Chapter 06

Key Work feature: Benchmarking

Benchmarking is credited to have started at Xerox Corporation in the 1970s, when its group of engineers and technicians became aware of the gains being made to their core copier business by Japanese competitors. Not only were the Japanese producing cheaper copiers but also better quality copiers. To counter this Xerox developed process engineering techniques to analyze its own manufacturing procedures as well as those of its competitors. The result was that Xerox improved its processes and began to regain the lost ground. This level of scrutiny was then applied to other areas of its operation.

There are many definitions of benchmarking such as that provided by a CEO of Xerox who defined benchmarking as "the continuous process of measuring products, services and practices against the toughest competitors or those companies recognized as industry leaders." Camp's (1989) defines benchmarking as "the search for industry best practices that lead to superior performance". Codling (1996) defined benchmarking as "an ongoing process of measuring and improving products, services and practices against the best that can be identified worldwide". Spendolini (1992), a former Xerox benchmarking executive defines benchmarking as, "a continuous, systematic process for evaluating the products, services and work processes of organizations that are recognized as representing best practices for the purposes of organizational improvement".

To be effective benchmarking must be continuous. An organizations needs to proactively identify different parts of the organization that will benefit from benchmarking. It should not be seen as stand alone but rather be holistic and fully integrated into an organization’s strategy. Although benchmarking is arguably less popular than it was in the past and in some quarters is seen as yet one more management fad, it is still a useful tool of analysis if used correctly. However it is important to realise that it is not a panacea. Nor is it a substitute for decision-making. Neither will its adoption ensure business success. In fact, benchmarking that is poorly understood and inappropriately implemented will be a waste of time.

McGaughey (2002) makes the following points about benchmarking:
The benchmarking process is continuous.

Best practice is dynamic; it must be constantly revised to take account of changes within the organization and its changing competitive landscape.

Performance must be measured.

In order to determine appropriate strategies organizational performance in critical areas must be measured. This will involve the use of both quantitative and qualitative measures.

Many things can and should be benchmarked.

For example, products, services, processes and activities can be benchmarked. Any one or all of these and more can contribute to an organization's success or failure.

Companies should compare themselves to best-in-class performance wherever it can be found.

Industry leaders, competitors, and any other organization or institution believed to show best practice should be used in establishing an organization’s benchmarks. Those striving to become world-class competitors should define best practice from a global perspective, i.e. who is the best in the world?

The objective of the benchmarking process is to improve organizational performance - to make a firm more competitive.

An organization should be realistic and tailor its benchmarking effort in line with its own strategic objectives.

Benchmarking is about learning.

It is about learning how to do better, the things that are critical for an organization’s success. This learning is continuous precisely because an organization’s internal and external markets are in constant state of flux.

McGaughey highlights three types of benchmarking: internal, external and best practice. Internal benchmarking involves establishing best practice within an organization. External benchmarking examines best practice in other organizations. Best practice benchmarking is really an extension of external benchmarking that focuses on emulating the best in the world. It involves identifying the undisputed best at performing the processes which an organization believes are crucial to its business success.

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Oxford University Press, Online Resource Centre, Chapter 06.

Chapter 06