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Introduction:
Measuring a performance against a well recognized business eminence or
quality framework could deliver a range of advantages for firms. It is vital
for a firm to know its own standard and compare it with others in today's
aggressive corporate environment. Benchmarking is a way to evaluate a
firms performance with those of other firms. It helps in finding the best
practice and to take needful working to improve the firms own
performance so that it meets or exceeds its competitors performance. It
is basically a process for reengineering or quality improvement
techniques, and focuses mainly on the ongoing quality management
efforts of SBUs which has resulted in the inception of a conceptual
framework for assessing users needs identified in market opportunity
analysis, the users ombudsman, a new service concept, relationship
marketing and a citizen charter.
Benchmarking can be considered as a reference point for measuring and
when applied to work processes can yield superior results.

As per the American productivity and quality centre (APQC),

Benchmarking is the process of identifying, understanding and adapting
outstanding practices and processes from organization anywhere in the
world by a firm to improve its performancei. Its the best practices which
a company should choose as benchmark as the standards to exercise
operational control. Hence, the performance of the firm can be evaluated
on a continuous basis till it reaches the best practice level by using
benchmarking. However, benchmarking offers organisations a tangible
method to evaluate performance (Kazmi, 2007). In order to excel, a firm
shall have to exceed the benchmarks.

What is to be benchmarked?

Benchmarks are usually set with respect to the critical areas of

operational and strategic significance that influence a firms performance.
These can be any well-known problem areas in a firm that can be clearly
defined or processes where improvements leads to maximum benefits (as
per the Paretos 80/20 rule). Benchmarking can be carried out with respect
to activities such as; employee training, strategic planning, internal
communication systems, manufacturing processes , accounting systems,
reward systems, strategic HRM, decision processes, distribution logistics,
customer service, etc.

Benchmarking against whom?

The competitors are the reference points for benchmarking. But till what
extent these competitors are willing to share the informations about their
best practices is also a factor to be taken into consideration.
Benchmarking can also be internal to the organization. Best practices in
one division could form the basis for benchmarking other similar activities
in other divisions. For example, Rentokil benchmarks its branches against
each other, identifies best practices and spreads them from across
branches through training or by transferring its managers to ensure a
consistent quality of service to its 1.5 million customers worldwide. At
Shell, internal best practices are identified and shared through its units
worldwideii.
World-class performers in the industry might share information about their
best practices. Sometimes, benchmarking against the best companies
may not be credible as they may be swamped with similar requests from a
number of other companies and hence unable to help all of them.
Companies in the subsequent positions in the industry can also provide a
valuable benchmarking experience to generate growth in a firms
activities/processes. Since some approaches could be similar across
different industries, the best companies in other industries can also meet
the purpose of benchmarking. This may serve to break the current
industry paradigms in search of new, world-class levels of performance.
For example, a medical centre might benchmark against a hotel industry.

Evolution of Benchmarking

Author Definition
Camp 1989 The continuous process of measuring products,
services and practices against the toughest
competitors or those companies recognised as
industry leaders.
Geber 1990 A process of finding the world-class examples of a
product, service or operational system and then
adjusting own products, services or systems to meet
or beat those standards.
Codling 1992 An ongoing process of measuring and improving
products, services and practices against the best
Vaziri 1992 A continuous process comparing an organisations
performance against that of the best in the industry
considering critical consumer needs and determining
what should be improved
Watson 1993 The continuous input of new information to an
organisation
Evans 1993 Measuring own performance against best-in-class
organisations to determine how they achieve their
performance levels and use the knowledge to
improve own performance
Kleine 1994 An excellent tool to use in order to identify a
performance goal for improvement, identify partners
who have accomplished these goals, identify
applicable practices to incorporate into a redesign
effort
Cortada 1995 A method for finding how to improve processes
quickly by learning from others dealing with similar
issues
Cook 1995 A kind of performance improvement process by
 identifying, understanding and adopting outstanding
practices from within the same organisation or from
other businesses

Types of Benchmarkingiii

Internal Benchmarking: Comparison of similar functions in different

operating(business) units within the organization. Ex: Tata Steels Colliery
divisions benchmarked their maintenance practices against the
Maintenance division inside the Steel Works at Jamshedpur

External Benchmarking: Comparison of organizations functions and

key processes against external good practice of other organizations.

Performance or Competitive Benchmarking: Organizations use

performance measures to compare themselves against similar
organizations. Ex : FMCGs comparing with each other for Retention rates,
Market share, profits, costs.

Functional Benchmarking: Comparison of similar functions of an

organisation against external best in any industry. Ex: Hindustan Max
GB Ltd , a pharmaceutical company, benchmark their maintenance
function with that of Tata Steel

Generic Benchmarking: Differentiation of functions which are generic in

nature in any industry. Ex: Airlines benchmark their customers service
with 5 star hotels.

Strategic Benchmarking: Used where organizations want to improve

their overall performance by focusing on specific strategies or processes.
Ex: Benchmarking against those organizations which have won awards or
some other distinctions.

Process Benchmarking: Focus on specific operations(processes). Ex: In

hotels - Housekeeping, Customer Care

Methodology
Five phases of benchmarking iv

Planning: Identify the product, service or process to be

benchmarked
Analysis: Determine the gap between the firms current
performance and that of the firms benchmarked and
identify the causes of significant gaps.
Integration: Establish goals and obtain the support of managers
who must provide the resources for accomplishing
the goals
Action: Develop action plans, and team assignment, implement the
plans, monitor progress and recalibrate benchmark as
improvements are made.
Maturity: Leadership position attended, best practices fully
integrated into process.

Seven step benchmarking model

Schematic diagram of benchmarking process
Key drivers in making success of benchmarking

Identifying other companies which are role models for learning

Acquiring reliable and valid data from these companies about their best
practices and standards and how these are set in the critical areas of
ones concern
Determining current competitive gaps and understanding the strategic
and tactical reasons for the gaps.
Reengineering, improving, or innovating upon existing practices and
processes to achieve better standards in critical areas.
Set up an action plan to induct the identified betterments.
Motivating the employees for effective implementation of the process
of benchmarking

Advantages of benchmarking
Minimizes the costs and saves time to adapt the best practices of other
companies rather than re-invent them in-house.
Helps in implementation of upcoming changes and sophisticated
technological improvements, arising out of change across industries.
Bridges the competitive gaps in ones own concern from other
competing firms.
Initiates the formulation of strategic goals and objectives based on the
external models for improving activities and processes in the
organization.
Stimulates an organization to overcome its inertia and think differently
in the context of the brand-new approaches/models implemented
elsewhere.
Facilitates organizational learning and,
 Drags improvement in critical areas within the organization by adapting
best practices and processes.

Disadvantages of benchmarking
The most resistant criticism of Benchmarking comes from the idea of
copying others.
It
is

not a strategy nor is it intended to be a business philosophy. Therefore,

it is a time taking technique.
Benchmarking is not instant pudding. It will not improve performance
if proper infrastructure of Total Quality Management is not in place

Examples of benchmarkingv

Some examples of companies that stand out for their best practices are:
a) Microsoft creativity and innovation, entrepreneurship, globalization; b)
3M new product development, entrepreneurial spirit Motorola six sigma
quality culture, c) Mc Kinsey high level strategic consultancy services, d)
Compaq and Dell computers marketing and distribution system, e)
Johnson and Johnson ethics.

Xerox

The benchmarking initiatives was taken by Xerox, one of the world's

leading copier
companies, as a part of its 'Leadership through Quality' program during
the early 1980s.
"Benchmarking at Xerox is still very much a matter of competitive
advantage. It is used to keep Xerox's edge razor-sharp, to discover where
something is being done with less time, lower cost, fewer resources and
better technology."
- Warren Jeffries, a Customer Services Benchmarking Manager,
Xerox, in 1999.

The history of Xerox goes back to 1938, when Chester Carlson, a patent
attorney and part-time inventor, made the first ever xerographic image in
the United States. Carlson struggled for more than five years to sell the
invention, as many companies did not believe there was a market for it.
Finally, in 1944, the Battelle Memorial Institute in Columbus, Ohio,
contracted with Carlson to refine his new process, which he had named
'electrophotography.' Three years later, The Haloid Company, maker of the
photographic paper, approached Battelle and obtained a license to
develop and market a copying machine based on Carlson's technology.

In the early 1980s, Xerox found itself increasingly vulnerable to the

intense competition from both the US and Japanese competitors.
According to analysts, Xerox's management failed to give the company
strategic direction. Xerox also suffered from its highly centralized decision-
making processes. As a result of this, return on assets fell to less than 8%
and market share in copiers came down sharply from 86% in 1974 to just
17% in 1984. Between 1980 and 1984, Xerox's profits decreased from $
1.15 billion to $ 290 million.

The 'Leadership through Quality' program introduced by Kearns revitalized

the company. The program encouraged Xerox to find various ways to
reduce their manufacturing costs. Benchmarking against the Japanese
competitors, Xerox found out that it took twice as long as its Japanese
competitors to bring a product to market, five times the number of the
engineers, four times the number of design changes, and three times the
cost of the designs. The company also found that the Japanese could
produce, ship, and sell units for about the same amount that it cost Xerox
just to manufacture them. These critical processes were then analyzed to
identify and define the improvement opportunities. Xerox identified ten
key factors that were related to marketing. These were customer
marketing, customer engagement, order fulfilment, product maintenance,
billing and collection, financial management, asset management, business
management, human resource management and information technology.
These ten factors were further divided into 67 sub-processes. Each of
these sub-processes then became a target for improvement. For the
purpose of acquiring data from the related benchmarking companies,
Xerox subscribed to the management and technical databases, referred to
the magazines and trade journals, and also consulted professional
associations and consulting firms.
Having worked out the model it wanted to use, Xerox began to implement
competitive benchmarking. However, the company found that this type of
benchmarking to be inadequate as the very best practices, in some
processes or operations were not being practiced by copier firms.
The company then adopted functional benchmarking, which involved a
study of the best practices followed by a variety of companies regardless
of any specific industry. Xerox zeroed in on various best practices followed
by other companies to benchmark its processes. These included American
Express (for billing and collection), Cummins Engines and Ford (for factory
floor layout), Florida Power and Light (for quality improvement), Honda
(for supplier development), Toyota (for quality management), Hewlett-
Packard (for research and product development), Saturn (a division of
General Motors) and Fuji Xerox (for manufacturing operations) and DuPont
(for manufacturing safety).

Motorolavi

Motorolas journey to achieve Six Sigma performance began in 1986 when

an engineer named Bill Smith quietly set out to devise a methodology to
standardize the defect measurement and drive improvements in
manufacturing. Developing this new methodology was the first step on
their journey and gave them the tools to begin measuring and comparing
the quality improvement rates of their business groups. Six Sigma became
their performance metric and was reflective of a product or process that
had just 3.4 defects per million units or opportunities.
Motorola uses TQM techniques to be successful and improve employee
creativity within their organization. Some of these methods include
training and education techniques, participative management, employee
empowerment and risk taking and team collaboration. The innovation of
TQM technique is one of the most fundamental stand of Motorola Inc.
Motorola Corp. became one of the first companies to receive the
prestigious Malcolm Baldrige National Quality Award. The award strives to
identify those excellent firms that are worthy a role model for other
businesses.

Motorola Corp. saved $22 Billion from 1986 to 2009, reflecting hundreds of
individual successes in all Motorola business areas including:
Sales and Marketing
Product design
Manufacturing
Customer service
Transactional processes
Supply chain management

In order to achieve Six Sigma performance, two Six Sigma sub-

methodologies were developed i.e. DMAIC (Define, Measure, Analyze,
Improve, Control) and DMADV (Define, Measure, Analyze, Design, Verify)..

In 2003, Motorola took Six Sigma to a management system level and

rebranded their efforts as Digital Six Sigma. In this phase, they started
with a business-wide balanced scorecard and then determined the
activities required to achieve those specific goals. The term Digital was
incorporated to add the requirement that the solutions which were
implemented had to be controlled with a systematic or non-manual
control mechanism to ensure that the change was sustainable. The
program further evolved in 2005 when they added Lean concepts to the
traditional Six Sigma framework to identify redundancies and reduce
costs, cycle time. Their emphasis was on reducing waste and non-value
added activities was critical in addressing the continuing competitive
pressures and increasing our productivity.
Motorolas benchmarking programs also prompted its innovation effort
and internal research as it strived to become the industry leader. This led
to the development of cell phones in the 1980s, the beginning of the
cellular age.

One characteristic of the Motorola benchmarking model was its simplicity.

Compared to the 10-step Xerox model, the Motorola process only contains
five steps:

1. Decide the process for benchmarking.

2. Find the companies to benchmark.
3. Gather the data.
4. Analyze the data and translate results into action plans.
5. Calibrate the plans as needed and restart the process.

Motorola also used the concept of generic benchmarking by learning it

from Dominos Pizzas order and delivery process to reduce cycle time
between order receipt and product delivery.

Conclusion

Benchmarking provides with a good learning opportunity for those who

are involved in the process, in addition to stimulating their own creativity
and stretching their cognitive ability. The probability of bringing about
needful changes in the organization and the benefits of such change also
become evident. Seeing is believing as the saying goes, seeing the
feasibility of certain ideas, processes and activities and their successful
implementation by other companies, tends to bolster ones self-
confidence and the belief that what others can do, another can do even
better. It assists in having incremental growth internally and in getting
even with others. But to gain the competitive edge, a company has to
identify what it can do uniquely, how it can be a trendsetter and perhaps
even redefine or invent the rules of the game. Significant favourable
differences from competitors are the potential cornerstones of a firms
strategy.
Bibliography
i American productivity and quality centre (APQC), 1993

ii Benchmarking, Savanam Chandra Sekhar, African Journal of Business

Management Vol. 4(6), pp. 882-885, June 2010

iii Benchmarking, Savanam Chandra Sekhar, African Journal of Business

Management Vol. 4(6), pp. 882-885, June 2010

iv An overview of benchmarking process: a tool for continuous improvement

and competitive advantage, Dean Elmuti and Yunus Kathawala Lumpkin
College of Business and Applied Sciences, Eastern Illinois University,
Charleston, Illinois, USA

v Benchmarking, Savanam Chandra Sekhar, African Journal of Business

Management Vol. 4(6), pp. 882-885, June 2010

vi Six Sigma Process and its Impact on the Organizational Productivity, Masoud
Hekmatpanah, International Journal of Social, Behavioral, Educational,
Economic, Business and Industrial Engineering Vol:2, No:7, 2008