Primary navigation:

QFINANCE Quick Links
QFINANCE Topics
QFINANCE Reference
Add the QFINANCE search widget to your website

Home > Performance Management Best Practice > Everything You Need to Know About Benchmarking

Performance Management Best Practice

Everything You Need to Know About Benchmarking

by Robin Mann

Executive Summary

  • Benchmarking is much more than a comparison of performance.

  • Benchmarking focuses on learning from the experience of others and can be defined as “identifying, adapting, and implementing the practices that produce the best performance results.”

  • Benchmarking is a powerful method for breakthrough thinking, innovation, and improvement, and for delivering exceptional bottom-line results.

  • New benchmarking methodologies aim to ensure that benchmarking projects result in major benefits, both financial and nonfinancial.

  • New tools available on the internet make benchmarking easier.

Introduction

Organizations are constantly looking for new ways and methodologies to improve their performance and gain a competitive advantage. As they seek improvements to their own business processes, many organizations recognize the importance of learning from best practices that have been achieved by other organizations. By removing the need to reinvent the wheel and providing the potential to adopt proven practices, benchmarking has become an important methodology for providing a fast track to achieving organizational excellence.

Types of Benchmarking

It is useful to distinguish between the main types of benchmarking.

First, there is informal benchmarking. This is a type of benchmarking that most of us do unconsciously at work and in our home life. We constantly compare and learn from the behavior and practices of others—whether it is how to use a software program, cook a better meal, or play our favorite sport. In the context of work, most learning from informal benchmarking comes from the following:

  • Talking to colleagues and learning from their experience (coffee breaks and team meetings are a great place to network and learn from others);

  • Consulting with experts (for example, business consultants who have experience of implementing a particular process or activity in many business environments);

  • Networking with people from other organizations at conferences, seminars, and internet forums;

  • Websites, online databases, and publications that share benchmarking information provide quick and easy ways to learn of best practices and benchmarks.

Second, there is formal benchmarking, of which there are two types: performance benchmarking, and best practice benchmarking.

Performance Benchmarking

Performance benchmarking describes the comparison of performance data obtained by studying similar processes or activities. Comparisons of performance may be undertaken between companies, or internally within an organization. It is useful for identifying strengths and opportunities for improvement. Performance benchmarking may involve the comparison of financial measures (such as expenditure, cost of labor, cost of buildings/equipment, cost of energy, adherence to budget, cash flow, or revenue collected) or nonfinancial measures (such as absenteeism, staff turnover, the ratio of administrative staff to front-line staff, budget processing time, complaints, environmental impact, or call centre performance).

Most people equate benchmarking to performance benchmarking. This is unfortunate, because performance benchmarking on its own is of limited use. Too often performance benchmarking data are collected (often at significant cost) and no further action is taken after the data have been obtained. While performance benchmarking enables a performance gap to be identified, it does not provide the idea, best practice, or solution as to how performance can be improved and the gap closed.

Best Practice Benchmarking

Best practice benchmarking describes the comparison of performance data obtained by studying similar processes or activities and identifying, adapting, and implementing the practices that produced the best performance results. Best practice benchmarking is the most powerful type of benchmarking. It is used for learning from the experience of others and achieving breakthrough improvements in performance. Best practice benchmarking focuses on “action”—i.e. doing something with the comparison data and learning why other organizations are achieving higher levels of performance.

Best practice benchmarking projects typically take from two to four months to identify best practices. The practices then need to be adapted and implemented. The time taken for the whole project varies depending on the project’s scope and importance, and on the resources used. Projects are usually resource-intensive (in terms of the project team’s time), and so care needs to be taken that they focus on issues of high strategic importance that will deliver major bottom-line benefits.

Popularity of Benchmarking

Research by the Centre for Organisational Excellence Research (COER), on behalf of the Global Benchmarking Network, identified the popularity of benchmarking in comparison to other business improvement tools.1 This research was based on a survey that was completed by over 450 companies from more than 20 countries.

Figure 1 shows the results in terms of the popularity of 20 business improvement tools. Mission and vision statements and Customer (client) surveys were the most popular (used by 77% of organizations), followed by Strengths, weaknesses, opportunities, and threats (72%), and Informal benchmarking (69%). Performance benchmarking was used by 49% and Best practice benchmarking by 39%.

Back to Table of contents

Further reading

Book:

  • Camp, Robert C. Benchmarking: The Search for Industry Best Practices That Lead to Superior Performance. Portland, OR: Productivity Press, 1989.

Websites:

  • Baldrige Performance Excellence Program, on the National Institute of Standards and Technology (NIST) website. A US government website that promotes the Baldrige Criteria for Performance Excellence: www.baldridge.nist.gov
  • Business Performance Improvement Resource (BPIR) has a large collection of information and resources on benchmarking and best practice: www.bpir.com
  • Centre for Organisational Excellence Research (COER), a New Zealand-based research and consultancy organization headed by the author. The website provides information on business excellence and TRADE benchmarking projects: www.coer.org.nz
  • European Foundation for Quality Management (EFQM), developers and custodians of the EFQM Excellence Model: www.efqm.org
  • Global Benchmarking Network (GBN) provides a listing of the main promoters/experts in benchmarking from over 20 countries: www.globalbenchmarking.org

Back to top

Share this page

  • Facebook
  • Twitter
  • LinkedIn
  • Bookmark and Share