Benchmarking

Benchmarking is the process of gathering data about targets and comparators, that permit current levels of performance to be identified and evaluated against best practice. Adoption of identified best practices should improve performance.


JS&W propose the following categories of benchmarking:

(a) Historical benchmarking

• An internal comparison of current against past performance.
• This is unsatisfactory, since it can induce complacence
• Comparison with competitors is the real test of performance.

(b) Industry/sector benchmarking

• Compares like with like across the industry or similar providers in the public service.
• Limitation of this method is that the whole industry may be under-performing and in danger from substitute products provided by other industries.

(c) Best-in-class benchmarking

• Looks for best practice wherever it can be found.
• This involves making comparison with similar features or processes in other industries.
• JS&W suggest that this approach can have a shock effect on complacent managers and lead to dramatic performance improvements.



The Benchmarking Process

Stage 1 - Ensure senior management commitment to the benchmarking process.

Stage 2 - The areas to be benchmarked should be determined and objectives should be set.

Stage 3 - Key performance measures must be established.

Stage 4 - Select organizations to benchmark against.

Stage 5 - Measure own and others’ performance.

Stage 6 – Compare performance.

Stage 7 – Design and implement improvement programmes

Stage 8 – Monitor improvements



Advantages of Benchmarking

(a) Position audit – benchmarking can assess a firm’s existing position, and provide a basis for establishing standards of performance.

(b) The comparisons are carried out by the managers who have to live with any changes implemented as a result of the exercise.

(c) Benchmarking focuses on improvement in key areas and set targets which are challenging but evidently achievable.

(d) The sharing of information can be a spur to innovation.

(e) The result should be improved performance, particularly in cost control and delivering value.



Drawbacks of Benchmarking

(a) It can cloud perception of strategic purpose by attracting too much attention to the detail of what is measured, since it concentrates on doing things right rather than doing the right thing: the difference between efficiency and effectiveness.

(b) Benchmarking does not identify the reasons why performance at a particular level, whether good or bad.

(c) It is a catching-up exercise rather than the development of anything distinctive. After the benchmarking exercise, the competitor might improve performance in a different way.

(d) It depends on accurate information about comparator companies.

(e) It is not cost-free and can divert management attention.

(f) It can become a hindrance and even a threat, sharing information with other companies can be a burden and a security risk.


(source: BPP Learning Media)





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