Benchmarking Analysis Implications- Valutrics

Benchmarking involves examining firms with a world-class product/service, process, or strategy and incorporating the best ideas from them into your own business in order to gain a competitive advantage. Benchmarking is an ongoing process and should not be done as a one-off event to correct problems. Ideally, it should be employed as a proactive tool to stay one step ahead of the competition.

Practice, policy, product/service, process, or strategy can be benchmarked. Benchmarking products or services usually involves examining factors such as price, technical quality, ancillary product or service features, speed, reliability, and other performance characteristics through direct product or service comparison.

Benchmarking strategies involves examining the successful long-range planning and implementation techniques other firms use to be successful in the marketplace. Strategic benchmarking provides long-term benefits and may take time for results to show, whereas with the other two benchmarking categories, the results may show up immediately.

Realistic targets and goals can be set by an organization through the use of benchmarking because another firm has already demonstrated that it is able to achieve a performance level that is desired by the benchmarking organization, thereby giving it something tangible to work toward. Benchmarking efforts should focus on those projects that relate directly to the firm’s overall strategy and provide the greatest room for improvement. For example, Federal Express ships packages across the world everyday. One of its main strategies is to ensure each customer receives their package on time and in good condition. Therefore, Federal Express spends most of their benchmarking efforts on ensuring that its customer service processes are the best.

Areas of benchmarking include products or services, work processes, support functions, organizational performance, and strategies.  Some questions that managers should ask themselves are the following:

• Is the topic important to customers?
• Is the topic consistent with the mission?
• Is the topic significant in terms of costs or key non-financial information?
• What processes are critical to our success?
• What problems do we need to overcome?
• Is the process resource intensive?
• What factors are causing the most problems?
• Does the project have a high potential for improvement?
• What functions have the greatest effect or potential for differentiating the organization from its competitors?

Benchmarking tasks should be prioritized for their importance to the overall mission of the firm, department, or unit seeking performance improvement.

It is important to understand the critical success factors in the process that will help to identify key drivers and measures of performance.

Data analysis helps to identify the gaps between their performance  and their benchmark partners. It also helps identify where a firm’s strengths lie.

Once the gaps between the benchmarking processes have been identified, their causes need to be understood so that the analyst can find out what the two firms do that is similar and different.

One of the most important components  is to set a well-defined process to implement the improvement initiatives and to monitor projected vs. actual progress on gap closure over time. Often, the source of improvement comes from adapting the best practices of the benchmarked firm to the unique circumstances of the benchmarking firm.

Dynamic competition necessitates constant monitoring of any changes in the competitive environment to determine any impact on the benchmarked parameters. In keeping with the continuous improvement ethos, future performance needs to be projected and existing benchmarks will have to be periodically adjusted and re-benchmarked in line with evolutionary change or performance slippage.