7/25/2019

What is Benchmarking?

• Benchmarking is the comparison of

performance either financial or non-financial
Benchmarking related to part of the business segment,
product, process or whole business with other
divisions or whole business inside the
business group (internal benchmarking),
competitors or other business (external
benchmarking) having similar characteristics
in terms of objectives, process, size, culture
and geo-location.

Why to Use Benchmarking?

Pros and Cons of Benchmarking
Pros of Benchmarking.
• Benchmarking is used to evaluate performance for
•It is based on the actual performance results rather than forecasted results is which
rewarding managers for its performance, identification subjective based on assumptions. So that no objections can be raised.
of performance gaps for improvements but it does not •It encourages learning and healthy competition which promotes productivity and
efficiency.
gives solutions for problems. •Appropriate use of benchmarking highlights critical success factors for the business
that can lead to success or failure of the business.
• It also helps to identify strengths and weaknesses of
the business, so that suitable strategies can be devised Cons of Benchmarking.
to achieve business objectives. •Benchmarking requires the identification of some part or whole of the business,
internal or external to the group which is the best. It also difficult to find business
with similar characteristics, without which result become obsolete.
• In practice, business use benchmarking to identify •Benchmarking requires the use performance measures is which available in both
successful role model to become successful by businesses.
improving important area of the business identified by •If competitor information is needed, it may not be available because of
confidentiality issues. However, mutual understanding that it will to both businesses
the market leader. may help.

Functional Businesses look to benchmark with partners drawn from Improving activities or services for
Benchmarking different business sectors or areas of activity to find ways of which counterparts do not exist.
improving similar functions or work processes. This sort of
Strategic Where businesses need to improve overall performance Re-aligning business strategies
benchmarking can lead to innovation and dramatic
Benchmarking by examining the long-term strategies and general that have become inappropriate
improvements.
approaches that have enabled high-performers to
succeed. It involves considering high level aspects such Internal Benchmarking Involves benchmarking businesses or operations from within the Several business units within the same
as core competencies, developing new products and same organisation (e.g. business units in different countries). The organisation exemplify good practice
services and improving capabilities for dealing with main advantages of internal benchmarking are that access to and management want to spread this
changes in the external environment. sensitive data and information is easier; standardised data is often expertise quickly, throughout the
readily available; and, usually less time and resources are needed. organisation
Changes resulting from this type of benchmarking may
be difficult to implement and take a long time to There may be fewer barriers to implementation as practices may
materialise be relatively easy to transfer across the same organisation.
However, real innovation may be lacking and best in class
Performance or Businesses consider their position in relation to Assessing relative level of performance is more likely to be found through external
Competitive performance characteristics of key products and performance in key areas or benchmarking.
Benchmarking services. activities in comparison with External Involves analysing outside organisations that are known to be best Where examples of good practices can
others in the same sector and Benchmarking in class. External benchmarking provides opportunities of learning be found in other organisations and
Benchmarking partners are drawn from the same sector. from those who are at the "leading edge". there is a lack of good practices within
finding ways of closing gaps in
This type of analysis is often undertaken through trade internal business units
performance
associations or third parties to protect confidentiality. This type of benchmarking can take up significant time and
resource to ensure the comparability of data and information, the
Process Focuses on improving specific critical processes and Achieving improvements in key credibility of the findings and the development of sound
Benchmarking operations. Benchmarking partners are sought from best processes to obtain quick recommendations.
practice organisations that perform similar work or benefits International Best practitioners are identified and analysed elsewhere in the Where the aim is to achieve world
deliver similar services. Benchmarking world, perhaps because there are too few benchmarking partners class status or simply because there
within the same country to produce valid results. are insufficient"national" businesses
Process benchmarking invariably involves producing
against which to benchmark.
process maps to facilitate comparison and analysis. This Globalisation and advances in information technology are
type of benchmarking often results in short term increasing opportunities for international projects. However, these
benefits. can take more time and resources to set up and implement and the
results may need careful analysis due to national differences