Benchmarking relies on a comparison of the characteristics of the organization with competitors or leading firms in the industry, and copying proven designs. Such comparing have long been used, hence some authors suggest that benchmarking is not a method that deserves special attention.
Using benchmarking managers try to eliminate the basic problem of comparisons - the inability to be better than company used for comparison.
Benchmarking is a systematic process of comparing own business with others, or comparing between each other among the various departments of the business to determine what is its current status and whether any change is needed.
Usually managers seek processes showing the highest effectiveness in a given area, and try to imitate the best. Benchmarking is treated as automatic and long-term process. Improving business areas should not be a one-off activity. Managers should collect information and search for better solutions.
Benchmarking in their current form began in a company Rank Xerox, which in the 70s underwent serious financial and organizational problems related to the strong competition in the market of photocopiers. Cost of production of main competitor - Canon - were repeatedly lower than those of Rank Xerox. Management has developed a three-part program of Leadership Through Quality, the second part was called Benchmarking.
There are four types of benchmarking:
- overall, also called horizontal.
- 'Internal benchmarking' is used in large organizations that have multiple branches or subsidiaries performing similar activities. There is the possibility of comparing the effectiveness of individual branches and dissemination of best practices. The advantage of this solution is to have full rights to the use of selected solutions, as well as access to all the data. The disadvantage is the access only to own solutions and the lack of comparison with others in the market. Therefore, internal benchmarking should be used complementarily for the dissemination of good practices.
- Competitive benchmarking is difficult to implement due to the reluctance of competitors to disclose their data. It is perceived as a cooperative method, not as a type of business intelligence acquisition. Cooperation between competitors of significant market share may give rise to adverse legal consequences associated with suspicion of preparing a collusion or other prohibited practices. Comparing with the competition does not give a large benefit also because it often uses similar technologies and related organisational solutions, typical for the industry. To find new solutions managers really need to go beyond the industry.
- Functional benchmarking requires finding an organization to comparisons in other industries, with the exception that there are compared only selected areas, which function similarly to our company. Managers can compare internal communications processes, organization of transportation, supply processes. Due to the lack of a competition, such partners are willing to exchange information. It is also possible to find new solutions that will significantly boost the efficiency of the operation. Functional bencmarking is considered by many authors as the best because of the potential effects of its use.
- Overall benchmarking is a variety of functional and it consists of comparing the processes of universal character that look similar in many organizations, regardless of their field of activity, such as customer service.
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