The process of comparing and measuring an organizations operations or its internal

processes against those of a best-in-class performer from inside or outside its industry
A means by which targets, priorities and operations that will lead to competitive
advantage can be establish.
Measuring performance against that of best-in-class organizations, determining how
the best in the industry achieve those performance levels and using the information as
a basic for the companys own targets, strategies and implementation.
The search of industry best practices that lead to superior performance.
 Internal benchmarking the search for best practice of internal operations by comparison of the
operating divisions within the same company. Data for internal comparisons are easy to achieve,
because problems of confidentiality dont exist. Communicating with sources of internal
benchmarking would also usually generate immediate improvement ideas
Competitive benchmarking studying products or business results against competitors to
compare pricing, technical quality, feature and other qualities of performance characteristics.
Sources of data for this type of benchmarking include those in the public domain and third parties. In
this type the competitors operation is studied from a distance without the cooperation of the target
firm.
Process benchmarking identifies the most effective practices in key work processes in
organizations that perform similar functions no matter what industry. This is also known as functional or
generic benchmarking. The rationale behind this is that many processes are common across
industries and innovations from other types of innovations can be applied across industries.
Compared with competitive benchmarking it is easier to obtain data for process benchmarking. It is
also relatively easy to find organizations with world-class operations through published information
such as case studies.
External drivers
Customers continually demand better quality, lower
prices and shorter lead times for their products.
Competitors are constantly trying to stay ahead and
steal markets
Changes in laws can demand improvements
Internal drivers
Targets that require improvements on performance
Innovations in technology
Self-assessment result
 Change the perspectives of executives and managers
Compare business practices with those of world class organizations
Challenge current practices and processes
Create improved goals and practices for the organization

Creating a better understanding of the current position

Increasing sensitivity to changing customer needs
Encouraging innovation
Developing realistic goals
Establishing realistic action plans
 Internal focus for benchmarking to begin the company must first realize that other companies have a better process. Some
organizations are not aware of this because they are too focused in their own processes. An internal focus limits the managements
ability to decide what is the best for the organization.

Setting benchmarking objectives that are too broad a vague, overly broad benchmarking objective such as improve
performance can result to failure. Improving performance may be the objective of all benchmarking efforts but employees need to
know how it will be done. They would need a narrower target: for example, replace ordering process to reduce errors by 50%.

Unrealistic timetables benchmarking is an extensive process that cannot be compresses in a few weeks. An experienced team
can benchmark in four to six months, but the usual time period for benchmarking is six to eight months. Trying to do it in lee time may
lead to inaccurate or incomplete data.

Poor team composition when a process is benchmarked the people who own and/or use the process must be involved. Engineers
and supervisors should be involved but not at the expense of excluding the process owners. The process owners are the ones who know
the most about how the process operates and they will be able to differentiate the companys processes against the benchmarked
processes easily.

Settling for companies which are not the best-in-class sometimes the organization benchmarks a company that is not the
best. This can be happen for the following reasons: the best-in-class does not allow others to benchmark its practices, researchers
identified the wrong best-in-class or the researchers benchmarked a company that was convenient. Benchmarking company that is
not the best in its class but have a better process that the company may be acceptable in the short run but in the long run the
company will still fall behind its competitors.

Improper emphasis - benchmarking teams sometimes put too much emphasis in collecting data and not on how to use the data
collected. Both data collection and usage are important but the company must also note how the benchmarking process was done so
the company may replicate the process in the future.

Limited top management support unweaving support from the top management is needed at all stages of the benchmarking
activity. It would help in getting the process started to carry it through and to secure the promised gains.
Customer Satisfaction
Product or service quality and consistency
Correct and on-time delivery
Spend of response or new product development
Correct billing

Internal Impact
Waste, rejects, or errors
Inventory levels/ work in progress
Cost operation
Employee turnover
 Benchmarking has been criticized for its practice of copying others. How can a business be truly
superior if it does not get ahead of the competitors? However, the alternative is to lose track of its
external environment and develop a process that is already being done.
Benchmarking is NOT a cure or a remedy. It is not a strategy nor a business philosophy. It is an
improvement tool for processes in the organization. For examples, if a production process has a
manufacturing time that is too long, the company can use benchmarking to shorten the process.
Benchmarking fails when the management does not support it. Some processes may have to be
benchmarked repeatedly, depending on the needs of the time.
Benchmarking is NOT a substitute to innovation but a source of information outside the organization.
Business success depends achieving organizational goals and benchmarking forces the organization
to set their goals against the reality
Benchmarking is NOT industrial tourism. Industrial tourism refers to instructed plant visits, during which
the visitor firm intends to learn something that will help with its processes or products.
Benchmarking is NOT spying. The use of a bench marking code of conduct ensures that the work is
done with the agreement and openness of all parties.
 Decide what to benchmark most business organizations have strategy o how the company wants to position itself in the
marketplace. This strategy is usually started in the form of a mission and vision. The firms critical activities would support the mission and
vision, also known as the critical success factors. When deciding what to a benchmark, it would be good to start by thinking of the
mission, vision and the critical success factors. The company analyze the processes and look for critical practices that will positively
impact organization

Understand current performance to compare the processes outside the benchmarks, the organization must first understand
it own processes, attention must be given to the inputs and outputs and the interviewing the operators may be necessary to establish
causes for deviations from normal routines. This is also the stage where the organization must decide on the metrics they will use to
measure the process. Examples of these metrics may be hours used, unit costs and quality measures. These metrics will form the
baseline for bench mark comparisons. Accounting information can be used as benchmarks but the benchmarking company must
consider that every organization may have different practices in their accounting system.

Plan once the firms current processes have been documented, it is possible to make decisions on how to conduct the study. The
management must assign a team that will execute the benchmarking activities. The team should decide on what types of
benchmarking to perform, what type of data are to be collected, the sources of information and the method of collection. Businesses
that can serve as benchmarks must be recognized. Finally, timetables for each benchmarking task must be agreed upon.

Collect data when collecting data, the team must document everything about the partners process. In addition, they must
understand the underlying factors, practices and processes: what makes the organization successful in the area? The benchmarking
team must also gain an understanding of the preceding and succeeding processes that affect the one they are benchmarking,
because changing one process in their own organization may have an impact on the other processes. They must also be able to grasp
the other companys culture and how they go through their processes.

Use the findings when the benchmarking study shows a negative gap in performance the objective would be change the
process to close that gap. If change is not the result the benchmarking process has been a waste of the organizations resources.