Benchmarking is an ongoing, systematic process of identifying the highest performance achieved by leading organizations in their quest for excellence and the skills they needed, and thus stimulating the efforts of its own organization to improve its performance at all structural levels. This is a strategy to stimulate change and optimize performance.
When does it apply?
Benchmarking is used mainly to compare own processes and indicators with those of recognized industry leaders.
Based on this, the gap in indicators between this organization and its most successful competitor is estimated. Usually, processes such as marketing, sales, purchasing, technology improvement, new product development and logistics are used for benchmarking. Depending on the selected object, benchmarking is divided into internal, competitive, process and strategic.
Internal benchmarking Internal benchmarking
involves comparing internal divisions (activities and processes) within the company itself. It is usually of interest to large organizations to determine whether some departments and divisions perform the same types of work more efficiently and effectively than others.
Competitive benchmarking
Involves comparing a company to direct competitors. The operations and processes of these competitors are evaluated and compared with their own operations and processes. By knowing what a competitor has done and what your organization is missing, you can adjust your own processes to increase their efficiency and produce better and cheaper products. For example, if a software manufacturer wants to strengthen its competitive position, it may try to establish what exactly Microsoft did in its time to become a market leader.
Process benchmarking
Involves finding the best-in-class for a particular process – whether it’s a competitor or not and in what industry it operates. For example, a chemical company can compare its logistics activities with what an electronics manufacturer is doing in this area.
Strategic benchmarking Strategic benchmarking
is used to achieve a sharp increase in labor productivity and an increase in production volume in order to strengthen its competitive position. To do this, the company must make a big leap, a breakthrough, and it is difficult to do this on its own. This type of benchmarking can be used for strategic planning purposes because it allows you to determine the relative competitive positions of all types of activities and, accordingly, to offer the optimal course. Strategic benchmarking can be carried out in several ways, in particular:
- By comparing the company’s own strategy and financial indicators with the strategy and indicators of its competitors;
- Analysis of the strengths and weaknesses of competitors and determining on this basis in which areas the company can surpass its competitors and what improvements it needs to increase its competitiveness.
How does this apply?
Benchmarking involves several steps.
Select the object to benchmark.
At this stage, determine which functions, the back Any processes, processes, or activities in your organization must be subject to a benchmarking procedure. Taking into account critical success factors (factors that are crucial for the organization), one or more processes are selected for benchmarking. How this is done will be shown in Chapter 5.
Form a team that will make a detailed scheme of processes: determine the stages of these processes and the sequence of operations, the procedure for each stage, the corresponding performance indicators, resources at the “input” and results at the “output”, as well as consumer requests. At this stage, they also formulate the goals of the project, find out what data needs to be collected, and make a trial list of questions.
Identify benchmarking partners.
Who are you going to take your cue from? The criteria for selecting benchmarking partners can serve, in particular, their best indicators in comparison with the subject of benchmarking or in their class, competitiveness in their field, availability of reliable information about the partner. To select benchmarking partners, you need to use several sources of information, such as databases, industry magazines, newspapers, bank reports, annual reports of competitors, specialist conferences, consulting agencies, universities, etc. It is also useful to talk with consumers, suppliers, employees, bankers.
Gather information.
Data on the effectiveness of the benchmarking partner process is collected through surveys, consultations with business partners, analysis of research materials and technical journals. Carefully study the partner’s process and relevant methods of work, evaluate performance indicators, collect quantitative and qualitative data.
Analyze the information.
Identify the performance gap between the organization and its benchmarking partner. After the partner data is collected, evaluated, and analyzed, it is compared with the relevant indicators of your own organization. Based on this, determine the existing gap in indicators between its own organization and the benchmarking partner. Differences in the methods of work used and the reasons for the discrepancy in indicators are documented. At the same time, it is especially important to answer the question of why your own process is not as effective and efficient as the best in its class.
Formulate functional goals.
Based on the results of benchmarking, new functional goals are formulated in order to bridge the gap in indicators. In addition, the results of benchmarking should be integrated into the company’s policy. This will facilitate the implementation of opportunities for improvement.
Develop action plans.
Now the goals need to be turned into concrete plans.
These plans should answer the following questions:
“When, for what purpose and what measures should be taken?”,
“How can the changes be successfully implemented?”,
“Who, what and how will do?” and
“Who will be responsible for what?”.
Follow the plans, make sure they have yielded results, and evaluate the progress made.
This is the stage of implementing measures to improve the work of the organization and implement changes. During this process, it is necessary to constantly monitor that everything goes according to plan, check whether (and how). The process is actually changing and whether the benchmarking goals are being achieved. Consequently, amendments are made if necessary.
Start it all over again.
Benchmarking is not a one-time act, but a process of continuous improvement. You can always find other, more effective methods. Competitors do not stand still, and over time, a new, better practice appears.