Topic Gateway Series


Topic Gateway Series No. 11

1 Prepared by Liz Murby and Technical Information Service Revised November 2008

Topic Gateways are available electronically to CIMA Members only in the CPD Centre on the CIMA website. along with a number of electronic resources. CIMA members and students should sign into My CIMA to access these services and resources. +44 (0)20 8849 2468 E. as defined in the CIMA Official Terminology 2005 edition. Our information specialists and accounting specialists work closely together to identify or create authoritative resources to help members resolve their work related information needs. +44 (0)20 8849 2259 F.Topic Gateway Series Benchmarking About Topic Gateways Topic Gateways are intended as a refresher or introduction to topics of interest to CIMA members. About the Technical Information Service CIMA supports its members and students with its Technical Information Service (TIS) for their work and CPD www. The Chartered Institute of Management Accountants 26 Chapter Street London SW1P 4NP United Kingdom T. They include a basic definition. our accounting specialists can help CIMA members and students with the interpretation of guidance on financial 2 . financial management and performance management.cimaglobal. a brief overview and a fuller explanation of practical application. tis@cimaglobal. Additionally. Finally they signpost some further resources for detailed understanding and research.

’ 'Internal benchmarking: comparing one operating unit or function with another within the same industry. regardless of their industry.elsevier. through data gathering. of target and comparators.’ CIMA Official Terminology 2005 Additional definitions include: 'A systematic approach to business improvement where best practice is sought and implemented to improve a process beyond the benchmark performance.’ Department of Trade and Industry 'Benchmarking is simply about making comparisons with others and then learning the lessons that those comparisons throw up. Adoption of identified best practices should improve performance.’ (Also known as operational benchmarking or generic benchmarking).’ 'Strategic benchmarking: type of competitive benchmarking aimed at strategic action and organisational change.’ 'Functional benchmarking: comparing internal functions with those of the best external practitioners. that permits relative levels of performance (and particularly areas of underperformance) to be identified.Topic Gateway Series Benchmarking Benchmarking Definition Benchmarking is defined as: 'Establishment.’ The European Benchmarking Code of Conduct Context In the current syllabus. 'Competitive benchmarking: in which information is gathered about direct competitors through techniques such as reverse engineering. CIMA students will learn and may be examined on this topic in paper P1 ‘Management Accounting and Performance Evaluation’.com [Accessed 7 November 2008] 3 . http://books. Study systems for these papers are available from CIMA Publishing.

1999 Notable private sector exponents include Britannia Airways. consult. if appropriate. which introduced benchmarking in 1983. The launch of ‘Best Value’ in the U.K. Southwest Airlines and the International Air Transport Association. Holloway. Its development is most closely associated with Xerox. 1999 UK organisations % claiming to be benchmarking Government Education Health Manufacturing and construction Transport Financial services Services and retailing Other Total across all sectors 58 62 69 50 43 33 36 49 48 Source: Holloway et al. 1986 A survey by the Open University Business School of more than 700 organisations in the UK found that 48% had undertaken benchmarking activities. 4 . compete in aspects of service provision. Local Authorities and other bodies were required to challenge. in the 1990s prompted a sharp rise in benchmarking activity in public sector organisations.Topic Gateway Series Benchmarking Overview History and overview Benchmarking has been around for some time. compare and. Jacobsen and Hillkirk.

industry or operational logic. absenteeism. it always requires the involvement of more than one party. inventory days. a degree of trust regarding information disclosure is necessary if benchmarking exercises are to be valuable. In the absence of such legislation. Benchmarking exercises may be classified as either results based or process based. benchmarking is often used in the public sector for issues of accountability. size. non-commercial organisations may find benchmarking programmes a useful catalyst for performance improvement. defect rates. Results benchmarking involves comparison of reported/collected organisation information elements: e.g. For public sector organisations operating under best value. It is not necessary for benchmarking partners to share similar organisational characteristics in age. 5 . debtors/receivables. Each must be willing to identify and share the relevant process based and performance information. or a part of it. However. Equally.Topic Gateway Series Benchmarking Benchmarking in practice Why benchmark? Motivation to benchmark arises from a need to satisfy one or more of the following objectives: • • • • • to show that performance targets can be achieved to accelerate and manage change to enable process improvement to maintain focus on the external environment to generate an understanding of world class performance. or partner. overhead costs or other metric. Scope Benchmarking may involve either the whole organisation. Formal benchmarking programmes against other organisations provide a means of either validating current performance levels or identifying process improvements. By definition. sales levels. some degree of comparison of service delivery is required by current legislation.

Clarification of strategic impact of benchmarked process 3. Maintain stimulus for continuous improvement. benchmarking partners can learn from the best in class and adapt their own internal processes to generate improved results. • 6 . What it involves Benchmarking programmes comprise four steps: 1. employees’ skills/knowledge. Identification and implementation of process improvements. organisational structure/culture) a tendency to focus on what is currently being done. rather than considering potential future practices/innovative breakthroughs. or strategic changes in light of 2 (above) 4. Identification and/or calibration of performance gap 2. Through dissection and analysis of process elements.Topic Gateway Series Benchmarking Process benchmarking refers to the practice of looking ‘behind’ reported performance results (metrics) and analysing the different internal processes which generate these. Problems of benchmarking Problems of implementing benchmarking programmes and obstacles to deriving maximum benefit include: • • • • • • deciding which activities/processes to benchmark identifying ‘best in class’ or other suitable benchmarking partners overcoming internal staff resistance resource constraints overcoming confidentiality issues from either benchmarking partner recognising and allowing for performance differences arising from non-transferable process input elements (for example.

Xerox. describing and interpreting others’ processes. There is no reason why organisations will not continue to derive benefit from its adoption for a very long time. technology and communications. J. G. 2nd ed. • • Benchmarking: the future The practice can arguably only benefit from increased advances in information.A. New York: Macmillan 7 . Flying off course: the economics of international airlines.g. but might be considered at the project outset since it can reduce problems later on undertaking generic benchmarking with non-competitor organisations found through informal networking concentrating on observing. London: Kogan Page Holloway. (1996). Business process benchmarking: finding and implementing best practices. staff and managers directly involved in the process) for involvement in benchmarking teams ensuring effective co-ordination and communication of information provided by benchmarking partners providing reciprocal information to benchmarking partners – a formal agreement regarding who will provide what information to whom and by when may not be essential. R.Topic Gateway Series Benchmarking Successful benchmarking Measures taken by ‘successful’ benchmarking organisations in managing benchmarking processes include: • • • • • appointing a knowledgeable and enthusiastic benchmarking ‘champion’ allowing sufficient authority and resources selecting the ‘right’ people (e. J. How to improve performance through benchmarking. (1992). et al. References Camp.C. London: CIMA Jacobsen. American Samurai.G. J. and Hillkirk. (1986). R. London: Routledge Fisher. (1999). (1995). Identifying best practice in benchmarking. Wisconsin: ASQC Quality Press Doganis.

Available from: www.cimaglobal. T. Power tool. T. [Accessed 7 November 2008]. Win a red letter day with financial [Accessed 7 November 2008]. Benchmarking research shows large gaps in cost and productivity. CIMA Insight. Research reveals methods needed for good benchmarking. September 2006.cimaglobal. Available from: www.cimaglobal. Financial Management. Financial fitness: pepping up your payroll. Available from: www. Higgins. pp 34-35 Available from: www.cimaglobal. Lisa. Marr. August 2005. Available from: www. CIMA Insight.cimaglobal. [Accessed 7 November 2008]. Finance benchmarking research shows major cost gaps. L. CIMA Insight. Higgins. June 2006. Available from: www. [Accessed 7 November 2008] Cooper. June [Accessed 7 November 2008]. K.cimaglobal. February 2002. T. Financial fitness: upping the performance of your finance function. October 2006. Higgins. Higgins.cimaglobal. CIMA Insight. CIMA Insight.cimaglobal. September 2005.cimaglobal. Financial fitness: upping the performance of your finance function. CIMA Insight. Cooper.cimaglobal. Cooper. Financial fitness: benchmark the total cost of your function. Available from: www. April 2004. Available from: www.Topic Gateway Series Benchmarking Further information CIMA articles Cleland. [Accessed 7 November 2008].com/insight [Accessed 7 November 2008]. Available from: www. 8 .com/insight [Accessed 7 November 2008]. L. Available from: [Accessed 7 November 2008].com/insight [Accessed 7 November 2008]. December 2006. CIMA Insight. CIMA Insight. November 2006. Benchmark your closing time with financial fitness. CIMA Insight.

July 2008. Issue 3. October 2006. A. Benchmarking performance.cimaglobal. Issue 6. April 2008.Topic Gateway Series Benchmarking Articles Full text from Business Source Corporate available from: www. F. Ending the CEO succession crisis. F. G. September 2007. Volume 23. and Levy. December 2007. pp 76-77 Francis. M. 21 Prahalad. Issue 10. Harvard Business Review. Credit Management. pp 68-74 Tucker. Harvard Business Review. Seymour. L. Volume 101. pp 63-64 Newman. February 2005. C. Gaither and Zivan. Measuring service line success: the new model for benchmarking. Volume 64. Harvard Business Review. Volume 65. Seymour. Issue 11.. Volume 83. pp 141-161 Solnik. and Hamel. pp 22-29 Higgins.K. Harvard Business Review. F and A benchmarking. Internal Auditor. p. Volume 12. Treasury benchmarking: what’s getting in the way. August 2008. Ross. Benchmarking reveals industry best practices. pp 8-10 Tucker. Volume 62. pp 72-81 Clemmon. Issue 7. November 2006. Volume 83. A Xerox cost center imitates a profit center. Volume 38. Benchmarking: get the gain without the [Accessed 7 November 2008] Batchelor. Supply Chain Management Review. How to measure yourself against the best. Financial Executive. Advisor Today. R. J. Issue 3. C.. F. R. Issue 1. Issue 44. Issue 2. Z. Volume 65. pp 70-72 Charan. July 2005. Franchising World. M. Metrics that matter: benchmarking. R. and Camp. January/February 1987. Volume 108. Issue 10. November/December 2006. Long Island Business News. Issue 7/8. 05/09/2008. T. Business Credit. pp 37-40 Bearden. pp 38-39 9 . Issue 7. Strategic intent. Volume 55. Healthcare Financial Management. Practice benchmarks for suitability. May/June 1985. pp 32A-33A Tesch. K. pp 168-174 DSO Benchmarking. M. D.

Volume 62. 2nd ed. J. Authorities on benchmarking: the state of benchmarking in UK Local Government. international configurations and strategic implications: the case of retailing. N. No. Kidlington: Elsevier Science. P. H. S. (2006). Globalisation. M. Long Range Planning. NJ: Wiley Zairi. and Rosenthal. Benchmarking for best practice. Issue 8. et al. Volume 32. 3. June 2001. pp 293-310 Leknes.Topic Gateway Series Benchmarking Supply Chain Benchmarking. Healthcare Financial Management. Managing the process-centred enterprise. London: CIMA Publishing Ghobadian.and customer-centred approach. Implementing the catchball process. (2001). Long Range Planning. San Francisco: Jossey-Bass Lennon. H. August 2008. A. (1998). No. London: CIMA Publishing Keehley. Oxford: Butterworth Heinemann 10 . Long Range Planning. and Carr. and Abercombie. pp 29-29 Tennant. P. No. Volume 34. [Accessed 7 November 2008] Hatten. 124 Articles Abstract only from Business Source Corporate available from: www. K. pp 287-308 Books Bowerman. Roberts. 1. Effective management of benchmarking projects. (2005). Strategic benchmarking reloaded with Six Sigma: improve your company’s performance with global best practice. (2001). and Kanri. Oxford: Butterworth Heinemann Zairi. (2007).W. 3. p. Volume 37. New York. Benchmarking in the public and non profit sectors: best practice for achieving performance breakthroughs. G.H. R. Hoboken. M. Benchmarking national tourism organisations and agencies: understanding best performance. (Advances in Tourism Research) Peters. February 2004. Benchmarking: concept and practice with particular reference to the finance function. London: McGraw-Hill Watson. (2008).cimaglobal. M. June 1999. C. (1996). Maintenance benchmarking and best practices: a profit.

Available from: http://digbig. The Best Practice Club is a UK based organisation.the Benchmarking Exchange The Benchmarking Exchange is the electronic benchmarking and bench mark [Accessed 7 November 2008] You may be able to obtain further information by joining a benchmarking club. Available from: [Accessed 7 November 2008] Global Benchmarking Council A US based research [Accessed 7 November 2008] The Benchmarking Network International resource for business process research and metrics.cimamastercourses. Further details can be found on their website. To book please go to Find and key in the course code PMCI. Available from: http://digbig.benchmarkingnetwork. Available from: www. Websites About Business and Finance Management Website with a benchmarking page. Available from: www.Topic Gateway Series Benchmarking CIMA Mastercourses Performance measurement and benchmarking: principles and [Accessed 7 November 2008] 11 .com/4xtxe [Accessed 7 November 2008] Benchnet .benchnet.

recorded or otherwise. stored in a retrieval system.Topic Gateway Series Benchmarking Copyright ©CIMA 2006 First published in 2006 by: The Chartered Institute of Management Accountants 26 Chapter Street London SW1P 4NP United Kingdom Printed in Great Britain No responsibility for loss occasioned to any person acting or refraining from action as a result of any material in this publication can be accepted by the authors or the publishers. All rights reserved. No part of this publication may be reproduced. photocopying. mechanical. in any form or by any means method or . without the prior permission of the publishers. electronic (whether now or hereafter known or developed). 12 Permission requests should be submitted to CIMA at tis@cimaglobal. or transmitted.

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