Importance of Benchmarking
External comparisons and study of competitor’s product to assess the technological advancement and quality of product, is the practice of ancient times. BUT, in today’s dynamic business environment there is need of improvement in this old practice. Benchmarking is different practice that leads towards the search, analysis and adoption of “Best Business Practices”, rather than seeking inside information through product analysis. In reality “Best practice” is the best practice in organization from which it is originated. It is compatible with its culture and processes.
In this process, first, you must have good understanding of own business processes for which you are going to find a best yard stick. Second step is to find such an organization by which comparison can be called “apple with apple comparison”. But there are some possibilities: it’s unlikely that you’ll find best practice in an organization that just happens to be “down the road” from you and its not possible for an organization to be best in all processes. So, there is no limitation in finding the best target, sometimes companies go across the countries to get the best one. Information collection depends upon the target organization’s cooperation, besides this information can be obtained by external resources i.e. trade press, supplier press releases, employment associations and nationally negotiated agreements. For this purpose during 1990s at two clearing houses were also established in North America to enable benchmarking information to be shared more widely.
After collecting information, you have to develop an approach to Benchmarking that works for you and is appropriate for your culture. It is because Benchmarking is not a just “Copy Paste Approach” otherwise you will sustain your position as a “Market Follower”. It provides you a platform to get beyond the limitations and by strengthening your weak areas, become a benchmark for the whole sector. Benchmarking is not a “One Time Show” rather its continuous process of adopting high quality standards. So, there must be a proper Planning and Control System to make Benchmarking Process beneficial for the organization.
Organizations that are leaders in Benchmarking (e.g. Yell, Xerox and TNT) have their own “process” that they use rigorously to implement Benchmarking Projects. It is part of their embedded approach to continuous improvement and assumes:
- You have a way to select strategically important Benchmarking Projects (and to filter out those that do not justify the level of resource and support).
- The right people are involved in the team and they are given the time to carry it out.
- Senior management participates: to help see through change and ensure implementation of practices that will deliver performance improvements.
- Your Bench-marking Project addresses all three of the following: Metrics, Processes and Organization (the “what, how and why” of performance).
Being a management tool, bench-marking can be a great driver of better value and improved services. Used badly, it can be an expensive disaster for the organization. Used properly, it can be cause of achievement of step-change and highly improved business performance.