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Meaning of Benchmarking

DEFINITION 1: Benchmark is a standard or a point of references against which things may be compared, measured and judged.

DEFINITION 2: Benchmarks refer to studies of circumstances and process that help in superior performances. In benchmarking process, efforts are made to learn, improve and evolve process to suit the organization circumstances.

DEFINITION 3: Benchmarks are an approach of setting goals and measuring productivity based on best industry practices.

It helps in improving performance by learning from best practices. It involves regularly comparison of different prospect of business process.

DEFINITION 4: Benchmarking is a process of continuous improvement in search for competitive advantages.

It is not a panacea or remedy for all problems faced by organizations.


Steps in Benchmarking Process

There are following steps in bench mark process -

  1. Identifying the Need for Benchmarking
  2. Clearly Understanding the Existing Business Processes
  3. Identify Best Processes
  4. Compare Own Processes and Performance with That of Others
  5. Prepare a Report and Implement the Steps Necessary to Close the Performance Gap
  6. Evaluation


STEP 1 - Identifying the Need for Benchmarking:

This step will define the objectives of the benchmarking exercise.

It will also involve selecting the type of benchmarking.

Organizations identify realistic opportunities for improvements.

STEP 2Clearly Understanding the Existing Business Processes:

                 This step will involve compiling information and data on performance. This will include

  1. Mapping processes
  2. Different method of collecting data and information -Information and data is collected by different methods such as interviews, visits and filling of questionnaires.

Identify Best Processes:

               Within the selected framework, best processes are identified.

These may be within the same organization or external to it. But it should be very clear that with whom and what we are going to compare

Compare Own Processes and Performance with That of Others:

While comparing gaps in performance between the organizations, better performers are identified. Further, gaps in performances are analyzed to seek explanations. Such comparisons have to be meaningful and credible.

Feasibility of making the improvements in the light of the conditions that apply within the organization is also examined.

Prepare a Report and Implement the Steps Necessary to Close the Performance Gap:

A report on the benchmarking initiatives containing recommendations is prepared.  Such a report includes the action plan(s) for implementation.

A business organization must evaluate the results of the benchmarking process in terms of improvements vis-à-vis objectives and other criteria set for the purpose. It should also periodically evaluate and reset the benchmarks in the light of changes in the conditions that impact its performance.



Area in which Benchmarks can be used

  1. Product development
  2. Manufacturing costs assessment
  3. Operations and maintenance
  4. Distribution
  5. Customer services
  6. Plant utilization levels
  7. Human resource management

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