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BENCHMARKING


Definition
Benchmarking is the process of identifying "best practice" in relation to both products (including) and the
processes by which those products are created and delivered. The search for "best practice" can take place
both inside a particular industry, and in other industries (for example - are there lessons to be learned from
other industries?).

The objective of benchmarking is to understand and evaluate the current position of a business or
organisation in relation to "best practice" and to identify areas and means of performance improvement.

The Benchmarking Process
Benchmarking involves looking outward (outside a particular business, organisation, industry, region or
country) to examine how others achieve their performance levels and to understand the processes they use.
In this way, benchmarking helps explain the processes behind excellent performance. When the lessons
learnt from a benchmarking exercise are applied appropriately, they facilitate improved performance in
critical functions within an organisation or in key areas of the business environment.

Application of benchmarking involves four key steps:
(1) Understand in detail existing business processes
(2) Analyse the business processes of others
(3) Compare own business performance with that of others analysed
(4) Implement the steps necessary to close the performance gap









Benchmarking should not be considered a one-off exercise. To be effective, it must become an ongoing,
integral part of an ongoing improvement process with the goal of keeping abreast of ever-improving best
practice.

Types of Benchmarking
There are a number of different types of benchmarking, as summarised below:

Type

Description

Most Appropriate for

the Following Purposes

Strategic

Benchmarking

Where businesses need to improve overall performance by

examining the long-term strategies and general approaches

that have enabled high-performers to succeed. It involves considering high-level aspects such as core competencies, developing new products and services and improving capabilities for dealing with changes in the external environment. Changes resulting from this type of benchmarking may be difficult to implement and take a long

time to materialize

Re-aligning business

strategies that have

become inappropriate

Performance or

Competitive

Benchmarking

Businesses consider their position in relation to performance

characteristics of key products and services. Benchmarking

partners are drawn from the same sector. This type of

analysis is often undertaken through trade associations or

third parties to protect confidentiality.

Assessing relative level

of performance in key

areas or activities in

comparison with others

in the same sector and

finding ways of closing

gaps in performance

Process

Benchmarking

Focuses on improving specific critical processes and

operations. Benchmarking partners are sought from best

practice organizations that perform similar work or deliver

similar services. Process benchmarking invariably involves

producing process maps to facilitate comparison and

analysis. This type of benchmarking often results in shortterm

benefits.

- Achieving

improvements in key

processes to obtain quick

benefits

Functional

Benchmarking

Businesses look to benchmark with partners drawn from

different business sectors or areas of activity to find ways of

improving similar functions or work processes. This sort of

benchmarking can lead to innovation and dramatic

improvements.

- Improving activities or

services for which

counterparts do not exist

Internal

Benchmarking

Involves benchmarking businesses or operations from within

the same organization (e.g. business units in different

countries). The main advantages of internal benchmarking

are that access to sensitive data and information is easier;

standardized data is often readily available; and, usually less

time and resources are needed. There may be fewer barriers

to implementation as practices may be relatively easy to

transfer across the same organization. However, real

innovation may be lacking and best in class performance is

more likely to be found through external benchmarking.

- Several business units

within the same

organization exemplify

good practice and

management want to

spread this expertise

quickly, throughout the

organization

External

Benchmarking

Involves analyzing outside organizations that are known to

be best in class. External benchmarking provides

opportunities of learning from those who are at the "leading

edge". This type of benchmarking can take up significant

time and resource to ensure the comparability of data and

information, the credibility of the findings and the

development of sound recommendations.

- Where examples of

good practices can be

found in other

organizations and there

is a lack of good practices

within internal business

units

International

Benchmarking

Best practitioners are identified and analyzed elsewhere in

the world, perhaps because there are too few benchmarking

partners within the same country to produce valid results.

Globalization and advances in information technology are

increasing opportunities for international projects. However,

these can take more time and resources to set up and

implement and the results may need careful analysis due to

national differences

- Where the aim is to

achieve world class

status or simply because

there are insufficient

“national" businesses

against which to benchmark

 

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