Concept
What is Benchmarking?
We have already discussed some definitions of Benchmarking but at this juncture it is important to understand the basic concept of Benchmarking and 8its purpose. We have seen that in broader sense Benchmarking is comparison of performance. It can take many forms but usually it consists of giving scores to various aspects of product, service or process and then comparing these scores with the leader’s scores. The scores are given against certain parameters or identified areas, which need improvement (Harper, 2005). Basically Benchmarking is a practical Management tool for improving performance by learning from best practices and the processes by which they are achieved. In short, it is a way of learning and making the most of other people’s experience and expertise and avoiding the duplication of efforts,rather avoiding “reinventing the wheel” (www.dgroups.org).
Benchmarking
The purpose of Benchmarking is to help improve the effectiveness of process,product quality and delivery of services. In all it helps the organisations to keep themselves on a pedestal and compare themselves with their competitors in turn helping them to improve. As a result the organisations can be more creative and innovative in their efforts and can develop a competitive edge over their competitors. Benchmarking can be considered as a strategic tool for building competitive advantage. The main objective of Benchmarking is to understand and evaluate the current position of an organisation, identify the areas, which needs improvement and work on the ways and means of performance improvement.
Let us now see different types of Benchmarking to understand the concept in a better manner.
Types of Benchmarking
Benchmarking can be of different types. It depends on the organizations to see, which type of benchmarking is the most useful for them. The different types of benchmarking can broadly be classified as follows:
1. Strategic Benchmarking
2. Performance or competitive Benchmarking
3. Process Benchmarking
4. Functional Benchmarking
5. Internal Benchmarking
6. External Benchmarking
7. International Benchmarking
What is Benchmarking?
We have already discussed some definitions of Benchmarking but at this juncture it is important to understand the basic concept of Benchmarking and 8its purpose. We have seen that in broader sense Benchmarking is comparison of performance. It can take many forms but usually it consists of giving scores to various aspects of product, service or process and then comparing these scores with the leader’s scores. The scores are given against certain parameters or identified areas, which need improvement (Harper, 2005). Basically Benchmarking is a practical Management tool for improving performance by learning from best practices and the processes by which they are achieved. In short, it is a way of learning and making the most of other people’s experience and expertise and avoiding the duplication of efforts,rather avoiding “reinventing the wheel” (www.dgroups.org).
Benchmarking
The purpose of Benchmarking is to help improve the effectiveness of process,product quality and delivery of services. In all it helps the organisations to keep themselves on a pedestal and compare themselves with their competitors in turn helping them to improve. As a result the organisations can be more creative and innovative in their efforts and can develop a competitive edge over their competitors. Benchmarking can be considered as a strategic tool for building competitive advantage. The main objective of Benchmarking is to understand and evaluate the current position of an organisation, identify the areas, which needs improvement and work on the ways and means of performance improvement.
Let us now see different types of Benchmarking to understand the concept in a better manner.
Types of Benchmarking
Benchmarking can be of different types. It depends on the organizations to see, which type of benchmarking is the most useful for them. The different types of benchmarking can broadly be classified as follows:
1. Strategic Benchmarking
2. Performance or competitive Benchmarking
3. Process Benchmarking
4. Functional Benchmarking
5. Internal Benchmarking
6. External Benchmarking
7. International Benchmarking
The description of different types is given in Table.
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| Types of Benchmarking |
Performance Benchmarking
Benchmarking is mainly related to assess the performance level of organizations or individuals. Performance Benchmarking specifies this
concept. In this type the performance information collection is generally expressed in measurable, quantifiable units and making comparisons with other compatible organizations. The performance benchmark parameters are generally measured for a longer duration spread over a period of two to three years for effective monitoring and for witnessing the improvement.
It is also known as competitive Benchmarking. The main aim of this type of Benchmarking is to assess the performance levels in key areas or activities in comparison with the ‘market leaders’ and finding ways to improve the performance and innovate. This type of benchmarking is very important keeping in mind the strategic perspective as it helps in building a competitive advantage.
Performance Benchmarking answers the most important questions:
• What are the most important performance yardsticks?
• Where do we rank, compared with others?
Value of Benchmarking
Benchmarking is not only a concept but it is a proven tool adopted by management very successfully. Benchmarking not only improves the
performance but also brings the value addition. The value addition can be in the form of the following:
• Helps identify and facilitate sharing of key performance factors for peer organizations.
• Evaluates performance measures and goal-setting as it relates to key stakeholders like customers, investors, regulators, government and others.
• Encourages collaboration on the development of industry performance measurements.
• While organization can benefit from a single quality practice, the impact of moving from “Conformance” thinking to “performance” thinking yields dramatic business improvements.
Features of Benchmarking
The main features of benchmarking are as follows:
• It is a managerial tool.
• It is a process of continuous learning and this learning comes from others through exchange of knowledge experiences.
• It is to identify best practices and compare with current performance.
• It is to add the value to utility performance.
• It is a practical approach in which step changes in performance can be achieved by replicating the best practices already undertaken by someone else. It provides better understanding of the `big picture’ and gaining a broader perspective of the interplay of the enablers that facilitate the implementation of good practice.
• It gives impetus for seeking new ways of doing things which comes through learning only. So it provides opportunities for staff to learn new skills and be involved in the transformation process from the outset.
• It promotes a culture that is receptive to fresh approaches and ideas and creates an atmosphere of awareness.
• It gives the greater confidence to staff in developing and applying new approaches because it is already tested and applied somewhere else.
• It helps to improve quality, productivity and assist to identify priorities for improvement.
• It allows a wide range of performance indicators to be studied and performance shortfall to be clearly seen.
• It is for standardization.
• It is for validation of data.
• It is to enhance performance of utility through data collection and analysis.
• The last and most important feature is to satisfy customers and to develop interest and motivation within the organization with an urge to improve performance.
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