Benchmarking is one of the various tools available to reengineering teams.

"Essentially, benchmarking means looking for the companies that are doing
something best and learning how they do it in order to emulate them" (Hammer &
Champy 137). However, there is one problem with benchmarking. It can restrict a
reengineering team's thinking to the framework of what is already being done in
the same industry. Benchmarking when used this way is just a tool for catching
up not jumping ahead.

Benchmarking's roots lie in the land surveyor's term, where a benchmark was a
distinctive mark made on a rock, wall or building. In this perspective, a
benchmark served as a reference point in determining one's current position or
altitude in topographical surveys and tidal observations.

In the 1970s, the concept of a benchmark evolved beyond a technical term

signifying a reference point. The word migrated into the lexicon of business,
where it came to signify the measurement process by which to conduct
comparisons. During the Eighties, the definition of benchmarking grew in scope
and focus, becoming the outreach activity of comparing yourself against others.

Benchmarking gained tremendous influence and currency in the Nineties.

Correspondingly, front-line employees and operating managers have applied
basic benchmarking skills in scores of different business situations. Among these
applications, three distinct types of benchmarking have proliferated. They include
process benchmarking, performance benchmarking, and strategic benchmarking.

Process benchmarking focuses on discrete work processes and operating

systems, such as the customer complaint process, the billing process, the order-
and-fulfillment process, or the strategic planning process. This form of
benchmarking seeks to identify the most effective operating practices from many
companies that perform similar work functions. In recent years, process
benchmarking has grown in stature in the United States. Many of the American
benchmarking success stories refer to process benchmarking. Its power lies in its
ability to produce bottom-line results. If an organization improves a core process,
for instance, it can then quickly deliver performance improvements. These
performance improvements may be calculated through increased productivity,
lower costs or improved sales, but their net effect frequently translates into
improved short-term financial results

Performance benchmarking enables managers to assess their competitive

positions through product and service comparisons. Performance benchmarking
usually focuses on elements of price, technical quality, additional product or
service features, speed, reliability and other performance characteristics.
Reverse engineering, direct product or service comparisons and analysis of
operating statistics are the primary techniques applied during performance
benchmarking. The automotive, computer, and financial services industries
regularly uses performance benchmarking as a standard competitive tool.
Strategic benchmarking examines how companies compete. Strategic
benchmarking is seldom industry-focused. It wanders across industries seeking
to identify the winning strategies that have enabled high performing companies to
be successful in their marketplaces. Strategic benchmarking influences the
longer-term competitive patterns of a company. Consequently, the benefits may
accrue slowly. Organizations seeking short-term benefits, such as those reflected
in quarterly performance reports, usually find that process benchmarking
produces results more rapidly.

Benchmarking is a necessity for companies engaged in reengineering their

processes and systems. Benchmarking gives you the ability to see things
differently and enables a company to get outside its conditioned responses or
customary structures of thinking. Reengineering without benchmarking will likely
produce only very small improvements, not the spectacular large performance
improvements often seen with radical re-design. Through the study of outside
best practices, a company can identify and import new technology, new skills,
new structures, new training and new capabilities.

One of the mistakes people make when beginning their benchmarking endeavor
is that they only look to benchmark someone within their own industry. Although
this doesn't hurt, they probably already know enough about their industry to know
what works and what doesn't. Worse yet, some people think they must
benchmark their competitor. However if the competitor is worst, then the
benchmarking effort is just a waste of time and energy. "If a team is going to
benchmark, it should benchmark from the best in the world, not the best in its
industry" (Hammer & Champy 137). This approach is sometimes referred to as
Best Practices, Exemplary Practices or Business Excellence.

Effective benchmarking can be broken down into the following seven steps: 1.)
Determine, which functional areas within the company are to be benchmarked.
Focus on the areas that will benefit most from the process, based upon the cost
and importance. 2.) Identify the key factors and variables with which to measure
those functions. These are usually in the general form of financial resources and
product strategy. 3.) Select the best-in-class companies for each area to be
benchmarked. Criteria for determining those companies are ones that perform
each function at the lowest cost, with the highest degree of customer satisfaction.
4.) Measure the performance of the best-in-class companies for each benchmark
being considered. Performance can be determined from sources such as the
companies themselves, articles in trade journals, analysts in the market, credit
reports, clients and vendors, or trade associations. 5.) Measure your own
performance for each variable and begin comparing the results in an "apples-to-
apples" format to determine the gap between your firm and the best-in-class
examples. 6.) Specify those programs and actions to meet and surpass the
competition based on a plan developed to enhance those areas that show
potential for compliment. 7.) Implement these programs by setting specific
improvement targets and deadlines, and by developing a monitoring process to
review and update the analysis over time (Johnson).

Benchmarking can ignite ideas into a team, especially if teams used as the
benchmark industry come from outside their own industry or "benchmarking
outside-the-box" (O'Dell). One good example was Hewlett Packard who
reengineered their material procurement process using ideas and a purchasing
model adapted from a senior manager who join the company from the
automotive industry. "Benchmarking is the practice of being humble enough to
admit that someone else is better at something and wise enough to learn how to
match and even surpass them at it" (O'Dell).

Benchmarking can yield great benefits in the education of executives and the
realized performance improvements of manufacturing operations. In addition,
benchmarking can be used to determine strategic areas of opportunity. The
determination of benchmarks allows one to make a direct comparison. Any
identified gaps are improvement areas.

In the rough-and-tumble marketplace of the 2000s and beyond, few

organizations can afford to ignore these lessons of competitiveness. There's a
simple test to determine benchmarking's applicability to an organization. Can an
organization afford to stop improving? Can an organization afford to stop
learning? Can an organization afford to stop competing for its position in the
marketplace? Every organization strives to maintain and enhance its position
over time. That is the essence of competitiveness.