Benchmarking is the search for best practices – it allows your organization to see what others are doing, what is working for them and what to avoid. Benchmarking is best defined as:
“The process of identifying, understanding, and adapting outstanding practices and processes from organizations anywhere in the world to help your organization improve its performance.”
Ideally performance should be compared with an organization that is acknowledged to be the best in the class of activity in question. The exercise should concentrate on areas of business that are of key strategic importance.
Competitive benchmarking is when comparisons are made with those of a direct competitor.
Internal benchmarking compares one part of a business with a different part of the same business.
Process or activity benchmarking involves comparing an internal function with that of the best practitioner (not necessarily a direct competitor). It does not matter which industry the best practitioner is in. This type of benchmarking helps to identify the best practices in any type of organization that has established a reputation foe excellence in specific business activities e.g. marketing, engineering, human resources e.t.c.
Steps in Benchmarking
1. Identify a very specific area to benchmark.
2. Establish a work team comprised of strategic, functional and tactical representatives from all affected areas.
3. Determine the company to study.
4. Once best practices have been identified, collect and analyze the data, the plot company’s performance against best practices. Identify improvement opportunities.
5. Determine the level of effort required to re-engineer the best practices to suit the given firms unique circumstances.
6. Do a cost benefit analysis and implement the priorities established.