Professional Documents
Culture Documents
Abstract
This paper responds to call in literature to advance research into benchmarking narratives for holistic Competitive Advantage (CA)
by acknowledging the areas of weakness in presenting a comprehensive role of benchmarking for CA; Defending better contribution
of process benchmarking for gaining financial excellence as compared to the role of performance one. Key benchmarking roles for
gaining CA in an organisation are identified through cross industrial literature review to making better focus of benchmarking
efforts. Benchmarking definition with common pitfalls is clarified along with a recommended general implementation methodology.
Pre and post impact of benchmarking on performance of different organisations is mentioned. Its role for CA has been put forward
under two sections A) General benchmarking role in three perspectives i.e. Knowledge sharing, facilitating appraisal process and
usage of excellence models are presented. B) Role of process benchmarking is compared with performance one towards CA through
financial results. Research can be used in multi dimensions; Alignment of company’s benchmarking strategy with it's corporate one
for organisational cohesiveness; Customised scorecard with specific measures can be derived for performance monitoring of the
strategy; Process benchmarking is recommended to generate better financial results; A customer oriented company can be
developed by keeping in view their (customer's) importance in developing and deploying the strategy; Roles of benchmarking models
are generic and cross industrially applicable. Further research can be done to identify its organisational level, industry, size &
sector (public or private) specific role/benefits/methodology. Too, specific relationship/ weightage can be developed among
variables of roles of benchmarking models.
Introduction: Companies are becoming more performance oriented in this dynamic environment as Mukherjee et. al.
(2002) say that performance challenges and the need to be cost effective are apparent through out the world. Ho et.al. (2006)
say, “Choosing a viable method for effective evaluation of performance is not an easy task. There is a substantial body of
literature discussing different research methods applied to performance evaluation. These methods include: multivariate
statistical analysis; balanced scorecard; data envelopment analysis; analytic hierarchy process; fuzzy set theory and financial
statement analysis (FSA).” Too, a lot of literature defends other methods of performance measurement e.g. grey relation
analysis (GRA) (Tsai, 2000); performance prism (Pursglove, 2007); Activity Based Management, TQM, SPC, DOE, JIT
(Kumar et.al. 2001); Data Envelopment Analysis (DEA) (Mukherjee et.al. 2002)”. Wong et.al. (2008) has divided the
performance data analysis techniques in to parametric (e.g. simple/multiple regression analysis etc.) and non parametric ones
(e.g. BSC, DEA etc.). However, regardless of approach, the strength of performance management systems lies in domains of
strategic and change management (Ho et.al. 2006). Welch et.al. (2001) say that over the last ten years benchmarking,
excellence and performance improvement have become important to those organisations perusing performance improvement.
This study is about benchmarking based performance excellence in an organisation.
Pfeffer says that CA is some thing that “distinguishing an organisation from their competitors; provides positive
economic benefits, is not readily duplicated (Pfeffer 1994). Massa et.al. (2004) implies that it is an outcome of particular mix
of tangible and intangible assets, to which the firm has access. CA has been taken more or less around these definitions in this
piece of work.
As managers seek new ways to compete in market, one technique that has made headlines in the management community is
benchmarking (Bagchi 1997). Kearns says that in order to have a competitive edge over others, more and more companies
are starting to assess their performance. Among the processes used, benchmarking seems to be, if one judges its results in
A thirteen step implementation methodology adapted from works of Povey (2007); Kumar et.al. (2001); Wang et.al. (2008);
Zairi (1998); Zairi (2000); Anand et.al. (2008) and Freytag et.al. (2001) for generic benchmarking is presented here: 1) Get the
leadership and followership commitment, 2) Develop a benchmarking team with a sponsor and owner by using Belbin’s
approach, 3) Classify the firm’s processes on a matrix of Important (Strategic impact on business performance) vs.
performance 4) Pick the process to be benchmarked (i.e. with low performance, important (strategically significant), 5) Score
its activities individually on a selected scale, 6) Identify the firms with similar challenges, 7) Identify the selected benchmarking
process in other firm(s), 8) Score the process activities on the same scale in each individual benchmarking partner (if there are
more than two), 9) Select the highest performing activities for improvement through benchmarking data, 10) Adapt the
benchmarking data to Co.’s culture for improvement, 11) Implement the improvement, 12) Monitor the performance to ensure
better results, 13) For higher performance identify another process from the matrix of important vs. performance & strategic
impact on overall performance.
Like all researches this study has some assumptions: 1) Measures taken in the models are generally acceptable measures
across the industries and businesses. 2) The measures are excellence oriented. 3) Benchmarking is taken as a holistic concept
regardless of type/level in the first half of the paper to demonstrate its contribution for CA. 4) Benchmarking is taken as an
integral part of TQM to present its pre and post impacts on performance (Carpinetti et.al. 2002). 5) Excellence/contribution to
CA also involves generating financial results (Fuller 2000). There are two research questions: 1) How does benchmarking
contribute towards CA in an organisation? 2) Weather performance based or process based benchmarking contributes better
for financial results? These questions are chosen to help focus on filling the gap of developing holistic dimensions of
benchmarking strategies which able to be integrated with other business processes in developing CA (Wang et.al. 2008)
through cross industrial literature review. Moreover, argument about the better role of performance vs. process benchmarking
towards financial progress helps a company in adopting the most appropriate type for improvement. Too, a limited literature
is available on this aspect of performance management. The research intends to fill this gap. The remainder of this paper is
organised as follows: The next section reflects significance of benchmarking. Then, general benchmarking role for CA is
presented in four perspectives. After that, the comparison of process and performance benchmarking in contributing towards
financial results is detailed. Finally, summary/conclusion and scope for future research are discussed.
A) General Benchmarking Role for CA: Bagchi (1996) argue that search for the best practices can go beyond direct
competitors to indirect ones (regardless of industry affiliations). Nevertheless, there are also some misconceptions about
benchmarking e.g. considering it merely a catching up process to produce a me- too product/process. One of the main reasons
Bowerman, Francis and Ball say that many of the gains from benchmarking were difficult to quantify. Some were able
to cite specific gains; for example, an internal benchmarking project helps to reduce staff absences by half among the
worst teams. The most commonly cited benefit are that benchmarking yields useful information, which prompted
further investigation which sometimes led to changes to processes or reduced costs. Generally participants felt that the
projects encouraged people to think about the way they did things and how they could be improved and often helped to
forge support networks with others doing a similar job (Bowerman et.al. 2002). Zairi and Whymark argue that
benchmarking (both internal and external) is an integral part of Total Quality Management (TQM). Consequently the
concept is embedded in excellence models e.g. EFQM Excellence Model, MBNQA etc They present some examples
where TQM (embedding benchmarking) generate these impressing results: Motorolla achieves cumulative
manufacturing cost savings of $5.5 billion from 1988-second quarter of 1994; Solectron Corp. increases its sales from
$130 million to $1.455 billion and net profits from $4 million to $56 million. Its stock price has achieved an average
growth of 82 %; Federal Express gets revenue of $1 billion in first ten years of TQM application; Ames Rubber Corp.
achieves a 99.9 % quality and on time delivery status through sharing its TQM techniques with its suppliers.
Since the function of benchmarking is to gather/utilize secondary information in a systematic way to excel, so “economy of
scope of best practices” is its major contribution in improving value added activities. This, in turn, contributes towards
business growth either internally/externally or both. However, in this research, its role in CA has been presented in four
perspectives which are described in the later. In each perspective a model is given with some specified measures. These
measures are generally accepted measures across the industries. As Rothenberg et.al. (2005) argue that there should be an
enterprise consensus about the measures because different metrics tell different about how the organisation is doing. For
example, it is assumed that service quality and customer satisfaction will always lead to better financial performance (Rust et
al., 1995). Sharief (2002) & Maire (2002) go ahead and argues about a flexible benchmarking management reporting
method in an industry with properties of a "score card' of strategic and operational factors, that could be cross industrially
applicable. It means, choice of right measures also significantly depends upon the strategic direction of an organisation. Too,
Pursglove et.al (2007) say that measuring performance in a changing business environment requires that measurement
systems must be relevant and appropriate for the environment and the strategies of the organisation. They also say that
managers’ perceptions of the success and failure of performance measurement initiatives were related to: the purpose of the
initiative, and; the structure and culture of the organisation. Moreover, Parken (2005) argues that measures should be selected
by keeping in view the internal and external stakeholders’ interests. Besides selecting right measures, “aggregation” is
another topic of concern in segregating performance indicators under different dimensions (Parketn 2001). There are several
ways of organizing the measures e.g. on the basis of efficiency (output per unit input), life cycle, regulatory etc (Rothenberg
et.al. 2005) e.g. Mukherjee et.al. (2002) say, “Data envelopment analysis (DEA) is a mathematical approach to handle
situations with multiple inputs and multiple outputs and has been a proven way to measure bank performance”. In this
research the aggregation has been made in four perspectives. The choice of these perspectives is backed by vast literature
1) Benchmarking & Excellence models for CA: Zairi et.al (1995) argue that importance of benchmarking has been
explicitly acknowledged in excellence awards e.g. Malcolm Baldridge National Quality Award (MBNQA) criteria, EFQM
Excellence Model ®. However this research has only discussed the case of EFQM Excellence Model ®. This model
encourages the applicants for the European Quality Award (EQA) to justify the role of continuous learning and improvement
in the organisation. This justification is the adoption of an approach of management by processes and facts; which in turn is
one of the basic building blocks of the model. The most critical aspect of continuously improving the processes is adoption of
benchmarking activity as EFQM Excellence Model ® allocates specific percentage of points to benchmarking activity for
winning the award. Maire (2002) says “it is obvious that the value assigned to the weight of an element has a determining
influence on the result of the aggregation”. Too, Eskildsen et al (2001) argue that the EFQM Excellence Model® allocates
points to both enablers and results. This allocation of points helps in focusing on both sides of the business i.e. what business
does and what it achieves. More over the organisatons can recognise and acknowledge the relationship between the enabler
and the result criteria in the EFQM excellence model. The understanding of this relationship facilitates the business in
identifying and picking the related superior practices. Theses practices can be either from inside or outside of the business.
These best practices are then adapted to add value in the value chain of the business. And this addition in the value chain
ultimately leverages CA over competitors. Moreover Motwani (2001) argues about the centrality of continuous improvement
in the quality frameworks by declaring it as a main driver for continuous improvement. Figure (1) summarizes the impact of
benchmarking on CA creation through EFQM Excellence Model ® usage:
Systematic Approach Framework for Goal
to organisation setting
The above model can be functional by adopting these generally acceptable measures: 1) Systematic Approach to
organisation: # of enablers, # of results, results enabler ratio, core processes to enablers ratio, support processes to enablers
ratio; 2) Goal Setting Framework: # of low performing processes identified/self assessment, # of performance benchmarking
studies/quarter; 3) Self Assessment: # of self assessment exercises/quarter, # of processes benchmarked, low performing
processes identified/assessment, high performing processes identified/assessment.
2) Benchmarking & knowledge sharing (KS) for CA: A knowledge-based perspective of the firm has recently emerged
in strategic management literature. Innovation needs to be managed (Massa et.al. 2004); it doesn’t occur accidentally from
contingencies. Benchmarking is a methodology to bring innovation in an organisation by knowledge sharing. It is a
pursuit by an organisation to enhance performance by learning from other’s successful practices.” “It’s a continuous
activity; key internal processes are adjusted, performance is monitored, new comparisons are made with the current
The above model helps an organisation in identifying the KPIs by focusing on two domains of internal and external
growth of an organisation. Too, its holistic nature helps in integrating in a range of other business operations for
excellence. These measures can be incorporated generically/cross industrially to make the model operational: 1)
Culture/Shared Values: Documented code of conduct availability/employee, cross departmental cooperation index 2)
Self Assessment: see benchmarking role in excellence model; 3) Leadership Style/Empowerment/Communication:
employee involvement index, follow up suggestion ration, opinion surveys; 4) Transfer of Technology: Training
offered per appraisal, % of time allocated for inventing new things, Time allocated to develop/adopt next generation; 5)
Competitive Response/Strategic Grouping: Stakeholders perception survey, Senior management/month, # of
performance benchmarking/quarter; 6) SCM/Alliances: # of support outsourced processes, Core/support processes
ratio, # of suppliers, # of customers, customers supplier ratio etc.).
3) Benchmarking & Appraisal for CA: “If the management of enterprises could conduct their own measurement or
Internal Appraisal
Distinct Competencies
Internal
Benchmarking
Need For
Improvement / CA Aligned to produce CA
For AGILITY
Change
External
Benchmarking
Figure 3: shows that internal benchmarking is leading to internal appraisal. The outcome of the internal appraisal is an
identification of distinct competencies (DC) of a firm. DCs are those competencies in which the firm does better than
the others. As internal appraisal reveals resources of firm, that can be transformed in to capabilities (Jay Barney 1991).
More over it also allows the firm to look for the opportunities for the internal growth. This opportunity could be in the
form of synergizing the output of two processes to reduce cost. Porter five forces is one of the classical models in favor
of internal appraisal or benchmarking (Freytag 2001). On the other hand external benchmarking facilitates external
appraisal. Zairi et. al. (1995) says, “Benchmarking adds an external perspective to a total quality organisation. It
ensures that the wheel of continuous improvement is turning in the right direction, that is, towards achieving higher
standards of competitiveness. Many companies have adopted benchmarking for this very reason, e.g. Alcoa, AT&T,
Kodak, etc.” The result of it is the identification of key success factors (KSF). This external scanning helps the business
in finding out the opportunities of external growth. That could be in the form of seeking mergers, strategic alliances etc.
CA is basically the outcome of blending DC and KSF; which in turn are the outputs of appraisal process. As Powell
(1992) argues about the alignment between internal and the external environment of the organisation for producing the
competitive advantage.
The above model can be operational at ground level by adopting these measures: 1) External Appraisal: # of strategic
groups in industry, # of direct competitors, # of indirect competitors, Common potential success factors/strategic group;
Uncommon potential success factors/strategic group, 2) Internal Appraisal: # of total resources/Co, Type of resources
consumed per core process, Type of resources consumed per support processes, resources consumed/total # of core
processes, resources consumed/total # of support processes etc.).
B) Process Benchmarking vs. Performance Benchmarking: Anand et.al. (2008) argue that there is a lack of
consensus on benchmarking categories because, there are many bases of its categorisation e.g. Freytag et.al. (2001) mention
A) Internal Variables: Following dimensions are covered in this context (adapted from the work of Rolstadas 1998):
1) Operational Efficiency: “Performance of a bank is generally conceptualized as the extent to which the bank is able to
utilize its resources to generate business transactions, and is measured by their ratio, which we call efficiency. (Mukherjee
et.al. 2002).” Process benchmarking seeks to identify the most effective operating practices from many companies that
perform similar work functions. Therefore, process benchmarking could be considered as an indirect measure of operational
efficiency or the ability of a firm to carry out its operations in the best possible way for a given set of resource constraints
(Delpachitra et.al, 2002).
2) Innovation: Commitment to process innovation has a significant relationship with product success (Drew, 1995). “While
process benchmarking is strategically useful in all types of markets and industries, it is especially beneficial to firms competing
against strong rivals in turbulent markets. In such markets, innovative research designs such as process benchmarking
partnerships are needed to generate the detailed competitive comparison information that firm survival requires (Ralston,
2001)”. Too, Rolstadas (1998) says that process oriented thinking is one of the major trends towards CA.
3) Key Processes: Modern benchmarking involves the comparison of performance between organisations but the primary
objective of benchmarking is to increase the probability of attaining CA. In comparing the performance of one institution with
other institutions, all benchmarking studies aim to define and examine the key internal activities within critical business
processes, those offering the potential to improve competitiveness and overall business performance (Delpachitra, 2002).
4) Fundamental Understanding of “As Is” of business system: “Benchmarking, when carried for maximum benefit, is a
process-driven activity which requires an organisation to have a fundamental understanding of its “as is” process and the
superior performing benchmark process. This means in terms of both its outputs and practices. (Zairi et.al. 1995).” This
shows that process benchmarking contributes in much detail in this perspective.
5) Research Tool: The information sought in benchmarking normally consists of two parts: quantitative and qualitative
performance data (Andersen, et.al. 1999). Ralston, Wright and Kumar say that process benchmarking partnerships are
emerging as a research tool to help small firms to build a competitive advantage against larger rivals. Managers are now
beginning to appreciate the need to benchmark the strategically relevant processes in their value chain. Process benchmarking
begins with exploratory qualitative research to determine the core processes to be benchmarked. Quantitative research then
follows, using an audit methodology and involving the collection of the costs of core processes from benchmark partners on a
standardised computer spreadsheet. Strategic planning decisions can then be made about how to generate greater customer
value by eliminating excess capacity, outsourcing and modifying existing processes (Ralston et.al. 2001). Too, Hanman
projects the dangerous outcome to form conclusions/develop improvement strategies on quantitative comparisons without
understanding processes and the definitions behind these performance comparisons (Hanman 1997). Further, Jones &
B) External Variables: This area covers variables outside an organisation (predominantly). Following aspects are presented
in this dimension:
1) Industry Trend: Wassen (2007) argues that performance benchmarking better contributes for understanding industry
trends/strategy dimensions e.g. Using Audit Commission performance indicators, CIPFA comparative statistics and
monitoring information etc (Bowerman et.al. 2002).
2) Business Flux/Impact on BPR: Delpachitra et.al. (2002) is an advocate of connecting BPR with benchmarking. Grant says
that when the external environment is in a state of flux, the firm's own resources and capabilities are a more durable basis on
which to define strategy (Grant, 1991). Resources are inputs for processes, so the role of process benchmarking can be
exploited in this perspective. Ralston, Kumar & Wright say that process benchmarking allows the firm to improve and/or re-
engineer its work processes and functions to build a competitive advantage that is more sustainable in today's fluctuating
external environment. It is therefore, likely that process benchmarking will grow in popularity as an essential market research
tool for strategic planning for all firms. (Ralston et.al. 2001).
3) New Product Success: This variable is related to the above mentioned second point. Drew says that commitment to process
innovation and administrative innovation seems to have significant relationship with new product success (Drew1995).
4) Value Chain: Porter argued that firms should regularly benchmark each significant activity. Activities in which the firm
performs better or at lower cost can be used as the basis for building competitive advantage (Anderson, 1999)”.
5) Centralisation vs, Decentralisation/Outsourcing: Process benchmarking also helps FIs to identify the areas where excess
capacity is present and to take appropriate measures to manage it. Such activities will certainly improve profitability in lending
Following Table 1 summarizes the above discussion of comparison between process and performance benchmarking:
Conclusion & Extension of Future Work: The aims of the research are to clarify the role of generic
benchmarking for CA and to differentiate contribution of process & performance benchmarking for financial results.
Two main assumptions of the study are; 1) benchmarking as an integral part of TQM, 2) CA incorporates financial
excellence. Three dimensions are explored where it helps in developing CA in an organisation i.e. by knowledge sharing;
facilitating the appraisal process; and encouraging organisations to implement quality frameworks. The common objective of
the dimensions is to facilitate a learning culture. One major outcome of benchmarking is “agility” in terms of lean and
flexible production, which drives the organisations to system improvement by maintaining/updating CA.
Process benchmarking has found to be more contributory towards CA as compared to performance one along the
perspectives of internal and external variables. However the connection between them can better be explored by accepting; 1)
Process benchmarking is evolved from performance one, 2) Performance and process benchmarking are instead two phases
of benchmarking for CA.
The research can be practically applied in several prospects e.g. 1) Models presented are cross industrially applicable because
the dimensions are generic and acceptable; 2) Company’s benchmarking strategy can be aligned with its business strategy for
bringing organisational cohesiveness; 3) Customized scorecard with relative weightage of each dimension (depending upon
the company) can be derived from the models to monitor benchmarking strategy performance in an organisation for
excellence (Moesen et.al. 2007); 4) A customer oriented organisation can be developed by keeping in view the importance
of centrality of customers due to benchmarking (Zairi 1995); 5) Models can help organisations in taking informed decision
for evaluating benchmarking investments in a business due to their holistic nature.
Primary limitation of the study is that it draws its data cross industrially. Further research can be done to conduct an industry
specific (e.g. public vs. private, large vs. small etc) research about benchmarking role for CA e.g. Ralston et.al. (2001) implies
that benchmarking has been ignored in literature in small financial firms; Bowerman, Francis, Ball and Fry argue about the
different motives in public sector for benchmarking for instance fiscal restraint etc. This shows that different drivers/targets
may require different methodology for deploying benchmarking strategies in public sector. They further imply that public
sector tend to follow compulsory approach to benchmarking as compared to private sector which goes for voluntary
approach. This difference in context/culture may cause different outcomes. More over they argue that competition is not the
only driving force for benchmarking; it can be applied to the services/products which are in continuous need. Too, further
research is needed to uncover different types of benchmarking for different levels (Bowerman et.al. 2002).
“We shall not cease from exploration and the end of all our exploring will be to arrive where we started and
know the place for the first time.” (TS Eliot, Four Quartets)
References:
Akhlaghi F, (1997), How to Approach Process Benchmarking in Facilities Management? Facilities, Vol. 15, No. 4.
Anand G, and Kodali R, (2008), Benchmarking the benchmarking models, Benchmarking-An International Journal, Vol. 15, No. 3
Anderson B, Fagerhaung T, Randmal S, Schuldmaier J, Prenninger J, (1999), Benchmarking Supply Chain Management-Finding Best Practices, Journal of
Business & Industrial Marketing, Vol. 14, No. 5/6.
Bagchi P (1996) Role of benchmarking as a competitive strategy: the logistics experience, International Journal of Physical Distribution & Logistics
Management, Vol. 26 No. 2, 1996, pp. 4-22.
Bagchi P (1997), Logistics Information Management Volume 10 · Number 1 · 1997 · pp. 28–39
Barney J (1986), Organisational culture: can it be a source of sustained competitive advantage?, The academy of Management Review, Vol. 11, No. 3
Barney J (1991), Firm resources and sustained competitive advantage, Journal of Management, Vol. 17, No. 1, pp 99-120.
Basnet C, Corner J, Wisner J, Ten K, (2003), Benchmarking Supply Chain Management Practice in New Zealand, Supply Chain Management-An International