Benchmarking Basics

Benchmarking is a strategic and analytic process of continuously measuring an organization's products, services, and practices against a recognized leader in the studied area (Department of the Navy TQL Glossary, 1996).

Benchmarking is more than a simple comparison of one organization's business practices to another for the purpose of improving one's own process. Benchmarking provides a data-driven, decision-making vehicle to implement changes of world-class quality to core business practices. And, since there is no one way to perform a process that will be the industry's best practice forever, benchmarking is also an ongoing discovery process that recalibrates to establish new baselines for continuous improvement. Performed well, benchmarking will also promote teamwork and remove subjectivity from mission-critical decision making.

Background

The term "benchmark" comes from the U.S. Geological Survey benchmarking symbol. It means to take a measurement against a reference point. Probably the most successful of the benchmarking pioneers is the Xerox Corporation. Xerox began conducting benchmarking studies formally in the late 1970s in its copier duplicator manufacturing division. Other companies have achieved similar successes from benchmarking, including: Ford Motor Company, Alcoa, Milliken, AT&T, DuPont, IBM, Johnson & Johnson, Kodak, Motorola, and Texas Instruments. Many of these companies are winners of the Malcolm Baldride National Quality Award. The award program's board of examiners recognizes benchmarking as a key quality tool; it is tied to over one third of the total award points. Similar criteria are used for the President's Quality Award, the Quality Improvement Prototype Award, and the Deming Prize.

Other definitions of benchmarking include:

• a surveyor's mark … of a previously determined position… used as a reference point …a standard by which something can be measured or judged.. (Webster; 1984 [emphasis added]).
• a process of industrial research that enables managers to perform company-to-company comparisons of processes and practices to identify the "best of the best" and attain a level of superiority or competitive advantage:the search for those best practices that will lead to the superior performance of a company.. (Camp, 1989).
• a continuous, systematic process for evaluating the products, services, and work processes of organizations recognized as industry or world leaders.. (Spendolini, 1992).
• a process for rigorously measuring your organization's performance and processes vs. the .best-in-class. organizations (both public and private), and using the analysis to substantially improve services, operations, and cost position.. (Kaiser Associates, Inc., 1995).
• the search for industry best practices that lead to superior performances.. (Benchmarking Report for the Assistant Secretary of Defense for Command, Control, Communication, and Intelligence, 1994).
• 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 at it.. (American Productivity and Quality Center, 1993).

A best practice is:

• the best-in-class
• the industry leader
• the best-of-breed
• world-class
• a relative term

Benchmarking is:

• a tool to identify, establish, and achieve standards of excellence.
• a structured process of continually searching for the best methods, practices, and processes and either adopting or adapting their good features and implementing them to become the "best of the best."
• the practice of measuring your performance against world-class organizations.
• an ongoing investigation and learning experience ensuring that best practices are uncovered, adapted, and implemented.
• a disciplined method of establishing performance goals and quality improvement projects based on industry best practices.
• a searching out and emulating of the best practices of a process that can fuel the motivation of everyone involved, often producing breakthrough results.
• a positive approach to the process of finding and adapting the best practices to improve organizational performance.
• a continuous process of measuring products, services, and practices against the company's toughest competitors or those companies renowned as industry leaders.
• learning how leading companies achieve their performance levels and then adapting them to fit your organization.
• a research project on a core business practice.
• a partnership where both parties should expect to gain from the information sharing.
• both a business tool and a quality tool for improving key business processes.

Successful benchmarking will help you:

• find who does the process best and close the gap.
• recognize the leading organizations in a process or activity.
• create performance standards derived from an analysis of the best in business.
• ensure that comparisons are relevant.
• measure your performance, your processes, and your strategies against best in business.
• measure business processes.
• assess performance over time.
• accelerate continuous process improvements (CPI).
• establish more credible goals for CPI.
• establish actionable objectives.
• discover and clarify new goals.
• establish customer expectations of business standards set by the best suppliers in industry.
• help your organization achieve breakthrough improvements.
• create a sense of urgency for change.
• increase customer satisfaction.
• become direction setting.
• provide a positive, proactive, structured process.

Benchmarking requires:

• a thorough understanding of your organization's business processes before any comparisons are attempted.
• planning to identify the best-in-class for comparison and data collection.
• analysis to determine the performance gaps.
• integration to set new goals and standards.
• an action plan to implement the changes to the process.
• constant updating to keep the standard of excellence.
• a means to measure.
• commitment by leadership.
• resources, including time.

Benchmarking works best when:

Benchmarking is not:

• just looking for a better way to do things; it looks for the best way.
• a mere comparison.
• only competitive analysis.
• site briefings.
• industrial tourism.
• spying.
• easy.
• quick.
• fool proof.
• free.
• subjective.
• a panacea.
• a program.
• a cookbook process.
• a mechanism for determining resource reductions.
• business as usual.
• a management fad.

Benchmarking does not:

• copy. Instead, you must adapt the information to fit your needs, your culture, and your system. And, if you copy, you can only be as good as your competitor, not better.
• steal. To the contrary, it is an open, honest, legal study of another organization's business practices.
• stop. Rather, it is a continuous process that requires recalibration.

Timeliness, responsiveness, accuracy, etc., are all performance measures that can be benchmarked against numerous processes. Don't just round up the "usual suspects." Stretch. Only your imagination will limit you.

Source: USN Benchmarking Handbook

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