Benchmarking is the process of identifying “ultimate practice” in relation to both products and the processes by which those products are created and delivered. The search for “best practice” can taker place both inside a particular industry, and also in other industries (for example – are there lessons to be learned from other industries?).
The objective of benchmarking is to understand and evaluate the current position of a business or organisation in relation to “best practice” and to identify areas and means of performance improvement.
The Benchmarking Process
Benchmarking involves looking outward (outside a particular business, organisation, industry, region or country) to examine how others achieve their performance levels and to understand the processes they use. In this way benchmarking helps explain the processes behind excellent performance. When the lessons learnt from a benchmarking exercise are applied appropriately, they facilitate improved performance in critical functions within an organisation or in key areas of the business environment.
Application of benchmarking involves four key steps:
(1) Understand in detail existing business processes
(2) Analyse the business processes of others
(3) Compare own business performance with that of others analysed
(4) Implement the steps necessary to close the performance gap
is the process of comparing one’s business processes and performance ratings industry bests and/or best practices ustries. Dimensions typically measured are quality, time and cost. In the process of benchmarking, management identifies the best firms in their industry, or in another industry where similar processes exist, and compare the results and processes of those studied (the “targets”) to one’s own results and processes. In this way, they learn how well the targets perform and, more importantly, the business processes that explain why these firms are successful.
The cobblers would place someone’s foot on a “bench” and mark it out to make the pattern for the shoes. Benchmarking is used to measure performance using a specificindicator unit of measure, productivity per unit of measure, cycle time of x per unit of measure or defects per unit of measure) resulting in a metric of performance that is then compared to others
Also referred to as “best practice benchmarking” or “process benchmarking”, this process is used in management and particularly to best practice companies’ processes, usually within a peer group defined for the purposes of comparison. This then allows organizations to develop plans on how to make improvements or adapt specific best practices, usually with the aim of increasing some aspect of performance. Benchmark There is no single benchmarking process that has been universally adopted. The wide appeal and acceptance of benchmarking has led to the emergence of various benchmarking methodologies may be a one-off event, but is often treated as a continuous process in which organizations continually seek to improve their practices. The methodology consists of:
- Select subject
- Define the process
- Identify potential partners
- Identify data sources
- Collect data and select partners
- Determine the gap
- Establish process differences
- Target future performance
- Identify your problem areas –
Because benchmarking can be applied to any business process or function, a range of research techniques may be required. They include: informal conversations with customers, employees, or suppliers; exploratory research techniques such as focus groups in-depth marketing research, questionnaires re-engineering analysis, process mapping, quality control variance reports, or financial ratio analysis. Before embarking on comparison with other organizations it is essential that you know your own organization’s function, processes; base lining performance provides a point against which improvement effort can be measured.
- Identify other industries that have similar processes –
For instance if one were interested in improving hand offs in addiction treatment he/she would try to identify other fields that also have hand off challenges. These could include air traffic control, cell phone switching between towers, transfer of patients from surgery to recovery rooms.
- Identify organizations that are leaders in these areas
– Look for the very best in any industry and in any country. Consult customers, suppliers, financial analysts, trade associations, and magazines to determine which companies are worthy of study.
- Survey companies for measures and practices
– Companies target specific business processes using detailed surveys of measures and practices used to identify business process alternatives and leading companies. Surveys are typically masked to protect confidential data by neutral associations and consultants.
- Visit the “best practice” companies to identify leading edge practices
– Companies typically agree to mutually exchange information beneficial to all parties in a benchmarking group and share the results within the group.
Implement new and improved business practices –
Take the leading edge practices and develop implementation plans which include identification of specific opportunities, funding the project and selling the ideas to the organization for the purpose of gaining