Introduction
Benchmarking is the measurement of a firm’s policies and practices through a logical
comparison with another firm or a unit of the same firm in order to determine the relative performance.
The main objectives of benchmarking include identification of what improvements are necessary and
how high performance is attained by other companies.
When conducted well, it has the power to reveal important gaps which can be certainly used to
improve the company’s performance (Stauffer, 2003).It therefore remains relevant in the current global
operations as more companies strive to achieve best results in a highly competitive market setting. In
order to experience notable success in benchmarking, a company will need to be more creative
especially by using companies whose core business is totally outside its industry. The best way to
approach this is to begin by looking at things from the customers’ point of view. To achieve this, the
steps a customer takes in acquiring a product are considered alongside the companies that provide the
products. These companies are then analyzed in order to understand how they carry out their
processes. For companies with locations spread across the world, benchmarking needs to be carefully
conducted bearing in mind the aspect of international context which is fundamental in global
benchmarking.
Companies benefit from benchmarking through improved performance and productivity levels.
Benchmarking helps, organizations understand their industry better, which leads to innovative thinking.
Innovative thinking helps you to achieve the desired performance level more rapidly. Other benefits
include the identification of the best practice to use in a particular process. Savings are generated using
benchmarking because it allows you to continuously improve performance and productivity, therefore
eliminating costly errors.
Benchmarking is a tool that provides goals for realistic process improvement and helps you
understand the changes required to improve performance. You may use benchmarking to identify and
rectify problem areas, implement strategic change initiative, or for continuous process improvement.
Benchmarking is the practice of being humble enough to admit that someone else is better at
something, and being wise enough to learn how to be as good or even better than them.
DISCUSSION
There are numerous benchmarking methodologies that can be used by a company with
locations spread across the world. They include reengineering, benchmarking questionnaires, taskresource maps and diagrams. For benchmarking questionnaires, organizations may need to turn to
outside sources like academic institutions that engage in gathering relevant data.
Other sources they can utilize include specialized consulting companies whose core business is
to collect such type of data. The questionnaires can then be used to obtain useful quantitative and
qualitative data that is specific to every location of the organization across the world. Task-resource
maps can also be employed especially where internal processes are the subject of examination. They
can map the flow of information systems, communication, orders, decisions, channels of communication
and even customers in the various locations. Reengineering focuses mainly on making rapid changes in
people, processes, and the organization as move to attain a required change for the business to
continue remaining relevant at a global scale. However, it must be equally noted that reengineering can
also lead to a sudden downturn if not implemented successfully, but it can improve an organization
quite dramatically if it is implemented wisely especially through adoption of a global benchmark for
guiding the process (Schniederjans, 1998).The trade methodology, which is a best practice
benchmarking methodology, can also be used by such companies. It is based on exchange of best
practices and information related to goods, services and processes in order to improve their
performance.
Since its development in New Zealand Benchmarking club, it has been applied in numerous
benchmarking projects across the globe, gaining great momentum and application as from 2007 when it
became possible to run several projects as a result of enhanced project management system and
training materials. The methodology comprises five steps which include planning the project (Terms of
reference), current state research (Research), data collection and analysis (Act), communication & best
practice implementation (Deploy) and evaluation of benchmarking process and outcomes (Evaluate).It is
best summarized by Terms of Reference, Research, Act, Deploy, and Evaluate which together make up
the word TRADE (Centre for Organizational Excellence Research, n.d).By exchanging information in
different, unique locations where a company is conducting business, a precise outcome is arrived at
which becomes useful in addressing the performance of the company.
Xerox Corporation is an example of a company that has used benchmarking in a highly
international context. After becoming vulnerable to intense competition from US and Japanese
companies, it embarked on vigorous benchmarking efforts. By benchmarking against Japanese
competitors, it established that it took twice the period taken by Japanese competitors to avail a
product in the market; three times the costs of design, five times the number of engineers, and four
times the number of changes in designs. It was also established that for almost the same cost of
manufacturing, the Japanese companies could afford to manufacture, ship and have the products sold.
Another discovery was that in a million units, there were about 30, 000 defective parts-approximately
30 times those of the competitors. It was equally revealed that if Xerox was to catch up with the
competition it would need 18 percent annual productivity growth rate, consistently for five years. This
proved a harsh reality for Xerox managers and they found it extremely hard to believe at first but they
finally accepted and embarked on fixing it.They defined benchmarking as a process to measure Xerox
against its toughest competitors. As a result, overall customer satisfaction increased more than 90
percent.
Conclusion
In conclusion, benchmarking is still very relevant in companies and organizations wishing to
improve their performance in different markets and localities. It gives the companies a chance to look
inwardly with the standards of a company that is performing better in business. The greatest advantage
of benchmarking is that it often benefits all the involved companies. By sharing valuable information
affecting both companies, even the best performing company can gain.
In a world where competition is stiff and survival depends on efficiency, customer satisfaction,
quality and social responsibility among other factors, business leaders cannot afford to ignore the
consideration of what other companies could be doing differently. Whatever is ignored might just be the
reason for a company’s underperformance compared to others. Overall, benchmarking is healthy if
carried out strategically and cautiously. However it should not be seen as the only best way to propel a
business forward but rather one of the ways.
References
Centre for Organizational Excellence Research (n.d). TRADE Best Practice Benchmarking Methodology.
Retrieved from https://www.coer.org.nz/?view=featured
Iacobucci, D.Nordhielm, C (2000). Creative Benchmarking. Havard Business Review, 89-91.
Icmrindia (2009) Xerox: The Benchmarking Story. Retrieved from
http://www.icmrindia.org/free%20resources/casestudies/xerox-benchmarking-1.htm
Schniedejans, M.J. (1998). Operations management in a global context. Connecticut: Greenwood
Publishing Group, 1998.
Stauffer, D (2003). Is your Benchmarking Doing the Right Work? Harvard Management Update, 85-88.
Limitations of Benchmarking