Benchmarking Process

Businesses are expected to deliver good quality products and services which are not only defect-free, but also which are being manufactured or developed more efficiently (more cost-effective and faster) than before. Hence there is a constant need for continuous improvement of overall performance within an organization.

There is always a need to improve previous performance metrics of one’s own organization, or a competitor’s performance or that of the whole industry. We can achieve this continuous improvement in performance through the process named “Benchmarking”.

Benchmarking is a way of discovering what is the best performance being achieved so far and use that as the starting reference for raising the performance targets for future. This information can then be used to identify gaps in an organization’s processes and improving them in order to achieve a competitive advantage.

Benchmarking is one of the most fundamental tools and techniques of modern quality management, which revolves around customer satisfaction, standard processes and continuous process improvement. You can take Professional Course in Project Management on KnowledgeHut to get the best of PM understanding.

Organizations use benchmarking technique for the following objectives:

1. To improve its performance.
2. To understand relative cost position and to identify opportunities for improvement.
3. To gain strategic advantage by focusing on capabilities critical to building strategic advantage.
4. To increase the rate of organizational learning since the benchmarking exercise brings new ideas and facilitates experience sharing.

There are three broad classification of benchmarking:

1. Internal Benchmarking (improving against own previous standards of performance)
2. Competitive Benchmarking (comparing and raising the performance bar in comparison to competition)
3. Strategic Benchmarking (Comparing world-class performance and setting that as the reference for raising future performance parameters)

An Approach to Benchmarking

Benchmarking involves the following five phases:

1. Planning

It is imperative that the organization does adequate planning before embarking into the process. It includes planning the following:

1. Identify the activities that need to be benchmarked prior to engaging in benchmarking.
2. Identify the techniques to be used for data collection from a range of research techniques available such as informal conversations with customers, employees or suppliers, exploratory research techniques, re-engineering analysis, process mapping, quality control variance reports, financial ratio analysis, or simply reviewing cycle times or other performance indicators.
3. Identify and baseline the benchmark performance, a point against which improvement effort can be measured.

2. Collection of information

Information needs to be collected which include the primary data and secondary data. Primary data refers to collection of data directly from the benchmarked organization/organizations itself, while secondary data refers to information generated from the media, publications or internet. Data can be collected suitable techniques as planned.

3. Analysis of data

All collected data is analyzed to understand the gaps in actual and expected performance. The root causes of all such gaps are analyzed and ascertained for finding appropriate solutions for the root causes.

4. Implementation

Actual solutions' steps are designed for each root cause of the gaps. And such actions and solutions are being implemented for achieving the improvement in expected performance. This will involve actual changes incorporated into the benchmarked activities and processes so that the gaps are not only narrowed down, but are also eliminated, leading to the expected performance target achievement.

5. Monitoring

A regular and systematic evaluation of progress made and improvements achieved in the key performance indicators from the above implementation has to be carried out through the benchmarking process. If required, there will be a need to adjust the overall benchmarking strategy of planning, data collection and implementation of new changes in the benchmarked activities until expected improvements are achieved.