Benchmarking - Wikipedia
Benchmarking
This article is about the business term. For the geolocating activity, see Benchmarking (geolocating). For other uses, see Benchmark (disambiguation).
Benchmarking is the practice of comparing business processes and performance metrics to industry bests and best practices from other companies. Dimensions typically measured are quality, time and cost.
Benchmarking is used to measure performance using a specific indicator (cost per unit of measure, productivity per unit of measure, cycle time of x per unit of measure or defects per unit of measure) resulting in a metric of performance that is then compared to others.[1]
Also referred to as "best practice benchmarking" or "process benchmarking", this process is used in management in which organizations evaluate various aspects of their processes in relation to best-practice companies' processes, usually within a peer group defined for the purposes of comparison. This then allows organizations to develop plans on how to make improvements or adapt specific best practices, usually with the aim of increasing some aspect of performance. Benchmarking may be a one-off event, but is often treated as a continuous process in which organizations continually seek to improve their practices.
In project management benchmarking can also support the selection, planning and delivery of projects.[2][3]
In the process of best practice benchmarking, management identifies the best firms in their industry, or in another industry where similar processes exist, and compares the results and processes of those studied (the "targets") to one's own results and processes. In this way, they learn how well the targets perform and, more importantly, the business processes that explain why these firms are successful. According to National Council on Measurement in Education, benchmark assessments [4] are short assessments used by teachers at various times throughout the school year to monitor student progress in some area of the school curriculum. These also are known as interim government.
In 1994, one of the first technical journals named Benchmarking: An International Journal was published.
History
The term benchmark, originates from the history of guns and ammunition, in regards to the same aim as for the business term; comparison and improved performance. The introduction of gunpowder arms replaced the bow and arrow from the archer, the soldier who used the bow. The archer now had to adapt to the new situation, and learn to handle the gun. The new weapon left only a mark on the target, where the arrow used to be visible, and with the bow gone, the soldiers title changed to marksman, the man who put the mark. The gun was improved already in the early beginning, with rifling of the barrel, and the rifle was born. With the industrialization of the weapon-industry in the mid-1800s, The mass production of ammunition as a cartridge replaced the manual of loading of black-powder and bullet into the gun. Now, with standardized production of both the high-precision rifle, as well as the cartridge, the marksman was now the uncertain variable, and with different qualities and specifications on both rifle as well as ammunition, there was a need for a method of finding the best combination. The rifled weapon was fixed in a bench, making it possible to fire several identical shots at a target to measure the spread.
In 2008, a comprehensive survey[5] on benchmarking was commissioned by The Global Benchmarking Network, a network of benchmarking centres representing 22 countries.
  1. Mission and Vision Statements and Customer (Client) Surveys are the most used (by 77% of organizations) of 20 improvement tools, followed by SWOT analysis (strengths, weaknesses, opportunities, and threats) (72%), and Informal Benchmarking (68%). Performance Benchmarking was used by 49% and Best Practice Benchmarking by 39%.
  2. The tools that are likely to increase in popularity the most over the next three years are Performance Benchmarking, Informal Benchmarking, SWOT, and Best Practice Benchmarking. Over 60% of organizations that are not currently using these tools indicated they are likely to use them in the next three years. Benchmarking mainly depends on SWOT analysis and will also be using in future for almost 4-5 years.
Procedure
There is no single benchmarking process that has been universally adopted. The wide appeal and acceptance of benchmarking has led to the emergence of benchmarking methodologies. One seminal book is Boxwell's Benchmarking for Competitive Advantage (1994).[6] The first book on benchmarking, written and published by Kaiser Associates,[7] is a practical guide and offers a seven-step approach. Robert Camp (who wrote one of the earliest books on benchmarking in 1989)[8] developed a 12-stage approach to benchmarking.
The 12 stage methodology consists of:
  1. Select subject
  2. Define the process
  3. Identify potential partners
  4. Identify data sources
  5. Collect data and select all partners
  6. Determine the gap
  7. Establish process differences
  8. Target future performance
  9. Communicate
  10. Adjust goal
  11. Implement
  12. Review and recalibrate
The following is an example of a typical benchmarking methodology:
Costs
The three main types of costs in benchmarking are:
The cost of benchmarking can substantially be reduced through utilizing the many internet resources that have sprung up over the last few years. These aim to capture benchmarks and best practices from organizations, business sectors and countries to make the benchmarking process much quicker and cheaper.[9]
Technical/product benchmarking
The technique initially used to compare existing corporate strategies with a view to achieving the best possible performance in new situations (see above), has recently been extended to the comparison of technical products. This process is usually referred to as "technical benchmarking" or "product benchmarking". Its use is well-developed within the automotive industry ("automotive benchmarking"), where it is vital to design products that match precise user expectations, at minimal cost, by applying the best technologies available worldwide. Data is obtained by fully disassembling existing cars and their systems. Such analyses were initially carried out in-house by car makers and their suppliers. However, as these analyses are expensive, they are increasingly being outsourced to companies who specialize in this area. Outsourcing has enabled a drastic decrease in costs for each company (by cost sharing) and the development of efficient tools (standards, software).
Types
Benchmarking can be internal (comparing performance between different groups or teams within an organization) or external (comparing performance with companies in a specific industry or across industries). Within these broader categories, there are three specific types of benchmarking: 1) Process benchmarking, 2) Performance benchmarking and 3) Strategic benchmarking. These can be further detailed as follows:
Tools
Further information: List of benchmarking methods and software tools
Benchmarking software can be used to organize large and complex amounts of information. Software packages can extend the concept of benchmarking and competitive analysis by allowing individuals to handle such large and complex amounts or strategies. Such tools support different types of benchmarking (see above) and can reduce the above costs significantly.
The emerging technology of benchmarking engines automates the stage of going from data to noteworthy comparative insights, sometimes even expressing the insights in English sentences.
Metric benchmarking
Another approach to making comparisons involves using more aggregative cost or production information to identify strong and weak performing units. The two most common forms of quantitative analysis used in metric benchmarking are data envelopment analysis (DEA) and regression analysis. DEA estimates the cost level an efficient firm should be able to achieve in a particular market. In infrastructure regulation, DEA сan be used to reward companies/operators whose costs are near the efficient frontier with additional profits. Regression analysis estimates what the average firm should be able to achieve. With regression analysis, firms that performed better than average can be rewarded while firms that performed worse than average can be penalized. Such benchmarking studies are used to create yardstick comparisons, allowing outsiders to evaluate the performance of operators in an industry. Advanced statistical techniques, including stochastic frontier analysis, have been used to identify high and weak performers in industries, including applications to schools, hospitals, water utilities, and electric utilities.[13]
One of the biggest challenges for metric benchmarking is the variety of metric definitions used among companies or divisions. Definitions may change over time within the same organization due to changes in leadership and priorities. The most useful comparisons can be made when metrics definitions are common between compared units and do not change so improvements can be changed.
Social media and benchmarking
Social media is beginning to penetrate more and more into existing business processes. In this sense, benchmarking is no exception. Because of their inherent characteristics, it can even be argued that social media will have a significant impact on benchmarking. Here are some of the benefits associated with this.
Joint benchmarking is, in fact, a social activity, and social media provide many new and effective ways for social interaction.
Social media opens the way to new additional sources of information and data collection channels.
Benchmarking is becoming increasingly business-oriented, and social media is supporting this type of continuous engagement, different from working on individual projects.
See also
References
  1. ^ Fifer, R. M. (1989). Cost benchmarking functions in the value chain. Strategy & Leadership, 17(3), 18-19.
  2. ^ Invernizzi, Diletta Colette; Locatelli, Giorgio; Brookes, Naomi J. (2017-08-01). "How benchmarking can support the selection, planning and delivery of nuclear decommissioning projects" (PDF). Progress in Nuclear Energy. 99: 155–164. doi​:​10.1016/j.pnucene.2017.05.002​.
  3. ^ Invernizzi, Diletta Colette; Locatelli, Giorgio; Brookes, Naomi J. (2018-03-05). "A methodology based on benchmarking to learn across megaprojects: The case of nuclear decommissioning" (PDF). International Journal of Managing Projects in Business. 11 (1): 104–121. doi​:​10.1108/IJMPB-05-2017-0054​. ISSN 1753-8378.
  4. ^ National Council on Measurement in Education (USA) http://www.ncme.org/ncme/NCME/Resource_Center/Glossary/NCME/Resource_Center/Glossary1.aspx?hkey=4bb87415-44dc-4088-9ed9-e8515326a061#anchorB Archived 2017-07-22 at the Wayback Machine
  5. ^ "Archived copy" (PDF). Archived from the original (PDF) on 2014-08-03. Retrieved 2013-12-04.
  6. ^ Boxwell Jr, Robert J (1994). Benchmarking for Competitive Advantage. Robert J Boxwell Jr, New York: McGraw-Hill. p. 225. ISBN 0-07-006899-2.
  7. ^ Beating the competition: a practical guide to Benchmarking. Washington, DC: Kaiser Associates. 1988. p. 176. ISBN 978-1-56365-018-5. Archived from the original on 2009-08-27. Retrieved 2009-07-14.
  8. ^ Camp, R. (1989). The search for industry best practices that lead to superior performance. Productivity Press.
  9. ^ "What is Benchmarking? Save Supply Chain Costs" Retrieved 2014-3-25.
  10. ^ Del Giorgio Solfa, F. (2017). Public Benchmarking: contributions for subnational governments and Benchmarking Design. Villa Elisa: FDGS, p. 5. ISBN 978-987-42-6026-0. doi​:​10.13140/RG.2.2.36285.10722
  11. ^ "Benchmarking: How to Make the Best Decisions for Your Practice". NueMD. 2013-12-13.
  12. ^ prEN16231:2011 Energy Efficiency Benchmarking Methodology, Brussels: CEN, 2011, p5 (Definition 3.2)
  13. ^ Body of Knowledge on Infrastructure Regulation "Incentive Regulation: Basic forms of Regulation"
Last edited on 11 February 2021, at 09:36
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