Explanation of Benchmarking

Introduction

The purpose of this presentation is to discuss a decision making technique (Benchmarking), the sharing of performance and operational information to continuously compare activities among organizations to identify "Best Practices" and improve performance. The principle of benchmarking was developed by companies operating in an industrial environment. I will say more in a thorough explanation of this decision making technique. I will elaborate on an example of how this technique could be applied to a problem. I will also talk about identification of the limitations and benefits of Benchmarking.

Explanation of Benchmarking

Benchmarking, as it is known today, was developed in the USA in the Seventies. In recent years, organizations such as government agencies, hospitals and universities have also discovered the value of benchmarking and are applying it to improve their processes and systems. In addition, industry associations now increasingly use the tool to improve sector-specific processes. Most recently, public authorities have begun to explore the use of benchmarking as a tool for improving policy implementation processes, by focusing on the framework conditions which underlie the business environment and the economy more generally.

Benchmarking has proven to be most valuable process for identifying performance improvement areas. Measurement of best performing companies leads to identification and implementation of "Best Practices". Benchmarking now recognized as an essential technique for achieving continuous improvement areas. Benchmarking allows us to analyze and improve key business processes, eliminate waste, improve performance, profitability and market share. Benchmarking's strength is that it allows us to make decisions based on facts, not intuition or 'gut feeling'. Measurement is the key, knowing where we are today and where we need to be tomorrow; finding out what makes some companies successful. Benchmarking is all about looking at individual processes and functions, seeing what the 'best of the best' are doing, in whatever industry." In the race for continual improvement, more organizations are using benchmarking to provide an objective measurement and standard for performance.

Graphic

The application of benchmarking by a company involves a number of stages, as illustrated in Figure 1

A company first applies diagnostic benchmarking to explore the relative performance of different functions in the business. It is often based on a questionnaire, which asks a manager to rate the company against a set of business criteria. The second stage, holistic benchmarking, involves examining the totality of the business. This is used to identify key areas for improvement within the business. It addresses qualitative aspects by looking at systems and processes in the company. It also provides quantitative information based on trends and ratios. This diagnostic-holistic approach provides a relatively simple introduction to benchmarking. It offers structured, cost-effective feedback and requires only a minimum of resources to implement. It enables companies to improve their performance by identifying critical competencies, strengths and weaknesses, and then to use the lessons learnt from best practice in making the necessary improvements. In the third, mature stage, the company graduates to process benchmarking. This focuses on seeking to improve specific processes in order to achieve world-class performance. Process benchmarking is conducted by project teams. The first step is to specify a process, or a series of interconnected processes, to be studied. Next a benchmarking partner with superior performance in the process being examined is identified. The high performance process of the partner is then studied. In this way the performance gap is established