What is Benchmarking - Types of Benchmarking
To succeed in a highly competitive market it is essential for the firm to us the technique of benchmarking. A benchmarking refers to a point of reference against which a firm measures its performance. These points of reference technically refer to as’ standards can be in different facets of an organization like processes, system, caliper and training of marketing staff, service culture, and customer service.
Benchmarking which involves the study of a firm’s performance with the standards of the best in class organization in different facts of business with an objective to improve its performance. Usually it has been a practice among the firms to compare there performances against industry leaders. How ever, at times, benchmarking may be undertaken even against a smaller firm if it has a particular strengths because of being more focused that can set a standard for the industry.
At the same time firm must recognize the benchmarking should not aim at matching only but should be aimed to out perform the effect of competitors. However if the benchmarking is to be used as a strategic tool in developing the different dimensions of an organization then the benchmarking study should not be restricted to industry only but must include other industries as well as.
The basic spirits of benchmarking lies in the systematic search for best practices both inside and outside of the industry which would served as matrices against which a firm would measure its performance. Thus, a firm can not use benchmarking as s strategic weapon for superior performance unless it understands its own processes and the process of the best in class organization.
Levels of Benchmarking:
Since a benchmark against which a firm would measure its strategies and performance can be taken from both inside as well as outside a firm‘s industry. Therefore, conceptually there can be distinct level of benchmarking.
Internal benchmarking aims to improve a firm‘s performance by comparing the same with the metric taken form its own department or functions.
Competitive benchmarking attempts to improve a firm‘s performance by a cross comparison within the same industry. Thus, it compares a firm’s s performance wit its competitors on any facts of the organization like product function, or organization as a whole. The basic aim of a competitive benchmarking is to improve a firm competitive position relative to its competitors. Therefore, a competitive benchmarking would enable a firm to find a reply of the following questions:
. To what extent its strategies and performance are close to the best practice in the industry?
- Should it continue with its existing strategy or modify or change it?
- What kind of improvement is required in the existing process and system to make them outstanding?
Comparative benchmarking is much wider then internal and competitive benchmarking as it calls for the comparison across all industry with an aim to identify best practice in all areas of business.
Types of competitive Benchmarking:
There can be various type of competitive benchmarking depending on the variable used for the comparisons. Generally a firm can make use of the following types of competitive benchmarking to remain competitive.
Operational benchmarking also called performance benchmarking involves a comparison of operational variables like product features, service quality, and delivery with the best in class organization to ensure superior performance.
Process benchmarking aims to compare system and processes that are used to facilitate a firm in turning out its market offering with the benchmark.
Strategic benchmarking calls for a comparison between the strategies used by a firm to achieve a particular strategic stature in the industry with the strategies of the competitors in the same market.