Explain the Advantages and Methodology of Benchmarking

Benchmarking: Advantages and Methodology

Benchmarking is a process used in management and particularly strategic management, in which organizations evaluate various aspects of their processes in relation to best practice, usually within their own sector. This then allows organizations to develop plans on how to adopt such best practice, usually with the aim of increasing some aspect of performance. Benchmarking may be a one-off event, but is often treated as a continuous process in which organizations continually seek to challenge their practices.

Benchmarking in simplistic terms is the process where you compare your process with that of a betterprocess and try to improve the standard of the process you follow to improve quality of the system, product, and services etc. A process similar to benchmarking is also used in technical product testing and in land surveying. See the article benchmark for these applications.

Advantages of benchmarking:

Benchmarking is a powerful management tool because it overcomes” paradigm.” Paradigm Blindness can be summed up as the mode of thinking, “The way we do it is the best because this is the way we’ve always done it.” Benchmarking opens organizations to new methods, ideas and tools to improve their effectiveness. It helps crack through resistance to change by demonstrating other: methods of solving problems than the one currently employed, and demonstrating that they work, because they are being used by others.

Collaborative benchmarking

Benchmarking, originally invented as a formal process by Rank Xerox, is usually carried out by individual companies. Sometimes it may be carried out collaboratively by groups of companies (e.g. subsidiaries of a multinational in different countries). One example is that of the Dutch municipally-owned water supply companies, which have carried out a voluntary collaborative benchmarking process since 1997 through their industry association.

Procedure

There is no single benchmarking process that has been universally adopted. The wide appeal and acceptance of benchmarking has led to various benchmarking methodologies emerging. The most prominent methodology is the 12 stage methodology by Robert Camp (who wrote the first book on benchmarking in 1989.

The following is an example of a typical shorter version of the methodology:

Identify your problem areas – Because benchmarking can be applied to any business process  or function a range of research techniques may be required. They include: informal conversations with customers, employees, or suppliers, exploratory research techniques such as focus groups, or in-depth marketing research, quantitative research, surveys, questionnaires, re engineering analysis, process mapping, quality control variance reports, or financial ratio analysis. Before embarking on comparison with other organizations it essential that you know your own organization’s function, process; base lining performance provides a point against which improvement effort can be measured.

Identify other industries that have similar processes – For instance if one were interested in improving hand offs in addiction treatment s/he would try to identify other fields that also have hand off challenges. These could include air traffic control, cell phone switching between towers, transfer of patients from surgery to recovery rooms.

Identify organizations that are leaders in these areas – Look for the very best in any industry and in any country. Consult customers, suppliers, financial analysts, trade associations, and magazines to determine which companies are worthy of study.

Survey companies for measures and practices – Companies target specific business processes using detailed surveys of measures and practices used to identify business process alternatives and leading companies. Surveys are typically masked to protect confidential data by neutral associations and consultants.

Visit the “best practice” companies to identify leading edge practices – Companies typically agree to mutually exchange information beneficial to all parties in a benchmarking group and share the results within the group.

Implement new and improved business practices – Take the leading edge practices and develop implementation plans which include identification of specific opportunities, funding the project   and selling the ideas to the organization for the purpose of gaining demonstrated value from the process.