You are on page 1of 21


Benchmarking is the process of comparing one's business processes and performance metrics to industry bests and/or best practices from other industries. Dimensions typically measured are quality, time and cost. In the process of benchmarking, management identifies the best firms in their industry, or in another industry where similar processes exist, and compare the results and processes of those studied (the "targets") to one's own results and processes. In this way, they learn how well the targets perform and, more importantly, the business processes that explain why these firms are successful.

The term benchmarking was first used by cobblers to measure people's feet for shoes. They would place someone's foot on a "bench" and mark it out to make the pattern for the shoes. Benchmarking is used to measure performance using a specific indicator (cost per unit of measure, productivity per unit of measure, cycle time of x per unit of measure or defects per unit of measure) resulting in a metric of performance that is then compared to others.

Also referred to as "best practice benchmarking" or "process benchmarking", this process is used in management and particularly strategic management, in which organizations evaluate various aspects of their processes in relation to best practice companies' processes, usually within a peer group defined for the purposes of comparison. This then allows organizations to develop plans on how to make improvements or adapt specific best practices, usually with the aim of increasing some aspect of performance. Benchmarking may be a one-off event, but is often treated as a continuous process in which organizations continually seek to improve their practices.

[edit] Benefits and use

In 2008, a comprehensive survey [1] on benchmarking was commissioned by The Global Benchmarking Network, a network of benchmarking centers representing 22 countries. Over 450 organizations responded from over 40 countries. The results showed that:

1. Mission and Vision Statements and Customer (Client) Surveys are the most used (by 77% of organizations of 20 improvement tools, followed by SWOT analysis(72%), and Informal Benchmarking (68%). Performance Benchmarking was used by 49% and Best Practice Benchmarking by 39%. 2. The tools that are likely to increase in popularity the most over the next three years are Performance Benchmarking, Informal Benchmarking, SWOT, and Best Practice Benchmarking. Over 60% of organizations that are not currently using these tools indicated they are likely to use them in the next three years.

[edit] Collaborative benchmarking

Benchmarking, originally described as a formal process by Rank Xerox, is usually carried out by individual companies. Sometimes it may be carried out collaboratively by groups of companies (e.g. subsidiaries of a multinational in different countries). One example is that of the Dutch municipally-owned water supply companies, which have carried out a voluntary collaborative benchmarking process since 1997 through their industry association. Another example is the UK construction industry which has carried out benchmarking since the late 1990s again through its industry association and with financial support from the UK Government. [edit] Procedure

There is no single benchmarking process that has been universally adopted. The wide appeal and acceptance of benchmarking has led to the emergence of various benchmarking methodologies. One seminal book on benchmarking is Boxwell's Benchmarking for Competitive Advantage (1994).[2] The first book on benchmarking, written and published by Kaiser Associates,[3] is a practical guide and offers a 7-step approach. Robert Camp (who wrote one of the earliest books on benchmarking in 1989)[4] developed a 12-stage approach to benchmarking.

The 12 stage methodology consists of:

1. Select subject 2. Define the process 3. Identify potential partners 4. Identify data sources 5. Collect data and select partners 6. Determine the gap 7. Establish process differences 8. Target future performance 9. Communicate 10. Adjust goal 11. Implement 12. Review and recalibrate

The following is an example of a typical benchmarking methodology:

1. Identify your problem areas - Because benchmarking can be applied to any business process or function, a range of research techniques may be required. They include: informal conversations with customers, employees, or suppliers; exploratory research techniques such as focus groups; or in-depth marketing research, quantitative research, surveys, questionnaires, reengineering analysis, process mapping, quality control variance reports, or financial ratio analysis. Before embarking on comparison with other organizations it is essential that you know your own organization's function, processes; base lining performance provides a point against which improvement effort can be measured.

2. Identify other industries that have similar processes - For instance if one were interested in improving hand offs in addiction treatment he/she would try to identify other fields that also have hand off challenges. These could include air traffic control, cell phone switching between towers, transfer of patients from surgery to recovery rooms. 3. Identify organizations that are leaders in these areas - Look for the very best in any industry and in any country. Consult customers, suppliers, financial analysts, trade associations, and magazines to determine which companies are worthy of study.

4. Survey companies for measures and practices - Companies target specific business processes using detailed surveys of measures and practices used to identify business process alternatives and leading companies. Surveys are typically masked to protect confidential data by neutral associations and consultants. 5. Visit the "best practice" companies to identify leading edge practices Companies typically agree to mutually exchange information beneficial to all parties in a benchmarking group and share the results within the group. 6. Implement new and improved business practices - Take the leading edge practices and develop implementation plans which include identification of specific opportunities, funding the project and selling the ideas to the organization for the purpose of gaining demonstrated value from the process.

[edit] Costs

The three main types of costs in benchmarking are:

* Visit Costs - This includes hotel rooms, travel costs, meals, a token gift, and lost labor time. * Time Costs - Members of the benchmarking team will be investing time in researching problems, finding exceptional companies to study, visits, and

implementation. This will take them away from their regular tasks for part of each day so additional staff might be required. * Benchmarking Database Costs - Organizations that institutionalize benchmarking into their daily procedures find it is useful to create and maintain a database of best practices and the companies associated with each best practice now.

The cost of benchmarking can substantially be reduced through utilizing the many internet resources that have sprung up over the last few years. These aim to capture benchmarks and best practices from organizations, business sectors and countries to make the benchmarking process much quicker and cheaper. [edit] Technical/product benchmarking

The technique initially used to compare existing corporate strategies with a view to achieving the best possible performance in new situations (see above), has recently been extended to the comparison of technical products. This process is usually referred to as "technical benchmarking" or "product benchmarking". Its use is well-developed within the automotive industry ("automotive benchmarking"), where it is vital to design products that match precise user expectations, at minimal cost, by applying the best technologies available worldwide. Data is obtained by fully disassembling existing cars and their systems. Such analyses were initially carried out in-house by car makers and their suppliers. However, as these analyses are expensive, they are increasingly being outsourced to companies who specialize in this area. Outsourcing has enabled a drastic decrease in costs for each company (by cost sharing) and the development of efficient tools (standards, software). [edit] Types

* Process benchmarking - the initiating firm focuses its observation and investigation of business processes with a goal of identifying and observing the best practices from one or more benchmark firms. Activity analysis will be required where the objective is to benchmark cost and efficiency; increasingly applied to back-office processes where outsourcing may be a consideration.

* Financial benchmarking - performing a financial analysis and comparing the results in an effort to assess your overall competitiveness and productivity. * Benchmarking from an investor perspective- extending the benchmarking universe to also compare to peer companies that can be considered alternative investment opportunities from the perspective of an investor. * Performance benchmarking - allows the initiator firm to assess their competitive position by comparing products and services with those of target firms. * Product benchmarking - the process of designing new products or upgrades to current ones. This process can sometimes involve reverse engineering which is taking apart competitors products to find strengths and weaknesses. * Strategic benchmarking - involves observing how others compete. This type is usually not industry specific, meaning it is best to look at other industries. * Functional benchmarking - a company will focus its benchmarking on a single function to improve the operation of that particular function. Complex functions such as Human Resources, Finance and Accounting and Information and Communication Technology are unlikely to be directly comparable in cost and efficiency terms and may need to be disaggregated into processes to make valid comparison. * Best-in-class benchmarking - involves studying the leading competitor or the company that best carries out a specific function. * Operational benchmarking - embraces everything from staffing and productivity to office flow and analysis of procedures performed.[5] * Energy benchmarking - process of collecting, analysing and relating energy performance data of comparable activities with the purpose of evaluating and comparing performance between or within entities[6]. Entities can include processes, buildings or companies. Benchmarking may be internal between entities within a single organization, or - subject to confidentiality restrictions - external between competing entities.

[edit] Tools

Benchmarking software can be used to organize large and complex amounts of information. Software packages can extend the concept of benchmarking and competitive analysis by allowing individuals to handle such large and complex amounts or strategies. Such tools support different types of benchmarking (see above) and can reduce the above costs significantly. [edit] Metric benchmarking

Another approach to making comparisons involves using more aggregative cost or production information to identify strong and weak performing units. The two most common forms of quantitative analysis used in metric benchmarking are data envelope analysis (DEA) and regression analysis. DEA estimates the cost level an efficient firm should be able to achieve in a particular market. In infrastructure regulation, DEA can be used to reward companies/operators whose costs are near the efficient frontier with additional profits. Regression analysis estimates what the average firm should be able to achieve. With regression analysis firms that performed better than average can be rewarded while firms that performed worse than average can be penalized. Such benchmarking studies are used to create yardstick comparisons, allowing outsiders to evaluate the performance of operators in an industry. A variety of advanced statistical techniques, including stochastic frontier analysis, have been utilized to identify high performers and weak performers in a number of industries, including applications to schools, hospitals, water utilities, and electric utilities.[7]

One of the biggest challenges for metric benchmarking is the variety of metric definitions used among different companies and/or divisions. Definitions may also change over time within the same organization due to changes in leadership and priorities. The most useful comparisons can be made when metrics definitions are common between compared units and do not change over time so improvements can be verified.

Bench marking Definition

Benchmarking is the process of identifying "best practice" in relation to both products (including) and the processes by which those products are created and delivered. The search for "best practice" can taker place both inside a particular industry, and also in other industries (for example - are there lessons to be learned from other industries?).

The objective of benchmarking is to understand and evaluate the current position of a business or organisation in relation to "best practice" and to identify areas and means of performance improvement.

The Benchmarking Process

Benchmarking involves looking outward (outside a particular business, organisation, industry, region or country) to examine how others achieve their performance levels and to understand the processes they use. In this way benchmarking helps explain the processes behind excellent performance. When the lessons learnt from a benchmarking exercise are applied appropriately, they facilitate improved performance in critical functions within an organisation or in key areas of the business environment.

Application of benchmarking involves four key steps:

(1) Understand in detail existing business processes

(2) Analyse the business processes of others

(3) Compare own business performance with that of others analysed

(4) Implement the steps necessary to close the performance gap

Benchmarking should not be considered a one-off exercise. To be effective, it must become an ongoing, integral part of an ongoing improvement process with the goal of keeping abreast of ever-improving best practice.

Types of Benchmarking

There are a number of different types of benchmarking, as summarised below: Type Strategic Benchmarking Where businesses need to improve overall performance by examining the long-term strategies and general approaches that have enabled highperformers 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 take a long time to materialize Purposes Re-Performance or Competitive Benchmarkingaligning business strategies that have become inappropriate 2. Performance or Competitive Benchmarking Businesses consider their position in relation to performance characteristics of key products and services. Benchmarking partners are drawn from the same sector. This type of analysis is often undertaken through trade associations or third parties to protect confidentiality. purposes:

Assessing relative level of performance in key areas or activities in comparison with others in the same sector and finding ways of closing gaps in performance

3. Process Benchmarking Focuses on improving specific critical processes and operations. Benchmarking partners are sought from best practice organisations that perform similar work or deliver similar services.

Process benchmarking invariably involves producing process maps to facilitate comparison and analysis. This type of benchmarking often results in short term benefits. Businesses 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 sort of benchmarking can lead to innovation and dramatic improvementsAchieving improvements in key processes to obtain quick benefits 4. Functional Benchmarking Businesses 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 sort of benchmarking can lead to innovation and dramatic improvements purposes Improving activities or services for which counterparts do not exist. 5. Internal Benchmarking Involves benchmarking businesses or operations from within the same organisation (e.g. business units in different countries). The main advantages of internal benchmarking are that access to sensitive data and information is easier; standardised data is often readily available; and, usually less time and resources are needed.

There may be fewer barriers to implementation as practices may be relatively easy to transfer across the same organisation. However, real innovation may be lacking and best in class performance is more likely to be found through external benchmarking. purposes Several business units within the same organisation exemplify good practice and management want to spread this expertise quickly, throughout the organization

6. External Benchmarking Involves analysing outside organisations that are known to be best in 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 resource to ensure the comparability of data and information, the credibility of the findings and the development of sound recommendations purposes Where examples of good practices can be found in other organisations and there is a lack of good practices within internal business units 7. International Benchmarking Best practitioners are identified and analysed elsewhere in the world, perhaps because there are too few benchmarking partners within the same country to produce valid results.

Globalisation and advances in information technology are increasing opportunities for international projects. However, these can take more time and resources to set up and implement and the results may need careful analysis due to national differences purposes

Where the aim is to achieve world class status or simply because there are insufficient"national" businesses against which to benchmark.

What is Benchmarking
Benchmarking is the process of determining who is the very best, who sets the standard, and what that standard is. In baseball, you could argue that seven consecutive World Series Championships made the New York Yankees the benchmark. If we were to benchmark "world conquest", what objective measure would we use to compare Julius Caesar to Adolph Hitler; Gengis Khan to Napoleon? Which of them was the epitome, and why? We do the same thing in business. Who is the best sales organization? The most responsive customer service department? The leanest manufacturing operation? And how do we quantify that standard?

Why Should I Benchmark

If you don't know what the standard is you cannot compare yourself against it. If a customer asks "What is the MTBF on your widget?" it is not enough to know that your Mean Time Between Failures is 120 hours on your standard widget and 150 for your deluxe widget. You also have to know where your competitors stand. If the company against whom you are competing for this order has a MTBF of 100 hours you are probably okay. However, if their MTBF is 10,000 hours who do you think will get the order?

What can I Benchmark

Most of the early work in the area of benchmarking was done in manufacturing, like the example above. Now benchmarking is a management tool that is being applied almost anywhere. The Fortune Magazine article "Beat the Budget and Astound your CFO" outlines how Rank Xerox even applied benchmarking to their sales effort.

Related Issues
Once we decide what to benchmark, and how to measure it, the object is to figure out how the winner got to be the best and determine what we have to do to get there.

Benchmarking is usually part of a larger effort, usually a Process Re-engineering or Quality Improvement initiative. The Westinghouse Quality Management System shows one way of fitting it all together.

Final Thoughts
You know you need to benchmark, but you are just too busy. Well if you don't benchmark, and then implement improvements based on it, you will find yourself out of business. Then you'll have plenty of time to benchmark, but it won't matter.

Benchmarking is the practice of identifying, understanding, and adapting the successful business practices and processes used by other companies (or even other departments within the same company) to increase your own business success. It is a business strategy that is used by manufacturers and service-oriented companies alike. While it may involve learning from one's competitors, benchmarking is more focused and narrowly defined than competitive analysis. Competitive analysis can be used in conjunction with benchmarking to identify gaps and provide strategic direction; however, benchmarking itself measures specific performance gaps between a company and its competitors. When used effectively, benchmarking can be a valuable tool in increasing the health of any business. "It is not an unnecssary cost to be avoided," wrote James Dodd and Mark Turner in National Public Accountant, "but rather, a tool that when used properly can produce quantum leaps in company performance." Benchmarking relies on the study of general business practices that are not industry specific (generic benchmarking), specific business or manufacturing functions (functional benchmarking), general industry characteristics (industry benchmarking), strategies in general (tactical benchmarking), or the numerical characteristics of specific products or processes (performance benchmarking). Benchmarking is most often implemented by examining other organizations within the same industry. "Most [small businesses] regard their businesses as too unique to warrant detailed comparison across industries, " stated Dodd and Turner. "They see no valid comparisons and, therefore, do not recognize any meaningful benefit from examining practices outside their own industries." But many analysts believe that companies can learn from the experiences of enterprises from a wide range of industries. After all, new lessons in business efficiency, innovation, and financial success can be found every day in all types of businesses. In recent years, the benchmarking concept has also made an impact on the burgeoning world of ecommerce. Uncertainties still surround the utility, significance, and dimensions of benchmarking in the electronic business world. For example, some observers contend that the dot-com emphasis on speed to marketwhile an essential component of overall business successhas led many businesses to give too little attention to examining revenue streams, site traffic, and other web site activity data that might anable them to improve their practices and processes. But analysts believe

that as more dot-coms establish a presence on the Internet, benchmarking will grow in importance as a productive tool to measure web site activity as well as core business processes such as customer service and marketing. "Once those core processes have been determined," wrote Tamara Wieder in Computer world, companies need to figure out how much those processes are costing them. Then, based on that information, businesses can compare their cost structures to those of other companies and evaluate their own performance over time."


Business experts point to several factors that can hinder a company's efforts to institute meaningful benchmarking practices. These include: Unexamined core business processes. The ultimate quality, price, or reliability of the end product or service that is made available to customers is predicated on many aspects of a company's operations, and these facets need to be taken into consideration when examining internal processes.. Inadequate people or technology resources. A business should make sure that it has the resources (in terms of workforce, technology, or funding) to both launch a thorough benchmarking program and implement its findings. Unwillingness or inability to accept the legitimacy of business ideas or practices from outside sources. Many employees and organizations are resistant to change, because of general contentedness, fear of the unknown, perceived challenges to their abilities, etc. Resistance can be minimized, however, if owners and managers make it clear that benchmarking is not a faultfinding exercise but rather an established program to help the company grow and prosper in a fastchanging business world. Speed of in-house benchmarking processes. Effective benchmarking programs are given mandates to conduct their investigates in a timely manner, so that improvements can be implemented quickly. Inadequate follow-up training. Benchmarking programs can uncover many areas in which companies can improve their performance. But if the company does not provide its work force with sufficient training to implement needed changes in a timely and effective fashion, then the initiative becomes a waste of time and resources.

Service and manufacturing firms often evaluate their performance in relation to the performance of industry competitors. The term "benchmarking" is often used to describe this process of comparing practices or strategies to other companies. The benchmarking process sometimes helps a firm find documented strategies and tactics employed by highly admired companies. Such practices are often referred to as "best practices." According to the consulting firm Best Practices LLC, companies exhibiting a best practice may not be best-in-class in every area. But due to industry forces or the firm's goal of excellence, practices have been implemented and developed that have brought the firm recognition in a certain area. Typically the best practices result in a higher profit for the firm, and these more competitive business practices ensure a firm's survival or limit entry by new competitors.


Some firms are so well known for best practices in certain areas that it is not necessary to consult books, magazines, libraries, or the Internet to find the information. For example, Federal Express is often cited as having best practices among competitors in the expedited small package industry for their on-time delivery and package tracking services. Microsoft, the computer software developer, is cited as being innovative and creative, while the L.L. Bean outdoor products and clothing company is frequently lauded for their customer service practices and return policy guarantees. When a firm is benchmarking to learn about the best practices of others, often these superior methods are found in companies outside the firm's key industry segment. Thus it is important to research and observe companies in a wide variety of settings, countries, industries, and even in the not-for-profit arena to learn better ways to continuously improve. Information on best practices and innovative technologies can also be found on the Best Manufacturing Practices (BMP) web site. This site has as its goal to increase the quality, reliability, and maintainability of goods produced by American firms. One way BMP accomplishes this goal is to identify best practices, document them, and share the information across industry segments. They believe that by sharing best practices, they allow companies to learn from others'attempts and to avoid costly and time-consuming duplication of efforts. Companies profiled have submitted abstracts of what their organization does well and they include previous practices, changes to new processes, and information on implementation as well as quantitative details and lessons learned.


Other ways to identify best practices include observing businesses as a consumer or a mystery shopper. It is also possible to identify best practices by examining professional journals and business periodicals. Companies that win various awards often exhibit best practices to emulate. The Malcolm Baldrige National Quality Award winners are a good group of companies to benchmark for best practices. They have met the rigorous award criteria and have had success that allowed them to win this prestigious award. The Malcolm Baldrige National Quality Award is given to U.S. organizations that have shown achievements and improvements in seven areas:

leadership, strategic planning, customer and market focus, information and analysis, human resource focus, process management, and business results. Winners of this national quality award have documented practices in the areas of quality and productivity as well as increased profits. The award highlights best practices by recognizing the achievements of those companies that improve the quality of their goods and services. Whether companies apply for the award or not, the criteria can be used by business, industrial, governmental, and other organizations in evaluating their own quality improvement efforts. Industry Week, a publication aimed at manufacturers, has since 1990 set out to find and share stories of America's best plants. They later extended their coverage to include Europe's best plants. They have set out to define the best practices of world-class competition and highlight quality approaches, lean manufacturing, and employee empowerment. The publication stresses the fact that these practices can be implemented in a wide range of industries to improve competitiveness and productivity. Learning about the best practices of others is a valuable way for firms to gather fresh insights into possible methods of improving a myriad of aspects of their operations. It should be an important part of an organization's strategic planning activities.

Benchmarking is the process of comparing an organization's operations and internal processes against those of other organizations within or outside its industry. The other organizations against which the comparisons are made, known as 'benchmark partners', are usually those that are perceived to be the best performers in their class. The purpose of benchmarking is to identify and adopt best known practices that can lead to superior performance. It was a buzzword in the 80's and 90's, but continues to be strongly practiced in various industries today. Benchmarking is a systematic process - it must have a framework and use a standard set of attributes that are measurable to compare multiple organizations objectively. Benchmarking must be performed on a specific area or activity only, such as operational best practices, information technology, staffing, compensation packages, distribution systems, budgeting, and the like. Limiting the scope of the benchmarking activity allows the formulation of a more focused agenda that provides more useful information from better-targeted benchmark partners.

In general, benchmarking partners are classified into four (4) categories: 1) internal, which pertains to departments, factories, etc. of the same company; 2) competitive, which pertains to direct competitors; 3)

functional, which pertains to best-in-class organizations who are in the same field or activities; and 4) generic, which pertains to leading organizations from various fields and industries. Benchmarking with internal partners is usually the best starting point for a benchmarking program. However, many companies or organizations are not big enough for internal benchmarking, and have to resort to external benchmark partners to get the information they need. Identifying suitable external benchmarking partners depends on the purpose of the benchmarking activity as well as the nature of the benchmarking organization. For example, it would be good to be able to benchmark against a leading competitor, but this benchmarking arrangement is usually quite difficult to set up because most leading competitors will not divulge their 'trade secrets' to enable a competitor to catch up, resulting in bench mark results that are empty of useful information. In such cases, functional or generic benchmarking partners involving worldclass non-competitor companies are viable options, since these are often willing enough to share information with an organization. Benchmarking consists of five (5) basic steps: 1) decide on what process or area to benchmark, considering which would give the most leverage or improvement potential; 2) understand the internal processes or operations involved in the area being benchmarked and collect data on their key performance metrics; a good understanding of how an internal system works would facilitate understanding of those of the benchmark partners; 3) identify organizations who are best in class in the area to be benchmarked and arrange mutually-beneficial benchmarking activities with them; 4) conduct the benchmarking activities arranged with the partners; and 5) analyze the benchmark data and adopt practices that will produce the greatest benefits to the organization. There are many ways by which the benchmarking proper may be conducted with the benchmarking partner, but one of the most popular ones is by exchanging information through a questionnaire, possibly on a visit to the partner. This may consist of the following steps: 1) develop a questionnaire that covers all the information that need to be obtained; 2) answer the questionnaire internally to test it and so that the same information may be provided reciprocally if the partner asks for it; 3) provide a reason for every question so that its necessity may be rationalized to the partner if necessary; 4) discuss the questionnaire to clarify its objectives, areas of interest, and areas of confidentiality and sensitivity with the partner; and 5) arrange a visit with the partner. If the visit to the benchmarking partner materializes, the following guidelines would be useful: 1) prepare for the visit thoroughly; 2) define the purpose and objectives well; 3) commit the questionnaire to memory and leave the hard copy behind; 4) be open and honest during the visit; 5) avoid being seen by the partner taking down notes, but take down notes nonetheless; 6) reciprocate information requests; 7) thank the partner again and again. Benchmarking is just a tool to learn from others, and not a tool to win in business. It will not give information on what products and services customers want, or how to generate more revenues and profits. There are other management techniques to accomplish these objectives. These must complement the regular use of benchmarking to ensure continuous improvement in everything that a company does. Lastly, benchmarking per se is not useful unless knowledge gained from it are put in action to benefit the company.


core definition

Benchmarking is a process that enables comparison of inputs, processes or ouputs between institutions (or parts of institutions) or within a single institution over time.
explanatory context

Benchmarking, in practice, tends to be more about sharing good practice than undertaking formal comparative measurements. However, the term has a wide range of meanings especially in the higher education context. According to Schofield (1998, pp. 1112), for example, the term is used in diverse ways: Massaro identities one aspect of the problem in that the term is used fairly loosely to cover qualitative comparisons, statistical comparisons with some qualitative assessment of what the statistics mean, and the simple generation of statistical data from a variety of sources which are then published as tables with no attempt at interpretation... [and] Wragg in his description in Chapter 7 of the Commonwealth Benchmarking Club sees one of the advantages of the cooperative methodology that was adopted in that approach as leading to a true benchmarking process, ie in the absence of predetermined benchmarks, the aim is to establish benchmarks through the process... which can themselves be used in future to guide management in the quest for continuous improvement. .
analytical review

Campbell and Rozsnyai's (2002, p. 131) definition is: Benchmarking: Setting levels against which quality is measured or a process of identifying and learning from good practice in other organizations. The Quality Assurance Agency for Higher Education (QAA) (undated) has a similarly terse definition, which is rather closer to the concept of benchmark rather than the benchmarking process: Benchmarking: A term used to describe a standard against which comparisons can be made.. Higher Education Funding Council for England (HEFCE ) (2010) defines benchmarking as: A process through which practices are analysed to provide a standard measurement ('benchmark') of effective performance within an organisation (such as a university). Benchmarks are also used to compare performance with other organisations and other sectors.

European Commission, Education and Training (2008) defines benchmarking in a limited way: A standardised method for collecting and reporting critical operational data in a way that enables relevant comparison of the performances of different organisations or programmes, often with a view to establishing good practice.

The UNESCO definition of benchmarking is: A standardized method for collecting and reporting critical operational data in a way that enables relevant comparisons among the performances of different organizations or programmes, usually with a view to establishing good practice, diagnosing problems in performance, and identifying areas of strength. Benchmarking gives the organization (or the programme) the external references and the best practices on which to base its evaluation and to design its working processes. Benchmarking is also defined as: a diagnostic instrument (an aid to judgments on quality); a self-improvement tool (a quality management/quality assurance tool) allowing organizations (programmes) to compare themselves with others regarding some aspects of performance, with a view to finding ways to improve current performance; an open and collaborative evaluation of services and processes with the aim of learning from good practices; a method of teaching an institution how to improve; an on-going, systematically oriented process of continuously comparing and measuring the work processes of one organization with those of others by bringing an external focus on internal activities. (Vlsceanu et al., 2004, p. 25) For AEC (2004) benchmarking is more restricted and quite specific: A process by which standards are set in terms of levels of challenge and typical content for a given award (e.g. a Bachelor degree in music). For HEQC (2004, p. 26): Benchmarking: A process by which an institution, programme, faculty, school, or any other relevant unit evaluates and compares itself in chosen areas against internal and external, national and international reference points, for the purposes of monitoring and improvement.

What do we mean by 'benchmarking'? Jackson and Lund (2000) suggested a working definition for benchmarking in UK higher education which encompasses both development and accountability: '...a process to facilitate the systematic comparison and evaluation of practice, process and performance to aid improvement and regulation.' They add that benchmarking is: '...first and foremost, a learning process structured so as to enable those engaging in the process to compare their services-activities-processes-products-results in order to identify their comparative strengths and weaknesses as a basis for selfimprovement and/or self-regulation. Benchmarking offers a way of not only doing the same things better but of discovering 'new, better and smarter' ways of doing things and in the process of discovery, understanding why they are better or smarter.' The Working Group embraced this definition, particularly the emphasis upon learning from the process. In the context of its work, the Group defined benchmarking as identifying, considering, comparing and learning from developing practice in Scotland and internationally, and set about actioning this.

Benchmarking measures the effectiveness of business processes compared to industry standards. It is a classic management tool that companies use to determine the profitability of their products and services. While there are several forms of benchmarking, such as process or performance, financial benchmarking is probably the relevant, because it measures the effectiveness of money spent on operations.

The Facts

Benchmarking takes broad segments of a company's operations and breaks them down in to small, complete processes that can be measured for overall effectiveness. While benchmarking takes time and detail to implement, it is one part of company's strategic management process to ensure industry competitiveness.

Strategic Management

Strategic management is the implementation and evaluation of certain goals or objectives a business wants to achieve. In order to measure effectiveness, a business will use benchmarking to review smaller processes or a large division. By starting with the small processes, businesses will discover deficiencies quickly and determine how to correct them; in turn, this will make the entire division more competitive.

Financial Benchmarks

Financial benchmarking examines monetary processes within business division to determine their industry competitiveness. Some examples of financial benchmarks include: Does the company spend above industry average for rent and utilities? How does the cost of materials compare to the industry? Are employee salaries and benefits competitive with the rest of the industry?

In addition, financial ratios are helpful when reviewing divisions for effectiveness. For example, this could mean figuring the ratio of sales of notebooks to desktop PCs against the benchmarks of industry peers. Ratios should be tracked regularly to determine where fluctuations occur and what drives these differences.

Benchmark Advantages

Benchmarking provides quantitative results for business processes. Measuring the financial strengths and weaknesses of a divisional process gives management a clear picture of whether goals have been achieved. Another advantage of benchmarking is that it begins with smaller processes; once problems are identified, they may be easier to change than an entire division process.

Benchmark Disadvantages

Benchmarking is a very detailed process; breaking down divisions into a small, finite process is time-consuming and labor-intensive, and can be rendered completely ineffective if done improperly. Additionally, specific benchmark goals do not exist. A company must use benchmarks to determine if it is competitive to rivals and within industry standards. Benchmarking is also a continuous process that must be reviewed often to ensure that the information being gathered is still useful to the company. Refining benchmarks is a managerial process that must occur to ensure bad measurements are not being taken of division processes.