Benchmarking is the process of comparing one's business processes and performance metrics to industry bests or best practices from other industries. Dimensions typically measured are quality, time and cost or in another industry where similar processes exist, and compares 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 Benefits of Benchmarking
Competitive Analysis
By
identifying areas you wish to improve on in your business and benchmarking your
existing performance against competitors, your business can strive to enhance
your execution tenfold. Using benchmarking this way has allowed businesses to
gain strategic advantages over competitors and grow industry averages.
Benchmarking
involves looking at current trends in data and projecting future trends
depending on what you aim to achieve. In order to know you have been
successful, benchmarking needs to be a continuous process. Monitoring
performance is an inherent characteristic of it.
As
well as monitor performance, continuous improvement is an essential attribute
of benchmarking. This is because the aim of benchmarking is to improve a
certain element of a business. This improvement should not merely be something
that improves once and is forgotten, but something that improves over time and
is continuous.
Once
benchmarking has been carried out, goals and performance metrics are set in
order to improve performance. These goals are new, more competitive targets for
a company but they must be achievable. If goals are unrealistic to achieve
teams become demotivated and goals are destined to remain unfulfilled.
When
companies look at their processes and metrics they need to ask hard questions
to get all the answers they need. This includes talking to everyone in the
business and understanding their roles. By asking these questions and gaining a
better understanding of everyone’s role, ownership for processes and
performance is encouraged. This means that employees will take pride in their
job and the work they do. This pride leads to better performance and
higher-quality end results.
Benchmarking
identifies where your company is right now compared to where you want it to go.
If you are looking at improving any process in your business, benchmarking is a
way of looking at how you can excel and become more successful through
outlining the steps needed to achieve your goal.
Considerations
·
Before an organization can achieve the full benefits of
benchmarking, its own processes must be clearly understood and under control.
·
Benchmarking studies require significant investments of manpower
and time, so management must champion the process all the way through,
including being ready and willing to make changes based on what is learned.
·
Too broad a scope dooms the project to failure. A subject that
is not critical to the organization’s success won’t return enough benefits to
make the study worthwhile.
·
Inadequate resources can also doom a benchmarking study by
underestimating the effort involved or inadequate planning. The better you
prepare, the more efficient your study will be.
Plan
1. Define
a tightly focused subject of the benchmarking study. Choose an issue critical
to the organization’s success.
2. Form
a cross-functional team. During Step 1 and 2, management’s goals
and support for the study must be firmly established.
3. Study your own process. Know how the work is
done and measurements of the output.
4. Identify partner organizations that may have
best practices.
Collect
5. Collect information
directly from partner organizations. Collect both process descriptions and
numeric data, using questionnaires, telephone interviews, and/or site visits.
Analyze
6. Compare
the collected data, both numeric and descriptive.
7. Determine
gaps between your performance measurements and those of your partners.
8. Determine
the differences in practices that cause the gaps.
Adapt
9. Develop
goals for your organization’s process.
10. Develop
action plans to achieve those goals.
11. Implement
and monitor plans.
Benchmarking Examples
Process Benchmarking:
This type of benchmarking helps you to better understand how your processes
compare to others in your industry. By looking at other companies in the
industry you can improve your processes to make them more efficient and
cost-effective.
Strategic Benchmarking:
Strategic benchmarking, similar to process benchmarking, is all about improving
parts of your company through looking at others in the industry. Strategic
benchmarking relates to strategy and how to create a strategy that will allow
you to be more competitive in your area.
Performance
Benchmarking: Performance benchmarking is the hardest
process to improve as it involves learning about competitor performance metrics
and procedures, and also making changes to processes within your business on
the lower levels. Introducing new processes is a challenging action in any
business as it requires buy-in from many different levels in the company.
Performance benchmarking can uncover findings that might not be possible to
implement in the business without creating a long-term change plan. These can
be also the most effective and successful changes for a company