Benchmarking is a versatile tool that can be applied in a variety of ways to meet a range of requirements. Different terms are used to distinguish the various ways of applying benchmarking procedures to existing practices. The first word in each term relates to either the type of partner or the purpose of benchmarking. At the outset of benchmarking projects, it is vital to be clear on exactly what needs to be achieved through benchmarking and then apply an appropriate methodology.
Standard benchmarking terms include:
- Strategic benchmarking
- Performance benchmarking or competitive benchmarking
- Process benchmarking
- Functional benchmarking or generic benchmarking
- Internal benchmarking
- External benchmarking
- International benchmarking
1. Strategic Benchmarking
Strategic benchmarking is used where businesses need to improve overall performance by examining the long-term strategies and general approaches that have enabled high performers to succeed. It involves considering high-level aspects such as core competencies, developing new products and services and improving capabilities for dealing with changes in the external environment. Changes resulting from this type of benchmarking may be difficult to implement and may take a long time to materialize. This type of benchmarking is suitable when the company has to realign business strategies that have become inappropriate.
2. Performance Benchmarking
Performance benchmarking or competitive benchmarking is used when organizations consider their positions in relation to performance characteristics of key products and services. Benchmarking partners are usually drawn from the same sector. It is common practice for companies to undertake this type of benchmarking processes through trade associations or third parties to protect confidentiality.
This type of benchmarking is suitable for assessing relative levels of performance in key areas or activities in comparison with others in the same sector to find ways of closing gaps in performance.
3. Process Benchmarking
Process benchmarking is used by the organization when the focus is on improving specific critical processes and operations. Benchmarking partners are sought from best practice organizations and are drawn from the same sector. Process benchmarking invariably involves producing process maps to facilitate comparison and analysis. This type of benchmarking is suitable for achieving improvements in key processes to obtain quick and shortterm benefits.
4. Functional Benchmarking
Functional benchmarking or generic benchmarking can lead the organization to innovation and dramatic improvements. It is used when organizations look to benchmark with partners drawn from different business sectors or areas of activity to find ways of improving similar functions or work processes. This type of benchmarking is suitable for improving activities or services for which counterparts do not exist.
5. Internal Benchmarking
Internal benchmarking involves seeking partners from within the same organization and from business units located in different regions. The main advantages of internal benchmarking are access to sensitive data and information, availability of standardized data and the whole process requiring less time and resources. There may be fewer barriers to implementation as practices may be relatively easy to transfer across the same organization. However, this process has certain limitations. Real innovation and best practices are more likely to be found through external benchmarking. This type of benchmarking is suitable when several business units within the same organization exemplify good practice and management and want to spread this expertise quickly throughout the organization.
6. External Benchmarking
External Benchmarking involves analysing outside organizations that are known to be the best- in-the-class. External benchmarking provides opportunities of learning from those who are at the “leading edge.” This type of benchmarking can take up significant time and resources to ensure the comparability of data and information and the credibility of the findings and development of sound recommendations. This type of benchmarking is suitable where examples of good practices can be found in other organizations and there is a lack of good practices within internal business units.
7. International Benchmarking
This is used when the best practitioners are located in other countries. This is due to globalization and advances in information technology. There is a need for careful analysis and interpretation due to national differences.
This type of benchmarking is suitable where the aim is to achieve world-class status or simply because there are insufficient “national” businesses against which to benchmark. Box 11.2 illustrates the benchmarking of business schools in India for tracking and building quality.
Box 11.2 Benchmarking of B-Schools—Tracking and Building Quality
Business India was the first business magazine to report on the best business schools in India way back in 1982. The Business India group was also the first media house to team up with the All India Management Association (AIMA) to bring out the largest B-School Rating and Ranking exercise in the country. The surveys conducted by the group filled an important gap because there was hardly any information or benchmarks available about good quality business schools in the country.
The benchmarking survey was conducted using an online format, which was the first by any media house in tune with the emerging technologies. The easy to respond, user friendly online format allowed the business schools to keep visiting their completed questionnaires many number times to update and validate their information before submitting them finally. Business India had an overwhelming response to their online format with over 150 B-schools registering with them on the Web site. The survey questionnaire was also mailed to each individual B-school from their database of over 1,800 B-schools.
Once the benchmarking data was collected and analysed, it was distributed through a benchmarking report internally within the institutions and externally to benchmarking partners for the implementation of improved processes. The overall goal was the adoption of process enablers in the home institutions to achieve effective quality improvement. Benchmarking was more than just gathering data. It involved adapting a new approach of continually questioning how processes were performed, seeking out best practices and implementing new models of operation.
Source: Poornima M. Charantimath (2017), Total Quality Management, Pearson; 3rd edition.