Benchmarking is the process of comparing something or someone with best practice. Best practices are collections of activities within an organisation that are done very well and recognised as such by others Or Benchmarking refers to a process of comparing agencies,operations and performance against recognised standards and improving those operations to enhance the effectiveness. It is the way of discovering the best practices and strives for continuous improvement in a particular organization, by a competitor or in different organization. In other words, Benchmarking is measurement of the quality of an organization’s policies, products, programs, strategies, etc., and their comparison with standard measurements, or similar measurements of its competitor.
- Continuous method of measuring and comparing an organization’s business processes against another organization.
- Discover performance gaps between one’s own processes and those of leading organizations.
- Incorporate leading organization’s processes into one’s own strategy to fill the gaps and improve performance.
Objectives of Benchmarking
- To determine what and where improvements are called for
- To analyze how other organizations, achieve their high performance levels
- To use information to improve performance.
- Product and process improvement
- Time & Cost Reduction
- Competitive Strategy
Categories of Benchmarking
There are four primary categories of benchmarking: internal, competitive, functional, and generic.
- Internal Benchmarking: Internal benchmarking means comparison of internal operations between different divisions or similar functions in different operating units within an organisation. Internal benchmarking compares similar internal functions within an organisation. In other words, It is the process of comparing internal results in a systematic and standard way and comparison of practices & performances between teams, individuals or groups within an organization.
- Competitive Benchmarking: Competitive benchmarking compares a work process with that of the best competitor in the same market. It means, this is the process of comparing you products, services, processes and practices to a direct competitor using standard measurements and comparing your results to a competitor. Its evaluate your current competitive position, develop strategies and evaluate performance.
- Functional Benchmarking : Functional benchmarking compares a work function to that of the functional leader in the same industry or different industry. In other words, this benchmarking is the practice of comparing results across diverse industries and processes using commonalities in functional capabilities. It means comparing your results to a firm or industry with which you don’t directly compete.
- Generic Benchmarking: This focuses on the best work processes, instead of focusing on a company’s business practices, similar procedures and functions are benchmarked. This is the process of comparison of functions which are generic in nature in any organization.