BENCHMARKING

LECTURE – 9
 Definition
 Benchmarking is the systematic
search for best practices, innovative
ideas, and highly effective operating
procedures. – Besterfield and
others.
 Benchmarking is the practice of a
business comparing key metrics of
their operations to other similar
companies.
 Definition
 Benchmarking is the
measurement of the quality
of an organization's policies,
products, programs,
strategies, etc., and their
comparison with standard
measurements, or similar
measurements of its peers.
 Objectives of benchmarking
 1) to determine what and where
improvements are called for,
 2) to analyze how other
organizations achieve their high
performance levels,
 3) to use this information to
improve performance.
 Reasons for Benchmarking
1. Benchmarking is a tool to achieve
business and competitive objectives.
2. It inspires managers to compete.
3. It is cost and time efficient.
4. It helps organization to develop those
strengths and weaknesses that will
enable it to gain competitive
advantages.
5. It allows gaols to be set objectively
based on external information.
 Benchmark Concept

Our performance Other’s Performance

level Level

Creative
Adaptation

Benchmark Performance
 BENCHMARK PROCESS
1. Decide what to benchmark.
2. Understand current performance.
3. Plan for benchmarking.
4. Study others.
5. Learn from the data.
6. Use the findings to set benchmark
 1. Decide What to Benchmark
 Begin with the thinking about mission of
the organisation and the Critical Success
Factors for achieve mission of own
organisation.
 Track which process is causing trouble
most.
 Identify which the process contributes
most to customer satisfaction.
 Decide What to Benchmark
 Identify the process that does not perform upto
mark.
 Understand the most competitive pressure on
the firm.
 Identify processes or functions that have most
potential for differentiating the firm from others.
 Set the function or process for benchmarking.
 It must be done quickly and it should not be too
large.
 2. Understanding Current
Performance
 Thoroughly study and document the current
performance of the organisation.
 Use flow diagram, cause and effect diagram to
understand each aspect of performance.
 Attend all inputs and outputs carefully.
 Interview and take comments from the working
people who know the work or process most.
 Quantify the measure of performance.
 These data would be the baseline for
benchmarking.
 3. Planning
 Remember benchmark planning is a
learning process.
 It is better to use information in the
public domain to focus the inquiry and to
find appropriate benchmark partner.
 There are three types of benchmarking:
– Internal benchmarking.
– Competitive benchmarking.
– Process / product benchmarking.
 Continues
 Product benchmarking
 It can be set from comparative data about
product taken at the customer’s location.
 A product of the competitors can be
bought and made it open and test with
one’s product.
 Process benchmarking or
Functional or Generic
benchmarking
 Process of competing firm to produce
product is analysed and compared to
one’s own process to find out differences.
 Process information could also be get from
published information.
 It may also get from discussion with
suppliers and consultants.
 How to select benchmark firm
 Start search with publicly available information,
such as trade journals, magazines, internet etc.
 Study success story articles, technical
information's, and regular lists of top performing
organisations.
 Numerous database firms are also available
today.
 Standard ratios are available for all publicly
traded firms form stock exchange.
 Government agencies also compile large
quantities of industry information.
 Business contacts also very good source.
 Continues
 Make a short list of possible benchmark
partners.
 4. Study others
 Benchmarkers may use internal sources,
data in public domain and original
research to collect information about other
competing firms.
 Original research may be done by
questionnaire, site visits, and focus group
techniques.
 One can use a combination of techniques
too.
 5. Learning fro the data
 Identify the gap between the performance
or process of benchmark firm and your
own firm.
 Identify the dept of gap.
 Identify the reasons for the gap.
 Determine the differentiating
process/function/performance/product
characteristics etc of best-in-class firm.
 Determine the benefit of following best-in-
class practices of the benchmark firm.
 6. Use the findings.
 Communicate the gap to operating people and
motivate them to bring change.
 Translate the intended change into goals,
objectives and action plans.
 Generic steps for developing action plan:
– Specify tasks to be done.
– Make a sequence of tasks.
– Determine resource needs.
– Establish task schedule.
– Assign responsibility for each task.
– Describe expected results.
– Specify methods for monitoring results.
 Pitfalls of Benchmarking
 Benchmarking is not a panacea. It is an
improvement tool.
 It is copy of others, not an original action.
 It is not a substitute of innovation.
THANK YOU ALL.