Benchmarking is an iterative, continuous strategic discover process that is a key driver of growth in today’s competitive global landscape. Under expert guidance, a meticulously orchestrated benchmarking process can drive efficiency and productivity in nearly any facet of an organization’s operation. Before assessing exactly how your business can use benchmarking, a thorough understanding of the optimal methodology for benchmarking is absolutely essential.
Simply put, benchmarking is a process of studying successful businesses within your industry for certain practices, but can also involve study outside of your industry. Essentially any business process can be the subject of a benchmarking study. Manufacturing processes, new product development, customer service, sales, marketing and channel resourcing, profitability, staff management – the list is extensive. Self-study may also be necessary to determine which areas of your business are the most important to benchmark in the first place. By comparing your self-study with either the best practices or performance measures of another organization, recommendations can be made and then implemented, resulting in organic growth when done correctly.
Different Types of Corporate Benchmarking
There are generally three varieties of benchmarking – informal benchmarking, performance benchmarking and best practice benchmarking. Informal benchmarking is not structured and may only involve broad, qualitative or unfocused comparisons between your company and others. Performance benchmarking examines performance metrics for a specific process within your business and others, in order to identify areas for improvement and establish performance targets. Best practice benchmarking involves intensive study of other organizations and compares the way high performers in specific areas tackle problems and implement solutions. Performance and best practice benchmarking are considered formal benchmarking, and although they involve more time, effort and expertise, typically yield more tangible results.
Five years ago, less than half of companies studied used formal benchmarking as an improvement tool, according to a comprehensive study conducted by the Global Benchmarking Network. Informal benchmarking was undertaken by nearly 70% of organizations, despite indications that it is not nearly as effective as formal benchmarking. Why is informal benchmarking less effective than formal benchmarking? It’s all about the methodology. Formal benchmarking follows a strict process, which begins with planning and analysis, self-study and external information collection, recommendation and finally implementation. Five years ago, companies didn’t possess the internal expertise in the methodology of the overall process, nor the methodology to conduct each specific step.
What has changed since then? Companies are beginning to recognize that they do not possess the time, expertise or objectivity to conduct rigorous, formal benchmarking themselves. At the same time, global consulting firms are finely tuning their methodology and expertise in such areas, making them vital partners in benchmarking endeavors. As discussed in a recent study done by the Global Benchmarking Network, consultants are able to provide several benchmarking services – the ability to expertly conduct in person interviews with the partner company, resulting in a higher-quality objective self study; industry specific knowledge; and in many cases, an already formed network within a specific industry, making the process of finding partners to compare performance and best practices with seamless and successful.
As organizations everywhere recognize the value of continuous, formal benchmarking practices in a competitive landscape, it has already become an integral growth tool that companies are using worldwide.
For nearly 40 years, SAI has been a leader in providing formal benchmarking services for major companies in many industries.