Benchmarking

Benchmarking is an important business strategy and continuous improvement tool that enables organizations to measure their products, services or processes against the best in the industry. This enables the company to  emulate best practices, innovative ideas and highly effective operating procedures. It is a process of measuring the company's products, services or processes against those of another company held "best in class" in the industry. 

Specific metrics are compared, to arrive at the areas of improvement enabling data based business decisions. It was in 1979 that Xerox coined the word 'Bench marking' when it noticed that some of its Japanese competitors were offering products manufactured by it, at a lower price. The company did a market related benchmarking study (competitive bench marking) for its production department.  Microsoft is another company that uses the benchmarking techniques in a very effective manner.  

Apart from 'External benchmarking" wherein you compare your company against other companies, you can also do "Internal benchmarking". Here the benchmarking is done within the same company between its various units or departments. Benchmarking between shifts or a similar operation or process in other department reveal best practices that can be emulated for the overall progress of the organization. Benchmarking helps to create new methods or improve current practices to attain higher standards. 

The principle of 'Benchmarking 'is very simple and obvious to understand. Even as an individual we can aspire to become better in what ever we do by pitching ourselves against the best. As for example, the name of Ameen Sayani comes to mind as one of the best radio jockeys we have ever had in India. A young RJ can identify particular aspects that led to his success such as the use of voice, networking within the industry, work schedules etc to see the gaps between his performance and that of the maestro. He can then go about finding ways to improve and reach high standards. 

In marketing and sales area, the company may like to compare sales figures for similar products manufactured by different companies/ leading brands or major disruptors in the industry. Other areas that can be benchmarked include production outputs and service delivery timelines. Supply chain would do well to benchmark KPIs such as perfect order rate, inventory turnover and on time delivery percentages. In HR, cost per hire between similar industries and the rentention rate of those hired can be relevant metrics. Quality, cost and time are important parameters for comparison. 

Although benchmarking has its merits as a continous improvement tool, critics point out that it stifles innovative thinking and working for "a better solution" as you tend to be content with copying what is already available, not wanting to waste time in reinventing the wheel. Further, it is very important while benchmarking to ensure that clear and unambiguous objectives are clearly defined. In the absence of correct context, there would be measurement issues and comparisons would be difficult. The barriers to effective benchmarking include lack of accurate data, confidentiality, high costs and unknown competitors. The challenges are all the more if you are a small company with limited resources. 

Organizations would do well to take up the challenge of implementation in a systematic manner by (a) Planning out in detail what you want to benchmark (b) Collect relevant data through research (c) Analyze the data against a clear objective of knowing where you are and where you want to be (d) Develop an action plan and (e) Monitor the progress. 

 Clarity in the process of what you are doing, will enable you to fine tune the bench marking exercise to the company's own unique needs and goals.After all, in spite of the challenges, benchmarking is a useful tool  for organizations to measure internal progress and also meaure its performance visvis world class organizations so as to reach greater heights.   

This post is a part of #BlogchatterA2Z 2023