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What is Benchmarking?
Benchmarking is a systematic process for identifying and implementing best or better practices. Although experts break benchmarking into several types, there exist two main types;  "Informal" and "Formal" Benchmarking.
 

Whichever methodology or type of benchmarking is used the BPIR website has become an essential tool for benchmarking - it helps  organisations to quickly find benchmarks, benchmarking partners and best practices.  

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Types of Benchmarking?  

It is useful to distinguish between the main types of benchmarking: Firstly, there is Informal Benchmarking. This is the type of benchmarking that most of us do unconsciously at work and in our home life. Secondly, there is Formal Benchmarking of which there are two types: Performance Benchmarking and Best Practice Benchmarking.

What is Informal Benchmarking?  

This is a type of benchmarking that most of us do unconsciously at work and in our home life. We constantly compare and learn from the behaviour and practices of others – whether it is how to use a software program, how to cook a better meal, or play our favourite sport. In the context of work, most learning from informal benchmarking comes from the following:

  • Talking to work colleagues and learning from their experience (coffee breaks and team meetings are a great place to network and learn from others). 
  • Consulting with experts (for example, business consultants who have experience of implementing a particular process or activity in many business environments.
  • Networking with other people from other organisations at conferences, seminars, and Internet forums.
  • On-line databases/web sites, such as the BPIR, and publications that share benchmarking information provide quick and easy ways to learn of best practices and benchmarks.

What is Formal Benchmarking?

There are two types of Formal Benchmarking - Performance and Best Practice Benchmarking.

Performance benchmarking; this involves comparing the performance levels of organisations for a specific process. This information can then be used for identifying opportunities for improvement and/or setting performance targets. Performance levels of other organisations are normally called benchmarks and the ideal benchmark is one that originates from an organisation recognised as being a leader in the related area. Performance benchmarking may involve the comparison of financial measures (such as expenditure, cost of labour, cost of buildings/equipment, cost of energy, adherence to budget, cash flow, revenue collected) or non-financial measures (such as absenteeism, staff turnover, the percentage of administrative staff to front-line staff, budget processing time, complaints, environmental impact or call centre performance).

Best practice benchmarking; this is where organisations search for and study organisations that are high performers in particular areas of interest. The processes themselves of these organisations are studied rather than just the associated performance levels, normally through some mutually beneficial agreement that follows a benchmarking code of conduct.   Knowledge gained through the study is taken back to the organisation and where feasible and appropriate, these high performing or best practices are adapted and incorporated into the organisation’s own processes. Therefore best practice benchmarking involves the whole process of identifying, capturing, analysing, and implementing best practices . There are a number of best practice benchmarking methodologies. One of which is the TRADE Best Practice Benchmarking Methodology.

Who uses Benchmarking?

In the West most large and highly successful organisations use best practice benchmarking as a tool to continually learn and improve. The resources needed to carry out repeated best practice benchmarking projects properly and in a way that maximises the learning to be gained from the experiences can be considerable, hence it is used more frequently within large organisations. A key reason for the development of the BPIR was to offer help to all organisations (large or small) who may not have the necessary resources to undertake best practice benchmarking. Therefore the BPIR website has been designed to assist in every step of a benchmarking process. On the other hand, comparative or competitor benchmarking is not affected to the same degree by resources, and is used by organisations of all sizes, the most basic form of this practice is simply knowing your main competitors product price, something that is a prerequisite to staying in business.

Indications are that the use of benchmarking worldwide continues to grow since Robert Camp wrote the first book on benchmarking in 1989. Support for this comes from

  • The 2008 study by the Global Benchmarking Network showed the improvement tools that are likely to increase in popularity the most over the next three years are Performance Benchmarking, Informal Benchmarking, Strengths, Weaknesses, Opportunities, and Threats, and Best Practice Benchmarking. Current use of  Informal benchmarking is 68% of organisations,  Performance benchmarking, 49%, and Best practice benchmarking, 39%.
  • The growth from year to year in membership of the Global Benchmarking Network which now has representatives from over 20 countries
  • The growth in the number of countries that have a business excellence award to more than 70 (the growth in business excellence is likely to be correlated to the growth in benchmarking as a central part of business excellence is benchmarking with as much as 50% of the points associated with these models attributed to benchmarking) and
  • The continuing popularity of benchmarking within the academic community as the number of papers written on the subject continues to grow. 

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What are the common challenges associated with benchmarking?

There are several main issues that both inhibit organisations actively involved in benchmarking and prevent others from attempting active involvement. The BPIR has been developed to address these challenges. In a survey of UK organisations findings indicated that among some of those involved in benchmarking there were difficulties encountered during the process. These difficulties included:

  • finding suitable partners
  • difficulties in comparing data (50% of organisations found this)
  • resource constraints (time, finance and expertise)
  • staff resistance

The main reasons given by respondents for not being involved in benchmarking at all were:

  • ignorance
  • resource constraints
  • data comparability
  • too small to gain
  • not appropriate 

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How can the BPIR help?

Membership of the BPIR simplifies the whole process of benchmarking so that all organisations whatever their size and level of resource can benefit from this powerful technique of "learning from the experience of others".  The BPIR will assist you in finding suitable benchmarking partners, measuring performance, and directly shares good ideas and best practices from leading organisations through the hundreds of case studies provided.  

As information on the website represents the views and/or experiences of a diverse range of organisations of all sizes, and from many different industry sectors and geographical locations, we are sure that the BPIR will help you to benchmark and improve your organisation's performance.

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What is the track record of benchmarking use?

Because benchmarking is so closely linked to business excellence, many of the benefits attributed to one can also be attributed to the other. For organisations to reach performance levels judged as "world-class" the various business excellence models indicate clearly, through their scoring systems, the importance of benchmarks and the process of benchmarking. Czarnecki through considering the Baldrige scoring table concluded that over half the points available were related to benchmarking activities.

There are many case studies focusing on the success gained through benchmarking alone in organisations. The best known of these are perhaps the experiences at Xerox and Chrysler. In the late 70’s and early 80’s where, faced with ruin due to more efficient Japanese competitors, benchmarking turned the giant Xerox organisation around and put it back at the top of the market. At Chrysler Corporation the benchmarking of Japanese new product development techniques prior to the development of the Viper sports car is credited with saving three billion dollars from development costs and one year of development time.

Payback, from a financial perspective, is likely to vary dependent on the specific aims of the project. If projects are carefully selected, planned and managed, there is no reason why major benefits (financial and non-financial) should not be obtained.  A 2008 study by the Global Benchmarking Network indicated an average financial return of $100,000 to $125,000 per best practice benchmarking project with over 20% reaping benefits of more than $250,000 per project

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Read our Management Brief Report to learn more about benchmarking

Read our FREE Management Brief Report on benchmarking. For more benchmarking resources to help you to apply benchmarking become a member of the BPIR.com.

 
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