What is Benchmarking?

Benchmarking is a systematic process for identifying and implementing best or better practices to improve organizational performance. It includes comparing and evaluating an organization’s practices, processes, products, or services against those of industry leaders or competitors, as well as against best practices in the industry. This process involves using the insights gained and the creative ideas of the benchmarking team to implement improvements and transformational change, concluding with a final evaluation to assess the benefits achieved. Various benchmarking methodologies are available to guide this process including the BPIR.com’s TRADE Best Practice Benchmarking Methodology.

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.com has become an essential tool for benchmarking – it helps organisations to quickly find benchmarks, benchmarking partners and best practices.

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 can be defined as an unstructured approach to learn from the experience of other organizations; therefore, not following a defined process. It refers to the type of benchmarking that everyone does at work, often unconsciously, involving comparing and learning from the behaviour, practices and performance of others. It may involve:

  • Talking to work colleagues and learning from their experience.
  • Consulting with experts 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.
  • Browsing on-line databases/web sites and publications that provide expert opinion on a topic or shares information on an organisation’s practices or performance.

What is Formal Benchmarking?

Formal benchmarking consists of using a structured approach that brings together the approaches described in informal benchmarking into a formal methodology or a series of defined steps. There are two types of formal 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. Higher 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 a particular area 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 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 several best practice benchmarking methodologies. One of which is the TRADE Best Practice Benchmarking Methodology.

Who uses Benchmarking?

Most large and successful organisations use best practice benchmarking as a tool to continually learn and improve. The resource needed o carry out a best practice benchmarking project properly and in a way that maximises the learning to be gained from the experience can be considerable, hence it is used more frequently within large organisations. A key reason for the development of the BPIR.com was to offer help to all organisations (large or small) who may not have the necessary resources or knowledge to undertake best practice benchmarking project. Therefore the BPIR.com 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 growth of the world economy through globalisation. This necessitates the need for organisations to continually search for and implement best practices to compete and sustain in a global market.
  • Benchmarking is the only improvement technique that has rated in the top five most popular techniques in 1993, 2000, 2014 and 2017 according to Bain and Co’s analysis of these years in its global Management Tools and Trends Survey (Rigby and Bilodeau, 2018) – this emphasises that benchmarking is not a fad but a necessity for competitiveness. In 2017, benchmarking rated third in popularity in comparison to 25 of the most popular techniques, with strategic planning and customer relationships placed first and second, respectively.
  • The growth from year to year in membership of the Global Benchmarking Network which now has representatives from over 20 countries.
  • The number of countries that have a business excellence award. This stands at more than 50 (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 attributed to benchmarking).
  • The popularity of benchmarking within the academic community as the number of papers/research undertaken on the topic continues to grow. 

Today, it is accepted that to become a world-class organisation and sustain this success it is a necessity to have a fully deployed benchmarking strategy that enables informal and formal benchmarking to flourish. Modern day examples of benchmarking are shared each year by organisations competing for the GBN’s Global Benchmarking Award. Details of past winners are shown on the Award website, http://www.globalbenchmarkingaward.com/ and many examples of successful benchmarking projects are shown within the BPIR.com demonstrating how benchmarking has achieved outstanding financial and stakeholder-related benefits for organisations. Case studies on 11 successful benchmarking projects are available here.

What are the common challenges associated with benchmarking? 

There are some issues that both inhibit organisations actively involved in benchmarking and prevent others from attempting active involvement. The BPIR.com 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

How can the BPIR.com help?

Membership of the BPIR.com 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.com 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.

In addition, the BPIR.com will help you to understand how to undertake a benchmarking project through the provision of the TRADE Best Practice Benchmarking Methodology and supporting resources including the TRADE benchmarking project management system, training notes, slides and videos. Members can be further supported by being trained on benchmarking and having their benchmarking projects assessed through the TRADE Benchmarking Certification System.

As information on the BPIR.com 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.com will help you to benchmark and improve your organisation’s performance.