Benchmarking involves happening, accommodating and implementing best patterns. Bruder and Grey define it as “ a strict yet practical procedure for mensurating your organisation ‘s public presentation and procedures against those of best-in-class organisations, both public and private, and so utilizing this analysis to better services, operations and cost place dramatically. ” R.J. Fischer defines
Benchmarking in public presentation measuring footings: “ Through a series of public presentation steps criterions known as “ benchmarks ” — a individual can place the best in a category among those making a peculiar undertaking. Then, the best patterns are analyzed and adapted for usage by others desiring to better their ain manner of making things. ”
Benchmarking as a base entirely direction scheme is a comparatively new and germinating set of techniques. Its roots travel back to public presentation measuring, including the ICMA ground-breaking attempts to mensurate municipal activities in 1938, through Deming and his followings, the Hoover Commissions, and PPBS. In its current signifier, Bruder and Grey have set out the most elaborate docket, the following seven step protocol:
1. Determine which map will profit most from benchmarking ;
2. Identify cardinal cost, quality and efficiency steps for those maps ;
3. Conduct an adept sentiment study and literature reappraisal to happen the best in category organisation for each step ;
4. Measure the best in category public presentation in the cardinal countries identified ;
5. Compare your organisation ‘s public presentation against the best in category and quantify the spread ;
6. Stipulate actions to shut the public presentation spread to outdo in category and, if possible, the stairss necessary to “ leap-frog ” the current industry leader ; and,
7. Implement those actions and supervise your public presentation.
BenchmarkingA is the procedure of comparing one ‘s concern processes andA public presentation metricsA to industry bests orA best practicesA from other industries. Dimensions typically measured are quality, clip and cost. In the procedure of benchmarking, direction identifies the best houses in their industry, or in another industry where similar procedures exist, and compare the consequences and procedures of those studied ( the “ marks ” ) to one ‘s ain consequences and procedures. In this manner, they learn how good the marks perform and, more significantly, the concern processes that explain why these houses are successful.
Benchmarking is used to mensurate public presentation utilizing a specificA indicatorA ( cost per unit of step, productiveness per unit of step, rhythm clip of ten per unit of step or defects per unit of step ) resulting in a metric of public presentation that is so compared to others.
Besides referred to as “ best pattern benchmarking ” or “ procedure benchmarking ” , this procedure is used in direction and particularlyA strategic direction, in which organisations evaluate assorted facets of their procedures in relation to outdo pattern companies ‘ procedures, normally within a equal group defined for the intents of comparing. This so allows organisations to develop programs on how to do betterments or adapt specific best patterns, normally with the purpose of increasing some facet of public presentation. Benchmarking may be a one-off event, but is frequently treated as a uninterrupted procedure in which organisations continually seek to better their patterns.
Benchmarking focal points on company-to-company comparings of how good basic maps and procedures are performed. Among many possibilities, it may look at how stuffs are purchased, providers are paid, stock lists are managed, employees are trained, or paysheets are processed ; at how fast the company can acquire new merchandises to market ; at how the quality control map is performed ; at how client orders are filled and shipped ; and at how care is performed.
Benchmarking enables directors to find what the best pattern is, to prioritise chances for betterment, to heighten public presentation relation to client outlooks, and to leapfrog the traditional rhythm of alteration. It besides helps directors to understand the most accurate and efficient agencies of executing an activity, to larn how lower costs are really achieved, and to take action to better a company ‘s cost fight. As a consequence, benchmarking has been used in many companies as a tool for obtaining a competitory advantage.
Companies normally undertake benchmarking with a position towards the many betterments that it may offer. These benefits include cut downing labour cost, streamlining the work flow through reengineered concern procedures and common administrative systems, bettering informations centre operations through consolidation and retrenchment, concerted concern and information engineering planning, implementing new engineering, outsourcing some assignments and maps, redesigning the development and support procedures, and restructuring and reorganising the information engineering maps.
Goal of benchmarking
The end of benchmarking is to place the failings within an organisation and better upon them, with the thought of going the “ best of the best. ” The benchmarking procedure helps directors to happen spreads in public presentation and turn them into chances for betterment. Benchmarking enables companies to place the most successful schemes used by other companies of comparable size, type, or regional location, and so follow relevant steps to do their ain plans more efficient. Most companies apply benchmarking as portion of a wide strategic procedure. For illustration, companies use benchmarking in order to happen breakthrough thoughts for bettering procedures, to back up quality betterment plans, to actuate staffs to better public presentation, and to fulfill direction ‘s demand for competitory appraisals.
Benchmarking marks functions, procedures, and critical success factors. Functions are what specify the occupation or map that a individual fulfills. Procedures are what consume a company ‘s resources. Critical success factors are issues that company must turn to for success over the long-run in order to derive a competitory advantage. Benchmarking focuses on these things in order to indicate out inefficiencies and possible countries for betterment.
A company that decides to set about a bench-marking enterprise should see the undermentioned inquiries: When? Why? Who? What? and How?
Benchmarking can be used at any clip, but is normally performed in response to demands that arise within a company. Harmonizing to C.J. McNair and Kathleen H.J. Leibfried in their bookA Benchmarking: A Tool for Continuous Improvement, A some possible “ triggers ” for the benchmarking procedure include:
cost reduction/budget procedure
operations betterment attempts
new operations/new ventures
rethinking bing schemes
This is the most of import inquiry in direction ‘s determination to get down the benchmarking procedure. McNair and Leibfried suggest several grounds why companies may ship upon benchmarking:
to signal direction ‘s willingness to prosecute a doctrine that embraces alteration in a proactive instead than reactive mode ;
to set up meaningful ends and public presentation steps that reflect an external/customer focal point, Foster “ quantum spring ” thought, and concentrate on high-payoff chances ;
to make early consciousness of competitory disadvantage ; and
To advance teamwork that is based on competitory demand and is driven by concrete informations analysis, non intuition or intestine feeling.
Companies may make up one’s mind to benchmark internally, against rivals, against industry public presentation, or against the “ best of the best. ” Internal benchmarking is the analysis of bing pattern within assorted sections or divisions of the organisation, looking for best public presentation every bit good as placing baseline activities and drivers. Competitive benchmarking looks at a company ‘s direct rivals and evaluates how the company is making in comparing. Knowing the strengths and failings of the competition is non merely of import in plotting a successful scheme, but it can besides assist prioritise countries of betterment as specific client outlooks are identified. Industry benchmarking is more trend-based and has a much broader range. It can assist set up public presentation baselines. The best-in-class signifier of benchmarking examines multiple industries in hunt of new, advanced patterns. It non merely provides a wide range, but besides it provides the best chances over that scope.
Benchmarking can concentrate on functions, procedures, or strategic issues. It can be used to set up the map or mission of an organisation. It can besides be used to analyze bing patterns while looking at the organisation as a whole to place patterns that support major procedures or critical aims. When concentrating on specific procedures or activities, the deepness of the analysis is a cardinal issue. The analysis can take the signifier of perpendicular or horizontal benchmarking. Vertical benchmarking is where the focal point is placed on specific sections or maps, while horizontal bench-marking is where the focal point is placed on a specific procedure or activity. Refering strategic issues, the aim is to place factors that are of greatest importance to competitory advantage, to specify steps of excellence that gaining control these issues, and to insulate companies that appear to be top performing artists in these countries.
Benchmarking utilizations different beginnings of information, including published stuff, trade meetings, and conversations with industry experts, advisers, clients, and selling representatives. The outgrowth of Internet engineering has facilitated the bench-marking procedure. The Internet offers entree to a figure of databases-like Power-MARQ from the non-profit-making American Productivity and Quality Center-containing public presentation indexs for 1000s of different companies. The Internet besides enables companies to carry on electronic studies to roll up bench-marking informations. How a company benchmarks may depend on available resources, deadlines, and the figure of alternate beginnings of information.
ADVANTAGES and DISADVANTAGES OF BENCHMARKING
There are several cardinal advantages to utilizing benchmarking in an organisation.
Lowering Labor Costss
One advantage of benchmarking may be lower labour costs. For illustration, a little fabrication company may analyze how a top rival uses automatons for several basic works maps. These automatons may assist the rival save a important sum of money on labour costs. Company directors may obtain information on these robotics systems through the rival ‘s web site or on-line articles. They may besides place the company that sold the rival the automatons. Subsequently, the company utilizing benchmarking may name the automaton maker to assist put up its ain system.
Bettering Product Quality
Companies may besides utilize benchmarking to better merchandise quality. Engineers sometimes purchase prima rivals ‘ merchandises. They may so take them apart, analyze them and find how the rivals ‘ merchandises outlast or outperform others in the industry. Chemical applied scientists may analyze nutrient or cleansing merchandises in a similar mode. They can so compare assorted elements contained in competitory merchandises to their ain merchandise line. Subsequently, betterments can be made to merchandise quality.
Increasing Gross saless and Net incomes
A company that uses benchmarking to better its maps, operations, merchandises and services may bask additions in gross revenues and net incomes. Customers are likely to detect these betterments. The benchmarking company may besides advance is betterments through company booklets, its gross revenues reps, magazine and telecasting ads. These attempts are likely to increase gross revenues, particularly among nucleus clients. Companies that operate more expeditiously due to benchmarking can drastically take down their disbursals. These nest eggs can be lead to greater net incomes.
Some organisations use internal benchmarking to better public presentation in different sections. Department directors may analyze and emulate the best patterns of one peculiar section. These alterations may trip betterments among all sections. Internal benchmarking has its restrictions, nevertheless. The company ‘s top section may non be working every bit expeditiously as others in the industry. This means the other sections were non genuinely benchmarking against the best sections out at that place.
Benchmarking can necessitate a big investing in clip, labour, and capital.A A Costss for a big undertaking can easy make into the 100s of 1000s of dollars.A These can be minimized through careful, thoughtful, and consider planning.A Typically, there are disbursals related to go every bit good as indirect costs associated with employee clip devoted to trips and squad meetings.A With careful be aftering benchmarking costs can be kept to a lower limit. The undermentioned are its disadvantages:
Size: The size and range of a benchmarking undertaking is related straight to the cost.A An easy manner to minimise costs is to take on a stepwise approach.A This minimizes the sum of investing and hazard taken at the same time.
Dividing Costss: Organizations can pool resources by taking joint benchmarking undertakings and spliting costs accordingly.A This is more easy done in organisations that are non straight viing, such as authorities agencies.A Assorted organisations have pooled their resources and knowledge into benchmarking groups.
Advisers: Many adviser houses will besides help an organisation in a benchmarking project.A These organisations have the proficient cognition and experience to more expeditiously gather and construe data.A Careful background research of a adviser must be made to do this procedure more effectual and it comes at a price.A However, this does non necessitate engaging extra staff or spread outing functions of current staff.
Education and Travel: Benchmarking does necessitate instruction and travel costs.A Once a squad is chosen, they frequently need to be educated on the methods of benchmarking.A This is accomplished through workshops, seminars, meetings, and courses.A Then, this information must be disseminated to others.A When researching organisations, sometimes it is best to see the organisation in action and meet with the squad that performed and implemented the alterations to derive first-hand cognition of the procedures involved.
Communication: One of the most of import methods of maintaining benchmarking costs low is effectual communication.A This involves cognizing what you need and where your ain lacks are and sharing information about yourself.A Besides, informing others inside of your organisation of what has been learned through studies, analyses, etc. and its method of execution affecting flow charts, matrices, schematics, etc. is critical.A Clear communicating besides lets direction cognize how the undertaking is traveling and its status.A This reduces confusion and struggles among direction and the squad and among team members themselves.A
TYPES OF BENCHMARKING
Procedure benchmarkingA – the initiating house focuses its observation and probe of concern procedures with a end of identifying and detecting the best patterns from one or more benchmark houses. Activity analysis will be required where the aim is to benchmark cost and efficiency ; progressively applied to back-office procedures where outsourcing may be a consideration.
Financial benchmarkingA – executing a fiscal analysis and comparing the consequences in an attempt to measure your overall fight and productiveness.
Benchmarking from an investor perspective- widening the benchmarking existence to besides compare to peer companies that can be considered alternate investing chances from the position of an investor.
Performance benchmarkingA – allows the instigator house to measure their competitory place by comparing merchandises and services with those of mark houses.
Merchandise benchmarkingA – the procedure of planing new merchandises or ascents to current 1s. This procedure can sometimes affect contrary technology which is taking isolated rivals merchandises to happen strengths and failings.
Strategic benchmarkingA – involves detecting how others compete. This type is normally non industry specific, intending it is best to look at other industries.
Functional benchmarkingA – a company will concentrate its benchmarking on a individual map to better the operation of that peculiar map. Complex maps such as Human Resources, Finance and Accounting and Information and Communication Technology are improbable to be straight comparable in cost and efficiency footings and may necessitate to be disaggregated into procedures to do valid comparing.
Best-in-class benchmarkingA – involves analyzing the taking rival or the company that best carries out a specific map.
Operational benchmarkingA – embracings everything from staffing and productiveness to office flow and analysis of processs performed.
Energy benchmarkingA – procedure of roll uping, analysing and associating energy public presentation informations of comparable activities with the intent of measuring and comparing public presentation between or within entities.A Entities can include procedures, edifices or companies. Benchmarking may be internal between entities within a individual organisation, or – topic to confidentiality limitations – external between viing entities.
Benchmarking, originally describedA Rank Xerox, is normally carried out by single companies. Sometimes it may be carried out collaboratively by groups of companies ( e.g. subsidiariesA of a transnational in different states ) . One illustration is that of theA DutchA municipally-ownedA H2O supplyA companies, which have carried out a voluntary collaborative benchmarking procedure since 1997 through their industry association. Another illustration is theA UKA building industryA which has carried out benchmarking since the late ninetiess once more through its industry association and with fiscal support from theA UK Government
There is no individual benchmarking procedure that has been universally adopted. The broad entreaty and credence of benchmarking has led to the outgrowth of benchmarking methodological analysiss. One seminal book is Boxwell’sA Benchmarking for Competitive AdvantageA ( 1994 ) .A The first book on benchmarking, written and published byA Kaiser Associates, is a practical usher and offers a seven-step attack. Robert Camp ( who wrote one of the earliest books on benchmarking in 1989, A developed a 12-stage attack to benchmarking.
KAISER ‘s SEVEN-STEP Approach TO BENCHMARKING
Kaiser ‘s 7-step benchmarking procedure, which has been applied in more than 4,000 battles, provides construction and analytical asperity to both internal and external Benchmarking:
This measure involves specifying every bit accurately as possible the procedure to be benchmarked. It is the basis of the full benchmarking procedure. An wrong designation at this phase could ensue in a waste of cherished resources at ulterior phases. See the undermentioned inquiries: Have departmental precedences been established? Determine whether the section has strongly defined its overall intent. This includes puting long-run ends and short-run aims.
What is the degree of alteration? Does an full system necessitate rethinking? Possibly a peculiar procedure within that system needs to be improved. Can betterment be achieved by upgrading some peculiar undertaking within the procedure?
Has the work procedure to be selected been flowcharted? A good first measure in deriving an overview of the full procedure is to flowchart it. This will assist place job countries and turn up possible problem countries. Then set up the critical measurings by which to compare future advancement.
How much alteration is possible? Given your organisation ‘s resources and fortunes, happen out whether reforming the procedure is low-cost at the determined degree of alteration.
Have critical public presentation steps been determined? Investigate whether steps have been determined in conformity with client demands. Have the steps been expressed in footings of a ratio or per centum? Are at that place other steps and, if so, which step has precedence?
Has a undertaking description been written? Make sure the description includes the followers:
1. A ground for the undertaking
2. Goals and aims
3. The cost and continuance of the undertaking
4. Critical steps
5. Potential additions
6. The undertaking ‘s impact on the full organisation
Gather cogent evidence that the undertaking is necessary in footings of possible costs against possible benefits.
After achievement of measure 1, you will hold a aggressively focussed, clearly defined process that tells direction what needs to be changed, how much alteration can be achieved within given restrictions and how to mensurate accurately your procedures against those of others and against your ain future projections.
A Step 2
The three chief types of costs in benchmarking are:
Visit CostsA – This includes hotel suites, travel costs, repasts, a nominal gift, and lost labour clip.
Time CostsA – Members of the benchmarking squad will be investing clip in researching jobs, happening exceeding companies to analyze, visits, and execution. This will take them off from their regular undertakings for portion of each twenty-four hours so extra staff might be required.
Benchmarking Database CostsA – Organizations that institutionalize benchmarking into their day-to-day processs find it is utile to make and keep a database of best patterns and the companies associated with each best pattern now.
The cost of benchmarking can well be reduced through using the many internet resources that have sprung up over the last few old ages. These purpose to capture benchmarks and best patterns from organisations, concern sectors and states to do the benchmarking procedure much quicker and cheaper.
The technique ab initio used to compare bing corporate schemes with a position to accomplishing the best possible public presentation in new state of affairss, has late been extended to the comparing of proficient merchandises. This procedure is normally referred to as “ proficient benchmarking ” or “ merchandise benchmarking ” . Its usage is well-developed within the automotive industry ( “ automotive benchmarking ” ) , where it is critical to plan merchandises that match precise user outlooks, at minimum cost, by using the best engineerings available worldwide. Data is obtained by to the full dismantling bing autos and their systems. Such analyses were ab initio carried out in-house by auto shapers and their providers. However, as these analyses are expensive, they are progressively being outsourced to companies who specialize in this country. Outsourcing has enabled a drastic lessening in costs for each company ( by cost sharing ) and the development of efficient tools ( criterions, package ) .
Benchmarking softwareA can be used to form big and complex sums of information. Software bundles can widen the construct of benchmarking and competitory analysis by leting persons to manage such big and complex sums or schemes. Such tools support different types of benchmarking and can cut down the above costs significantly
Another attack to doing comparings involves utilizing more aggregate cost or production information to place strong and weak executing units. The two most common signifiers of quantitative analysis used in metric benchmarking are informations envelope analysis ( DEA ) and arrested development analysis. DEA estimates the cost degree an efficient house should be able to accomplish in a peculiar market. In substructure ordinance, DEA can be used to honor companies/operators whose costs are near the efficient frontier with extra net incomes. Regression analysis estimates what the mean house should be able to accomplish. With arrested development analysis, houses that performed better than norm can be rewarded while houses that performed worse than norm can be penalized. Such benchmarking surveies are used to make yardstick comparings, leting foreigners to measure the public presentation of operators in an industry. Advanced statistical techniques, includingA stochastic frontier analysis, have been used to place high and weak performing artists in industries, including applications to schools, infirmaries, H2O public-service corporations, and electric public-service corporations.
One of the biggest challenges for metric benchmarking is the assortment of metric definitions used among companies or divisions. Definitions may alter over clip within the same organisation due to alterations in leading and precedences. The most utile comparings can be made when prosodies definitions are common between compared units and do non alter so betterments can be verified.
By continuously seeking to place the best-in-class and extra or excel their public presentation, an organisation can implant in its civilization and behaviour a strong spirit of fight, pride, assurance, energy and endeavoring for betterment. Benchmarking is besides a comparatively low tech, low cost and speedy response technique that about any organisation can follow. Benchmarking besides seems to be common sense and is easy understood by directors, workers, providers, clients, the general populace and the media.
Benchmarking can easy go bogged down in public presentation measuring and lose sight of the existent aim of public presentation betterment. This is peculiarly important as mensurating the public presentation of organisations, peculiarly public organisations with multiple ends, is frequently a really hard undertaking. As Fischer suggests — no information are of all time perfect ; little differences should non be considered excessively meaningful ; and comparings with rivals should be used to happen ruddy flags. Sometimes, important factors may be excessively hard or even impossible to quantify ( eg. , spirit, energy or attitude ) .
Benchmarking can take to bounds on creativeness by concentrating on copying what already has been achieved, alternatively of promoting “ out of the box ” thought and looking for quantum discoveries. And it can go a ceiling on accomplishment in a given field. It can besides take to blind efforts to copy when more careful analysis would alleviate cultural, temporal, geographic or other features that limit the dependability of the selected benchmark.
Finally, the cost of benchmarking is rarely noted in the literature or considered in the field. Research takes clip, energy and resources. The more extended the benchmarking attempt, the more likely it is to devour the organisation ‘s advanced capacity. Taken to an extreme and combined with a complex public presentation measuring system to set up baselines, benchmarking can get down to negatively impact the quality and measure of services delivered.