Benchmarking – What Is It?

Benchmarking is a new buzzword in management. Some people are quite wary of this term fearing that industrial espionage may use this word as a cover. In fact, there is a fundamental difference between these two methods. Benchmarking is a management tool for measuring company’s performance which is supposed to be a general knowledge.

Initially, this method was invented in 1972 to measure a business performance by Cambridge Institute for Strategic Planning. First it was used by Rank Xerox during severe crises in 1979 to compare costs and quality of its product to Japanese ones. In general, benchmark is an objective measure that is widely considered to be a standard or best practice and can be used for comparing to another objects.

The purpose of benchmarking is to find a company showing a better business performance than your company does. After you determine the best management strategy you will have to answer the question of “how to make it better”.

Practically, benchmarking is an alternative method to strategic planning process, in which organizations evaluate various aspects of their processes in relation to the best practice of their competitors. The benchmarking process combines strategy development, industry analysis and competitor analysis into one process.

The reasons of benchmarking popularity in the world are as follows:

1. Global competitiveness. Today, during the times of business globalization, companies realize the importance of thorough study and adopting best practices from organizations that excel in its fields in order to improve its own business processes.

2. Reward for quality. National campaigns on identifying and recognizing the companies that are leaders of industry for quality and business performance has been grown in popularity for the recent years. The terms for participating in such campaign include both the demonstration of competitive advantages of products and mandatory implementation of benchmarking concept in company managerial practice.

3. The necessity for overall adaptation and utilization of global achievements in industry and business technology. Each company regardless its size and field of business should study and utilize the best practice in industrial and business technologies in order to keep apace with competitors.

Benchmarking process includes four consecutive steps, namely:

1. Understanding the company’s business processes
2. Business process analysis of other companies
3. Making comparisons of company’s current process and practices, with those of the organizations being benchmarked.
4. Incorporate best industry practices in all business processes to close the gap.

In Japan, the USA and other countries the development of benchmarking programs are supported by governments. This interchange of business experience is considered to help the growth of countries economy at large.

Google Yahoo Digg Technorati Delicious Slashdot