Benchmarking is the comparison of a company’s products, services, and processes with the same business’s best company. The importance of benchmarking is to improve the performance of the company. It also helps the company to set and perform with standards. It is a useful tool that provides objectivity to the business. It also is a tool for different companies to compare their workability with other companies.
Why should you benchmark?
The following points can help you understand better:
- The benchmarking technique allows you to find some of the best businesses in the market and look at the strategies they apply. It also makes you understand the things you can evaluate from them and then use in your businesses.
- Benchmarking also gives you the ability to identify the weaknesses and strengths of your business. If this not done, you could be moving to a blind path without any guidance.
- To have an objective view of your business is essential. When it is your business, you seem to be emotionally attached to it, which might create a barrier for you to look at objectivity.
- Benchmarking also makes you understand the employee productivity in your business. At the same time, this will further allow you to set reasonable expectations from the staff. Over or under expectation can cause harm to the flow of the business. There is no advantage of forming an expectation that the human workforce cannot meet. It will not do justice to the business if you set the expectation that is too low to drive your company’s real value. Looking at the productivity of successful companies will also help you understand your productivity gaps.
- Finance is a significant part of the business and should not be overlooked, so benchmarking also helps access finance in the industry. It will also make you understand the expenditure question you might have in your mind.
Types of benchmarking:
- Internal benchmarking: In internal benchmarking, the practice and performance of the company are majorly done by comparing between the teams, group, and individual with a single organization. They compare the things within the organization and evaluate them in comparison to one another.
- External benchmarking: In external benchmarking, there is a comparison of the performance with the other companies in the same business.
Benchmarking can have further divisions as follows:
- Process benchmarking: This benchmarking is used to evaluate or analyses the competitors working ways and the methods through which they can gain success. During process benchmarking, the gathering of data will be through surveys, research or website visits. The people can then utilize the data to achieve the same objectives or have the same aim.
- Performance metrics: For this benchmarking, the competitors’ evaluation base uses the numerical metrics gathered as a piece of information. These can also benefit the company’s growth, like identifying the performance gaps, prioritizing tasks, and working in that direction.
- Strategic benchmarking: Through strategic benchmarking, you can understand how the top successful companies compete and then utilize the leading strategies to succeed in the market. Strategic benchmarking is useful for companies who are aiming at long term goals.
- SWOT: The abbreviation says Strengths, Weaknesses, Opportunities and Threat. SWOT might give you the clarity to observe the strengths and weaknesses and then identify the same opportunities and threats. In this, most of the businesses provide their strengths, weaknesses, observations and threats.
- Peer benchmarking: Peer benchmarking is a business tool similar in their business and belongs to a similar filed. Then they can compare their performance with the competitors or each other.
- Group benchmarking: In this, the companies’ groups amalgamate together and go forth to some association to provide them with the required and necessary report to deliver their benchmarking aspects.
- Best practice benchmarking: In best practice benchmarking, the companies look up to the businesses that have already make their mark in their respective fields. The companies who look up to them to come at their level and be successful should also follow the tools, aims, objectives or practices inherited by these top leading companies.
What are the steps of benchmarking?
It is always good to follow a structured and systematic way for any benchmarking process. Let us have a glimpse at the steps of benchmarking that cab benefit our business and can give us a clearer vision on the direction to move into while using the technique of benchmarking:
This is the primary stage, so it needs proper time and attention. A single mistake at the first stage, which is the planning stage, can obstruct the whole process coming forward. It requires adequate time and dedication to making all the further steps even more efficient and effective.
In this phase, the first step is to identify the opportunities and ask the question, which is very important about what to benchmark? This phase should have top-level management’s involvement; this step’s decision should flow from top to down. Preparation for the list of processes that need to benchmark should be completed in this phase. And further shortlisting needs to be done, but again with the top management’s involvement.
In the second step of the planning phase, it is crucial to know the question “who to benchmark?” No here you need to identify the organizations whose processes will function as a benchmark for you. For your trial of this step, you can select several organizations because the direct competitors might not be present at the places you will gather the benchmark data. Or you c check whether the information of the selected companies are available to you or not.
The third step of this planning phase is to study the superior process by this. We mean that it will not be easy for you to access the data of the organizations selected so easily. Even if you have made you visit them, you need to cross-check the appointments to see them or check the relevant and authentic data collection sites.
This phase, as the name says, analyses the collected data and information. The personnel involved in the process selecting step should be deeply involved in this as they already know from where they started.
The fourth step in the analysis phase is to find the improved process. Once you have collected the data from the benchmarked organization, you need to develop an enhanced strategy from the data collected and analyzed from the net benchmarked company.
In the fifth step of the analysis phase, you need to set the improved process goals. Now in this step, the plan needs to be set to improve the company’s process. It would be best to set such purposes best even compared to the top organization in the industry.
This phase serves as a bridge linking the two stages before planning and analyzing. The only drawback or the thing which needs attention in this phase is that it will only move forward if the management has approved the earlier two stages. It will also tell you the acceptance of processes by the management. This phase is significant.
The sixth step is to gain acceptance, as said earlier. Unless there is not proper acceptance, it will hinder the process further. So this needs approval by the head of the department or the top management people.
The seventh step is to set new functional goals. Now, after the acceptance of processes is finally done, the new revised goals have to set.
This phase will have three steps and will need a scope to improve the parts.
The eight-step is to make an action plan for implementing it. This action plan will require the inputs taken by all, and you can implement it then. The things of utmost importance in an action plan are time, responsibility, targets and any obstacle. The people allocated responsibility for the action plan should commit to making it on the given timeline.
The ninth step is to implement the actions and monitor the progress after that. All the seniors involved in the first process should ensure that the plan’s first proper implementation is done and make sure to go through the monitoring process. You should ensure that the activities are getting monitored from time to time. When the revised process has completed, you need to sort the benefits out to show achievement.
The last step is to keep the process continuous. After the completion, the next step is to make more processes select more benchmarking companies and take the example of this process that can be the best to achieve the company’s success.
One of the most significant advantages of benchmarking is that you can learn so much from others’ processes and implement them in your with your processes. There is scope to see the negatives and positives of your business. The learning aspect of benchmarking is always ongoing. It would help if you kept it alive to get your company amongst the top and be the leader in this technique.
Benchmarking is one of the best practices in the industry. It makes your business improvements from learning and doing things in a cheaper, faster and better way. It gives the organizations a space of understanding to adopt the best practice to aim for their achievements. It will gradually help them in increasing the aspects of their performance.
One of the reasons for benchmarking is that it helps the organizations evaluate the areas where the gap, in between their standard and the organizations that are the largest and at the top.
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