Introduction to Benchmarking

Introduction

For many organisations, the most critical strategic tasks are the improvement of competitive business performance and the management of that process of change. Benchmarking (sometimes known as best demonstrated practice) is generally recognised as a useful technique that can make a contribution to these critical tasks.

A number of definitions of benchmarking have been put forward. One is “A structured process for learning from others, internally and externally, who are leaders in a field or with whom legitimate comparison can be made”. First used in the USA in the late 1970s, benchmarking became more used as a management practice in Europe in the late 1980s. In the 1990s it has become more central with literature and seminars becoming a more common place.

Purpose of benchmarking 

The roots of the technique are in the drive to seek competitive advantage from comparative cost, time and quality viewpoints. Benchmarking is one of the analytical tools in identifying performance improvement targets. It is a route to searching for more effective ways of doing business.

The most valuable comparisons are made with those organisations that are in different sectors, are recognised leaders and show the best practice in directly comparable processes.

The overall purpose and intent of benchmarking can be summarised as:

  • The development and understanding of the fundamentals that create business success, based on an objective measurement of relative performance against relevant companies, in critical business processes.
  • The focus on continuous improvement efforts, based on the ongoing analysis of the essential differences between similar processes in comparable businesses, and of the underlying reasons for these definitions.
  • The management of the change process and of the individual changes in achieving the improvements, based on the development and implementation of action programmes to close the gap between a company and the “best-in-class” company with the most relevant key performance variables.

Background

There are a number of complimentary approaches to benchmarking. These include:

  • Relative cost analysis
  • Reverse engineering
  • Continuous improvement programmes
  • Statistical process control
  • Total quality management
  • Change management
  • Competitor analysis

Whatever the starting point, these issues must be considered:

  • What approach is to be taken?
  • Is the process used effective?
  • How will the insights be used to improve the overall business performance?