Seven Steps In The Benchmarking Process Business Essay

Benchmarking is the procedure of checking ones business processes and performance metrics to industry bests or best practices from other industries. Dimensions typically measured are quality, time and cost. Along the way of benchmarking, management recognizes the best companies in their industry, or in another industry where similar processes exist, and compare the results and functions of those analyzed (the "targets") to one's own results and procedures. In this way, they understand how well the goals perform and, moreover, the business processes that explain why these companies are successful.

Benchmarking is utilized to evaluate performance using a specific indicator (cost per product of measure, production per device of measure, pattern time of x per device of strategy or flaws per unit of solution) producing a metric of performance that is then compared to others.

Also known as "best practice benchmarking" or "process benchmarking", this technique is used in general management and particularly strategic management, where organizations evaluate various areas of their processes in relation to best practice companies' functions, usually inside a peer group described for the purposes of contrast. This then allows organizations to build up plans about how to make improvements or modify specific best practices, usually with the purpose of increasing some facet of performance. Benchmarking may be a one-off event, but is often cured as a continuous process where organizations constantly seek to boost their techniques.


Indian organizations have become top notch both in conditions of size and performance. Therefore, there is a greater need to be superior in performance constantly. Quality is now the hallmark for both products and services. Indian and multinational organizations are becoming increasingly quality conscious and try to deliver high quality products and services to customers.

Quality delivery that was the property of General Electric, Ford, General motors, Xerox and AT&T had end up being the buzzword in many corporate circles in India as well. From Software major Infosys to Auto large Mahindra are implementing best in class solutions, borrows and choose best ideas, incubate and apply them within their corporate and business strategy.

As individuals do swot research, companies have to do swot analysis for his or her competitive advantage and then for long term success. The exterior competitive strain on the system acquired made its essential to benchmark with similar organizations or organizations of different breed.

However, benchmarking cannot stop all diseases of the company. Why the companies benchmark? Rather than being inward looking companies, large companies tend to be more outward looking nowadays. Liberalization and globalization acquired made the establishments very competitive. Similarly the transfer and adoption of solutions are definitely more easier nowadays.

The other benefit of benchmarking is the lowest cost from the process. The companies do not spend sizeable purchases in research and development and there is no threat of any sunk cost. The process or practice or technology are readily available and easily be plagiarized.

A company that decides to undertake a bench-marking initiative should consider the following questions: When? Why? Who? What? and How?


Benchmarking can be used at any time, but is usually performed in response to needs that arise in a company. Relating to C. J. McNair and Kathleen H. J. Leibfried in their book Benchmarking: AN INSTRUMENT for Continuous Improvement, some potential "causes" for the benchmarking process include

quality programs

cost decrease/budget process

operations improvement efforts

management change

new functions/new ventures

rethinking existing strategies

competitive assaults/crises


This is the most crucial question in management's decision to get started the benchmarking process. McNair and Leibfried suggest the key reason why companies may embark after benchmarking

to sign management's willingness to go after a school of thought that embraces change in a proactive rather than reactive manner;

to establish significant goals and performance steps that echo an external/customer concentrate, foster "quantum leap" thinking, and concentrate on high-payoff opportunities;

to create early on knowing of competitive drawback; and

to promote teamwork that is dependant on competitive need and it is motivated by concrete data examination, not intuition or gut sense.


Companies should benchmark internally, against competitors, against industry performance, or up against the "best of the best. " Internal benchmarking is the research of existing practice within various departments or divisions of the business, looking for best performance as well as figuring out baseline activities and drivers. Competitive benchmarking talks about a company's immediate competitors and evaluates the way the company is doing in comparison. Knowing the advantages and weaknesses of the competition isn't only important in plotting a successful strategy, but additionally, it may help prioritize areas of improvement as specific customer targets are revealed. Industry benchmarking is more trend-based and has a much broader opportunity. It can benefit create performance baselines. The best-in-class form of benchmarking examines multiple sectors in search of new, innovative techniques. It not only offers a broad scope, but also it provides the best opportunities over that range.


Benchmarking can concentrate on roles, procedures, or proper issues. It could be used to establish the function or mission of a business. It may also be used to look at existing procedures while looking at the organization as a whole to identify tactics that support major functions or critical objectives. When concentrating on specific functions or activities, the depth of the research is a key issue. The research can take the proper execution of vertical or horizontal benchmarking. Vertical benchmarking is where in fact the focus is positioned on specific departments or functions, while horizontal bench-marking is where the focus is put on a specific process or activity. Related to strategic issues, the target is to identify factors that are of very best importance to competitive benefits, to define options of excellence that catch these issues, and isolate companies that seem to be top performers in these areas.


Benchmarking uses different resources of information, including posted material, trade meetings, and discussions with industry experts, consultants, customers, and marketing staff. The introduction of Internet technology has facilitated the bench-marking process. THE WEB offers access to a number of databases-like Power-MARQ from the nonprofit American Production and Quality Center-containing performance signals for thousands of different companies. THE WEB also enables companies to execute electronic research to collect bench-marking data. How a company benchmarks may be based upon available resources, deadlines, and the number of alternative resources of information.


Lowering Labor Costs

One benefit of benchmarking may be lower labor costs. For example, a small making company may analyze what sort of top competition uses robots for many basic place functions. These robots can help the rival save a significant amount of money on labor costs. Company managers may obtain home elevators these robotics systems through the competitor's website or online articles. They could also identify the business that sold the competition the robots. Eventually, the business using benchmarking may call the automatic robot maker to help set up its own system.

Improving Product Quality

Companies may also use benchmarking to boost product quality. Technicians sometimes purchase leading competitors' products. They may then take them apart, study them and determine how the rivals' products outlast or outperform others in the industry. Chemical engineers may review food or cleaning products in the same way. They can then compare various elements within competitive products with their own product line. Subsequently, advancements can be made to product quality.

Increasing Sales and Profits

A company that uses benchmarking to improve its functions, operations, products and services may enjoy raises in profits. Customers will probably notice these advancements. The benchmarking company could also promote is advancements through company brochures, its sales reps, magazine and television ads. These work will probably increase sales, especially among main customers. Companies that operate more proficiently scheduled to benchmarking can significantly lower their bills. These savings can be lead to greater profits.


Some organizations use internal benchmarking to boost performance in various departments. Department managers may review and emulate the best practices of one particular team. These changes may spark advancements among all departments. Internal benchmarking has its limits, however. The company's top department may not be working as successfully as others in the industry. This implies the other departments were not truly benchmarking contrary to the best departments out there.


When it comes to Competitive Intelligence, there are many simple tools that provides for sophisticated comparisons of business functions between organizations that will help companies "benchmark" the constituent techniques of the company with direct or indirect competitors, allowing a business to gain top of the hand in a current market. But, what is the process for setting the metrics, methodologies, milestones and comparisons which might be used to measure the success of an CI/benchmarking function, or the success of the Strategic Planning division all together?

Benchmarking is most beneficial used and described as a framework for strategic planning in that, once elements of study are revealed, metrics can be applied to the key success factors (KSFs) of the industry or market and these measures or "benchmarks" are then used to build up future quality and market initiatives for the company to improve its overall competitive position.

It is normally considered that there are seven steps to this process, as described below. However, this research of intra- and sometimes inter-industry competitors can form the building blocks for future rival evaluation when the emphasis is placed after the goals and financial functions of the competition.

Seven Steps in the Benchmarking Process:

1. Determine which practical areas within your operation should be benchmarked -- those that will gain most from the benchmarking process, based upon the cost, importance and potential of changes following study.

2. Identify the key factors and parameters with which to measure those functions -- usually in the overall form of money and product strategy.

3. Select the best-in-class companies for every single area to be benchmarked -- those companies that perform each function at the lowest cost, with the highest degree of client satisfaction, etc. Best-in-class companies will probably be your direct competitors (overseas or home), or even companies from a new industry (parallel rivals with substitute or substitute products; latent competitors which might backwards- or forwards-integrate into the market; or,

out-of-industry businesses with whom you do not compete, but which have best-in-class areas to be analyzed such as FedEx or Wal-Mart in logistics).

4. Measure the performance of the best-in-class companies for every single standard being considered -- from resources like the SEC, companies themselves, articles in the press or trade publications, analysts in the market, credit reports, clients and vendors, trade associations, the federal government or from interviews with other organizations prepared to share their previous research or "swap" it with you.

5. Solution your own performance for each and every variable and get started evaluating the results within an "apples-to-apples" format to determine the gap between your company and the best-in-class instances. Always feel free to estimate results, as exact steps are usually disproportionately difficult to acquire and often do not significantly add value to the study.

6. Designate those programs and activities to meet and exceed the competition based on an idea developed to improve those areas that show prospect of compliment. The company can choose from a few different approaches -- from simply attempting harder, to emulating the best-in-class, changing the rules of the industry or leapfrogging your competition with development or technology from beyond your industry.

7. Put into practice these programs by arranging specific improvement focuses on and deadlines, and by developing a monitoring process to examine and upgrade the analysis as time passes. This will also form the basis for monitoring, revision and recalibration of measurements in future benchmarking studies.


One of benchmarking's cardinal questions is that of what to measure. That depends on the type of the business. The main point is that you cannot chase 50 benchmarks at exactly the same time. One macro benchmark is required which in turn might be divided into some supporting micro options.

Although it is fine to circulate such a strategy, the most useful aspect of the benchmarking process can be the opportunity for people in an company to see at first palm how other organisations start their business. It's the process itself which is valuable; the voyage that is more educational than the reaching of the vacation spot. Nevertheless, measurable performance falls in to the three wide-ranging areas


cost; and


Time actions should incorporate the procedure from start to finish. For instance, from when a customer places an order to enough time of receipt of goods and repayment, in that way accounting for total lead time, product development time and fruitful time.

Cost measures are the traditional basis of evaluation between companies and, because of this, we tend to be most comfortable with these steps. Two which is often useful in benchmarking are total process cost per device of end result and return on belongings.

Quality steps should capture the errors, defects and waste attributable to processes. Some procedures which should be utilized in achieving this include process variability, defects, process produces, customer perceived quality, cost of quality and quality improvement work.


There are a variety of types of benchmarking, as summarised below



Most Appropriate for the Following Purposes

Strategic Benchmarking

Where businesses need to boost overall performance by examining the long-term strategies and standard approaches that have enabled high-performers to succeed. It entails considering high level aspects such as center competencies, developing services and services and increasing capabilities for interacting with changes in the external environment.

Changes caused by this type of benchmarking may be difficult to put into action and have a very long time to materialise

Re-aligning business strategies that contain become inappropriate

Performance or Competitive Benchmarking

Businesses consider their position in relation to performance characteristics of key products and services.

Benchmarking associates are drawn from the same sector. This type of analysis is often performed through trade associations or third functions to protect confidentiality.

Assessing relative degree of performance in key areas or activities in comparison with others in the same sector and finding ways of closing spaces in performance

Process Benchmarking

Focuses on bettering specific critical processes and functions. Benchmarking companions are sought from best practice organisations that perform similar work or deliver similar services.

Process benchmarking invariably consists of producing process maps to accomplish comparison and evaluation. This type of benchmarking often results in a nutshell term benefits.

Achieving improvements in key techniques to acquire quick benefits

Functional Benchmarking

Businesses turn to benchmark with associates drawn from different business industries or areas of activity to find means of improving similar functions or work techniques. This sort of benchmarking can lead to innovation and dramatic improvements.

Improving activities or services that counterparts do not are present.

Internal Benchmarking

Involves benchmarking businesses or procedures from within the same organisation (e. g. business units in different countries). The main advantages of interior benchmarking are that usage of hypersensitive data and information is simpler; standardised data is often readily available; and, usually less time and resources are needed.

There may be fewer obstacles to implementation as procedures may be not too difficult to transfer across the same organisation. However, real innovation may be lacking and best in course performance is more likely to be found through external benchmarking.

Several sections within the same company exemplify good practice and management want to pass on this skills quickly, throughout the organisation

External Benchmarking

Involves analysing outside organisations that are known to be best in category. External benchmarking provides opportunities of learning from those who find themselves at the "leading edge".

This kind of benchmarking can take up significant time and tool to ensure the comparability of data and information, the credibility of the conclusions and the introduction of sound suggestions.

Where types of good practices are available in other organisations and there's a insufficient good procedures within internal business units

International Benchmarking

Best professionals are recognized and analysed in other places on the globe, perhaps because there are too little benchmarking partners within the same country to create valid results.

Globalisation and innovations in it are increasing opportunities for international assignments. However, these can take more time and resources to create and implement and the results might need careful analysis anticipated to national differences

Where the aim is to achieve top notch status or simply because there are insufficient"national" businesses against which to benchmark.


There are several secrets to successful benchmarking. Management dedication is the one that companies frequently name. Since management from top to bottom is responsible for the continued operation and analysis of the business, it is crucial that management be committed as a team to using and implementing benchmarking strategies. A solid network of personal associates as well as having an wide open brain to ideas is other secrets. In order to implement benchmarking at all stages, there must be a well-trained team of people in order for the procedure to work accurately and efficiently. Predicated on the information gathered by the well-trained team, there must also be an attempt toward constant improvement. Other secrets add a benchmarking process that has historical success, sufficient time and personnel, and complete knowledge of the functions to be benchmarked.

In almost any kind of program that a company researches or intends to apply, there must be goals and aims set with the specific program. Benchmarking is not a different. Successful companies determine goals and goals, concentrate on them, keep them simple, and continue with them. As in any program, it is always imperative to gather accurate and constant information. The info should be grasped and able to be defined as well as assessed. The data must have the ability to be interpreted in order to make comparisons with other organizations. Lastly, keys to successful benchmarking include a extensive follow-through process and the help of consultants with experience in developing and establishing such programs.

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