Benchmarking is a core element of continuous enhancement programs. It is a way of discovering what is the best performance being achieved.
Management theory and practice have long recognised a link between effective performance measures and effective management.
The effectiveness of any given performance measure rests on how it will be used.
For performance measures to have meaning and provide useful information, it is essential to make comparisons.
The comparisons may evaluate progress in achieving given goals or targets, assess trends in performance over time, or weigh the performance of one organisation against another.
To be successful, benchmarking should be executed as a structured, systematic process.
It will not be successful if applied in an ad hoc method on a random basis.
In most cases benchmarking is best-practice-oriented and is part of a continuous improvement program that integrates a feedback process.
Benchmarking needs an understanding of what is important to the organisation and then measuring performance for these factors.
The gap between actual performance and preferred achievement is naturally studied to find opportunities for improvement.
Root cause analysis typically follows to assess the cause of substandard performance, and a search for best practices may be used to help address performance problems.
Benchmarking can be internal or external.
When benchmarking internally, organisations benchmark against their own projects.
When benchmarking externally, organisations seek projects from other companies.
External benchmarks are usually considered to offer the greater advantage; however, internal benchmarking can be useful where no external benchmarks are available.
Internal benchmarks are often the starting point for quantitative process examination.
External benchmarks provide the added advantage of comparing against competitors.
Without external benchmarks, an organisation and its managers may lack an understanding of what institutes “good” performance.
Benchmarking processes are not easy to implement, and to be successful an organisation must overcome numerous barriers.
Some private-sector companies fear that they may lose their competitive advantage by sharing information, and others fear exposure of organisational weakness.
While benchmarking can be very useful in developing plans for service improvement, product innovation and design advancement, the organisation might also run the risk that employees and managers will not be receptive to the proposed changes.
Benchmarking is time-consuming and costly.
Cost of benchmarking include time for planning, travel, documentation, and implementation.
The investment is lost if benchmarking data are not used to drive improvement.
