Benchmarking is “measuring our performance against that of best-in-class companies, determining how the best-in-class achieve those performance levels and using the information as a basis for our own company’s targets, strategies and implementation.” Simply, it is “search of industry best practices that lead to superior performance”. Whereas best practices refers to the approaches that produce exceptional results, are usually innovative in terms of the use of technology or human resources and recognized by customers or industry experts.
Benchmark is a point of reference against which things are measured. In business, the reference points and standards can take many forms. They are measured by questions about the product or services.
The concept of benchmarking has been around for a long time. In 1800's, Francis Lowell, a New England colonist studied British textile mills and imported many ideas along with improvements he made for the burgeoning American textile mills.
It is believed that formally, benchmarking may have evolved in the 1950's when W. Edwards Deming taught the Japanese the idea of quality control. The method was rarely used in the United States until the early 1980's when IBM, Motorola and Xerox became the pioneers. Xerox is one of the best known examples of organizations that have implemented benchmarking.
It promotes through understanding of the company's own processes i.e., the company current profile is well understood.
It involves limitation and adaptation of the practices of superior competitors, rather than invention thereby saving time and money for the company practicing benchmarking.
It enables comparison of performance measures in different dimensions, each with best practices for that particular measure.
It allows organisations to set realistic, rigorous new performance targets and this process helps convince people of the credibility of these targets.
Limitations of Benchmarking:
The primary limitation is the fact that best-in-class performance is not a static but a moving target. New technology can create quantum leap performance improvement.
It is not a panacea that can replace all other quality efforts or management processes that can improve the competitive advantage of a company.
It is not an "instant pudding”. It will not improve performance if the proper infrastructure of a total quality program is not in place.
Competitive benchmarking,Strategic benchmarking,Process benchmarking and Product benchmarking are the types of benchmarking.
There are 5 Phases in the Benchmarking Process,which are as follows:
1.Planning: This phase involves answering the following questions:
•What is to be benchmarked? Which process cause the most trouble?
•Which process contributes most to customer satisfaction and which are not performing up to expectations?
•What are the competitive pressure impacting the organization the most?
•What processes or functions have the most potential for differentiating our organization from the competition?
•To whom or what will we compare and how will data be collected?
2.Analysis: The analysis phase in involve a careful understanding of current processes and practices as well as those of the organizations being benchmarked. What is desired is an understanding of internal performance on which to assess strength and weakness.
3.Integration: Integration is the process of using benchmark findings to set operational targets for change. It involves careful planning to incorporate new practices and to ensure that benchmark findings are incorporated in all formal planning processes.
4.Action: Action plan for change also should contain milestones for updating the benchmark findings and on-going reporting mechanism. Progress towards finding must be reported to all employees.
5.Maturity: Maturity will be attained when best industry practices are incorporated in all business processes, thus ensuring superiority. Maturity is also achieved when benchmarking becomes on-going, essential and self-initiated facet of the management process.
Benchmarking is an on-going process that requires data gathering, goal setting and analysis. These are accomplished by seven step model. These are:
1.Identify what to be benchmark
2.Determine what to measure
3.Identify who to benchmark
4.Collect the data
5.Analyze data and determine the gap
6.Set goals and develop action plan
7.Monitor the process.
.K Shridhara Bhat “Total Quality Management” Text and Cases,2010.
.Donna C.S. Summers “Quality Management” Creating and Sustaining Organizational Effectiveness, 1999,
.B. Janakiraman, RK Gopal “ Total Quality Management Text and Cases,September 2010.
This article has been written by Subhash Kumar. He is an Electrical Engineer from B.I.T.,Sindri(Dhanbad) and worked in Tata Motors Limited for 5 years. His interest areas are Operations and Supply Chain. He can be reached at email@example.com.