Benchmarking is the ongoing activity of evaluating an organisation’s processes, products and services or comparing the organisation’s performance with the best in the world with the aim of improving performance and gain competitive advantage.
The process involves looking beyond your internal organisation and industry for best practices. The best may be a non-competitor in another industry but the focus still remains on improving business processes, understanding and effectively meeting customer’s requirements.
In a dynamic business environment, businesses need to be adaptable to change. Processes that might have boosted sales and profitability a few years ago might no longer be appropriate for building success today.
With benchmarking, the aim is not to go out there and just imitate everything that the industry, segment, market or product leaders are doing. It is about understanding your business and its value proposition and then deciding on what needs to be benchmarked.
It is also about comparing your performance with the best performers and identifying areas of improvement.
There are various ways of benchmarking, for example, internal, functional, external or generic. Whichever approach is chosen depends on the needs of the organisation.
However, it should be noted that the process of benchmarking if not carried out appropriately can be time consuming and very resourceful.
For the process to be a success there is need to ensure that everyone from the top to the bottom of the organisation is involved. There has to be also, the willingness to adapt and learn from others.
Furthermore, the successful implementation of the benchmarking process involves the following phases:
• Identifying business processes to be benchmarked: The key here is analysing and understanding the environment in which the business operates and what drives performance. Various activities and processes are involved in creating organisational value, thus there is the need to identify which processes are essential and need to be improved.
• Selecting and organising the benchmarking team: There is need to have a motivated and skilled team that has the capability to effect change. The selection of the team could be based on the following factors; leadership ability, communication skills, functional knowledge, project management skills and credibility.
Benchmarking is not an individual activity; it is about a group of individuals working and interacting together to effect change and improve business performance.
The choice of the team could also be based on the availability and willingness of the participants.
The more enthusiasm and interest the participants have, the more impact this will have on other team members and ultimately the overall results.
• Analysing your organisation’s business processes: The process of benchmarking involves sharing and exchanging information with those regarded as the best-in-class. There is collaboration from all the parties involved.
By analysing your internal processes, this helps you establish the outcomes gap between your organisation and the world class and gives you something to talk about with your benchmarking partners.
It also helps identify solutions within the organisation before embarking on an external benchmarking process and examine those factors that influence business performance.
• Collecting and analysing best performance information: From the internal analysis, the organisation would be able to identify its information needs. This phase involves selecting the benchmarking business partners and gathering all the necessary data and information via internal information sources, external information sources or original benchmarking research.
However, certain factors have to be considered such as; amount and accuracy of information required, how the information will be used, cost and time limit of obtaining the information, sources of data and the ease of access to data.
The data is then analysed to identify any performance gaps and the reasons for differences in performance. This helps identify what influences business processes and hence business performance allowing improvements to be implemented.
• Implementing and Controlling: This phase involves putting into practice the findings from the benchmarking study. Senior management should be involved at this stage and their buy-in is key to the success of the project.
The improvements in the processes might consists of small but often sequential improvements to current work processes, examining the processes as a whole to see if they can be done better or changing the entire way of doing business.
After the implementation phase begins, there is still need to monitor the progress of the new processes and take corrective action where necessary.
Benchmarking is an on-going activity and not a once in a while activity. You should view the process as a platform for learning.
If you regard benchmarking as a once-off process then you are bound to miss out on great opportunities and suffer greater losses.
Applied appropriately, benchmarking is can help organisations improve business performance and remain competitive.