Usually benchmarking is treated as a structured process and it is best provided by the development of a step by step model. The important part here is that a proper structure provides the ways and means of conducting benchmarking but it should not be formulated in such a manner so as toBenchmarking create complex situations. The basic structure of any benchmarking process consists of the following five steps. These steps can then be modified according to the needs of the organisations.
1. Element: This involves identifying the product, service or processes one wishes to benchmark.
2. Aspect: This step involves identifying the aspects of the product, service or process, which one wishes to benchmark (e.g. if a product is benchmarked with the market leader of the similar kind of product, then the same aspects can be used to benchmark).
3. Scale: This uses the identified scale, e.g. if comparison is made with the leader, then the same scale of performance measurement can be used.
4. Score: This involves allocating score to each aspect, within the scale. For example, the rating agencies making a scale and giving score against each aspect.
The five basic steps involved in a benchmarking process are
Element
Aspect
Scale
Score
Benchmark
5. Benchmark: This is the final step where the comparison is done between the scores of each aspect with that of the leader.
Let us now see an illustration, which will give an idea as to how the process of benchmarking works. This simple model can be applied anywhere depending on the requirement of the organization.
Illustration
Suppose different aspects related to operations are to be benchmarked with that of the leader. Simple table can be used to compare the results.The aspects which includes staff, suppliers, etc. in the illustration can be measured keeping in mind set standards, which is to be benchmarked or whatever may be viable depending on the need. These can also be represented with the help of charts or with graphical representations and the operational risk can be measured.
We can see that the Gap (Refer illustration) are identified. These gaps can then be filled by reformulating certain strategies of the organisation and then the specified goal(s) of the organization can be met keeping in mind the target score.
This was an overview of the benchmarking process. In the similar manner we can have different models of bench marking. Any type of benchmarking process model should provide an adequate framework for the successful planning and execution of benchmarking exercise (Matters & Evans, 2007).
In the subsequent subsection we will learn a six-step benchmarking model. We do have a five step model also but here we will only see the six-step model as it seems to be best suited for all types of organizations.
Activity 1
Suppose you want to benchmark the financial risk of your organization or the organization you are familiar with, with that of the leaders. Formulate a simple benchmarking model to compare the results with that of leaders.
Application of Benchmarking
Benchmarking can be used for different purposes. It can be for:
1. Identifying and managing risk in the financial sector.
2. 360 Degree appraisals.
3. Benchmarking training for communications.
4. Benchmarking in IT Company.
5. Benchmarking for identifying and merging quality improvement.
One of the most popular benchmarking tool is a 360 degree feedback form,which is used for performance appraisal. A sample of the 360 degree feedback form is given below to help us understand the concept of benchmarking and how it is applied.
Activity 2
Try to formulate a similar kind of feedback form for your organization. You can develop a scale with different aspects.
Six Step Process Model
There are many process models in benchmarking ranging from Four-Steps to Twelve-Steps. Most of them are keyed to the Total Quality Management(TQM), Deming Cycle of Continuous Improvement, PDCA cycle i.e. Plan, do,Check and Act. The most important aspect is that one must first understand in detail ones own process before setting out on a ‘benchmarking expedition’.The simplest process model recommended by GOAL 1 /QPC 2 and APQC has six steps as shown in Table .
1. Element: This involves identifying the product, service or processes one wishes to benchmark.
2. Aspect: This step involves identifying the aspects of the product, service or process, which one wishes to benchmark (e.g. if a product is benchmarked with the market leader of the similar kind of product, then the same aspects can be used to benchmark).
3. Scale: This uses the identified scale, e.g. if comparison is made with the leader, then the same scale of performance measurement can be used.
4. Score: This involves allocating score to each aspect, within the scale. For example, the rating agencies making a scale and giving score against each aspect.
The five basic steps involved in a benchmarking process are
Element
Aspect
Scale
Score
Benchmark
5. Benchmark: This is the final step where the comparison is done between the scores of each aspect with that of the leader.
Let us now see an illustration, which will give an idea as to how the process of benchmarking works. This simple model can be applied anywhere depending on the requirement of the organization.
Illustration
Suppose different aspects related to operations are to be benchmarked with that of the leader. Simple table can be used to compare the results.The aspects which includes staff, suppliers, etc. in the illustration can be measured keeping in mind set standards, which is to be benchmarked or whatever may be viable depending on the need. These can also be represented with the help of charts or with graphical representations and the operational risk can be measured.
We can see that the Gap (Refer illustration) are identified. These gaps can then be filled by reformulating certain strategies of the organisation and then the specified goal(s) of the organization can be met keeping in mind the target score.
This was an overview of the benchmarking process. In the similar manner we can have different models of bench marking. Any type of benchmarking process model should provide an adequate framework for the successful planning and execution of benchmarking exercise (Matters & Evans, 2007).
In the subsequent subsection we will learn a six-step benchmarking model. We do have a five step model also but here we will only see the six-step model as it seems to be best suited for all types of organizations.
Activity 1
Suppose you want to benchmark the financial risk of your organization or the organization you are familiar with, with that of the leaders. Formulate a simple benchmarking model to compare the results with that of leaders.
Application of Benchmarking
Benchmarking can be used for different purposes. It can be for:
1. Identifying and managing risk in the financial sector.
2. 360 Degree appraisals.
3. Benchmarking training for communications.
4. Benchmarking in IT Company.
5. Benchmarking for identifying and merging quality improvement.
One of the most popular benchmarking tool is a 360 degree feedback form,which is used for performance appraisal. A sample of the 360 degree feedback form is given below to help us understand the concept of benchmarking and how it is applied.
Activity 2
Try to formulate a similar kind of feedback form for your organization. You can develop a scale with different aspects.
Six Step Process Model
There are many process models in benchmarking ranging from Four-Steps to Twelve-Steps. Most of them are keyed to the Total Quality Management(TQM), Deming Cycle of Continuous Improvement, PDCA cycle i.e. Plan, do,Check and Act. The most important aspect is that one must first understand in detail ones own process before setting out on a ‘benchmarking expedition’.The simplest process model recommended by GOAL 1 /QPC 2 and APQC has six steps as shown in Table .
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| The Six Step Process Model in Benchmarking |
Advantages of Benchmarking
Benchmarking has proved to be one of the most effective tools for bringing about quantum-leaps in performance. The main advantages of benchmarking are as follows:
• It is an effective ‘wake-up call’ which helps to work as an agent for change.
• It is a practical approach in which 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 of 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.
Disadvantages of Benchmarking
There are certain disadvantages of benchmarking but they are very few.The advantages outweigh the disadvantages, but it is important to know and consider the possible disadvantages so that corrective measures can be planned and implemented to minimize the impact of disadvantages. The few common disadvantages are as follows:
• Difficulties getting agreement on what indicators are to be used.
• Difficulties in defining the data.
• Gives only limited information about how to correct performance shortfalls.
• The projects can be completed quickly but the results may take much longer time.
• Highly ambitious goals may lead to unsuccessful benchmarking process.
• Many organizations avoid the process lest their weaknesses be exposed to their competitors.
• Cultural differences may, lead to some difficulties in applying best practices as happening MNCs.
Mistakes to be Avoided
It is important to avoid some common mistakes to achieve the desired targeted benefits from the benchmarking exercise:
• Benchmarking should not be just for the sake of doing.
• Not defining the data items correctly and consistently and not collecting the data accurately limits its effectiveness.
• Not spending enough time in the beginning to select right framework of performance indicators and subsequently spending too much time on one part of the process at the cost of other key parts.
• Focusing entirely on comparisons of performance measures and ignoring the processes and activities for improvement.
• Relying on pre-existing benchmarks instead of modifying/adapting according to organizational needs.
Benchmarking has proved to be one of the most effective tools for bringing about quantum-leaps in performance. The main advantages of benchmarking are as follows:
• It is an effective ‘wake-up call’ which helps to work as an agent for change.
• It is a practical approach in which 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 of 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.
Disadvantages of Benchmarking
There are certain disadvantages of benchmarking but they are very few.The advantages outweigh the disadvantages, but it is important to know and consider the possible disadvantages so that corrective measures can be planned and implemented to minimize the impact of disadvantages. The few common disadvantages are as follows:
• Difficulties getting agreement on what indicators are to be used.
• Difficulties in defining the data.
• Gives only limited information about how to correct performance shortfalls.
• The projects can be completed quickly but the results may take much longer time.
• Highly ambitious goals may lead to unsuccessful benchmarking process.
• Many organizations avoid the process lest their weaknesses be exposed to their competitors.
• Cultural differences may, lead to some difficulties in applying best practices as happening MNCs.
Mistakes to be Avoided
It is important to avoid some common mistakes to achieve the desired targeted benefits from the benchmarking exercise:
• Benchmarking should not be just for the sake of doing.
• Not defining the data items correctly and consistently and not collecting the data accurately limits its effectiveness.
• Not spending enough time in the beginning to select right framework of performance indicators and subsequently spending too much time on one part of the process at the cost of other key parts.
• Focusing entirely on comparisons of performance measures and ignoring the processes and activities for improvement.
• Relying on pre-existing benchmarks instead of modifying/adapting according to organizational needs.
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