Knowledge and Process Management Volume 8 Number 2 pp 123135 (2001)

DOI: 10.1002/kpm.110

& Research Article

Benchmarking and the Role of

Organizational Learning in Developing
Competitive Advantage
Jonathan D. Pemberton1*, George H. Stonehouse2 and
David J. Yarrow3
1
Division of Business Analysis, Newcastle Business School, University of Northumbria, UK
2
Division of Strategic Management, Newcastle Business School, University of Northumbria, UK
3
Centre for Business Excellence, Newcastle Business School, University of Northumbria,
Northumberland, UK

Benchmarking is concerned with enhancing organizational performance by establishing

standards against which processes, products and performance can be compared and
consequently improved. Organizational learning, on the other hand, refers to the processes
by which organizations develop new knowledge and core competences in order to gain
competitive advantage. By reference to a survey of over 700 companies drawn from the
manufacturing and service sectors in northeast England, this paper examines the relationship
between benchmarking and the characteristics of organizational learning. By examining
several variables associated with organizational learning, evidence is presented that supports
the argument that benchmarking brings the greatest benefits to an organizations performance
when combined with effective organizational learning. Vision, training and education, a
problem-solving culture and human resources strategy are some of the key elements
associated with benchmarking and organizational success. A high degree of commonality
exists between the results of the manufacturing and service sectors, although differences do
emerge in the context of employee morale and motivation for example. Furthermore, all the
organizational factors examined in both sectors proved to be statistically significant when
comparing world class and potentially winning companies with their competitors, adding
weight to the argument that the existence of organizational learning within a company is an
essential ingredient in the quest for superior performance. Copyright # 2001 John Wiley &
Sons, Ltd.

INTRODUCTION a quality culture are major aspects of the philoso-

Continuous change and improvement are now
integral features of global business activity. Out-
standing customer service, eradication of flawed
products, elimination of waste and the creation of
*Correspondence to: Jonathan D. Pemberton, Newcastle Busi-
ness School, Northumberland Building, University of North-
umbria, Newcastle upon Tyne, NE1 8ST, UK.
E-mail: jon.pemberton@unn.ac.uk
phy of continuous improvement, and are central to
the total quality management (TQM) paradigm
(Dale and Bunney, 1999).
Many innovative approaches to management,
often emanating from Japan, have emerged during
the last thirty years, and have been embraced by
Western businesses in the quest for improved
performance. During this period, the theory and
practice of benchmarking has also developed.
While many definitions and variations exist,

Copyright # 2001 John Wiley & Sons, Ltd.

RESEARCH ARTICLE
benchmarking is essentially a set of tools and
approaches designed to assist in achieving contin-
uous improvement. Boxhall notes that by using
objective external standards an organization can
assess its performance in relation to competitors
but, more importantly, by learning from the
experience, can develop best practice leading to
performance improvement (Boxhall, 1994). Essen-
tially, therefore, benchmarking is concerned with
setting objective standards and performance indi-
cators, based on the practices of best performers,
and learning how leading companies achieve their
outstanding performance.
The mechanics of benchmarking, and the vary-
ing approaches to it, are examined later in this
paper, but the identification and management of
organizational expertise built around customers,
products, processes, technology and competitors
are integral elements of the benchmarking process.
Here, the notion of organizational learning arises
which has emerged as an area of increasing
importance over the last few years (Argyris, 1992;
Quinn, 1992; Senge, 1990; Grant, 1997). It is prima-
rily concerned with the development and manage-
ment of an organizations information and knowl-
edge assets and their potential to act as a
determinant of competitive performance (Nonaka,
1991; Wiig, 1997; Bennett and Gabriel, 1999; Hong
and Kuo, 1999). Learning relates to both individual
and organizational learning, each dependent on the
other and their features and characteristics influ-
enced by organizational structure, infrastructure
and culture (Stonehouse and Pemberton, 1999).
The theme of this paper centres on an examina-
tion of the linkages between benchmarking and
organizational learning and, in particular, their
potential in generating superior performance. It is
argued that enhanced business performance
results largely from the effective handling, sharing,
application and management of knowledge arising
as a consequence of organizational learning. Con-
versely, reservations are expressed in relation to
the operational nature of some benchmarking tools
that, perhaps, have the potential to improve
performance, but not necessarily to the extent
that leading competitors are outperformed. Thus,
distinctive ways of doing business that give rise to
competitive edge depend heavily on integrating
the results of the benchmarking exercise comple-
mented with further organizational learning.
The evidence presented in this paper arises from
a study of over 700 companies involved in a
benchmarking project conducted by Newcastle
Business School. The results suggest that organiza-
tions categorized as world-class performers and
potential winners have achieved such success
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Knowledge and Process Management
through a variety of means, including benchmark-
ing techniques. Furthermore, such organizations
display many of the characteristics of organiza-
tional learning.
WHAT IS BENCHMARKING?
A benchmark can be defined as a physiological or
biological reference value against which perfor-
mance is compared (Zairi, 1992). In its narrowest
sense, therefore, benchmarking in a business
context is concerned with comparing a companys
performance with that of competing organizations
in an attempt to improve how it performs the
same, or similar, functions (Watson, 1992). As a
starting point, it represents an attempt to identify
and subsequently implement best practice (Camp,
1995). Zairi neatly encapsulates the spirit of the
approach, and its possibilities, stating that ......the
essence of benchmarking is to encourage contin-
uous learning and to lift organisations to higher
competitive levels. Through problem-solving, the
acquisition of internal and external knowledge and
its effective implementation, standards of practice
can be enhanced with the direct effect of achieving
higher levels of customer satisfaction and, as a
consequence, business performance can also be
greatly improved (Zairi, 1998).
In effect, the enhanced learning and knowledge
accrued in the benchmarking process results in
improved products, processes and, ultimately, per-
formance. Where organizational learning is absent,
however, the benchmarking process is of limited
value in terms of generating superior performance, a
theme pursued in later sections of this paper.
There is no single, agreed approach to bench-
marking and its benefits are largely governed by the
nature of the process adopted. Camp, for example,
identifies four distinct methods of benchmarking,
whereas Bhutta and Huq argue that there are seven
different approaches to benchmarking (Camp, 1989;
Bhutta and Huq, 1999). In this paper, attention is
focused on metric, process and diagnostic bench-
marking, three broad categories encompassing
many of the features of methods discussed by
other authors (Appleby, 1999). In particular, diag-
nostic benchmarking is examined in more detail in
the context of organizational learning, making
reference to the findings of research conducted at
Newcastle Business School.
Metric benchmarking
Metric benchmarking is based upon comparisons
of certain performance data which are perceived to
J. D. Pemberton et al.
Knowledge and Process Management
be both important and relevant. For example,
manufacturing companies use such data to com-
pare their delivery reliability, scrap rates and
absenteeism levels, among several other measures,
with those of other competitors and award-winning
companies (DTI et al., 1995). The use of league
tables to compare performance of similar organiza-
tions, particularly in relation to schools, colleges
and universities, is a common, if sometimes
controversial, example of metric benchmarking.
This form of benchmarking requires a group of
organizations to submit performance data relating
to different aspects of their activities, against
which individual organizations can then evaluate
their performance in relation to that of leading
performers or industry averages. While such
benchmarking may highlight the strengths and
weaknesses of an organizations performance,
there are obvious and inherent dangers in using
raw data on aspects of performance as the basis for
comparison. This is particularly true where exact
like-with-like comparisons are not possible with
the result that the potential for organizational
learning is significantly reduced, although such
comparisons may still can act as a catalyst for
improved business performance.
In short, metric benchmarking is concerned with
what constitutes good performance rather than
how it is achieved. As such, it can help an
organization to pinpoint aspects of performance
that need to improve, but provides little guidance
in the process of learning to improve. In essence, it
is unlikely to involve any degree of organizational
learning that significantly enhances performance
superior to that of leading competitors.
Process benchmarking
With the shortcomings apparent in metric bench-
marking, process benchmarking involves in-depth
comparisons of specific areas of activity between
two or more organizations in an attempt to learn
how improved performance might be achieved
(Zairi, 1992; Camp, 1995). However, while offering
potentially greater benefits in this respect, the
approach is both difficult and expensive. As a
consequence, few organizations embarking upon
process benchmarking have fully capitalized upon
its potential to significantly enhance performance,
with research indicating that as few as 5% of
benchmarking projects actually result in the trans-
fer of best practice (CCI, 1993). Lewis also arrives
at the same conclusion, suggesting that, from
personal experience, 95% of best practice sharing
is of no value (Lewis, 2000).
Szulanskis extensive study of intra-firm best
Benchmarking and Organizational Learning
RESEARCH ARTICLE
practice transfers offers some insights into the
reasons for the difficulties in successfully finding
and implementing best practice (Szulanski, 1993a).
He found that, on average, it took twenty-seven
months for a firm to identify an existing best
practice, with an additional nine months needed to
act and capitalize on this information. While the
study was conducted in an intra-organizational
setting, there is no reason to suspect that its
findings do not provide useful insights into
the inter-organizational transfer of practices
(Szulanski, 1993a,b, 1995).
It is worth stressing, however, that process
benchmarking can and does produce impressive
results. For example, Camp presents six case
studies outlining the success of companies such
as AT&T, Ritz-Carlton and Westinghouse, for
example (Camp, 1995). Zairi and Codling cite
further examples of companies that have experi-
enced success in this arena (Zairi, 1998; Codling,
1998). However, Friedewald describes such exam-
ples as a few leading lights, arguing that the
amassed survey evidence is limited and of
dubious reliability, fraught with problems of
definition and methodology, with all but the most
quality mature organizations tending to focus on
metrics, as opposed to best practices (Friedewald,
2000, unpublished dissertation).
The observed difficulties centre predominantly
on the inability of all but the most sophisticated
and innovative companies to recognize the impor-
tance of benchmarking in the wider context of
organizational learning and to integrate the two to
produce a tangible and measurable improvement
in comparative performance.
Diagnostic benchmarking
It is clear that a necessary precursor to process
benchmarking is a detailed understanding of the
organizations own processes. Naturally, in most
organizations, the first step in a process bench-
marking exercise concerns a study and mapping
of the processes in question, an often informative
procedure in itself. Ultimately, valuable lessons are
subsequently learned by comparing the businesss
own processes with those of other organizations,
although the preparatory step of pooling of
knowledge about the processes from various
internal sources is often the most informative and
beneficial consequence of the process. Codling, for
example, notes that the first benefits from bench-
marking usually occur at this stage, with
waste, error and duplication being identified and,
subsequently, eradicated (Codling, 1998). In this
sense, benchmarking promotes both inter- and
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RESEARCH ARTICLE
intra-organizational learning, permitting a wider
view of the business and its environment, and
with the potential to exploit the resulting knowl-
edge derived from the learning process in a more
effective way with a resultant improved competi-
tive performance.
Diagnostic benchmarking has features of metric
and process benchmarking, seeking to explore
both practices and performance, as well as identi-
fying areas of relatively weak company perfor-
mance and organizational practices showing room
for improvement (Appleby, 1999). While process
benchmarking is an improvement technique, diag-
nostic benchmarking is effectively a health check
for the company, designed to identify practices to
be changed, and an indication of the performance
improvements that could and should ensue.
The technique builds upon the idea of perfor-
mance comparisons, but recognizes the limitations
of using such a benchmark in isolation by inviting
an organization to compare its practices or pro-
cesses to those of other organizations, simulta-
neously assessing the results arising from their
practices. In this way, diagnosis of practices and
the associated performance represents a significant
step to improving future performance through
newly acquired organizational learning and
knowledge. In reality, the benchmarking process
forces managers to reflect upon current practice in
comparison to that of leading organizations,
assisting in the learning process by not only
highlighting problems but also by demonstrating
alternative approaches (Yarrow, 1999). PROBE
(Promoting Business Excellence) is an international
benchmarking scheme managed by the Confedera-
tion of British Industry (CBI) in partnership with
London Business School, the IBM Consulting
Group and the University of Northumbria at
Newcastle and is a good example of diagnostic
benchmarking.
This approach to benchmarking and learning is
not without problems, however. It is often difficult to
determine which set of practices to benchmark, and
how they are linked to the key indicators of
performance. Furthermore, in moving between orga-
nizations, determining when like is being compared
with like, especially where day-to-day work prac-
tices are concerned, presents a significant hurdle.
Diagnostic benchmarking also has similarities
with self-assessment, a popular technique utilized
by progressive organizations since the 1990s
(Oakland, 1999). Self-assessment is frequently
based upon the European Foundation for Quality
Management (EFQM) model setting out a blue-
print for the excellent business by describing
the practices that should be in place and the
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Knowledge and Process Management
performance that should follow (Dale and Bunney,
1999). It entails a comparison of an organizations
practices and performance via quantitative assess-
ments and qualitative judgements, based on the
benchmark standards of the model. Despite
the apparent similarities with diagnostic bench-
marking, self-assessment focuses on absolute
standards defined by the model, rather than on
inter-organizational comparisons, but the EFQM
model places emphasis on benchmarking as a key
element of business excellence.
ORGANIZATIONAL LEARNING
At this juncture, and before examining the link
with benchmarking in more detail, it is necessary
to define and explain the concept and processes of
organizational learning. Organizational learning is
concerned with developing new organizational
knowledge with the purpose of enhancing organi-
zational performance. Furthermore, according to
Stonehouse and Pemberton, organizational know-
ledge is a shared collection of principles, facts,
skills, and rules which inform organizational
decision-making, behaviour and actions......deve-
loped from the knowledge of individuals in the
organization. Superior knowledge, if appropriately
managed, should create superior performance
(Stonehouse and Pemberton, 1999).
The notion of knowledge is a central theme of
organizational learning, embodied in an organiza-
tions practices and processes, as well as in its
products and services. Organizational learning is
concerned with the strategies and processes of
identifying, capturing and leveraging such know-
ledge to enhance competitiveness (Manasco, 1996).
Consequently, companies strive to learn more
quickly than their competitors with a view to
increasing their competitiveness.
The process of organizational learning and the
production of new knowledge is complicated.
Learning can be based upon experience, analysis,
experimentation or from teaching, with two broad,
but conflicting, theories of learning (Jackson, 1993).
The behaviourist approach takes a narrower and
more mechanistic view of learning, arguing that it
takes place in response to changes in our environ-
ment. The cognitive approach is based upon the
view that learning is complex and involves reflec-
tion and understanding. Senge differentiates
between two categories of organizational learning
namely, adaptive learning and generative learning
(Senge, 1990). Adaptive learning centres on chang-
ing in response to developments in the business
environment. Generative learning is about building
J. D. Pemberton et al.
Knowledge and Process Management
and developing new products and ways of doing
business to gain a competitive edge. Pemberton and
Stonehouse discuss the links between the various
forms of learning in more detail, arguing that, in
essence, a cognitive approach aimed at generative
learning represents the most effective template for
an organization striving for superior performance
(Pemberton and Stonehouse, 2000).
The systems and processes by which organiza-
tions seek to manage their learning are equally
important as by concentrating on key elements
of the learning process, companies can leverage
intellect enormously (Quinn, 1992). Additionally,
organizations must develop an environment that
facilitates the processes of learning (Stonehouse and
Pemberton, 1999), based on the following objectives:
$ Fostering of both individual and organizational
learning
$ Setting clear goals for the learning process
$ Encouraging inquisitiveness by challenging
existing assumptions
$ Encouraging both convergent and divergent
thinking
$ Sharing information and knowledge through
openness
$ Facilitating the formalization, storage, sharing,
transfer and coordination of knowledge.
However, the achievement of such objectives relies
on three aspects of the organizational context,
namely,
$ Organizational culture
$ Organizational structure
$ Organizational infrastructure and communica-
tions.
A learning culture is one which is based upon a
clear and shared vision, within which both indivi-
dual and organizational learning and knowledge
are valued highly. Furthermore, existing practice is
always questioned, experimentation with new
approaches is encouraged, individuals are empow-
ered to take decisions, and trust and sharing of
knowledge form an integral element of this culture.
The building of organizational structures which
promote learning are characterized by the deter-
mination to resolve the dilemma caused by the
need for experts in a particular field to share ideas
while simultaneously ensuring that a holistic
approach to organizational knowledge is deve-
loped. While there is no ideal solution, specialist
and cross-functional groupings can be formed
through network structures or through cross-
functional project teams or task groups in a flat
organizational structure.
Benchmarking and Organizational Learning
RESEARCH ARTICLE
An organizations infrastructure consists of the
systems and technology that underpin its activi-
ties, learning culture and structure. Development
in information and communications technology,
for example networking and multimedia, have
transformed the ability of both individuals and
organizations to augment their intelligence by
accelerated learning.
Arguably, culture acts as a critical discriminating
element when comparing the success of different
companies in their approaches to organizational
learning. This manifests itself in a number of ways,
with some, if not all, of the following present:
$ A shared vision of business objectives across
the whole organization with active employee
participation
$ A proactive stance to training and education
and identification of personal development
needs
$ Strategies that instill a strong corporate social
responsibility and trust within an organization,
as well as addressing human resourcing issues
$ Mechanisms of performance measurement and
reporting, including individual and organiza-
tional skills assessment
$ A problem-solving culture
$ An awareness of customer orientation and
needs
$ A conducive environment encouraging innova-
tion, either customer, product or company
related
$ An understanding of the issue of quality both
within internal procedures and in the produc-
tion of products.
Several authors have examined these issues in
various contexts. Zairi, for example, discusses many
of these characteristics in relation to benchmarking
and organizational learning (Zairi, 1999). Mintzberg
et al. also stress the importance of desire for success,
tolerance of mistakes, belief in human potential,
openness, trust and being outward looking, as
evidence of an organizational learning culture
(Mintzberg et al., 1998). Recent research by Griego
et al. concludes that training and education designed
to improve job performance, as well as recognition
and reward incentives, are key elements of organi-
zational learning (Griego et al., 2000).
BENCHMARKING AND
ORGANIZATIONAL LEARNING
Irrespective of the benchmarking technique
employed by an organization, learning, in some
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RESEARCH ARTICLE
form, takes place. However, there is a danger that
some approaches to benchmarking can result purely
in attempts to emulate the practice of successful
organizations. While performance improvement
may ensue, this could correspond merely to adap-
tive learning and under such circumstances is
unlikely to result in an organization overtaking its
competitors. Instead, benchmarking should be used
as a catalyst for reflection on, and review of, current
organizational processes and practices, as a basis for
creating new approaches based on new organiza-
tional knowledge. In this sense, diagnostic and
process benchmarking are more likely than metric
benchmarking to be associated with learning that
addresses these issues.
Creative approaches to generating new organi-
zational knowledge are dependent upon organiza-
tional learning accompanying benchmarking.
Clearly, this depends upon benchmarking taking
place in an organizational context that promotes
learning. In reality, an organizational culture that
promotes a shared vision and clear goals
encourages creative thinking and sharing of ideas
is more conducive to organizational learning.
The use of benchmarking techniques in such a
cultural setting results in a cognitive approach,
where knowledge is developed through generative
learning, thereby helping to develop benchmarks
appropriate to the individual organization and
encouraging knowledge transfer through the pro-
cess of organizational improvement.
To illustrate the importance of organizational
learning in benchmarking, the remainder of the
paper focuses on research conducted at Newcastle
Business School, concentrating on the relationship
between diagnostic benchmarking and the ele-
ments present in organizational learning.
RESEARCH
Diagnostic benchmarking, in its many guises, is
designed to assist managers in improving business
performance. Rather than attempting a review of
the advantages and disadvantages of the various
approaches, this section explores the relationships
between diagnostic benchmarking and organiza-
tional learning by reference to the PROBE method-
ology. PROBE (Promoting Business Excellence) has
grown out of a series of studies designed to
identify best practice and world-class perfor-
mance, benchmarking hundreds of companies in
several countries against these standards (CBI,
1997; Hanson et al., 1994, 1996; Voss et al., 1995,
1997, 1998).
The two main tools associated with PROBE,
128
Knowledge and Process Management
corresponding to the manufacturing and service
sectors respectively, have also created several
variants. These include MICROSCOPE, designed
for small and medium-sized organizations and
PILOT, a simplified version adapted by Newcastle
Business School as a high-volume, introductory-
level benchmarking tool specifically designed for
businesses in the north-east of England.
Methodology
The research presented in this paper is based on the
results of the PILOT project, based on 280 manu-
facturing companies and 448 service sector organi-
zations. The study covers a range of issues as
diverse as relationships with customers, manage-
ment of employees, design and development of new
products, financial performance, the extent to which
the organizations stated vision and goals are
genuinely shared by its employees, the prevailing
quality mindset and the extent to which staff feel
that they have a voice within the company.
Attention is focused on the organization being
benchmarked and a small team, normally consist-
ing of 23 senior and middle managers, is formed
to make judgements about the organizations
practices and performance. By reference to a
questionnaire, the team scores the organization on
approximately sixty different aspects of the busi-
ness. Other more general, factual information is
also collected on geographical spread of markets,
local presence, sources of finance etc.
The issue of benchmarking is addressed expli-
citly with participants asked to assess their
companys position in relation to benchmarking
using a five-point scale ranging from none (1),
through benchmarking within the organization or
against competitors, to regular documented bench-
marks against competition and world-class stan-
dards (5). Other issues, again based on a five-point
scale, are examined and include general
approaches to strategy, staff, environment and
more technical aspects. Lower scores indicate an
absence or low priority attached to a particular
factor by an organization; higher scores suggest
that an organization has embraced, addressed
or actively encouraged developments in these
areas.
Once coded, responses to the questionnaire were
analysed using SPSS, assessing potential associa-
tions between the issues and topics explored in the
questionnaire. The use of chi-squared tests based
on the resulting two-way contingency tables has
been used throughout to test the hypothesis of
independence between the various factors. More
specifically, for the purposes of this paper, the
J. D. Pemberton et al.
Knowledge and Process Management
features indicative of the organizational learning
process were examined by reference to their
presence among those companies actively engaged
in benchmarking.
For the manufacturing sector, approximately a
quarter of the questions posed related to organiza-
tional learning covering the fifteen areas of:
$ Shared vision
$ Vision
$ Problem-solving culture
$ Employee involvement
$ Quality vision
$ Human resources strategy
$ Quality management processes
$ Skills assessment (organizational need)
$ Identification of personal development needs
$ Generation of innovative product concepts
$ Training and education
$ Performance measurement and reporting
$ Job flexibility
$ Employee morale
$ Exploitation of innovation and creativity
For the service sector, eighteen factors were
relevant. A high degree of commonality with the
manufacturing sector is apparent, but the wording
of some questions differed slightly and other
questions were included too. The factors relating
to organizational learning were:
$ Skill and job training and education
$ Shared vision and goals
$ Role of leadership in developing service culture
Figure 1 North-east companies manufacturing sector
Benchmarking and Organizational Learning
RESEARCH ARTICLE
$ Day-to-day teamwork
$ Quality values
$ Human resources strategy
$ Recognition and reward
$ Skills assessment (organizational need)
$ Generation of innovative product concepts
$ Identification of personal development needs
$ Problem-solving culture
$ Management of business processes
$ Innovative environment
$ Performance measurement and reporting
$ Quality mindset
$ Employee involvement
$ Listening to staff
$ Employee satisfaction
Associated areas such as customer orientation,
new market planning and product development
for example, were also addressed in the survey,
but the general nature of the questions were not
specific to organizational learning and are there-
fore not examined here.
Furthermore, a set of charts comparing an
organizations practices and performance with
those of other service or manufacturing compa-
nies in general, and of those which inhabit the
same sector at a more specific level, were com-
piled. Prabhu et al. provide more detailed com-
mentary of the technique (Prabhu et al., 2000).
However, in the context of this paper, further
analysis centres on the elements of organizational
learning and the potential association with
the classification of the practice and performance
129
RESEARCH ARTICLE Knowledge and Process Management

Figure 2 North-east companies service sector

of the respondents appearing in these charts and
based on the four categories (Prabhu et al., 2000):
$ Could do better (CDB) or room for improve-
ment (RFI)
$ Vulnerable (VUL)
$ Promising (PROM) or
$ Potential winner (PW) or world class (WC).
Figures 1 and 2 show the compiled results across
the north-east companies within the manufactur-
ing and service sectors respectively.
On the basis of these classifications, further
analysis was also conducted investigating associa-
tions between the features of organizational learning
and the performance/practice classification. To faci-
litate this analysis, a dichotomous score based on
whether a company is a world-class/potential
winner as opposed to being in one of the three
remaining classifications was deployed. Chi-squared
tests to assess significant differences between the
proportion of respondents in each of these cate-
gories against the various organizational factors
were carried out.
Results
Manufacturing sector
Table 1 shows the association between the bench-
marking question and each of the fifteen organiza-
tional learning factors identified previously. Only
three factors are not significant, with nearly half of
the factors highly significant (at 0.1% level),
indicative of the fact that those organizations that
have embarked upon benchmarking also have a
predisposition towards organizational learning.
A further breakdown by world-class/potential
winners and a single grouping of could do better,
vulnerable and promising categories against each

Table 1.

Significant associations

0.1% 1% 5% No association

Shared vision Problem-solving culture Vision Job flexibility

Employee involvement Quality vision Employee morale
Human resources strategy Quality management Exploitation of innovation
processes and creativity
Skills assessment Generation of innovative
(organizational need) product concepts
Identification of personal development needs
Training and education
Performance measurement and reporting

130 J. D. Pemberton et al.

Knowledge and Process Management RESEARCH ARTICLE

Table 2.

Significant associations

0.1% 1% 5%

Shared vision Human resources strategy Identification of personal

development needs
Employee involvement
Quality vision
Skills assessment (organizational need)
Training and education
Performance measurement and reporting
Quality management processes
Generation of innovative product concepts
Problem-solving culture
Job flexibility
Employee morale
Exploitation of innovation and creativity

of the fifteen organizational learning factors shows
significant differences between the two groups,
with the former attaching greater weight to these
factors than the latter. While all are significant at
the 5% level, identification of personal develop-
ment needs and human resources strategy are not
significant at the 0.1% level.)
Service sector
The analysis presented above was also repeated
for the service sector companies, the results of
which appear in Table 3. Once again, only three
factors are not significant, with the majority of
the factors being significant at the 1% (or higher)
level. Although these factors are not perfectly
mapped with those of the manufacturing sector,
there is clear evidence that those organizations
that have embarked upon benchmarking have a
predisposition towards the features associated
with organizational learning.
When looking at the potential differences
between world-class/potential winners and the
single grouping of the could do better/room for
improvement, vulnerable and promising categories,
all eighteen factors were significant at the 0.1%
level, with world-class/potential winners exhibiting
a greater propensity to embrace and adopt features
associated with organizational learning in compar-
ison to competitors in the other category.
DISCUSSION
The results above lend weight to the notion that
the characteristics of organizational learning are
strongly associated with companies engaged in

Table 3.

Significant associations

0.1% 1% 5% No association

Problem-solving culture
Performance measurement
and reporting
Skill and job training
and education
Generation of innovative
product concepts
Shared vision and goals Role of leadership in Employee involvement
developing service culture
Quality mindset Day-to-day teamwork Listening to staff
Quality values Human resources strategy Employee satisfaction
Skills assessment
(organizational need)
Identification of personal
development needs
Management of business
processes
Innovative environment
Recognition and reward

Benchmarking and Organizational Learning 131

RESEARCH ARTICLE
benchmarking. This predisposition manifests itself
in a number of ways. Training and education
figure prominently and is highly significant in
both the manufacturing and service sectors. This
supports the research conducted by Griego et al.
(2000). A problem-solving culture, shared vision,
development of personal needs and a strong
awareness of quality are also apparent, with a
human resources strategy being an integral ele-
ment of an organizations overall business stra-
tegy. In the case of the service sector, teamwork,
recognition and reward and proactive manage-
ment are important factors for those organiza-
tions involved in benchmarking. It is clear, as
many other authors have reported, that the
factors investigated in this research appear to be
key elements of organizational learning. How-
ever, adoption of benchmarking would appear to
be strongly associated with many of these
features.
Furthermore, the cultural environment, as exem-
plified by the significant factors described above,
represents an essential element distinguishing
benchmarking organizations with their non-
benchmarking counterparts. As outlined earlier in
this paper, culture is one of three elements present
in a learning organization, the other two being
structure and infrastructure. The latter two have
not been the focus of the research presented in this
paper, and the PILOT project contains few ques-
tions that address these areas explicitly. However,
their existence is invariably a necessary condition
for developing a culture that truly enhances
organizational learning and influences competitive
performance (Stonehouse and Pemberton, 1999).
It is interesting to note that certain factors
indicative of organizational learning appear not
to be significant when examined in conjunction
with benchmarking. The issue of employee morale
and satisfaction fall into this category in both the
manufacturing and service sectors. At first sight,
this is surprising, but is consistent with the
work of Herzberg examining human motivation
and behaviour (Herzberg, 1966). Just as Herzberg
found that hygiene factors had little impact on
work performance, it appears that such hygiene or
environmental factors have little impact on orga-
nizational learning, unlike those of shared vision
and problem solving, for example, which directly
impact on organizational learning.
In the case of the service sector, employee
involvement and listening to staff also appear
non-significant. The former is perhaps explained
by the customer-driven focus of the service sector.
Indeed, listening to the customer, as opposed to
the employee, was a highly significant result in the
132
Knowledge and Process Management
wider context of the PILOT project. Employee
involvement, on the other hand, is highly signifi-
cant in the manufacturing sector, almost certainly
indicative of the differing emphasis placed on the
importance of the individual by the two different
sectors. In the case of the manufacturing sector,
innovation and creativity appear to have no
association with benchmarking. This, in part,
reflects the mechanical nature of benchmarking
techniques, and lends support to the notion that an
organization may be unable to gain a competitive
edge by simply emulating established bench-
marks. Only with a more innovative stance can
superior performance really ensue.
This is perhaps reinforced by the findings relating
to the differences between world-class/potential
winners and the other classifications in respect of
the factors and features of organizational learning.
Without exception, highly significant results were
observed in both manufacturing and service sectors,
with the characteristics of learning organizations
differentiating the two groups.
In essence, these results add weight to the
notion that benchmarking is merely one element
of a range of features and characteristics that
permit a company to gain competitive advantage.
World-class and potential winners do not view
benchmarking as a panacea for guaranteed suc-
cess, but it complements existing approaches and
is underpinned by a learning culture. This is
supported by Zairi who argues that benchmarking
should not be seen as a tool since, . . . the impact of
its application is more for changing attitudes and
behaviours and raising commitment through
better education, awareness and inspiration from
model companies. Benchmarking is perhaps the
best means for servicing the human asset by
continuously supplying new ideas to sustain
superior performance levels (Zairi, 1998). More
specifically, Karlof and Ostblom have coined the
term benchlearning which creates an environ-
ment that rewards constant learning and results in
better performance and greater success (Karlof and
Ostblom, 1993). Training and education, coupled
with employee involvement, identification of per-
sonal needs and a human resources strategy, are
all factors that showed a significant associa-
tion with the technique of benchmarking, as
well as differentiating characteristics of world-
class/potential winners and those not in this
category.
Ultimately, benchmarking assists in addressing
a variety of business aspects including strategy,
customer satisfaction and leadership, the very
issues of concern to organizations performing at
world-class or potential winner level. In practice,
J. D. Pemberton et al.
Knowledge and Process Management
the identification of knowledge through bench-
learning results in new core competences with
improved customer service, a stronger competitive
edge, a clearer view of an organizations position
within the marketplace and a more solid base
upon which future business activity can be devel-
oped. This is achieved through cross-fertilization
of ideas, processes and practice, a natural by-
product of benchmarking and organizational
learning, and a necessary element of continuous
improvement.
The research presented here also shows that
vision, both shared and quality, is also strongly
linked to those organizations that have embraced
benchmarking within their organizations, and
is a differentiating factor between world-class/
potential winners and the other groupings. How-
ever, the relationship between benchmarking and
vision is a potentially contradictory one. Where
benchmarking is viewed merely as a tool, it can
result in a mechanical and prescriptive process.
The use of successful organizations acting as a
benchmark against which others are compared has
the potential to stifle imagination, creativity and
vision in the desire to conform to perceived
accepted norms of best practice. This is unhelpful
in two main ways. First, development of new core
competences through benchmarking may hinder
an organizations ability to maintain or enhance a
competitive advantage by copying existing prac-
tice rather than developing new methods of
conducting business. Second, accelerating advan-
ces in information and communications technol-
ogy (ICT), for example, can soon make established
norms redundant in a relatively short space of
time, with more innovative organizations eclipsing
established companies in respect of best practice.
In turn, the existing models of benchmarking may
become outdated and therefore not provide the
most suitable template upon which to generate
meaningful comparisons.
Furthermore, the process-oriented approach
adopted by most of the benchmarking techniques
in use today may lead to an organization giving
less attention to customer service. This clearly
depends on the area upon which a company
decides to focus within the benchmarking pro-
cess. However, the nature of benchmarking tends
to emphasize learning about processes in the
context of best practice, with relatively little stress
placed on customer expectation and service. This
is at variance with the TQM paradigm where the
end-user assumes a central role in issues of
quality, but may be an unfortunate offshoot of
benchmarking.
Benchmarking and Organizational Learning
RESEARCH ARTICLE
CONCLUSION
Benchmarking, whatever its focus, represents an
attempt by an organization to assess, compare and
advance its performance using acknowledged
benchmarks of good and best practice. However,
as the research presented here demonstrates,
benchmarking is most likely to deliver signifi-
cantly improved organizational performance when
it is coupled to organizational learning. Indeed, the
term benchlearning is perhaps a more instructive
term when examining competitive performance in
a benchmarking context.
By identifying the features that constitute orga-
nizational learning, analysis of the PILOT study
data shows that twelve of these fifteen character-
istics in the manufacturing sector are significantly
associated with the adoption of benchmarking
within the organization; corresponding figures for
the service sector were fifteen from eighteen
organizational learning characteristics. Further-
more, in both sectors, significant differences
between world-class/potential winners and the
single grouping of could do better, promising
and vulnerable were apparent for all organiza-
tional learning factors. While more detailed
research is clearly required to assess potential
causality, the evidence presented in this paper
further advances the argument that when asses-
sing performance and practice in a benchmarking
context, the presence of organizational learning
appears a key determinant of success.
Ultimately, competitive advantage arises when
a company does things differently to its compe-
titors and behaves in a distinctive way through,
for example, its practices, product innovation and
quality approaches, to name a few. Where bench-
marking tools encourage emulation of competi-
tors, improving performance above existing levels
may result, but is unlikely to lead to sustained
and sustainable competitive advantage. If, how-
ever, benchmarking is used as a means of
examining existing practices of a business using
established norms, or comparisons with competi-
tors, that subsequently lead to new practices
being adopted, superior performance might
ensue. The management of the learning process
and the resulting knowledge generated is at the
heart of this process.
The challenge for businesses embracing bench-
marking revolves around their ability to develop
a learning culture that goes beyond imitiation of
existing best practice by developing new ideas
and processes to improve efficiency and enhance
quality, as well as striving to improve upon the
practices of competitors. In effect, organizational
133
RESEARCH ARTICLE
learning would appear to be an essential ingre-
dient if companies are to optimize the outputs of
the benchmarking process in the pursuit of
superior performance.
ACKNOWLEDGMENTS
The authors would like to express their sincere thanks to
Andrew Robson for his help in conducting some of the
additional statistical analysis presented in this paper.
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