Hemant Gaule IIM, Ahmedabad

Benchmarking is the process of comparing performance or functioning of specific processes or methods to another that is considered to be an industry standard or best practice. Bogan and English, authors of Benchmarking for Best Practices, define benchmarking as an ongoing outreach activity; the goal of the outreach is identification of best operating practices that, when implemented, produce superior performance. The outcome of benchmarking is expected to be lessons learned by the organization to apply best practices in their functions, keeping their own objectives, processes and business models in view. Through benchmarking, organizations assess various characteristics of their processes vis-àvis the best practice, usually within a peer group described for the points of comparison. This then allows organizations to develop plans on how to make improvements or adopt best practice, usually with the aim of increasing some aspect of performance. Benchmarking is a singular event, but the outcome of benchmarking is a continuous process in which organizations continually seek to challenge their practices. Types of Benchmarking Process benchmarking Financial benchmarking Performance benchmarking Product benchmarking Investigating business processes with a goal of identifying and observing the best practice. Performance and comparison of financial analyses examine the overall competitiveness Assess their competitive position by comparing products and services  Designing new products or upgrades to current ones  Can sometimes involve reverse engineering which is taking apart competitors products to find strengths and weaknesses Strategic benchmarking Functional benchmarking Observing how others compete Focus benchmarking on a single function in order to improve the operation of that particular function

Process of Benchmarking
1. Identification of problem areas. Before comparing an organization with others it is important to know your own organization's function and processes, and where the problem

Hemant Gaule IIM, Ahmedabad
lays. This not only gives a direction to the process, but also provides a point against which improvement effort can be measured. A range of research techniques are used for this. 2. Identification of other industries with similar processes. This provides an base set of organizations to get a generic comparison. 3. Identification of leaders in these areas. This provides a comparison basis with the best practices, and the changes that led to the most efficient processes. 4. Reviewing companies for measures and practices. Specific business processes of companies are reviewed via surveys to identify possible alternatives. 5. Information Exchange. After the identification of leading edge practices, companies can exchange mutually beneficial information.

6. Implementation. This involves fine-tuning the knowledge gained through benchmarking for the companies specific process

Out of the several methods prevalent for performance comparison and betterment in organizations, benchmarking (performance benchmarking in particular) is becoming increasingly popular. Several major things must be kept in view, however, while undertaking this process. Confidentiality of the information exchanged through benchmarking must be maintained to the level expected by the best practice organization. It may often be difficult for an organization implement the best practice, at all or with the same degree of effectiveness, hence, limitations of the organizations must be understood prior to the initiation of this process. With the important issues kept in mind, the practice of benchmarking can be an effective tool in the success of an organization.

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