Benchmarking is the process of continuously measuring and comparing one's organizational processes against industry best practices to identify areas for improvement. It involves identifying high-performing companies, understanding what processes enable their high performance, and adapting those processes for use within one's own organization. Benchmarking provides benefits such as process and product improvement, cost reduction, and gaining a competitive advantage. It follows a typical process of planning, data collection, analysis, and integration of best practices. Common metrics that are benchmarked include financial ratios, productivity, customer satisfaction, and quality.

1. Benchmarking?

2. What is Benchmarking
• A method for identifying and importing best
practices in order to improve performance
• The process of learning, adapting, and measuring
outstanding practices and processes from any
organization to improve performance
• Benchmarking is the process of improving
performance by continuously identifying,
understanding, and adapting outstanding practices
found inside and outside the organization.

3.  Benchmarking is the process of continuously measuring
& comparing one’s organisational processes against
comparable processes in leading organisations, to obtain
information, that will help the organisation, identify &
implement improvements. (Kaiser Associates)
Benchmarking is an essential part of TQM for
continuous improvement
 Search for industry best practices that lead to superier
performance. (Robert Camp-Xerox)
 A standard of excellence or achievement against which other
similar things mustbe measured or judged. (sam Bookhart -
Dupont)

4. Benchmarking Features
Continuous method of measuring and
comparing a firm’s business processes
against those of another firm.
Discover performance gaps between
one’s own processes and those of
leading firms.
Incorporate leading firm’s processes
into one’s own strategy to fill the
gaps and improve performance.
 Benchmarking has three main features:

5. BENCHMARKING / BENCHMARKS
 BENCHMARKS
Measurements to guage the performance of a
function /operation.
Best practices benchmarking :-
Metrics
Benchmarks
Operating
Statistics
Process
Benchmarking
Practices
 BENCHMARKING
Ongoing search for best practices that produce
superior performance when adapted & implemented
in organisation.

7. Why Benchmarking?
• Survival lies in emulating best and not in
lagging behind. Bench marking is time and
cost efficient because it involves imitation and
adaptation rather than pure invention.
Prevents the “Re-inventing the wheel”.

8. Why Benchmarking?
• Benchmarking gives us the chance of gaining:
• Better Awareness of Ourselves (Us)
– What we are doing
– How we are doing it
– How well we are doing it
• Better Awareness of the Best (Them)
– What they are doing
– How they are doing it
– How well they are doing it

9. Why Benchmark
• Identify opportunities to improve performance
• Learn from others’ experiences
• Set realistic but ambitious targets
• Uncover strengths in one’s own organization
• Better prioritize and allocate resources

10. Benchmarking Becoming More
Common
• There are three reasons that benchmarking is
becoming more commonly used in industry
(Boxwell, 1994).
– Benchmarking is a more efficient way to make
improvements. Managers can eliminate trials and
errors.
– Benchmarking speeds up organization’s ability to
make improvements. Today, time is of the essence.
– Benchmarking has the ability to bring your
performance up as a whole significantly.

11. Three Major Benefits of Benchmarking
Product and Process Improvement
Cost Reduction
Competitive Strategy

12. Product and Process Improvement
• In general, by implementing benchmarking
activity, organizations can improve their
operation process (Slack et al, 2001). For
instance, South African Breweries plc had
encountered the problem of poor employee
skill, which is a significant difficulty to
implement the world-class processes. As such,
they decided to benchmark strategy from an
organization in Geneva. They, consequently,
attained the solution (Slack et al, 2001).

13. Cost Reduction
• Benchmarking facilitates a reduction of
operation costs (Delpachitra et al, 2002). For
example, benchmarking helped Australian
Financial Institutes to reduce operation costs
by outsourcing some operation and
alternating distribution channels (Delpachitra
et al, 2002).

14. Competitive Strategy
• The most significant benefit from
benchmarking is that it helps the organization
planning and implementing competitive
strategies (Kolarik, 1995). In other words, as
benchmarking provides an ability to compare
and learn from the best practices in any
particular industry, organizations can develop
their system to achieve competitive
advantages or eliminate their competitive
disadvantages.

15. Competitive Strategy
• Build core competencies that will help to sustain
competitive advantage
– Access to a variety of markets
– Perceived benefit of product or service will increase
– Product or service is hard to imitate
– Low-cost leader
• Target specific shift in strategy
– Entering new markets
– Developing new products
• To create a firm more adaptable to change

16. BENCHMARKING PROCESS
Determine Data
collection
Method &
collect data
Recalibration
of BM
Identify What is to be
Benchmarked
Identify World class
Companies for BM
Establish “GAP” &
analyse
Set targets to bridge the
GAP
Communicate to all level
Analyse driving
forces
Analyse
resisting forces
Establish Action plan
Implementation &
monitoring
Planning
Analysis
Integration
Action

17. Benchmarking Process
Planning
Collecting
Data
Analysis
Improving
Practices

18. 1. Planning
• Determine the purpose and scope of the
project
• Select the process to be benchmarked
• Choose the team
• Define the scope
• Develop a flow chart for the process
• Establish process measures
• Identify benchmarking partners

19. 2. Collecting Data
• Conduct background research to gain
thorough understanding on the process and
partnering organizations
• Use questionnaires to gather information
necessary for benchmarking
• Conduct site visits if additional information is
needed
• Conduct interviews if more detail
information is needed

20. 3. Analysis
• Analyze quantitative data of partnering
organizations and your organization
• Analyze qualitative data of partnering
organizations and your organization
• Determine the performance gap

21. 4. Improving Practices
• Report findings and brief management
• Develop an improvement implementation plan
• Implement process improvements
• Monitor performance measurements and track
progress
• Recalibrate the process as needed

22. Commonly Benchmarked Performance
Measures
Financial Ratios
Productivity Ratios
Customer-related Results
Operating Results
Human Resource Measures
Quality Measures
Market Share Data
Structural Measures

23. Commonly Benchmarked Performance
Measures
Financial Ratios: Such as ROA or ROI are
probably the easiest to obtain and
compare.
Productivity Ratios: Are useful in
measuring the extent to which a firm
effectively uses the scarce resources that
are available to it.

24. Commonly Benchmarked Performance
Measures
Customer-related Results: Include
customer satisfaction and comparisons of
customer satisfaction relative to
competitors.
Operating Results: Might include cycle
times, waste reduction measures, value-
added measures, and lead time.

25. Commonly Benchmarked Performance
Measures
Human Resource Measures: May include
employee satisfaction measures, training
expenditures, turnover, and absenteeism.
Quality Measures: These can include
conformance-based quality information
such as reject rates, capability information,
performance information, or other
measures.

26. Commonly Benchmarked Performance
Measures
Market Share Data: Includes shares in the
different markets served by the firm.
Structural Measures: Include objectives,
policies, and procedures followed by a
firm.

28. Benchmarking Costs
• The three main types of costs in benchmarking
are:
B
Time
Costs
Visit
Costs
Database
Costs

29. Benchmarking Costs
• Time Costs - Members of the benchmarking
team will be investing time in researching
problems, finding best practice companies to
study, visits, and implementation. This will
take them away from their regular tasks for
part of each day so additional staff might be
required.

30. Benchmarking Costs
• Visit Costs - This includes hotel rooms, travel
costs, meals, a token gift, and lost labor time.

31. Benchmarking Costs
• Benchmarking Database Costs - Organizations
that institutionalize benchmarking into their
daily procedures find it is useful to create and
maintain a database of best practices and the
companies associated with each best practice
now.

33. Benchmarking Ethics
• Since the concept of benchmarking can lead
to unscrupulous and sometimes unethical
behavior, the SPI Council on Benchmarking
and the International Benchmarking
Clearinghouse have established a general code
of conduct (Thompson). The code is as
follows:

34. Benchmarking Code of Conduct
Do not ask competitors for sensitive information. Do not make them
feel that if the data is not shared the benchmarking process will end. If
you ask the company for sensitive and valuable information, be
prepared to give the same in return.
Use an ethical and unbiased third party such as an
ombudsman or legal advisor for direct competitor advice.
Treat any information obtained from a benchmarking partner as
privileged or “top secret” information. Don't give away any
information or potential trade secrets without permission.

35. Benchmarking Code of Conduct
When benchmarking with competitors, set up certain rules that state that
things will not be discussed that give either company a competitive
advantage. Establish the purpose is for both parties to improve or gain
benefit. Costs should not be discussed.
Consult with a legal advisor if any information gathering
procedure is in doubt.
Do not misrepresent yourself or your organization as being
someone or something that you are not.
Show that you are committed to the effectiveness of the
process. And in doing so maintain a professional and
honest relationship with your benchmarking partners.