Benchmarking is first and foremost a tool for improvement, achieved through comparison with other organizations recognised as the best within the area. In this chapter we will present some central definition, different type of benchmarking, and the motivation for using benchmarking. We do also try to position benchmarking I relation to other quality and improvement tools in use in the organization as well as strategy and strategic planning. Pre-condition for using benchmarking are also reviewed. (Andersen, et al., 1996)
BENCHMARKING DEFINITIONS
Somewhat philosophically, benchmarking can be defined as follow:
Benchmarking is the practice of being humble enough to admit that someone else is better at something, and being wise enough to learn how to match and even surpass them as it (APQC, 1993) (Andersen, et al., 1996)
A benchmark is a measured -"best-in-class" achievement recognised as the standard of excellence for that business process. (APQC, 1993), (Andersen, et al., 1996)
The original meaning of the word is: A predefined position, used as a reference point for taking measures against.
There are several different theories about where the word benchmark really comes from. One of them claims it to originate from geographical surveying, where a benchmark is a topological reference point in the terrain. The position of other points is given with reference to this benchmark. (Andersen, et al., 1996)
Another theory says that the word comes from the sale of fabrics, where the stores usually had, and other still have, a ruler sunk into the counter to measure the amount of fabric. Thus, the salesperson took measures against a benchmark. (Andersen, et al., 1996)
A third one claims that benchmark comes from fishing contests. The size of the fish is compared through placing the fish on a bench and measuring the length of it by using a knife to make a mark in the bench. When the next fish is put on the bench, one can easily see whether its size matches the previous ones (Andersen, et al., 1996)
Operational definition of benchmarking.
Many people see benchmarking only as a method for comparing key figures, very often financial, for the purpose of marking a company against competitors or an industry standard. We would strongly like to emphasise that this is a far too limited view of benchmarking. Benchmarking might have been used this way earlier, but is today a far more powerful tool. Do therefore, please, observe the points made by the arrows in the definition above:
DIFFERENT TYPES OF BENCHMARKING
Benchmarking is about comparing a company with other companies. One can compare the company on a whole or one can compare processes, function, products, etc. different types of benchmarking can be define based on what is compared and whom it is comparing against.
Compare what?
Compare against whom
(Andersen, et al., 1996)
Benchmarking of what?
Three types of benchmarking can be define, depending on what is being compared:
When Xerox launched benchmarking in the early 1970s, it was mainly used for two purposes;
Later, one has realised that too much focus on performance measures (performance benchmarking) gives little information about how to improve or close the gap to the partner. This might often lead to the three D"s of benchmarking; disbelief, denial, and despair. One does not believe the presented results from the comparisons (disbelief), one denies the results by claiming that the companies are not comparable (denial), and one gets paralysed and unable to act because one does not know how to catch up with the competitors (despair). (Andersen, et al., 1996)
If learning, motivation, and improvement are to be the result of a benchmarking study, it requires that the causes for the performance gap are the focus of attention. The process itself has to be analysed, not only the measures (process benchmarking).
A business process can be defined as;
(Andersen, et al., 1996)
Benchmarking against whom?
Four types of benchmarking can be defined, depending on whom one compares against;
Internal benchmarking - A soft start
Internal benchmarking is mainly used within large corporations where different units are evaluated and compared to each other. If one unit performs better than the others, practices can be transferred internally for improvement. The advantages of internal benchmarking are that it is often easy to define comparable processes, data and information are easily accessible, and often on a standard format. (Andersen, et al., 1996)
Competitive benchmarking - A sensitive area
Competitive benchmarking is an extension of competitor analysis where instead of focusing on the industry average, focus is on the best competitors. Due to problems regarding sharing of sensitive information between competitors and the legal and ethical limitations connected to this type of benchmarking, competitive benchmarking is often seen as superficial and too focused on key figures. (Andersen, et al., 1996)
Functional benchmarking - To learn from your closest
In functional benchmarking, benchmarking partners can be customers, suppliers, or other companies within the same industry or technological area. It is other easy to get in touch with such companies and the problems facing these companies are often similar (Andersen, et al., 1996)
Generic benchmarking - Exercise in creativity
Finding companies in totally unrelated industries that perform similar processes as one might sometimes require a solid portion of creativity. The same goes for transferring knowledge for one industry to another. Still, the potential for identifying new technologies or practise that will lead to breakthroughs is highest in generic benchmarking. One example is the spread of bar coding from industry to industry. (Andersen, et al., 1996)
THE CORE OF BENCHMARKING
Benchmarking basically has four main attractions;
