What
Is Benchmarking?
Benchmarking, which is sometimes called best practices benchmarking, is a
standard business practice. Originally used by the manufacturing industry, is
now used as a management tool by many service businesses as well. The term
benchmark is defined as a point of refer 11511m1211l ence from which everything else is
measured.
Benchmarking systematically compares one organization's business practices and
standards against an industry leader in order to create new and improved
business practices and standards that lead to a better product or service.
Benchmarking can help your business become an industry leader as well.
There are four types of benchmarking, internal, competitive, functional, and
generic. Internal refers to benchmarking between business units within the same
company, while competitive benchmarking compares one business with its
competitor. Functional benchmarking involves comparing similar processes within
an industry, and generic benchmarking compares business operations between industries
that are unrelated. In most cases, benchmarking refers to the competitive type
of benchmarking--measuring products, services, and practices against
competitors.
How Does Benchmarking Work?
Businesses of all sizes can benefit from benchmarking, but it is especially
useful for small to medium sized businesses. Smaller businesses benefit because
benchmarking can help them avoid reinventing the wheel. By examining the
standards and practices of industry leaders, these companies can adapt them to
suit their needs.
Benchmarking typically involves a number of steps.
Every business process can be benchmarked, including marketing, product
development, purchasing, and customer service. Every company has strengths and
weaknesses so it is important to identify what doesn't work well. The first
step is to narrow the scope and decide which business processes to target.
Next, determine which companies excel in your industry and who the leaders are.
Typically there are one or two companies that set the standard for your
industry. Reading trade magazines and speaking with trade associations are two
of the best ways to accomplish this.
Once you have defined which companies are industry leaders, it is necessary to
study and evaluate their management practices with yours. Most companies are
happy to share their strategies for success, which are documented in writing.
It is then possible to compare and evaluate your practices against the best in
the industry and from there, make the necessary changes.
The purpose of benchmarking is not to adopt the same management practices, but
to adapt your findings to your particular company's needs. It is not a one size
fits all methodology, but rather an ongoing process. Indeed, once you have the
new and improved systems in place it is necessary to re-evaluate them from time
to time to ensure they still produce the best products and services. Although
benchmarking can be an expensive proposition, most companies find that it is
worth the cost.
