business units within the same organization exemplify good practice and management want to spread this expertise quickly throughout the organization.

6. To achieve world class status.