Generic Benchmarking

Benchmarking is a process of comparing an organization's or company's performance to that of other organizations or companies using objective and subjective criteria. The process compares programs and strategic positions of competitors or exemplary organizations to those in the company reviewing its status for use as reference points in the formation of organization decisions and objectives. Comparing how an organization or company performs a specific activity with the methods of a competitor or some other organization doing the same thing is a way to identify the best practice and to learn how to lower costs, reduce defects, increase quality, or improve outcomes linked to organization or company excellence.

Organizations and companies use benchmarking to determine where inputs, processes, outputs, systems, and functions are significantly different from those of competitors or others. The common question is, What is the best practice for a particular activity or process? Data obtained are then used by the organization or company to introduce change into its activities in an attempt to achieve the best practice standard if theirs is not best. Comparison with competitors and exemplary organizations is helpful in determining whether the organization's or company's capabilities or processes are strengths or weaknesses. Significant favorable input, process, and output benchmark variances become the basis for strategies, objectives, and goals. Often, a general idea that improvement is possible is the reason for undertaking benchmarking. Benchmarking, then, means looking for and finding organizations or companies that are doing something in the best possible way and learning how they do it in order to emulate them. Organizations or companies often attempt to benchmark against the best in the world rather than the best in their particular industry.

A problem with benchmarking is it may restrict the focus to what is already being done. By emulating current exemplary processes, benchmarking is a catch-up managerial tool or technique rather than a way for the organization or company to gain managerial dominance or marketing share. Benchmarking can foster new ideas or processes when management uses noncompetitive organizations or companies outside its own industry as the basis of benchmarking. What if new ideas are not generated? It is possible that no one in some other organization or company has had a great idea that is applicable to the input, process, or outcome that the organization is attempting to improve or change by benchmarking.

Benchmarking is not a competitive analysis. Benchmarking is the basis for change. It is about learning. The organization performing the benchmark analysis uses the information found in the process to establish priorities and target process improvements that can change business or manufacturing practices. Benchmarking commonly takes one of four forms.

Generic benchmarking investigates activities that are or can be used in most businesses. This type of benchmarking makes the broadest use of data collection. One difficulty is in understanding how processes translate across industries. Yet generic benchmarking can often result in an organization's drastically altering its ideas about its performance capability and in the reengineering of business processes.

Functional benchmarking looks at similar practices and processes in organizations or companies in other industries. This type of benchmarking is an opportunity for breakthrough improvements by analyzing high-performance processes across a variety of industries and organizations.

Competitive benchmarking compares the organization's processes to those of direct competitors. In competitive benchmarking, a consultant or other third party rather than the organization itself collects and analyzes the data because of its proprietary nature.

Internal benchmarking compares processes or practices within the organization or company over time in light of established goals. Advantages of internal benchmarking include the ease of data collection and the definition of areas for future external investigations. The primary disadvantage of internal benchmarking is a lower probability that it will yield significant process improvement breakthroughs.

Each form of benchmarking has advantages and disadvantages, and some are simpler to conduct that others. Each benchmarking approach can be important for process analysis and improvement. Breakthrough improvements are generally attributed to the functional and generic types of benchmarking.

Eight steps are typically employed in the benchmarking process.

Identify processes, activities, or factors to benchmark and their primary characteristics.

Determine what form is to be used: generic, functional, competitive, or internal.

Determine who or what the benchmark target is: company, organization, industry, or process.

Determine specific benchmark values by collecting and analyzing information from surveys, interviews, industry information, direct contacts, business or trade publications, technical journals, and other sources of information.

Determine the best practice for each benchmarked item.

Evaluate the process to which benchmarks apply and establish objectives and improvement goals.

Implement plans and monitor results.

Recalibrate internal base benchmarks.

A recurring problem that must be addressed during the eight steps is the determination of criteria to ensure that inaccuracies or inconsistencies do not occur that will make any comparison meaningless.

The eight steps of the benchmarking process can be summarized as an improvement analysis. That is, the organization investigates another organization to find out what it does and how it is done. During the investigation, what goes right and what goes wrong is determined. This information is then used for the improvement of activities or processes. When the activities and processes of the organization making the investigation are equal to or better than the measurements found during the investigation, no change is warranted because the investigating organization has the better practice.

Another view of benchmarking is as an organization gap analysis. The organization deter mines what it lacks in terms of what it knows and how it does things. The shortfalls that initiate the gap analysis can be activities and processes or they can be tactics and strategies. The organization must then determine what other organization is good at doing those things that can be improved or changed for the better. A very