Hemant Gaule

IIM, Ahmedabad

Benchmarking
Introduction
Benchmarking is the process of comparing performance or functioning of specific processes
or methods to another that is considered to be an industry standard or best practice. Bogan
and English, authors of Benchmarking for Best Practices, define benchmarking as an on-
going outreach activity; the goal of the outreach is identification of best operating practices
that, when implemented, produce superior performance.

The outcome of benchmarking is expected to be lessons learned by the organization to

apply best practices in their functions, keeping their own objectives, processes and
business models in view.

Through benchmarking, organizations assess various characteristics of their processes vis-à-

vis the best practice, usually within a peer group described for the points of comparison. This
then allows organizations to develop plans on how to make improvements or adopt best
practice, usually with the aim of increasing some aspect of performance. Benchmarking is a
singular event, but the outcome of benchmarking is a continuous process in which
organizations continually seek to challenge their practices.

Types of Benchmarking
Process benchmarking
Financial benchmarking
Performance
benchmarking
Product benchmarking
Strategic benchmarking
Functional
benchmarking
Investigating business processes with a goal of identifying
and observing the best practice.
Performance and comparison of financial analyses examine
the overall competitiveness
Assess their competitive position by comparing products
and services
 Designing new products or upgrades to current ones
 Can sometimes involve reverse engineering which is
taking apart competitors products to find strengths and
weaknesses
Observing how others compete
Focus benchmarking on a single function in order to
improve the operation of that particular function

Process of Benchmarking
1. Identification of problem areas. Before comparing an organization with others it is
important to know your own organization's function and processes, and where the problem
 Hemant Gaule
IIM, Ahmedabad
lays. This not only gives a direction to the process, but also provides a point against which
improvement effort can be measured. A range of research techniques are used for this.

2. Identification of other industries with similar processes. This provides an base set of
organizations to get a generic comparison.

3. Identification of leaders in these areas. This provides a comparison basis with the best
practices, and the changes that led to the most efficient processes.

4. Reviewing companies for measures and practices. Specific business processes of

companies are reviewed via surveys to identify possible alternatives.

5. Information Exchange. After the identification of leading edge practices, companies can
exchange mutually beneficial information.

6. Implementation. This involves fine-tuning the knowledge gained through benchmarking for
the companies specific process

Conclusion
Out of the several methods prevalent for performance comparison and betterment in
organizations, benchmarking (performance benchmarking in particular) is becoming
increasingly popular. Several major things must be kept in view, however, while undertaking
this process. Confidentiality of the information exchanged through benchmarking must be
maintained to the level expected by the best practice organization. It may often be difficult
for an organization implement the best practice, at all or with the same degree of
effectiveness, hence, limitations of the organizations must be understood prior to the
initiation of this process. With the important issues kept in mind, the practice of
benchmarking can be an effective tool in the success of an organization.