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Benchmarking
Benchmarking is a way of determining how well a business unit or organisation is performing compared with other units elsewhere. It sets a business’s measures of its own performance in a broad context and gives it an idea of what is “best practice”. In “The Benchmarking Book”, Michael Spendolini defined benchmarking as a “continuous systematic process for evaluating the products, services or work processes of organisations that are recognised as representing the best practices for the purposes of organisational improvement”.
Historically, measures of corporate performance have been compared with previous measures from the same organisation at different times. Although this gives a good indication of the rate of improvement within the organisation, it gives no indication of where the performance stands in absolute terms. The organisation could be getting better and better; but if its competitors are improving even more, then better and better is not enough.
In their book “Benchmarking: A Tool for Continuous Improvement”, C.J. McNair and H.J. Liebfried describe four different types of benchmarking:
• Internal benchmarking. This is a bit like the process of quality management, an internal checking of the organisation’s standards to see if there is further potential to cut waste and improve efficiency.
• Competitive benchmarking. This is the comparison of one company’s standards with those of another (rival) company.
• Industry benchmarking. Here the comparison is between a company’s standards and those of the industry to which it belongs.
• Best-in-class benchmarking. This is a comparison of a company’s level of achievement with the best anywhere in the world, regardless of industry or national market. The Japanese have a word for it, dantotsu, which means “being the best of the best”.
Benchmarking is a fluid concept which recognises that the relative importance of different processes changes over time as a business changes. For example, a retailer that shifts from selling through stores to selling over the internet suddenly becomes less concerned about customer parking facilities and more concerned about the performance of its fleet of delivery vans. The importance of benchmarking these respective activities changes similarly.
The process of benchmarking often requires that companies put their measures into some sort of public arena where others can use them for comparison. This is usually carried out by a third party, who puts the data in order and then discloses it in a way that does not reveal the identity of any individual data provider. Firms can, of course, recognise their own data and judge where they stand in the pecking order.
The enthusiasm for benchmarking has been fuelled by two things in particular:
• The Japanese development of total quality management and the idea of kaizen, of continuous improvement. This was a system built on careful measurement of industrial activities, followed by close monitoring of those measures. It not only forced managers to make such measurements; it made their competitors do so too.
• The work of Michael Porter on competitive advantage. This forced firms to think more about their competitors and where they stood in relation to them rather than where they stood in terms of their own history.
Further reading Boxwell, R.J., “Benchmarking for Competitive Advantage”, McGraw-Hill, 1994
Camp, R.C., “Benchmarking: The Search for Industry Best Practices that Lead to Superior Performance”, Quality Resources, 1989; Productivity Press, 2006
Karlof, B., “The Benchmarking Management Guide”, Productivity Press, 1993
McNair, C.J. and Liebfried, K.H.J., “Benchmarking: A Tool for Continuous Improvement”, HarperBusiness, 1992
Posted by : RF ( August 5, 2009 ) |
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BIZ_TALKS SITES STRATEGY - II Benchmarking ?
BIZ_TALKS SITES STRATEGY - II Benchmarking ?