MELVIN M.

SARSOSA, MBA
5
 Benchmarking Concept

What is our performance What are others' performance

level? levels?
How do we do it? How did they get there?

Creative
Adaptation

Breakthrough
Performance
Benchmarking
• “Benchmarking is a way to go backstage
and watch another company’s performance
from the wings, where all the stage tricks
and hurried realignments are visible.”
The Wall Street Journal
Benchmarking is the process of gathering,
analysing and valuating the world outside
your organization and comparing it to your
own. The result of this process becomes the
cornerstone of the organization’s
improvement.
• Benchmarking. is the process of comparing one’s
business processes and performance metrics to
industry bests and best practices from other
companies. Dimensions typically measured are
quality, time and cost.
• Benchmarking. is a method of improving business
performance by learning from others. The essence
of benchmarking lies in the continuous process of
comparing a company’s strategies, products and
processes with those of world leaders and the
best-in-class organizations in order to learn how
they achieved excellence, and then setting out to
match and even surpass it. For many companies,
benchmarking has become a key component of
their TQM programmes
Benchmarking: What Is It?
• Benchmarking can be defined as a process
for improving performance by constantly
identifying, understanding and adapting
best practices and processes followed
inside and outside the company and
implementing the results.
• “Benchmarking is the process of
identifying, understanding and adapting
outstanding practices and processes from
organizations anywhere in the world to
help your organization improve its
performance.” —American Productivity
and Quality Centre
 Reasons to Benchmark

• Promotes continuous improvement

• Makes companies search for the best practices, innovative
ideas, and highly effective operating procedures
• Can notify a company if it has fallen behind the
competition
• Inspires managers to compete
• Allows goals to be set objectively
• Performance metrics are defined as figures
and data representative of an organization's
actions, abilities, and overall quality.
... Performance metrics can vary
considerably when viewed through
different industries. Performance
metrics are integral to an organization's
success.
• Metrics are measures of quantitative assessment
commonly used for comparing, and tracking
performance or production.
• Metrics can be used in a variety of scenarios.
• Metrics are heavily relied on in the financial
analysis of companies by both internal managers
and external stakeholders.
• The essence of benchmarking is the
continuous process of comparing a
company’s strategy, products, processes
with those of the world leaders and best-in-
class organizations. The purpose is to learn
how the achieved excellence, and then
setting out to match and even surpass it.
• Robert Bob Camp, one of the pioneers of
organizational benchmarking, defined
benchmarking as “the search for industry
best practices that lead to superior
performance.” This search is done in a
study, generally over a specific period of
time, with companies reporting on agreed
upon data. The result of the study is often a
case to make improvements in key business
processes.
Types of Benchmarking
• Benchmarking is a versatile tool that can be
applied in a variety of ways to meet a range of
requirements. Different terms are used to
distinguish the various ways of applying
benchmarking procedures to existing practices.
Standard benchmarking terms include:

1. Strategic benchmarking
2. Performance benchmarking or competitive benchmarking
3. Process benchmarking
4. Functional benchmarking or generic benchmarking
5. Internal benchmarking
6. External benchmarking
7. International benchmarking
Types of Benchmarking
1. Strategic Benchmarking Strategic
benchmarking is used 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.
Types of Benchmarking
• 2. Performance Benchmarking
Performance benchmarking or competitive
benchmarking is used when organizations
consider their positions in relation to
performance characteristics of key products
and services.
• Benchmarking partners are usually drawn
from the same sector.
• It is common practice for companies to
undertake this type of benchmarking
processes through trade associations or
third parties to protect confidentiality.
Types of Benchmarking
3. Process Benchmarking Process
benchmarking is used by the organization
when the focus is on improving specific
critical processes and operations.
Benchmarking partners are sought from best
practice organizations and are drawn from the
same sector. Process benchmarking invariably
involves producing process maps to facilitate
comparison and analysis.
This type of benchmarking is suitable for
achieving improvements in key processes to
obtain quick and short-term benefits.
Types of Benchmarking
• 4. Functional Benchmarking Functional
benchmarking or generic benchmarking can
lead the organization to innovation and
dramatic improvements.
• It is used when organizations 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 type of benchmarking is suitable for
improving activities or services for which
counterparts do not exist
Types of Benchmarking
• 5. Internal Benchmarking Internal
benchmarking involves seeking partners
from within the same organization and
from business units located in different
regions.
• The main advantages of internal
benchmarking are access to sensitive data
and information, availability of standardized
data and the whole process requiring less
time and resources.
Types of Benchmarking
• 6. External Benchmarking External
Benchmarking involves analyzing outside
organizations that are known to be the best
in-the-class.
• External benchmarking provides
opportunities of learning from those who
are at the “leading edge.”
• This type of benchmarking is suitable where
examples of good practices can be found in
other organizations and there is a lack of
good practices within internal business
units
Types of Benchmarking
• 7. International Benchmarking This is used
when the best practitioners are located in
other countries.
• This is due to globalization and advances in
information technology. There is a need for
careful analysis and interpretation due to
national differences.
• This type of benchmarking is suitable
where the aim is to achieve world-class
status or simply because there are
insufficient “national” businesses against
which to benchmark.
Phases in the Benchmarking Process

• Although the number of phases in the

process may vary from organization to
organization, the following five phases
contain the core techniques:
• 1. Planning
• 2. Analysis
• 3. Integration
• 4. Action
• 5. Maturity
Phases in the Benchmarking Process

1. Planning: This phase involves answering the

following questions:
• What is to be benchmarked?
• Which processes cause the most trouble?
• Which processes contribute most to customer satisfaction
and which are not performing up to expectations?
• What are the competitive pressures impacting the
organization the most?
• What processes or functions have the most potential for
differentiating our organization from the competition?
• To whom or what will we compare?
• How will the data be collected
 Phases in the Benchmarking Process

• 2. Analysis: The analysis phase should involve a

careful understanding of your current processes
and practices as well as those of the organizations
being benchmarked. What is desired is an
understanding of internal performance on which to
assess strengths and weaknesses. The following
questions may then be asked;
• Is there a gap between the organization’s performance and that of the
best-in-the-class organizations?
• What is the gap? How much is it?
• Why is there a gap?
•What does the best-in-the-class do differently, that is better?
•If best-in-the-class practices were adopted, what would be the resulting
improvement?
Phases in the Benchmarking Process

• 3. Integration: Integration is the process of

using benchmark findings to set operational
targets for change. It involves careful
planning to incorporate new practices and
to ensure that benchmark findings are
incorporated in all formal planning
processes
• 4. Action: Action plan for change also should
contain milestones for updating the benchmark
findings and an ongoing reporting mechanism.
Progress toward benchmark findings must be
reported to all employees. The generic steps for
the development and execution of action plans
are:
• (a) Specify tasks
• (b) Sequence tasks
• (c) Determine resource needs
• (d) Establish task schedules
• e) Assign responsibility for each task
• (f ) Describe expected results
• (g) Specify methods for monitoring results
• 5. Maturity: Maturity will be attained when best
industry practices are incorporated in all business
processes, thus ensuring superiority. Maturity is
also achieved when benchmarking becomes an
ongoing, essential and self-initiated facet of the
management process. Benchmarking is a tool for
continuous improvement. It is not to be
undertaken to create one permanent improvement
and thereby miss the opportunity for future
improvements. In order to avoid complacency,
benchmarking must be used continuously to
pursue emerging new ideas.