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What is Benchmarking?

The term benchmarking was originally used by early land surveyors, who used the term to
identify a fixed point from which all other measurements are made. In the late 1970's however,
it took a broader meaning. Applied to an organization, benchmarking is a process to determine
who else does a particular activity the best and emulating what they do to improve performance.
A more formal definition is "simply the systematic process of searching for best practices,
innovative ideas and highly effective operating procedures that lead to superior performance
Businesses such as AT&T, Motorola, Xerox, as well as most major corporations and many
smaller ones have embraced benchmarking as standard operating procedure since the mid- to late
1980's. It has a particular significance in technology, where the rapid change of the business
climate can leave a company out in the cold. However, governmental and non-profit
organizations have begun implementing benchmarking as late as the early 1990's.
The issue of government benchmarking was among many in Vice-President Gore's National
Partnership for Reinventing Government Report (NPR). The report states that "federal agencies
have been reinventing their operations to become more businesslike, many have been
benchmarking against worldclass private sector companies, other organizations, and other federal
agencies that have become really good at what they do (2)." This led to the Federal
Benchmarking Consortium Study Report in February 1997. It is being used by agencies such as
the EPA and NASA, as well as the City of Reno and the Salt Lake City and various other federal,
state, and local government agencies to improve their procedures and practices.
Benchmarking is both different and similar in ways to other types of business improvement
practices. These practices include total quality management (TQM), reengineering, and
performance measurement.

Benchmarking vs. TQM

Total Quality Management, or TQM for short, consists of three main points (3). First,
collaboration with suppliers to ensure that the supplies utilized in work processes are well
designed and fit for use. Second, taking continuous employee analysis of work processes to
improve their functioning and reduce process variation. Third, maintaining close communication
with customers to identify and understand what they want and how they define quality.
TQM works by either one of two processes, consultant-oriented TQM or project-oriented TQM.
Consultant-oriented TQM typically involves the creation of separate quality control bodies that
oversee the implementation of improvement and the control of quality improvement procedures.
This process is generally problematic in the public-sector because the TQM bodies exist outside
the chain of command, confusing accountability. These bodies often fail to become a part of the
hierarchical structure of government organizations. In project-oriented TQM, some of the
shortcomings of consultant-oriented TQM are addressed. This entails including all employees in
the process and including their needs as well as the customer's, as well as using established
procedures as a foundation instead of implementing new ones.

In general, TQM uses internal methods and the ideas of people within an organization to improve
itself from the inside out. This does not include comparing one's organization to that of another,
which is critical in benchmarking. However, due to the potential unwillingness of employees to
accept ideas without understanding their logic, both TQM and benchmarking require the input of
everyone in an organization and a general resistance to change must be overcome.

Benchmarking vs. Reengineering

Another type of method of performance review and improvement is reengineering.
Reengineering has been defined as "the fundamental rethinking and radical redesign of business
processes to achieve dramatic improvements in contemporary measures of performance, such as
cost, quality, service, and speed (4)." This generally involves discarding old practices with
completely new ones. The new practices are usually determined from a process that requires a
team and consultant to come up with, measure, and convince others to take up new ideas.
Reengineering can be problematic in government because they are don't have profits and
completely discarding old processes and breaking down barriers between departments run into
political, trade union, or other pressures. This sometimes results in the creation of new agencies
rather than overhauling old ones. Reengineering is very expensive and prone to failure rates in
over fifty percent of cases. It also requires TQM after its successful implementation.
While reengineering is cutting-edge and dramatic, and encourages employees to think big, it is
still an internal process. It does not involve the practices of one organization to compare itself to
those of another. While benchmarking may result in the use of completely new ideas similar to
reengineering, it often is simply improving on existing ones. In addition, after performing
reengineering, organizations often turn to TQM, to maintain their success.

Benchmarking vs. Performance Measurement

Performance Measurement is government's way of determining whether it is providing a
quality product at a reasonable cost (5). In fact, more than half of all U.S. cities collect
performance measures of some type (6). Performance measurement is also used in both
government and the private sector for reporting to management.
Performance measurement can be used to measure such things as productivity, effectiveness,
quality, and timeliness. When performance measures are used extensively and consistently they
can be quite effective improving an organizations output. Government agencies used for the
following reasons (7):
Better decision-making: it provides managers with information to perform their management
control functions;
Performance appraisal: it links both individual and organizational performance to aspects of
personnel management and motivates public employees;
Accountability: it fosters responsibility on the part of managers;
Service delivery: Improvements in public service performance;
Public participation: clear reporting of performance measures can stimulate the public to take

a greater interest in and provide more encouragement for government employees to provide
quality services; and
Improvement of civic discourse: it helps to make public deliberations about service delivery
more factual and specific.
What benchmarking does is to use data collected as performance measures and compare it to
other organizations that perform those duties or processes. By comparing to other organizations
through benchmarking, performance measurement becomes something other than "bean
counting". However, since performance measurement is a prerequisite to benchmarking, the two
have become intertwined, but they are not the same.




Develop dialogue
Main within a process to
Principles improve it through
gradual increments


Take measurements completely new
for comparison and methods for
obsolete or failing

Compare processes
with others who do the
same and determine
best methods

These processes can be thought of as the following situation. An organization is seeking

improvement. First, it takes performance measures and determines what processes need to be
improved. Then, TQM can be employed to improve these processes internally. In addition, an
organization may look beyond itself to other organizations for insight, and benchmark. If both
TQM and benchmarking are not enough of an improvement, an organization may seek reengineering, and restructure the whole process. In any case, performance measurement and
TQM will need to be employed to insure that the processes developed remain at the proper
levels. Finally, the whole process will need to be repeated as new improvements are needed.

The History of Benchmarking:

Brief History
G.H. Watson outlines the development of benchmarking in five phases (8):
Phase 1 1950-1975
Phase 2 1976-1986
Phase 3 1982-1988
Phase 4 1988+
Phase 5 1993+

Reverse Engineering
Competitive Benchmarking
Process Benchmarking
Strategic Benchmarking
Global Benchmarking

Reverse engineering was tearing things apart, examining them, improving them, and putting
them back together. Benchmarking really began in its modern form with the introduction of
competitive benchmarking began with Rank Xerox, and its implementation of benchmarking in
beginning around 1976. This was followed by process benchmarking which included looking for
ideas outside of the direct competition. Strategic benchmarking involves fundamentally
changing the business, not just the process (9). Global Benchmarking is the newest and involves
comparing your organization on a global scale.

The Xerox Case

In the 1970s, Xerox was the largest manufacturer of copiers in the world. However, Japanese
manufacturers were making better copiers, selling them for less, and making a good profit. This
prompted the company to directly compare itself with its direct and best competitors to
determine what it could do to increase productivity while decreasing costs.
The results from their benchmarking were astonishing. They found (10):
Xerox's ratio of indirect to direct staff was twice that of direct competition;
It had nine times the number of production suppliers;
Assembly line rejects were in the order of ten times worse;
Product time to market was twice as long;
Defects per 100 machines were seven times worse.
However, Xerox's Japanese joint venture, Fuji Xerox, was performing well. The problem was
large, and forced some changes.
Over the next five years, Xerox would have to increase productivity 18% to keep up with its
competitors. It did this through a strategy known as leadership through quality, which became
the foundation of the revival of the company. For example, Xerox benchmarked L.L. Bean, a
Maine outdoor sporting goods retailer, because of their excellent warehouse procedures that are
now the standard at most companies. It also benchmarked almost 230 performance areas by the
time it won the Malcolm Baldridge National Quality award in 1989 (11).

Public Sector Cases

Due to the relative infancy of benchmarking in the public sector, results of many cases are still
not fully known. The demand for better for less has many taxpayer wanting a government that
acts like a business, and treats them as a paying customer. In and age when everything is
available at the click of a mouse or a swipe of a card, no one wants a government full of red tape
and long waits.
A couple of early federal examples are the Bureau of the Census and the IRS. The Bureau of
Census set up four teams that were each to do a specific task. One team withdrew due to a lack
of support from team members. Yet another withdrew because it could not find sponsors. A
third team took a very informal approach that proved of little use. Only one team finished, but it

proved difficult to even find a room to meet and get all the team members to be there at the same
The IRS, however, succeeded in benchmarking its information system. The IRS hired outside
consultants. They started by speaking to top IRS executives. Then the executives showed
managers examples in benchmarking. The managers then decided what to benchmark. This was
followed by literature review and outside contacts. Finally, using a method similar to Xeroxs
they benchmarked four areas (12). These included software measurement, picking and packing
in form distribution centers, personnel recruitment and retention, and assistance at walk-in
taxpayer sites. As a best-in-class performer, the Ogden, Utah site was emulated for its
recognized service record. It went so well, that they now require a benchmarking study as part
of standard methodology (13).
Successful benchmarking was done by NASA in the early 1990s as well. NASA conducted 47
separate benchmarking studies. They have been so successful that other federal agencies have
turned to NASA for help in benchmarking.
Government benchmarking also reached state and municipal levels. States such as Maryland and
Oregon benchmark various agencies very well. Municipalities that have benchmarked
successfully include Reno, Boston, Salt Lake City, and Indianapolis. Reno, frustrated by traffic
accidents, benchmarked survey techniques from Harrahs Casino Hotels. After surveying
residents and noting complaints, Reno Police were able to write fewer tickets while lowering the
number of accidents by twenty percent (14). As a result, the departments approval soared
from forty percent to ninety percent.

Growth and Demand

As mentioned earlier, benchmarking is a standard tool for most private sector companies.
However, in the case of government, it is growing very rapidly. Many agencies and
organizations nationwide and worldwide are beginning to look at benchmarking as a tool to help
them achieve better results for less. This can be much easier in government in some cases
because sharing information is "the cheapest and most efficient, effective, and compelling means
for improvement performance (15)."

Benchmarking has many advantages which will be discussed in this section. Rank Xerox's
experience with benchmarking led them to the following benefits (16):
Benchmarking brings out the newness and innovative ways of managing operations.
It is an effective team building tool.
It has increased general awareness of costs and performance of products and services in
relation to those of competitor organizations.

It brings together all the divisions and helps to develop a common front for facing
It highlights the importance of employee involvement and, as such, encourages recognition of
individual/team efforts.
These illustrate the benefits of competitive benchmarking, which is used in both the business
sector and the public sector. Some of the advantages that will be discussed here are team
building, comprehensibility, flexibility, creativity, and evolution.

Team Building
Benchmarking cannot be successful without the full involvement of everyone in contact with a
project. It creates a united front for an organization and gives those who work within it a
common goal to accomplish. It also includes the ideas and concerns of those affected.
Along with good work on such a project comes recognition. As mentioned there are several
awards for an organization to receive. Within an organization may be yet more awards for
individuals, teams, or agencies that have exemplary performance. This is achieved by setting
goals, then meeting, or exceeding them.

Unlike some methods, benchmarking is easy to understand. This is due largely to the fact that
benchmarking produces a direct comparison to another organization. After determining whom to
follow, you study what they do, and emulate it. There is no misunderstanding of the overall goal
of being the best.

Benchmarking is flexible and can be interdisciplinary. Benchmarking can be used on almost any
organization, public, private, or, non-profit. It can be fitted to a large multinational corporation
or a local shop, from a federal agency to the government of a small village.
Identifying the best does not necessarily mean that a competitor has the best solution. It may be
a company who just does something well. When Rank Xerox needed to make its shipping better,
it relied on L.L. Bean. This sort of out-of-the-box thinking can create new standards rather than
emulating someone else's practices.

Sometimes an organization might know where their goals are, but the path to meet them is not
clear. Furthermore, even if another organization is perceived to be doing something the best, it
does not mean it couldn't be done better. After clearly defining goals, however, it can be easier
to come up with new, innovative ways of getting there. It could also create news ways of
obtaining information or making partnerships, such as Remington, a shotgun shell manufacturer,
getting information on how to make shinier shells from Maybellienes lip stick containers.

Benchmarking evolves with the consumer and doesn't require a large up-front cost. As things
change in the world, so does who is the best. Because benchmarking involves constant
reiteration, evaluating and changing, it changes as the market or consumer does. Although
benchmarking is constantly in change, it isn't a big price tag up-front. All one needs are office
supplies and a list of the best performers to get started.

Benchmarking can require a large investment in time, labor, and capital. Costs for a large
project can easily reach into the hundreds of thousands of dollars. These can be minimized
through careful, thoughtful, and deliberate planning. As Robert Graham of Medrad notes,
Typically, there are expenses related to travel as well as indirect costs associated with
employee time devoted to trips and team meetings. With careful planning benchmarking costs
can be kept to a minimum (17).

The size and scope of a benchmarking project is related directly to the cost. An easy way to
minimize costs is to take on a stepwise approach. This minimizes the amount of investment and
risk taken concurrently.

Dividing Costs
Organizations can pool resources by taking joint benchmarking projects and dividing costs
accordingly. This is more easily done in organizations that are not directly competing, such as
government agencies. Various organizations have pooled their resources and knowledge into
benchmarking groups.

Many consultant firms will also aid an organization in a benchmarking project. These
organizations have the technical knowledge and experience to more efficiently gather and
interpret data. Careful background research of a consultant must be made to make this process
more effective and it comes at a price. However, this does not require hiring additional staff or
expanding roles of current staff.

Education and Travel

Benchmarking does require education and travel costs. Once a team is chosen, they often need
to be educated on the methods of benchmarking. This is accomplished through workshops,
seminars, meetings, and courses. Then, this information must be disseminated to others. When

researching organizations, sometimes it is best to see the organization in action and meet with the
team that performed and implemented the changes to gain first-hand knowledge of the processes

One of the most important methods of keeping benchmarking costs low is effective
communication. This involves knowing what you need and where your own deficiencies are and
sharing information about yourself. Also, informing others inside of your organization of what
has been learned through reports, analyses, etc. and its method of implementation involving
flowcharts, matrices, schematics, etc. is critical. Clear communication also lets management
know how the project is going and its status. This reduces confusion and conflicts among
management and the team and among team members themselves.

Custom Fit
As mentioned earlier, benchmarking is flexible to almost any application. The process of how to
go about benchmarking varies as much as organizations themselves and their ideologies do.
Processes vary widely by goals, philosophies, industry, cultures, management plan, and
organizational structure. This section will explain some of the explicit processes developed by
companies that have benchmarked. The most general and best for a first-try at benchmarking is
the most general process, which is the Motorola Five-Step Process described later. An
experienced benchmarker such as Rank Xerox, use a much more detailed process.

Rank Xerox Process

Rank Xerox revolutionized business thinking with its benchmarking plan. It had a clear goal and
determined upper management team. A five-phase, twelve-step process was developed by Robert
C. Camp, Manager of Benchmarking Competency Quality and Customer Satisfaction at Xerox
Xerox Twelve-Step Process
Phase 1: Planning
1. Identify what to benchmark
2. Identify comparative companies
3. Determine data collection method and collect data
Phase 2: Analysis
4. Determine current performance gap
5. Project future performance levels
Phase 3: Integration
6. Communicate findings and gain acceptance
7. Establish functional goals

Phase 4: Action
8. Develop action plans
9. Implement specific actions and monitor progress
10. Recalibrate benchmarks
Phase 5: Maturity
11. Attain leadership position
12. Fully integrate practices into processes

AT&T and Other Processes

Two-time, Baldrige Award winning AT&T, an active benchmarker, has developed a nine-step
model (19):
AT&T Nine-Step Process
1. Identify what to benchmark
2. Develop a benchmarking plan
3. Choose data collection method
4. Collect data
5. Choose best-in-class companies
6. Collect data during a site visit
7. Compare processes, identify gaps, and develop recommendations
8. Implement recommendations
9. Recalibrate benchmarks
Other processes have been developed such as the Motorola five-step process and the seven-step
process (20).
Motorola Five-Step Process
1. Decide what to benchmark
2. Find companies to benchmark
3. Gather data
4. Analyze data and integrate results into action plans
5. Recalibrate and recycle the process
Seven-Step Process
1. Determine which function(s) to benchmark
2. Identify key performance variable to measure
3. Identify best-in-class companies
4. Measure performance of best-in-class companies
5. Measure your own performance
6. Specify programs and actions to meet and surpass
7. Implement and monitor results

SPI Five Phase Model

The model produced by the Strategic Planning Institute's (SPI) Council on Benchmarking
produced the Simple Consensus Model summarizing the five phases of benchmarking in generic
terms. This can then be mapped over the above-mentioned processes. These fives steps are (21):
Step Description
1 Launch
2 Organize
3 Reach Out
4 Assimilate
5 Act
These steps can then be "mapped" onto the Motorola Five-Step Process as follows (22):

1. Decide what to benchmark
2. Find companies to benchmark
3. Gather the data
4. Analyze data and integrate
5. Recalibrate and recycle the process

Launch Organize Reach Out





Readiness is determining whether an organization is capable of starting and sustaining a
benchmarking process. There are five broad categories for assessing an organization's readiness
for best practices. These are (23):
1. Benchmarking readiness deals with matching the benchmarking organization and its
benchmark partners on various dimensions.
2. Culture readiness concerns the readiness of the benchmarking organization and its
environment for importing best practice.
3. Implementation readiness covers activities that prepare the specific organizational entity and
the benchmark practice itself for implementation in the new setting.
4. Operation readiness addresses the last and most enduring issues: those that monitor the status
and insure the successful ongoing operation of the practice once it is in place
5. Technical readiness centers on the technical skills needed to conduct a benchmarking study
and to import a best practice.
Various techniques are used to determine whether an organization is ready. This can be
accomplished by asking questions or a scoring system.

Government vs. Private Sector Benchmarking:

Benchmarking in the government is inherently different than in the private sector. This happens
because of differences in goals and differences in how government relates to labor and the

Quality and Profit

Both the government and private sector strive to provide quality services at lower costs. The
goal of government is not to produce a profit, but to reach some level of utility or benefit. This is
both a plus and a minus. Since there is no competition, information and ideas are rarely held
secret and are shared freely and casually most of the time. But, on the other hand, there is no
defined measurement of success such as stock prices.

Labor, Media and Other Issues

As in all organizations, there is a resistance to change and a general lack of pressure for
improvement. This can include organized labor, politicians, and other employees. In
benchmarking, this can be countered by starting at the top and involving everyone from the
bottom up, thus creating a team atmosphere dedicated to getting the job done.
The public sector is under constant scrutiny from the media, politicians, and citizens. Many feel
that benchmarking is an expensive waste of money, resources, labor, and time or other matters
are more pressing. In addition, failures can be very public and result in harsh criticism.
Therefore, careful planning should be implemented and public input sought on all benchmarking
projects to prevent confusion and waste at taxpayer expense. Also, benchmarking, if done
properly, will save resources that can then be used for other matters without increasing taxes or
A not-invented-here mentality is also hard to overcome. Many agencies have difficulty
accepting new ideas that have been implemented elsewhere. There is a suspicion that what
others do is not necessarily the same and would therefore be ineffective or fail. A thorough
understanding of the case involved and communication with the organization and individuals
responsible is always important to understanding the process being studied.

Benchmarking Dos and Donts:

The following is an abbreviated list of dos and donts from Bogan and English (24):

As a general rule, the process or function selected should be one of the most critical to your
business strategy.
Projects should be well defined, and generally they should require less than a year to complete

the research, analysis, action planning, and preliminary implementation.

Management must support the project, provide adequate resources, and be prepared to
champion implementation of the best practice findings.
The organization must be willing to change.
The team must understand who the customer is for the study. The customers expectations
from the study are established by direct interaction.
It is very useful to have an explicit mission statement which documents the projects
deliverables, purpose and metrics.
Identify all that may be affected by the project and secure their ideas, contributions, and
Consider implementation issues early in the planning phase and throughout the project.

Dont initially benchmark areas where the organization already performs well.
Dont benchmark topics or processes that arent important.
Dont benchmark processes that are so broad in scope, so poorly defined, or so poorly
circumscribed, that the team cannot agree on its mission and cannot focus its efforts.
Dont undertake benchmarking projects with a team that is too large to be effective (10 or
more) or too small to be credible (1 to 2).
Dont undertake complex process benchmarking efforts with team members that dont
understand the benchmarking process and dont have access to and experienced benchmarking
Dont benchmark unless all those affected by likely changes are represented on the
benchmarking team or are given opportunity to contribute their ideas and interests to the
benchmarking process.

The Awards:
Benchmarking is not limited to just succeeding and being recognized by peers, several awards
are given to organizations. These include the Malcolm Baldrige National Quality Award
(MBNQA), which opened to public organizations in 1997, the European Quality Award (EQA),
the Deming Prize, and the Carl Bertelsmann Prize which is awarded to innovative
municipalities. These awards focus on how an organization plans and executes its management
based on quality, planning, and improvement.

Malcolm Baldrige National Quality Award

The Malcolm Baldrige National Quality Award (MBNQA) was established by congress in 1987.
The award was established to recognize U.S. companies, and later government agencies, for
outstanding business practices. These practices are judged on seven categories, including

Leadership, Information and Analysis, Strategic Quality Planning, Human Resource

Development and Management, Management of Process Quality, Quality and Operational
Results, and Customer Focus and Satisfaction. Benchmarking was not included in 1988, was
added in 1989 at 80 points, but by 1993, benchmarking was 400 points of a possible total of 1000

A Case Study in Transit Benchmarking:

Mass Transit Railway Corporation (MTRC) in Hong Kong
MTRC carries millions of passengers daily and is one of the largest urban metros in the world
but they benchmark. This is because Top Management is committed to a policy of continuous
improvement (25).
Since 1993, MTRC has focused on three objectives (26):
To develop a system that facilitates continuous improvement through regular use.
To identify areas of excellence and make improvements to reach the level of best practice.
To build a system that can be used to in public to demonstrate the value of its services to
MTRC then began to benchmark key processes. The key processes are (26):
Identify the critical success areas of the business.
Define key performance indicators of each critical success area.
Submit data to the administrator.
Consolidate benchmarking results.Identify the gaps of each performance indicator with the
best performer.
Conduct process benchmarking for high-priority improvement areas.
This process benchmarking is done through Community of Metros (CoMET), which includes
mass transit systems from Mexico City, New York City, Paris, London, Moscow, Sao Paulo,
Berlin, and Hong Kong. Each year all members gather uniform performance data to compare in
semiannual meetings. Five key areas of interest are service quality, reliability, efficiency, asset
utilization, and financial performance. These areas of interest led to the development of eighteen
Key Performance Indicators (KPIs) from five categories including (27):
Financial Performance

Key Performance Inicators

1) Total cost/passenger
2) Operations cost/passenger
3) Mainenance cost/revenue car operation km
4) Fare revenue/passenger

5) total commercial revenue/operations cost

6) Operations cost/revenue care operating km
7) Total cost/revenue car operating km

8) Passenger journey/total staff + contractor hours

9) Revenue capacity km/total staff + contractor hours
10) Revenue car km/total staff hours

Asset Utilization

11) Passenger km/capacity km

12) Capacity km/track km


13) Revenue car operating hours between incidents

14) Car operating hours/total hours delay
15) Trains on time/total trains
16) Revenue operating car km/total incidents

Service Quality

17) Total passenger hours delay/1000 passenger journeys

18) Passenger journeys on time/total passenger journeys

MTRC ranked at the top of half of the KPIs. Cliff Kong, organization and methods manager,
says CoMET highlights the strengths and weaknesses of MTRC in various areas so the company
can focus its improvement efforts (28).
To continue their success, MTRC set up task forces for potential improvement areas. MTRC
also uses case studies and site visits to other metros. Then by studying others MTRC can
compare itself to other metros. However, there are some drawbacks. Major changes are not
achievable in the short term due to regulations and safety procedures.
MTRC has conducted several process benchmarking studies in the past, such as closed loop
customer satisfaction process, supplier management/purchasing process, information technology
and system function, asset management process, a safety case study, and a reliability case study
(29). They did so with companies such as IBM, Xerox, American Express, Federal Express,
Hong Kong Telecom, Chase Manhattan Bank, and Orient Overseas Container Line.
MTRC was able to net its biggest gains through benchmarking its suppliers. MTRC
implemented eight different changes in the supplier purchasing process to improve this area and
were able to reduce material supplier base by 40 percent (30). They were also able to save $16.5
million by means of alternative sourcing and $6 million by identifying and adopting a noise
damping wheel for its electrical multiple units (31).
According to Andrew McCusker, operations engineering design manager, Benchmarking is
not easy when you attempt to compare full-service delivery and organizational performance.
However, CoMET has been very successful in doing just that. The set of measures can be taken
on board by each metro and used as an indicator of business proficiency over the long term. It is
dynamic and helps to keep conservative organizations like railways keep moving (32). He
also adds, By maintaining long-term relationships with benchmarking partners and

recalibrating the measures, it will generate the opportunity for MTRC to win in competitive
battles (33).

This information is disseminated under the sponsorship of the United States Department of
Transportation, Federal Transit Administration, in the interest of information exchange. The
United States Government assumes no liability for the contents or use thereof. The United States
Government does not endorse products or manufacturers. Trade or manufacturers' names appear
herein solely because they are considered essential to the contents of these reports.

Why Benchmark?
Although companies benchmark IS/IT functions for a variety of reasons, the reasons
most commonly cited include justifying the company's investment in IT, evaluating
the performance of the IS group and its management, and improving the IS functions
within the organization. Benchmarking also often occurs as one component of a more
extensive cost assessment or cost reduction effort, a total quality management (TQM)
program, or a strategic planning effort.
The budgeting process periodically motivates IS managers to perform some
benchmarking. Most organizations subject development and acquisition of new
systems to stringent return-on-investment hurdles. With the increasing popularity and
availability of outsourcing services, many organizations require a justification of
existing systems as well. Metric benchmarking allows a company to compare its
investment in IT and IS to other similar companies. A company that spends less than
similarly sized companies in the same industry may be operating more efficiently than
its competition. Alternatively, it may be spending less because it has neglected to use
IT to achieve competitive advantage, to match its competitors' services, or simply to
save more money elsewhere in its budget. Benchmarking might spur such a company
to increase spending in IT or it may help the company identify a low cost IT strategy

that works effectively. Conversely, a company that spends more than similar
companies in the same industry may be operating less efficiently than its competition,
using IT to achieve competitive advantage, or investing in IT to reduce other
Another reason to benchmark is to assess job performance and to set performance
goals. The satisfaction of supervisors, subordinates, and peers is, of course, a key
measure of job performance. However, if a company is complacent, its urge to
achieve satisfaction is likely to entice it to set goals that are too easy to reach. In the
absence of objective measures and external comparisons, lack of performance may not
be noticed until it is too late to recover. Complacency is a potential problem at all
levels of management. Every manager should be asking the question, "how high can I
realistically set goals for my direct reports?" Internal benchmarking helps to identify
trends relevant to answering this question. However changes in technology reduce the
value of such trend analyses. For example, the use of software productivity tools
makes historical records of software development productivity obsolete; replacement
of mainframe systems with LAN-based systems may render historical statistics on
down-time obsolete. One true way to assess your performance when you are in a high
state of flux is to compare your performance to others in a similar state.
Finally, benchmarking is a cornerstone of continuous improvement. It supports
answering questions such as "what functions are most in need of improvement" and
"how are others doing the same thing better?" The hallmark of a good manager is a
healthy level of dissatisfaction with the status quo. Benchmarking enables this
dissatisfaction to be channeled into productive change.
What Do IS Groups Benchmark?
Fairly significant differences exist between the types of processes benchmarked by
companies doing metric benchmarking and those searching for best practices.
Companies doing metric benchmarking seek out processes that are easily measured
and for which comparisons with representative companies are likely to be available
and meaningful. Figure 1 provides a list of such processes and some common
measures on which they may be benchmarked.
Benchmarking for best practices has been shown to be most profitable when applied
to functions that are semi-stable and repeatable. [6] Processes that are done once or
twice a year, such as budgeting the IS function, and those that are not repeatable, such
as the development or purchase of a particular piece of software or equipment are not
likely candidates for benchmarking.

Xerox uses the ten questions listed in Figure 2 to identify areas for best practices
benchmarking. First, and most importantly, benchmarkers should identify what factors
are most critical to the success of the IS function and the organization as a whole.
These factors are not necessarily the same. For example, the factor most critical to the
success of the IS function might be to keep costs low while the factor most critical to
the success of the organization might be to keep customers satisfied. These critical
success factors might point to several different processes to benchmark, and all should
be considered. In selecting among these, preference should be given to those that have
the most potential for improvement and those that currently cause the greatest
problems. The questions in Figure 2, by focusing on the combination of importance
and potential improvement, can help companies identify processes to benchmark.
Figure 3 displays the results of a 1992 study by the Society of Information
Management (SIM) and Ernst & Young of the benefits, by industry segment, of
improving different practices. [7] Prototyping, cross-functional teams, joint
application design, and business process reengineering were the top four practices
most often identified in this study for providing value and improvement. These and
the other items in this figure offer some suggestions as to possible benchmarking
opportunities. However, this study captured the state of the industry at just one point
in time. As industry experience with many of these processes and as technology and
tools evolve, different processes and products come to the forefront. Furthermore,
what is most important for the majority of companies may not be important for your
company, or your company may already have achieved superior performance in the
areas identified.
Who Initiates Benchmarking?
The motivation for benchmarking often determines who in the organization begins the
process. For example, if the motivation is to justify the IS/IT budget, the CIO or the
manager responsible for the budget will likely initiate the process. Alternatively, the
mandate may come from someone such as the President or CEO who has the ultimate
authority for allocating budgetary resources. Questioning the CIO's budget, he or she
may ask, "how does this compare to what our competitors are spending in IT?" or
"can't the proposed initiatives and operations be accomplished without such a large
When benchmarking is done as part of a continuous improvement effort, it may be
initiated a "Quality Office" or "Quality Officer" either within the IT organization or
outside. Once TQM becomes embedded in the organizational culture, benchmarking
will likely become part of the problem-solving toolset of all managers. These
managers may then initiate a benchmarking effort as needed to address problems they

observe. In addition, metric benchmarking will likely be institutionalized and

performed periodically without any apparent champion.
Who Performs The Benchmarking?
Benchmarking is generally performed by a team of employees, sometimes with the
assistance of an outside consultant who has had previous experience with
benchmarking and the process or processes being benchmarked. The team usually
includes a project manager, data collectors and analysts, a facilitator trained in
benchmarking who may or may not have expertise in the area being benchmarked,
and various support personnel who work only part-time with the team. Among the
support personnel, the benchmarking team should probably include a lawyer for
dealing with the legal issues surrounding the sharing of competitive information,
personnel from library services or others specifically trained in searching for
information outside the organization, clerical and administrative workers, and senior
Who Do IS Organizations Benchmark Against?
IS organizations can benefit in different ways from different types of benchmark
partners. In this section we look at the advantages of benchmarking within the IS
organization, within the company but outside IS, against competitive organizations,
and against the best of breed (also known as best in class or BIC).
The benefits of benchmarking within the IS organization itself are that such
benchmarking establishes a baseline, data are readily available, cooperation can likely
be assured, and priorities for external benchmarking can be developed. Figure 4
identifies some other reasons to benchmark internally.
Some processes that occur within the IS organization, such as purchasing and quality
assurance, may also occur in other divisions, other business groups, or other business
units within the same company. Other processes may be analogous to processes that
occur elsewhere within the company. For example, the operation of the help desk may
be similar to the operation of a customer support desk for the products that the
company manufactures. The existence of parallel or nearly parallel processes at many
places within an organization provides an opportunity for benchmarking within
organizational boundaries. Such benchmarking can be performed more expeditiously
than benchmarking across organizational boundaries, and the benefits of the lessons
learned are magnified because they affect so many parties internally. They also offer
an opportunity to recognize and reward excellence within the organization.

Another source of benchmarking is the competition. Indeed, in some sense, the

competition is the best source for determining how well you are doing. But, who
competes for the services you provide? Don't make the mistake of looking to the IS
organization of your company's competitors. The competition for internal information
services groups consists of outsourcers of IS/IT services. If they can provide the
services you provide more efficiently than you can, then you have something to learn
from what they do. If you fail to learn, you may not survive -- your function, too, may
be outsourced. Unfortunately, the number of companies that provide IS outsourcing
services are relatively few, most are large, and most feel that they have little to learn
from companies whose business is not the provision of IS services. As a result, it may
be hard to find an outsource provider to benchmark against.
Finally, best of breed benchmarking looks at superior IS organizations in other
companies. It really doesn't matter whether or not the other company is a competitor.
However, the other company should be one that faces similar information systems
needs and provides similar services. It should also be reasonably similar in size,
degree of globalization, and management complexity. [8] Surprisingly, research
indicates that if you are just beginning to benchmark, looking at the best organization
may not be as satisfactory as looking at organizations that are better than you but not
too far ahead. Apparently, looking too far ahead may be demoralizing and result in
attempts at change that the organization is not prepared to make.
How Can You Find External Benchmark Partners?
Organizations searching for benchmarking partners most commonly consider those
that have received special awards, citations, or media attention; those referred to or
cited by professional associations and independent reports; and those recommended
by other professionals, associates and consultants. [9] Among formal awards and
citations, the Malcolm Baldridge National Quality Award, Deming Application Prize,
and the European Quality Award are given to organizations committed to total quality
and who excel at implementing a TQM approach. Even though recipients of these
awards have not been judged exclusively on their information systems, their IS
processes likely reflect the organizational focus on quality, increasing chances that
they would be good partners for best practices benchmarking. However, receipt of a
Baldridge or Deming Award, or a similar award for business practice excellence does
not guarantee excellence in overall IS practice and certainly does not guarantee
excellence in every phase of information processing and technology. Benchmarking
companies must carefully evaluate the potential contribution of partners identified in
this fashion.
One award more narrowly focused on IS is the Partners in Leadership Award from
SIM International. This award recognizes the joint efforts of a CEO or senior line

manager and a senior IT executive in such areas as "improving the quality and speed
of customer service, shortening cycle times and reducing costs, differentiating
products and services, and improving business processes leading to improved
financial and business performance." [10] Another award focused on IS
is Computerworld's annual Premier 100, a ranking and rating of the IS effectiveness of
publicly traded corporations earning over $300 million. Unfortunately, the judges
forComputerworld assess companies largely on statistical measures, and some of these
are inconsistent with measures normally used to benchmark excellent performance.
For example, Computerworld considers a high ratio of IS budget to total revenue to be
a positive factor in its award (reportedly as evidence that the company is committed to
technology) [11] whereas most organizations consider low values of this ratio to be
indicative of IS efficiency. CIO, in conjunction with Booz-Allen & Hamilton, conveys
the ESPRIT Award honoring companies for "excellence in strategic partnering for
return from information technology." [12] Computerworld's Smithsonian Award
recognizes companies for their innovative application of technology.
Trade and professional journals such
as Computerworld, Datamation, CIO, Information Week, Client/Server
Computing, DBMS, Journal of Systems Management, and others often highlight
organizations that have applied information technology in a new, unusual, or
exemplary fashion. Often these experiences relate to fairly narrow applications or
processes, such as software quality testing, database backup procedures, the
application of CASE tools, or the tuning of LAN servers. You may need to read
widely or use an electronic index such as AB/Inform or Dialog or a printed index such
as the Computer Literature Index to find companies noted for the processes that you
wish to benchmark. However, this effort may be worthwhile because it allows you to
select partners who have worked hard on the areas you wish to benchmark.
Professional associations such as Babson's CIMS and Boston SIM provide a forum
where practitioners and consultants with expertise in one area of IS relate and evaluate
their experiences with new processes and tools in that area. Attendants at such
conferences can easily identify companies that are potential benchmark partners and
consultants who, because of their experience, can help them identify such partners. In
addition, reports produced by these organizations often identify either metrics, best
practices, or both in specific areas.
Finally, the American Productivity & Quality Center (AP&QC) based in Houston,
Texas, maintains a database for to its members of companies that have done
benchmarking in a variety of areas. This database, including abstracts of the
benchmarking studies, can be searched on line, and additional information about prior
studies and best practices can be obtained through face-to-face meetings. Similar

databases are being developed by other companies for whom benchmarking is central
to their TQM efforts. [13]
How Do Companies Measure The Success Of A Benchmarking Effort?
Surprisingly little has been written about how organizations judge the success of their
benchmarking efforts. Many, in their evaluation, subsume benchmarking under the
umbrella of a broader TQM or reengineering effort and make no attempt to
individually assess its contribution. Others measure the success of benchmarking by
the extent to which it produces change. Unfortunately, while change can be measured
fairly easily, the impact of change is measured over time, and can rarely be attributed
to the success of a single initiative. If benchmarking is viewed as a learning process,
its success must be measured individually by its participants as well as collectively for
the organization..
How Likely Are Companies To Achieve Success?
According to one study, companies have been successful by their own measures in
approximately 70 to 90 percent of their benchmarking efforts. The highest rates of
success come when performing metric benchmarks of the IS/IT infrastructure and the
lowest success rates when performing metric benchmarks on strategic issues. Best
practice benchmarking achieved success rates between 80 and 88 percent, again
depending on what types of practices were benchmarked. [14]
What Are the Keys to Success?
Perhaps the most important key to the success of a benchmarking effort is to view it
primarily as a learning process. [15] The implication of this perspective is that the IT
process owners should come away from the benchmarking effort with new insights
about their own practices. These insights may or may not immediately lead to specific
change, but they should prepare participants for understanding when such change is
appropriate and enable them to recognize what alternative are applicable.
Experienced practitioners often note that one key to success is to start small. The
major danger of starting with too large an effort is that too many resources are
consumed in the benchmarking effort before any results can be realized. In addition,
the demand for change may be more than the organization can assimilate in a short
period of time. Companies that start small build a history of success and gain the
experience required to undertake more substantial efforts.
Another key to success is to have the commitment of top management. Benchmarking
can be costly and time consuming. Upon completion of a benchmarking effort, more

time and possibly more financial resources are needed to implement recommendations
that come from the benchmarking team. Even more time passes before those
recommendations produce a return. If management is not committed to benchmarking,
initiatives may be cut short before they can have an impact on the organization.
Finally, success requires that organizations act on their benchmarking results.
Benchmarking studies should not be sitting on bookshelves. They should contain
concrete recommendations that can be translated into action. Lack of action leads to
demoralization among the benchmark team members and leaves future benchmarking
teams without any incentive to find new opportunities.

It is often stated that those who benchmark do not have to reinvent the wheel (Parker, 1996).
By following others one can make improvements and not focus on stale ideas. Benchmarking at
first glance may be mistaken for a copycat form of developing strategic plans and for making
improvements within an organization. This is not true. Benchmarking is a process that allows
Organizations to improve upon existing ideas. In order to eliminate myths and misconceptions
about benchmarking it is important to know exactly what benchmarking is, the different types of
benchmarking, the criticisms of benchmarking, and the ethical practices concerning
Benchmarking is simply the process of measuring the performance of one's company against
the best in the same or another industry. Benchmarking is not a complex concept but it should
not be taken too lightly. Benchmarking is basically learning from others. It is using the
knowledge and the experience of others to improve the organization. It is analyzing the
performance and noting the strengths and weaknesses of the organization and assessing what
must be done to improve.
There are several reasons that benchmarking is becoming more commonly used in industry;

Benchmarking is a more efficient way to make improvements. Managers can eliminate

trial and error process improvements. Practicing benchmarking focuses on tailori
tailoring existing processes to fit within the organization.

Benchmarking speeds up organizations ability to make improvements.

Compare business practices with those of world class organizations

Challenge current practices and processes

Create improved goals and practices for the organization

Change the perspective of executives and managers.

Becoming competitive
Improving industry best practices
Defining customer requirement
Establishing effective goals and objectives
Developing the measures of productivity

It helps improve process effectiveness

Helps in cost reduction

It provides focus in planning operations

The sharing of information may create opportunities for innovations

It assesses the firms existing position and provides a basis for establishing standards of

Cross comparison are more likely to expose different ways of doing things

It provides evidence for additional resources

Is practitioner led, so gives a sense of ownership

Facilitates multi-disciplinary team building and networking

Provides an avenue for change in clinical practices.


Benchmarking is the danger of complacency and arrogance. Many organizations tend to relax
after excelling beyond competitors' standards. The realization of having become the industry
leader soon leads to arrogance, when considerable scope for further improvements remains.

It implies there is only one best way of doing business

The benchmark may be yesterdays solution to tomorrows problems. If the operating

environment is highly dynamic the solution will be dynamic.

It depends on the accuracy of the information about the comparator company

It may be difficult to decide which activities to benchmark

It encourages the mentality of catching up rather than being innovative

Lack of strategic relevancy

Organizations that benchmark, adapt the process to best fit their own needs and culture.
Although number of steps in the process may vary from organization to organization, the
following six steps contain the core techniques:
1. Decide what to benchmark.
2. Understand the current performance of your organization.
3. Do proper planning of what, how and when of benchmarking endeavor.
4. Study others well (the practices or system you wish to benchmark)
5. Gather data and learn from it.
6. Use the findings.
It involves the following;
Plan: Critical success factors, select a process for benchmarking, document the process, and
develop performance measures
Search: Find bench-marking partners
Observe: Understand and document the partners process, both performance and practice
Analyze: Identify gaps in performance and find the root causes for the performance gaps
Adapt: Choose best practice, adapt to the companys conditions, and implement changes.

Process benchmarking Its where we go beyond performance measures and also

compare how business processes are performed. The initiating firm focuses its observation and
investigation of business processes with a goal of identifying and observing the best practices
from one or more benchmark firms. Activity analysis will be required where the objective is to
benchmark cost and efficiency; increasingly applied to back-office processes where outsourcing
may be a consideration.

Financial benchmarking - performing a financial analysis and comparing the results in

an effort to assess your overall competitiveness.

Performance benchmarking - allows the initiator firm to assess their competitive

position by comparing products and services with those of target firms.

Product benchmarking - the process of designing new products or upgrades to current

ones. This process can sometimes involve reverse engineering which is taking apart competitors
products to find strengths and weaknesses.

Strategic benchmarking - comparison of strategic decisions and dispositions at a higher

level. It involves observing how others compete. This type is usually not industry specific
meaning it is best to look at other industries.

Functional benchmarking - comparison against organizations that are not necessarily

competitors, but that performs related tasks within the same technological area. In the school
analogy, this will be benchmarking against someone from another school, but of the same type.
A company will focus its benchmarking on a single function in order to improve the operation of
that particular function. Complex functions such as Human Resources, Finance and Accounting
and Information and Communication Technology are unlikely to be directly comparable in cost
and efficiency terms and may need to be disaggregated into processes to make valid comparison.

Internal benchmarking, comparison against the best within the same organization or
corporation, often called benchmarking within your own class.

Competitive benchmarking, comparison against the best direct competitors, which then can be
termed benchmarking against someone in the parallel class.

External benchmarking, it involves seeking outside organizations that are known to be best in
class. It provides opportunities of learning from those who are at the leading edge, although it
must be remembered that not very best practice solution can be transferred to others.

International benchmarking. Is used where partners are sought from other countries because
best practitioners are located elsewhere in the world and/or there are too few benchmarking
partners within the same country to produce valid results.


1. Competitors may refuse to share their information
Competitive benchmarking is the most difficult type of benchmarking to practice. For obvious
reasons, organizations are not interested in helping a competitor by sharing information. It looks
at all aspects of the competition's strategy. This does not just include the disassembly and
examination of the product but it analyzes the entire customers path of the organizations
competitor. This is a difficult thing to do because this information is not easily obtained.

The company should conduct an extensive research. It is also important to remember when using
competitive benchmarking that the goal is to focus on your direct competitors and not the
industry as a whole.
Reverse engineering. This is a process if buying a competitors product, dismantling it to
understand its components and its configurations.
2. Difficulties in deciding what activities to benchmark
This is where a company finds it difficult to make a choice on which activity to benchmark as
opposed to others. Therefore the company finds itself concentrating on irrelevant activities and
leaving the most important activities. At times the company will be forced to carry out so many
activities which make it expensive for the company.
The company should sub divide its processes so as to identify the most important activities to
They should involve experts in the relevant areas of concern so as to ensure quality decision
3. Successful practices in one organization may not be successful in another organization
This where a company borrows ideas applied by other companies and apply them on their
strategy expecting them to have the same results. In return, they end up being frustrated due to
the failure of the whole process. This is because techniques applied by one company may not be
applicable to another company.
Appraisal This is to evaluate the worth, significance, status of or give expert judgment on value
or merit of the practice that is used constantly to check its effectiveness and change where
Ideas borrowed should not be copied directly, but rather modified to suit the situation
4. It can be expensive to a firm
Benchmarking will involve an extensive research and experts knowledge in order to be
successful. Therefore the company has to spend more on resources required, thus increasing the
operating costs of the company.
The company should identify the key areas to benchmark and state the desired objective.

5. The benchmark may be yesterdays solution to tomorrows problem.

Since the operating environment is highly dynamic, the information obtained from the
competitor becomes obsolete before implementation thus the solution will be ineffective. Due to
changes in technology, current processes may be ineffective tomorrow.
Be up to date with the technology.
6. It encourages the mentality of catching up rather than being innovative
The company using their competitor to benchmark, will rather be centralized to competition and
trying to reach the levels of performance of the company in question, instead of being creative
and innovative to come up with better means and ways of doing things, were it not for
consideration of the competitor. The competitor company being used as benchmark may even
have more advanced resources, making it difficult to directly use it as basis for evaluating your
Emphasize on innovation rather than invention.
While using your competitor as basis for benchmarking, avoid the idea of trying to catch up,
rather, use it as a level of comparison to come up with better standards and ways for
organizational improvement and meeting or surpassing the industries best practices.
Since the concept of benchmarking can lead to unscrupulous and sometimes unethical behavior,
the SPI Council on Benchmarking and the International Benchmarking Clearinghouse have
established a general code of conduct (Thompson). The code is as follows:

When benchmarking with competitors, set up certain rules that state that things will not be
discussed that give either company a competitive advantage. Establish the purpose for both
parties to improve or gain benefit. Costs should not be discussed.

Do not ask competitors for sensitive information. Do not make them feel that if the data is not
shared the benchmarking process will end. If you ask the company for sensitive and valuable
information, be prepared to give the same in return.

Use an ethical and unbiased third party such as a legal advisor for direct competitor advice.

Consult with a legal advisor if any information gathering procedure is in doubt.

Treat any information obtained from a benchmarking partner as privileged or top secret
information. Don't give away any information or potential trade secrets without permission.

Do not misrepresent yourself or your organization as being someone or something that you are

Show that you are committed to the effectiveness of the process. And in doing so maintain a
professional and honest relationship with your benchmarking partners.
Benchmarking can be called the management tool that revived Xerox. Xerox defines
benchmarking as the continuous process of measuring our products, services, and practices
against our toughest competitors or those companies recognized as leaders (Parker, 1996). The
Xerox of today is not the Xerox of the sixties and seventies. During that time period the
organization experienced market erosion from competitors, primarily Japanese. These
competitors were marketing higher quality products in the United States at the same price or
lower as Xerox. Xerox found that the Japanese were able to assemble quality products at a low
price. This was hard for Xerox to grasp because they were the first to develop the photocopy and
their name had come to be synonymous with photocopies. How could the Japanese be beating
them at their own game? Xerox found that they had to regroup. In doing this they used reverse
engineering and made competitive benchmarking a fundamental part of their operations by the
early eighties. Xerox began to study other organizations within and out of their industry. By
1983, Xerox had bench marked more than 230 process performance areas in their operation.
They looked at all aspects of their business. Identifying the best processes used by others, Xerox
adapted them for their own use. This is how they regained their core competency and strategic
advantage in the photocopying industry (Brogan, 1994).

Benchmarking can be as complex as re-engineering or as simple as thumbing through the
quarterly reports of organizations and making comparisons. Although organizations must use
benchmarking with some caution, it can be informative and foster a spirit of openness and
cooperation from indirect competitors. It is not enough to benchmark the costs of activities and
identify best practices. When an organization looks at benchmarking they must look at all
aspects of the business, its products, and its processes. It is crucial for organizations to focus on
anything that will impact its performance and quality.

There are several keys to successful benchmarking. Management commitment
is one that companies frequently name. Since management from top to bottom
is responsible for the continued operation and evaluation of the company, it is
imperative that management be committed as a team to using and
implementing benchmarking strategies. A strong network of personal contacts
as well as having an open mind to ideas is other keys. In order to implement
benchmarking at all stages, there must be a well-trained team of people in
order for the process to work accurately and efficiently. Based on the
information gathered by a well-trained team, there must also be an effort
toward continuous improvement. Other keys include a benchmarking process
that has historical success, sufficient time and staff, and complete
understanding of the processes to be benchmarked.
In almost any type of program that a company researches or intends to
implement, there must be goals and objectives set for that specific program.
Benchmarking is no different. Successful companies determine goals and
objectives, focus on them, keep them simple, and follow through on them. As
in any program, it is always imperative to gather accurate and consistent
information. The data should be understood and able to be defined as well as
measured. The data must be able to be interpreted in order to make
comparisons with other organizations. Lastly, keys to successful
benchmarking include a thorough follow-through process and assistance from
consultants with experience in designing and establishing such programs.

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The benets of conducting a benchmarking exercise can include:

Creating a better understanding of the current position
Increasing awareness of changing customer needs
Encouraging innovation
Developing realistic, stretching goals
Establishing realistic action plans
Keys to Successful Benchmarking
What You Need to Make Benchmarking Effective
Focus on the processes that are critical to your business
Desire to use benchmarking in conjunction with strategic planning
Willingness to admit that youre not the best
Openness to new ideas from potentially unexpected sources
Commitment to provide resources and to overcome resistance to
Recognition given to successful benchmarking teams
Understanding of the benchmarking process
Communication to the organization about the objectives of the
benchmarking project
Key Benefits of Benchmarking
In addition to the points made above, benchmarking can help your organization in other ways. Some of
these include providing:
Actionable information to help companies grow. Organizations that regularly benchmark their
operations use these insights to map their strengths and weaknesses. With continuous

monitoring and data in hand, organizations can react faster and make the appropriate

Quantitative information drives strategic decisions and initiatives. Insight into the business
processes or systems allows organizations to focus on the right levers for growth. Knowing what
waste to cut or where investments need to be made based on datadriven evidence gives
executives confidence in their decisions.

Reduced uncertainty. Benchmarking provides quantitative evidence that helps companies

measure any change in performance. A significant benefit of benchmarking is the insight into
critical business processes it provides thereby enabling managers to proactively craft solutions
to address issues.

Tactical Action Plan. Misallocation of resources is often a result of an inefficient or ineffective

process. Comparing the process, staff, and systems involved in relation to a peer group allows
managers to address laggard processes with less effort and greater knowledge.

Enhanced understanding of cost structure relative to others. Comparing relative business costs
to top organizations and peers can drive the initiative to improve processes, systems, or staff
functions to gain a competitive advantage.

2.2 Benefits of benchmarking

Benchmarking is a tool that provides goals for realistic improvement and helps you
understand the changes required for improving performance. You may use benchmarking
to identify and rectify problems, implement strategic change initiatives, or for continuous
improvement. "In the private sector, the primary rationale for benchmarking is the desire
to maintain or regain a competitive market position. While most public sector
departments and agencies do not actively compete for market share, there are equally

valid reasons to consider benchmarking as a public sector management improvement

technique" (Bibliography #13, Chapter 1, p. 1). (1)
Provide meaningful performance information
"All levels of government need reliable ways of assessing the relative performance of public
programs in order to be able to set overall priorities and strategies. Benchmarking can
assist public sector managers improve the quality of their performance information. Such
improvements can, in turn, help organizations better meet external and internal
accountability requirements. Benchmarking information often adds an important
comparative perspective to organizational outputs. Specifically, some data may only be
valuable when compared through time or with other organizations..." (#13, ch. 1, p. 2).
Improve strategic planning and provide an assessment of the organization's
strengths and weaknesses
The organization can learn how to plan for the long term more effectively by seeing how
other organizations have reached better levels of performance through their own strategic
planning. Benchmarking allows management to determine where major problems lie, and
what can be done to strengthen weak areas. Areas of excellence will also surface, enabling
the organization to continue with what it is doing well.
Establish challenging performance goals and stimulate better performance
"Benchmarking is all about comparison, and comparison can be a driving force to spur on
organizational or individual performance" (#13, ch. 1, p. 1). Realizing what an organization
is doing wrong, or could do better, leads to easier planning for future target performance
levels. Management will know where it stands in terms of performance and what has to be
done to get where it wants to be. This should result in more realistic goals being set.
Benchmarking of activities or functions can help senior managers and staff determine how
organizations and programs are performing in relation to the leading organizations in their
field. The technique can uncover new and creative ideas to assist in performance
improvement. Benchmarking serves as a tool, among others, to assist managers in their
mandate to modernize and improve financial management in the federal government.
Foster implementation of best practices and lead to significant savings
Benchmarking and other comparative information can be used to address pressures by
identifying ways to streamline processes, or opportunities to improve the allocation of
resources. The implementation of best practices found in other organizations through
benchmarking will help the organization become more efficient and effective.

Building on Success

Benchmarking allows a company to avoid some of the trial and error associated with
setting untried goals and strategies from the ground up. For example, a newly

launched manufacturing company that has the opportunity to view and evaluate the
mechanical setup of an existing and successful manufacturing facility can see
firsthand what works and what doesn't by observing an industry leader's approach.
This gives the startup a chance to emulate tested practices and techniques and improve
its chances of success -- or at least to avoid known problems.

Strengthening Industries

While benchmarking may be considered imitation, sharing best practices can help
strengthen an overall industry. For example, in cities that focus on travel and tourism,
sharing information about how to provide superior customer service and enhance the
tourist experience can improve the perception of a city and increase business for
numerous companies in that industry. In this sense, sharing general information -rather than strategic operating strategies -- can improve the chance of successful
outcomes across the board.

Increasing Productivity

Benchmarking helps a company communicate best practices to employees and

establish specific goals and expectations that can enhance productivity. When goals
are based on leading industry standards, employees understand the expectations
associated with their roles and can measure their performance against those standards.
Greater efficiency reduces costs and increases profits.

Tailoring Benchmarks

Practices that work in one company aren't automatically effective in another company,
even when both operations are part of the same industry. The business owner must be
careful and specific when tallying benchmarks and integrating them into an existing
operation. She should consider the individual dynamics of her organization before
assuming the best practices of a similar business will work for her.

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Benefits of Benchmarking
Benchmarking in an essential self-improvement tool for companies as it helps them to
evaluate their comparative weaknesses and strengths, and learn what they should do to
improve. Benchmarking helps companies to find and adopt best practices with the hopes of
maximizing their profits. By using well defined processes, regardless of the company and
how they are structured, benchmarking becomes easy.


With benchmarking, companies can identify specific areas that need modification, thereby
eliminate guesswork. This in turn builds confidence in problem solving and assumptions are
taken into consideration.




Benchmarking plays an essential role in business processes as it helps companies to

prioritize on improvement opportunities, with the aim of maximizing their returns. By
doing so, it becomes easier to improve performance across all departments, which in turn
encourages healthy competition.



Benchmarking is just as essential as the unforeseen results, particularly when you want to
engage a number of folks to implement improvements. In other words, including
shareholders and executives in the benchmarking process can improve productivity as long
as necessary improvements are made.




Furthermore, benchmarking can raise the companys attention to performance output and
opens them to weaknesses and strengths. When organizations learn from others, applying
new strategies to common challenges becomes easier. Moreover, it encourages better
involvement as it motivates employees to assist in implementing improvements.



Benchmarking also increases the enthusiasm to communicate resolutions to common

challenges and encourage teamwork, especially when it comes to decision making. It gives
companys the perspective on how to execute good practices with the hopes of improving

performance across all departments. In addition, it increases the understanding and







The major drawback of the benchmarking process is that it may lead to arrogance and
complacency. Many companies tend to ease back after achieving their goals when further
improvements are still needed.