A definition and critical analysis of benchmarking

Category: Accounting

According to the Robert Camp definition on benchmarking, its the search for company best practices which will lead to superior performance. The article has highlighted the importance of benchmarking practice which leads to continuous improvement in the organization performance.

Moreover the authors mentioned the important of five steps in benchmarking such as:

What to benchmark

Select benchmarking partner

Collect data and analyze it

Goals for improvement

Implement and monitor

Benchmarking practices identified depending on the nature of the object that will benchmark such as process, product and strategic benchmarking. In addition the benchmarking could be in the same organization, for example, it might be internal benchmarking, competitive benchmarking, functional benchmarking and generic benchmarking.

Then the authors defined benchmarking subjects which is the first and important step in benchmarking, if improvements on product, services or performance aim to improve competitiveness and business results.

Finally, two cases are presented as an example of how companies can apply the proposed steps for organizing benchmarking initiatives which are focused on processes critical to competitive dimension.

Key Learning Points

The important ideas discussed in this article focuses on the basic five steps of benchmarking. Benchmarking is considered to be of great importance for gaining competitive advantage over the competitors by considering the improvement in performance level of the product and the operational strategies.

Benchmarking can be classified on the basis of two different variables. Classification can be done based on the objective of the study and the type of partner. Benchmarking can have the following three objective of study:

Process benchmarking - In this type of benchmarking operations, business processes, and work practices of two companies are compared.

Product benchmarking - Products and services of the competitor are compared.

Strategic benchmarking - In some ways it is similar to process benchmarking. Management practices and organizational structures are compared.

Based on the type of partner benchmarking can be divided into 4 types: Internal benchmarking, Competitive benchmarking, Functional benchmarking, and generic benchmarking.

Another key point to learn from the case study is how to define the objective of studying benchmarking. A series of steps is suggested for deciding the object of the benchmark. The given two case studies give a complete insight of the benchmarking process which is very critical to competitive advantage. The proposed cases demonstrate the role of benchmarking in competitiveness, strategic planning, and customer expectations. Implementation of improvement planning in the business operations rather than the functional hierarchy results more effective in the proportions of competitiveness. (Carpinetti, 2002)

Critical Analysis

The article has presented many facets of the term benchmarking in very elaborated and critical ways and methodologies. From this article I understood:

Definition of benchmarking: Earlier benchmarking was practicing and striving for the best methodologies of the industry for the best performance among the competitors. But now benchmarking has a broader meaning. It is a more rigorous and planned course of actions for measuring the current business operations and process management and comparing them with that of business competitors from all over the world which will help the organization in gathering information for improvements in the performance. Benchmarking is currently widely used in the word as a tool for continuous improvements and establishing total quality management.

Process Benchmarking concentrate on specific processes and steps of the business rather than the complete production process. The major focus of the article is that the analysis of organization's current practices and incorporating the best business procedures in the strategic decision making and business operations will be of great help in improving the overall performance carried out by the company. The process benchmarking is useful to improve the performance of various phases of the product development and improve the overall productivity by implementing strategies that are best in the industry and are used by other competitors. (Carpinetti, 2002)

Benchmarking is very advantageous for the organizations in the current competitive scenario. Following are some of the major benefits of benchmarking:

Renders real objectives and goals to achieve.

Prevents companies' business monopolies.

Objects operational satisfaction of companies.

Environment of consistent improvements.

Motivate employees by helping them in visualizing the improvements.

Develops a feeling of urgent improvements.

Indentifies the loopholes of the business process and steps to improve them.

Benchmarking is the only solution to examine the business competitiveness of a company and to improve the performance by doing comparison with the competitors.

The process of benchmarking is divided into 5 basic steps

What to benchmark?

Select benchmarking partner.

Collect data and analyze it.

Goals for improvement.

Implement and monitor.

Medium and smaller companies willing to follow global management patterns implement very rigid operational structure for the improvements in performance. But what they forget to consider is the compliance of those practices with the current market strategies. This article enlightens such issues of prioritizing the benchmarking of projects with strategic decisions, and customer expectations.

The article discusses different types of benchmarking that are applied in the operations with different requirements in the business process.

Process benchmarking: Key functions of this benchmarking type are to improve particular important business operations and processes. Benchmarking partners in this are the ones who produce similar services for the same target market and use best practices in the industry. This type of benchmarking is useful in achieving short term benefits for the company.

Strategic benchmarking: This type of benchmarking gains the overall performance of the business by analyzing long term changes in the business operations that have been useful for the competitors in improving their performance. This benchmarking considers the core aspects of business like improving competencies, development of novel products or services. This type of benchmarking is difficult to implement in the organization as it involves major organizational changes and long time to materialize these changes.

Competitive benchmarking: Position of a company in the market is assessed by the performance of their products or services in the market. The benchmarking partners are chosen from the similar sectors who are the manufacturers of similar products or services.

Internal benchmarking: Benchmarking of businesses operations and processes is done by comparing with the different business units of the same company. For his benchmarking process critical data is easily available for analyzing and it is less time and resources consuming. Implementation of business processes and operations is easy as they are done within the same organization but the best class in the industry cannot be achieved in this type of benchmarking.

External benchmarking: Analysis is done from the organizations that are best in the field. Performance mark is kept higher in this type as comparisons are done with the leaders of the business. This type of benchmarking takes time and resources for comparison.

The case studies in the article are shown very effectively as an example of employing the benchmarking processes in the business which is very critical for gaining a competitive edge over the competitors. The cases show the effectiveness of the process steps of the benchmarking in an organization. The steps are helpful in prioritizing the improvements in business operations, analysis of competitive dimensions and benchmarking of projects with the help of assessments. (Carpinetti, 2002)

Practical Implications

The proposed theories of benchmarking are very much useful for any real business case. These theories are being implemented in the given two business case in the article. Every organization in the current scenario is striving for the competitive advantage over the competitors. Innovation and improvements are the key factors for the success of any business. In the proposed business cases the companies are willing to improve their certain business processes and by following the theories of the articles they can achieve their objective. Application of the theories and methodologies in the article have are completely feasible in the real business world. At first sight these theories seems to be very impractical and superficial but after the assessment of the case studies we can see that deploying only performance improvement steps without considering the current market demands and competitive needs the specific goal cannot be achieved. These objectives of consistent performance and gaining competitive edge over the competitors can be carried out only by implementation of the theories in the article. (Process Benchmarking)

Learning Reflections

The article has been of great help in understanding the current requirements of improvement in business operations. The theories and case studies proposed in the article have completely changed the perspective of improvement in the performance of business processes and competitive advantage. Including strong improvement activities without considering the effects of current market requirements, business activities, and the process of the competitors will not be helpful in the overall improvement of the organizational performance. The 5 basic steps of benchmarking are the important steps for the consistent and significant improvement in the performance of the organization.