What Is Benchmarking?

What is Benchmarking?

Benchmarking has become a widely accepted practice in different industries. But knowing that you should benchmark does not mean you know exactly what it is and how it should be done. This section of the eGuide seeks to provide answers to the following questions:

2.1 What is the history of benchmarking?

Benchmarking is a management approach to identify Who is best? and What makes them so successful? It has experienced increased popularity, both by manufacturing and service companies. In management science, benchmarking is usually positioned as being an extension of an existing total quality program, and as being a way in which to establish new, more relevant and efficient standards of performance. The increased interest in benchmarking has certainly been stimulated with the publication of Xerox's manager Robert Camp's book on benchmarking (Camp, 1989). Since then, the phenomenon of benchmarking has been discussed by many authors primarily in the form of management guidebooks (e.g. Spendolini, 1992; Watson, 1992, 1993; Zairi, 1992; 1996; Harrington and Harrington, 1996; Cross, 1998; Codling, 1998; Czarnecki, 1999).

2.2 How can benchmarking be defined?

Ahmed and Rafiq (1998:228) point to the wide variation of commonly used definitions for benchmarking:

"Benchmarking is a continuous systematic process for evaluating the products, services and work of organizations that are recognized as representing best practices for the purpose of organizational improvement." (Spendolini, 1992)

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"Benchmarking is a continuous search for, and application of, significantly better practices that lead to superior competitive performance." (Watson, 1993)

"Benchmarking is a disciplined process that begins with a thorough search to identify best-practice-organizations, continues with the careful study of one's own practices and performance, progresses through systematic site visits and interviews, and concludes with an analysis of results, development of recommendations and implementation." (Garvin, 1993).

"Benchmarking is an external focus on internal activities, functions, or operations in order to achieve continuous improvement." (McNair and Leibfried, 1992).

In summary, benchmarking can be defined as a systematic procedure of comparative measurement with the objective to achieve continuous improvement. The great success of benchmarking in recent years is probably related to its inherent characteristic of being a knowledge-sharing and motivational process. It encourages managers and their staff to think in terms of performance measures and practices to increase profitability.

2.3 In which areas can benchmarking be used?

Benchmarking is currently used in several business areas and particularly in quality management. The objective of benchmarking is the promotion of process or product improvement by the identification of a recognized standard and of the related actions required.

The insights gained from benchmarking provide an organization with a foundation for building operational plans to meet and surpass the standard and promote an overall awareness of business improvement opportunities. It is argued from practitioners as well as from scientific communities that benchmarking can promote thinking that generates improvement breakthroughs and leads to greater awareness of the need for long term planning.

Despite the wide use of benchmarking techniques in quality, marketing, finance, technology innovation in the manufacturing industry, benchmarking is still a vague concept in the service industry, particularly in the tourism field.

2.4 What is the difference between internal and external benchmarking?

A distinction made in the literature is the difference between external and internal benchmarking (Spendolini, 1992; Camp, 1995). However, it is possible to further distinguish four different types of benchmarking (see Table 1) according to their focus and methodology applied in the benchmarking endeavor.

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Table 1: Different Types of Benchmarking.

Approach

Scope

Objectives

Advantages

Disadvantages

Internal

benchmarking

Functions, departments, projects, businesses in the same company or group at the same or another location

* Improve competitiveness

* Stimulate continuous improvement

* Improve economic efficiency

* Find effective employee rewarding