The “benchmarking” processes evolved in the US during 1980 with the pioneering work done at Xerox, Ford and Motorola companies. Benchmarking is search for the best practices in the industry leading to superior performance.
It has long been established that there is a clear link between performance measures and effective management. The performance measures provide a lot of insightful information, comparison of which enable the organizations to evaluate and track the progress achieved in their stated goals. The data also enable comparison of performance achieved by different organizations over a period of time.
Benchmarking provides an effective tool for measuring and improving an organization’s various programs. The important steps in benchmarking are given in the Six Sigma methodology, comprising: Define, Measure, Analyze, Improve and Control (DMAIC).
Benchmarking forms an integral part of an organization’s continuous improvement cycle. The essence of benchmarking, thus, constitutes proper measurements and comparisons, which lead to identifying opportunities for improvement.
Benchmarking is essential to succeed in the face of tough competition. It is a systematic process of measuring an organization’s performance against established industry leaders in order to identify the best practices. These, when implemented, help the organization in attaining superior performance.
In order to make the benchmarking process thoroughly reliable, it is necessary to validate the data involved in the process. It will need an experienced analyst to review the data collected after interviewing the project team and resolving the critical issues involved.
Alternately, the services of an outside and professionally qualified reviewer can be sought for an honest and accurate data validation. This ensures consistency of the benchmarking process across the organizations.
Some organizations are hesitant to implement the benchmarking process as they fear that they might lose their competitive advantage if they share confidential business information. They also feel concerned about exposing their organizational weaknesses. Such concerns can be avoided by hiding the identity of the process being sought to be benchmarked.
Arrogance of certain organizations also comes in the way of benchmarking process. These organizations believe that they are the best in the industry and see no need for benchmarking.
Absence of active participation by the senior management and lack of resources also present big obstacles for several organizations opting for benchmarking initiatives.
Whatever the type of benchmarking that an organization undertakes, the success of the process depends on a systematic and a well-structured approach, which includes the following steps:
- Planning and Preparation: This includes recognizing the need for benchmarking, determining the methodology and identifying the participants in the project.
- Collection of Data: This involves determining what you are going to measure and how you will do it. You also need to establish the type of metrics that you will use for data collection and analysis.
- Analysis of the Data: Before any meaningful analysis, the data collected needs to be validated and normalized by comparing it with different operations.
- Reporting: The findings of the analyses should finally be reported in a clear, concise and an easily understandable format.
- Sharing and Learning: Top performing bench-markers share their best practices among them for their common benefit.
- Actions for Improvement: After ascertaining the useful points learned through the benchmarking process, the organizations should plan and implement the needed changes for improvement.
- Institutionalizing the Learning Process: The insights for improvement gained through the benchmarking process should be absorbed and embedded into the organizational culture for sustained growth of the business.
Bench marking can be conducted at different levels (such as operational, functional and corporate) of the organization. These levels are interlinked for attaining sustained progress toward the goals outlined in the corporate vision.