Benchmarking is the process where an organization gathers data of its processes and performance metrics and then compares them against those from other organizations in order to identify and implement best practices. In other words, it’s a means of improving performance by adopting practices that have been successful in other organizations.
Benchmarking has become, since the 1990s, an important management tool of gaining and maintaining a competitive advantage. Today, this process is used by many organizations to obtain valuable information regarding best practices that will allow them to identify ways for improving their own operations without having to recreate the wheel. These best practices can be implemented in a faster and better way because they have models from other similar organizations to help guide their changes.
In order for Benchmarking to occur it is essential for organizations to determine what and where improvements are necessary, analyze how other organizations achieve their high performance levels, and use this information to improve their own performance. Many organizations are confused with the term “Benchmarking” and believe that it is only a way to compare their performance with others, which is only a part of it. This process’s ultimate goal is to adopt the best practices that result in high performance, and in order to achieve this, the main steps that need to be carried out are:
Plan
- What to benchmark: critical processes need to be identified and internal data for comparison collected (measure performance and understand strengths and weaknesses of current process)
- Who to benchmark: internal units (comparison of functions within an organization), other organizations (comparison across organizations) or the best in the industry (compare with exceptional performers).
Analyze
- Collect data: comparative data (qualitative/quantitative) needs to be collected systematically. This can be done by performing calls, surveys, site visits, interviews, or review of websites.
- Analyze data: analysis of gap between performances and identification of which strategies/practices can be adapted or adopted.
Act
- Implement improvements: Plan the actions to achieve the desired change, implement it and measure results for effectiveness.
Benchmarking can be used by all types of companies (including private, public, non-profit, for-profit) as well as industries (technology, education, manufacturing, etc) as a way to compare key metrics against other organizations and improve their performance. The benefits that this process can bring to those who implement it are:
- Understand their current situation (how well they are performing) compared to other organizations.
- Identify areas of opportunity.
- Prioritize improvement opportunities.
- Set performance targets.
- Monitor company performance and manage change.
It is important for organizations to take the Benchmarking process to the last step and not just use it as a competitive comparison studies. This process, if used correctly can be a tool to identify improved ways to meet customer needs and a cost-effective collection of innovative ideas.
