- The Benchmarking Process
Benchmarking is the process of measuring the performance of one company or organization against the best practices in the industry or in the world. Many companies employ benchmarking when they want to evaluate their business operations and overall performance when considered against the performance of the best companies in their league.
Benchmarking offers many clear advantages. It allows a company to be analyzed and its operations compared to better-performing companies. This allows companies to understand as well the business processes of its competitors who are better-performing. In addition, deficiencies in performance are identified and management is alerted on how to correct them. Benchmarking evaluates alternative solutions that may be adopted by the company. Among the indirect benefits are allowing a company to understand its own business processes and to re-evaluate its objectives and corporate strategy. Benchmarking beefs up a company’s competitiveness and positions the company to undertake continuous improvement throughout the company’s business operations (GBN, 2010). This is ultimately the rationale for doing benchmarking: to drive companies to innovate (not imitate) given the knowledge of best practices within and from outside its own environment (Bain & Company, 2013).
Benchmarking is said to have several disadvantages. One is that it is inadequate to evaluate the effectiveness of the performance metrics that are used to mark what is a best practice, Benchmarking identifies the standards of competitors but is silent on how they have attained those standards. Thus companies may risk using flawed standards as a best practice when the competitor standards prove to be low. Another disadvantage is companies can grow relaxed and complacent after outdoing competition they have benchmarked against. There is inertia rather than continuous improvement. As a final note, benchmarking is futile if there is no organizational game plan to change.
- Why Benchmark?
There are many stock answers to the question, “why do companies benchmark?” Based on my reading of the topic, the singular motivation for benchmarking is that companies desire to change as organizations and look on the best practices from within and from outside as well. Benchmarking guides companies into which direction they can grow and move forward as a business and as an organization and how they can get there. Benchmarking allows a company to calibrate and recalibrate their operational tactics and strategy and lead the company to greater performance. When a company undertakes benchmarking, it does so by evaluating key performance metrics against the better not lesser competitors. This helps to strengthen the company’s pillars because it is compared against the best in the industry or in the company. From the viewpoint of the superior company, benchmarking allows that company to be ahead of the pack as it measures itself to be better than lesser competitors.
References
Bain & Company. (2013). Insights Business Tools: Benchmarking. Retrieved from http://www.bain.com/publications/articles/management-tools-2011-benchmarking.aspx.
Bright Hub. (2012). The Hub for Bright Minds. Retrieved from http://www.brighthub.com/office/entrepreneurs/articles/82292.aspx#sthash.sfcqFNiH.dpuf.
Global Benchmarking Network. (2010). Benefits of Benchmarking. Retrieved from
http://www.globalbenchmarking.org/fundamentalsofbenchmarking/benefits-of-benchmarking.
