Benchmarking

Introduction
 Benchmarking is a method of improving
business performance by learning from other
companies how to do things better in order to be
the ‘best in the class’.
 Xerox: A continuous systematic process of
evaluating companies recognized as industry
leaders, to determine business and work
processes that represent ‘best practice’ and
establish rational performance goals.
 The main objectives of benchmarking at
IBM are as follows:
 To ensure that our business process
goals are set to exceed the best
qualitative results achieved by the world
class leaders.
 To incorporate the best practice
throughout IBM processes.
 Benchmarking originated in the USA
approximately a decade ago.
 Xerox was considered as being the
originator of benchmarking (Canon).
 Benchmarking is the process of
determining who is the very best, who sets
the standard, and what that standard is.
 Once decided what to benchmark, and
how to measure it, the objective is to figure
out how the winner got to be the best and
determine what we have to do to get there.
 Benchmark refers to a measure of best
practice performance.
 Benchmarking refer to the search for the
best practices that yields the benchmark
performance, with emphasis on how you
can apply the process to achieve superior
results.
Process of Benchmarking
 To set objectives and define the scope of your
efforts
 To gain support from your organization
 To select a benchmarking approach
 To identify benchmarking partners
 To gather information (research, surveys,
benchmarking visits
 To distill the learning
 To select ideas to implement
 To pilot
 To implement
Code of conduct for Benchmarking
 There are simple misunderstandings and serious legal
problems in benchmarking.
 International Benchmarking Clearing House has
suggested the following code of conduct.
 Legality
 Exchange
 Confidentiality
 Use of information
 Contact
 Preparation
 Completion
 Understanding
Types of Benchmarking
 There are essentially three types of
benchmarking: strategic, data-based, and process
based benchmarking.
 There are different types of benchmarking
depending on whether the benchmarking is
conducted with an external organization or with
the organization itself.
 Then there are benchmarking practices which
related to products, processes, people and
different functions.
Competitive benchmarking
 Xerox sent people to Japan to study about
Canon photocopiers.
 Ford Motors compared against Mazda and
removed various non-value added
activities and thus achieving a reduction in
headcount from 500 people to five people.
Strategic benchmarking
 The PIMS (Profit Impact of Marketing
Strategy) defines strategic benchmarking
as the development of measures for a
business unit, which quantifies its key
strengths and weaknesses to give some
external reference to the strategic planning
process.
 Strategic benchmarking aims at strategic
changes and prioritized resource
allocation.
Process Benchmarking
 Organizations can compare internal
processes between countries or
companies or divisions within the same
group.
 They can compare their own processes
with industry leading service providers.
Product benchmarking
 IBM issued instructions that all new
products must have a superior performance
to both their IBM precursor and the best of
their competitors products from the moment
of the very first customer shipment.
 Products were benchmarked on the basis
of functionality, reliability and availability.
Benchmarking Customer service
 Customer service is a complex supply
chain of service to customers.
 Benchmarking in this field will identify
where performance is below expectation
and where there is room for improvement
compared with competitors.
Internal Benchmarking
 Some organizations undertake internal
benchmarking in order to improve existing
performance and also as a first step
towards external benchmarking.
 Internal benchmarking is undertaken to
compare similar operations or functions
across the company or group.
 To establish an internal baseline
 To identify performance gaps in various
activities.
 To identify areas that needs improving
 To establish common practice and procedures
 To bring about effective communication process
within the organization
 To promote an understanding of the nature of
benchmarking
 To instill confidence in undertaking external
benchmarking.
Advantages and Limitations of
Benchmarking
 Provides direction and impetus for improvement
 Indicates early warning of competitive disadvantage
 Promotes competitive awareness
 Becomes the stepping-stone to ‘breakthrough’
thinking
 Identifies the ‘best practice’
 Provides an objective attainment standard for key
areas of business operations
 Links operational tactics to corporate vision and
strategy
 Exposes performance gaps
 Triggers major step changes in business
performance
 Helps companies redefine their objectives
 Challenges the ‘status quo
 Allows realistic stretch goals.
Limitations of benchmarking are as follows:
 The best-in-class performance is a dynamic
concept which is constantly changing. New
technology adoption and process improvement
can create manifold improvement in
performance.
 Benchmarking will not provide performance
overnight. It cannot replace TQM practices in
the organizations.
 Benchmarking is not a panacea for all quality ills
and cannot replace quality efforts of an
organization.
Steps in Benchmarking
 Planning
 Analysis
 Integration
 Action