Benchmarking
From Wikipedia, the free encyclopedia
- For the geolocating game, see benchmarking (geolocating). For other uses of the term 'benchmark' see benchmark.
Benchmarking (also "best practice benchmarking" or "process benchmarking") is a process used in management and particularly strategic management, in which organizations evaluate various aspects of their processes in relation to best practice, usually within their own sector. This then allows organizations to develop plans on how to adopt such best practice, usually with the aim of increasing some aspect of performance. Benchmarking may be a one-off event, but is often treated as a continuous process in which organizations continually seek to challenge their practices.
A process similar to benchmarking is also used in technical product testing and in land surveying. See the article benchmark for these applications.
Contents |
[edit] Advantages of benchmarking
Benchmarking is a powerful management tool because it overcomes "paradigm blindness." Paradigm Blindness can be summed up as the mode of thinking, "The way we do it is the best because this is the way we've always done it." Benchmarking opens organizations to new methods, ideas and tools to improve their effectiveness. It helps crack through resistance to change by demonstrating other methods of solving problems than the one currently employed, and demonstrating that they work, because they are being used by others.
[edit] Competitive benchmarking
Some authors call benchmarking "best practices benchmarking" or "process benchmarking". This is to distinguish it from what they call "competitive benchmarking". Competitive benchmarking is used in competitor analysis. When researching your direct competitors you also research the best company in the industry (even if it serves a different location).
ADVANTAGE OF THE BENCHMARKING FOR A COMPANY:
1.A better understanding of the waits(expectations) of the customer because it is: based on the reality of the market estimated in a objectivist way
2.A better economic planning of the purposes and the objectives to achieve in the company because they are: centred on what takes place outside controlled and mastered.
3.A better increase of the productivity:resolution of the real problems Understanding of the processes and what they produce "
4.Better current practices Search for the change Many decisions practices of break
5.A better competitiveness thanks to: a solid knowledge of the competition a strong implication of the staff new ideas on practices and tried techniques
Benchmarking has consequences which are beyond the process itself: it reforms all the levels of the company.; modifies the process of manufacture of the product leads(drives) ; also reforms the hierarchical organization of the company, the product itself, and the state of mind of the employees.
[edit] Collaborative benchmarking
Benchmarking, originally invented as a formal process by Rank Xerox, is usually carried out by individual companies. Sometimes it may be carried out collaboratively by groups of companies (eg subsidiaries of a multinational in different countries). One example is that of the Dutch municipally-owned water supply companies, which have carried out a voluntary collaborative benchmarking process since 1997 through their industry association.
[edit] Procedure
- Identify your problem areas - Because benchmarking can be applied to any business process or function, a range of research techniques may be required. They include: informal conversations with customers, employees, or suppliers; exploratory research techniques such as focus groups; or in-depth marketing research, quantitative research, surveys, questionnaires, reengineering analysis, process mapping, quality control variance reports, or financial ratio analysis.
- Identify organizations that are leaders in these areas - Look for the very best in any industry and in any country. Consult customers, suppliers, financial analysts, trade associations, and magazines to determine which companies are worthy of study.
- Survey companies for measures and practices - Companies target specific business processes using detailed surveys of measures and practices used to identify business process alternatives and leading companies. Surveys are typically masked to protect confidential data by neutral associations and consultants.
- Visit the "best practice" companies to identify leading edge practices - Companies typically agree to mutually exchange information beneficial to all parties in a benchmarking group and share the results within the group.
- Implement new and improved business practices - Take the leading edge practices and develop implementation plans which include identification of specific opportunities, funding the project and selling the ideas to the organization for the purpose of gaining demonstrated value from the process.
[edit] Cost of benchmarking
Benchmarking is a moderately expensive process, but most organizations find that it more than pays for itself. The three main types of costs are:
- Visit costs - This includes hotel rooms, travel costs, meals, a token gift, and lost labour time.
- Time costs - Members of the benchmarking team will be investing time in researching problems, finding exceptional companies to study, visits, and implementation. This will take them away from their regular tasks for part of each day so additional staff might be required.
- Benchmarking database costs - Organizations that institutionalize benchmarking into their daily procedures find it is useful to create and maintain a database of best practices and the companies associated with each best practice now.
[edit] Alternate, Statistical Definition, unrelated to usage in this article (perhaps this should be a new article?)
The term benchmarking also has a statistical definition. It is a method of using auxiliary information to adjust the sampling weights used in an estimation process, in order to yield more accurate estimates of totals.
Suppose we have a population where each unit k has a "value" Y(k) associated with it. For example, Y(k) could be a wage of an employee k, or the cost of an item k. Suppose we want to estimate the sum Y of all the Y(k). So we take a sample of the k, get a sampling weight W(k) for all sampled k, and then sum up W(k) x Y(k) for all sampled k.
One property usually common to the weights W(k) described here is that if we sum them over all sampled k, then this sum is an estimate of the total number of units k in the population (for example, the total employment, or the the total number of items). Because we have a sample, this estimate of the total number of units in the population will differ from the true population total. Similarly, the estimate of total Y [where we sum W(k) x Y(k) for all sampled k] will also differ from true population total.
We do not know what the true population total Y value is (if we did, there would be no point in sampling!). Yet often we do know what the sum of the W(k) are over all units in the population. For example, we may not know the total earnings of the population or the total cost of the population, but often we know the total employment or or total volume of sales. And even if we don't know these exactly, there often are surveys done by other organizations or at earlier times, with very accurate estimates of these auxiliary quantities.
The benchmarking procedure begins by first breaking the population into benchmarking cells. Cells are formed by grouping units together that share common characteristics, for example, similar Y(k), yet anything can be used that enhances the accuracy of the final estimates. For each cell C, we let W(C) be the sum of all W(k), where the sum is taken over all sampled k in the cell C. For each cell C, we let T(C) be the auxiliary value for cell C, which is commonly called the "benchmark target" for cell C. Next, we compute a benchmark facor F(C) = T(C) / W(C). Then, we adjust all weights W(k) by multiplying it by its benchmark factor F(C), for its cell C. The net result is that the estimated W [ formed by summing F(C) x W(k) ] will now equal the benchmark target total T. But the more important benefit is that the estimate of the total of Y [ formed by summing F(C) x F(k) x Y(k) ] will tend to be more accurate.
