Benchmarking

Benchmarking is a systematic comparison of organizational processes and performance to create new standards or to improve processes. Benchmarking models are used to determining how well a business unit, division, organization or corporation is performing compared with other similar organizations. A Benchmark is often used for improving communication, professionalizing the organization / processes or for budgetary reasons. Traditionally, performance measures have been compared with previous measures from the same organization at different times. Although this can be a good indication of the rate of improvement within the organization, it could be that although the organization is improving, the competition is improving faster. Benchmarking is the continuous search for an adaptation of significantly better practices that leads to superior performance by investigating the performance and practices of other organisations (benchmark partners). In addition, it can create a crisis to facilitate the change process. Benchmarking goes beyond comparisons with competitors to understanding the practices that lie behind the performance gaps. It is not a method for 'copying' the practices of competitors, but a way of seeking superior process performance by looking outside the industry. Benchmarking makes it possible to gain competitive superiority rather than competitive parity. The term benchmark refers to the reference point by which performance is measured against. It is the indicator of what can and is being achieved. The term benchmarking refers to the actual activity of establishing benchmarks and 'best' practices. It must be noted, however, that there will undoubtedly be difficulties encountered when benchmarking. Many of them are detailed in the corresponding document "Guide to Benchmarking" under "factors to be aware of". Significant effort and attention to detail is required to ensure that problems are minimised.

Advantages
Benchmarking is a powerful management tool because it overcomes "paradigm blindness." Paradigm Blindness can be summed up as the mode of thinking, "The way we do it is the best because this is the way we've always done it." Benchmarking opens organizations to new methods, ideas and tools to improve their effectiveness. It helps crack through resistance to change by demonstrating other methods of solving problems than the one currently employed, and demonstrating that they work, because they are being used by others. Collaborative benchmarking Benchmarking, originally invented as formal process is usually carried out by individual companies. Sometimes it may be carried out collaboratively by groups of companies (e.g. subsidiaries of a multinational in different countries). One example is that of the Dutch municipally-owned water supply companies, which have carried out a voluntary collaborative benchmarking process through their industry association. There is no single benchmarking process that has been universally adopted. The wide appeal and acceptance of benchmarking has led to various benchmarking methodologies emerging.

The following is an example of a typical shorter version of the methodology: 1. Identify your problem areas - Because benchmarking can be applied to any business process or function, a range of research techniques may be required. They include: informal conversations with customers, employees, or suppliers; exploratory research techniques such as focus groups; or in-depth marketing research, quantitative research, surveys, questionnaires, re engineering analysis, process mapping, quality control variance reports, or financial ratio analysis. Before embarking on comparison with other organizations it essential that you know your own organization's function, process; base lining performance provides a point against which improvement effort can be measured. 2. Identify other industries that have similar processes - For instance if one were interested in improving hand offs in addiction treatment s/he would try to identify other fields that also have hand off challenges. These could include air traffic control, cell phone switching between towers, transfer of patients from surgery to recovery rooms. 3. Identify organizations that are leaders in these areas - Look for the very best in any industry and in any country. Consult customers, suppliers, financial analysts, trade associations, and magazines to determine which companies are worthy of study. 4. Survey companies for measures and practices - Companies target specific business processes using detailed surveys of measures and practices used to identify business process alternatives and leading companies. Surveys are typically masked to protect confidential data by neutral associations and consultants. 5. Visit the "best practice" companies to identify leading edge practices - Companies typically agree to mutually exchange information beneficial to all parties in a benchmarking group and share the results within the group. 6. Implement new and improved business practices - Take the leading edge practices and develop implementation plans which include identification of specific opportunities, funding the project and selling the ideas to the organization for the purpose of gaining demonstrated value from the process.

Disadvantages
A major limitation of benchmarking is that while it helps organizations in measuring the efficiency of their operational metrics, it remains inadequate to measure the overall effectiveness of such metrics. Benchmarking reveals the standards attained by competitors but does not consider the circumstances under which the competitors attained such standards. If the competitors goals and visions were flawed or severely restricted due to some specific factor, an organization by benchmarking such standards runs the risk of trying to ape such flawed standards or settling for extremely low standards. A bigger disadvantage of benchmarking is the danger of complacency and arrogance. Many organizations tend to relax after excelling beyond competitors' standards, allowing complacency to develop. The realization of having become the industry leader soon leads to arrogance, when considerable scope for further improvements remains.

Finally, many organizations make the mistake of undertaking benchmarking as a stand-alone activity. Benchmarking is only a means to an end, and it is worthless if not accompanied by a plan to change. Comparing the pros and cons of benchmarking, the advantages of benchmarking overshadow disadvantages. Reference:http://www.brighthub.com/office/entrepreneurs/articles/82292.aspx http://www.smthacker.co.uk/introduction_to_benchmarking.htm http://vectorstudy.com/management_theories/benchmarking.htm