Internal benchmarking

From CEOpedia | Management online

Internal Benchmarking is an important tool which is used inside a company to improve its processes. It compares all types of results of a team, department or an individual to another part of a company. Internal benchmarking says which practice or habit is the best. That procedure is then implemented to another parts of a company or organisation. Internal benchmarking focuses primarily on the research and evaluation of processes and methods that take place in the company. Thanks to this method of analysis, it is easy to define which activities are ineffective or performed incorrect in a company, and then it is good to eliminate them. The effect of this should be to improve the results(J. Saul 2004, p. 6).

A company's "problem"

For example, there is a company which makes hand made wooden watches, there is two shifts. One is able to produce, pack and send to client about 25 watches a day, second shift only 20 of them. Management of the company wants to achieve the level of 50 watches per day overall. This level of production efficiency is the benchmark to achieve.

Some analysis is contucted, It is focused on the way the product is made. It seems that two employees can assemble watches faster than others. Mangment draws conclusions and good habits, then introduces it in second shift with the aim of improving results.

More about benchmarking

As we can see internal benchmarking makes companies to set golas in its development and guide employees to the best development path.

Internal benchmarking is one of four types of benchamarking. There is external, functional, general and internal. Internal benchmarking is the basis for starting external, general or functional one.

Internal benchmarking seeks to develop their own and autonomous standards. Examples of internal benchmarking are, strategies (plans, programs), organizational solutions for the future or the past or available technological products.

How to properly do internal benchmarking?

Five steps of internal benchmarking

  1. Selection of the object to benchamark. Selecition of proper "object" of benchmarking is the most important step. Without specyfying the "object" there is no possibility of proceeding any benchmark. Usually the problem is well known, so it should not be tough to determine.
  2. Selection of the object to comparison. There is also need to choose a comparison "object". The one which is our goal, or causes for example best financial results in other departments, makes the company management delighted.
  3. Selection of information. To perform a comparison and of course internal benchmarking a lot of information is necessary to obtain It is good to gather them from both sides. For exmple: information about duration of a process, what kind of tools are used, what facilitations are used by employees or why the specific item is usually broken.
  4. Identification of mistakes in performance. This step should be done carefully. Only the exact finding of the causes of errors will be effective and will result in improved factors, processes being checked. Errors in this step can contribute to unsatisfactory results of internal benchmarking.
  5. Development of solutions and remedies. In the last step changes should be made to the processes and habits that will lead to improvement. Some require an immediate response, others should be introduced gradually(L.O’Rourke(2012), p.10-29).

Advantages and disadvantages

Advantages of Internal Benchmarking:

  • It is cheap solution, because it takes place inside a company.
  • It has a short lead time and most important - has a very low risk of failure.
  • The success of benchmarking is not dependent on external factors.
  • Because it is done inside the company, it has easy and quick access to documents, company data and information. Thus, it enables a better understanding of own processes in the company and allows for a full assessment of the company's operation. In addition, it enables accurate data analysis .
  • Someone who carries out the process have full rights to use special solutions.
  • It brings high results in large and diversified organizations
  • The company's management knows its needs, thanks to which it is possible to determine quickly in what direction changes are needed and which elements should be analyzed.
  • It helps in SWOT analysis
  • Unnecessary and time-consuming researches and analysis are eliminated.

Disadvantages of Internal Benchmarking:

  • It has narrow perspective of action - limited only to the inside of the company.
  • It is a comparison of employees - prejudices for the process.
  • Impossible to compare the results with other companies

Target and Range

Range of Internal Benchmarking:

  • functions,
  • departments,
  • projects
  • business in the same company or group at the same or another location.

Targets

Examples of Internal benchmarking

  • Process Efficiency Measurement: This is a process of comparing current process performance to a previous benchmark performance in order to identify areas for improvement. For example, a company may measure the efficiency of its production line by comparing the time required to complete each task with the time required to complete the same task in the previous month.
  • Resource Allocation Analysis: This is a process of comparing the cost and resources required for a process against the expected output. For example, a company may compare the resources and cost associated with producing a certain product against the expected profits from the sale of the product.
  • Productivity Measurement: This is a process of comparing the number of products produced in a given period of time with the resources and cost associated with producing those products. For example, a company may measure the productivity of its employees by comparing the number of products produced in a given month with the cost and resources associated with hiring and training those employees.
  • Quality Assurance: This is a process of comparing the quality of the output produced by a process against the expected quality of the output. For example, a company may measure the quality of its products by comparing the number of defects reported in a given month with the number of defects expected in the same period of time.

Other approaches related to Internal benchmarking

Internal benchmarking is an important tool to improve a company's processes by comparing its performance with similar companies in the industry. Other approaches that can be used to improve internal processes include:

  • Business Process Reengineering (BPR): BPR is a radical approach to redesign existing processes to achieve a dramatic improvement in performance. It involves analyzing existing processes, identifying areas of improvement, and then redesigning the processes to achieve the desired outcome.
  • Lean Manufacturing: Lean manufacturing is a methodology that focuses on eliminating waste and increasing efficiency in all areas of the business. It is based on the belief that all resources should be used to provide the maximum value to the customer.
  • Quality Control: Quality control is a set of procedures that are used to ensure that products or services meet the standards of quality set by the company. Quality control involves identifying and addressing any issues that may arise during the production process.
  • Total Quality Management (TQM): TQM is an approach that focuses on ensuring that all aspects of the production process, from design to delivery, meet the highest standards of quality. It is based on the idea that all employees should be involved in the quality control process.

In conclusion, internal benchmarking is an important tool for improving a company's processes, but other methods such as business process reengineering, lean manufacturing, quality control, and total quality management can also be used to improve performance.


Internal benchmarking — recommended articles
Controlling — Operational control — Operational controlling — Management by results — Managerial controlling — Management by exceptions — Zero defects — Quality control plan — Feature-driven development

References

Author: Angelika Zając

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