Benchmark - What is Benchmarking?
63
Benchmarking
A benchmark is a point of reference for a measurement. The term ‘benchmark’ presumably originates from the practice of making dimensional height measurements of an object on a work bench using a tool and the surface of the workbench as the origin of measurements.
Benchmarking is a systematic tool which helps a company in determining whether its performance of organizational processes and activities represent the best practices or not.
Most business processes are common throughout different industries.
Example; NASA has the same basic Human Resources requirements for hiring and developing employees as does American Express. British Telecom has the same Customer Satisfaction Survey process as Brooklyn Union Gas.
These process, although from different industries but are all common and can be benchmarked very effectively. It's called "getting out of the box".
What is this benchmarking all about?
We can benchmark performance indicators, usually expressed in numbers such as:
- profit margin
- return on investment - ROI
- cycle times
- percentage defects
- sales per employee
- cost per unit of product or services
Or we can benchmark business processes which drive performance indicators, such as:
- how you develop a new product or service?
- how you manage to meet a customer's order or respond to an inquiry?
- how you produce your product or service?
Benefits of Benchmarking
Improving communication
Professionalizing the organization/processes
In outsourcing projects
Who performs the business process very well and has process practices that are adaptable to the organization?
- Who is the most compatible for the company to benchmark with?
Hence Benchmarking is the process of comparing the cost, time or quality of what one organization does against what another organization does.
The result is often a business case for making changes in order to make improvements. It is a process used in management and particularly strategic management, in which organizations evaluate various aspects of their processes in relation to best practice, usually within its own sector. This then allows organizations to develop plans on how to make improvements or adopt best practice, usually with the aim of increasing some aspect of performance.
