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Benchmarking Theory
This document discusses benchmarking, which is a strategic analysis tool used to identify areas for improvement through best practices. There are three types of benchmarking: internal, which compares a company's current performance to its past performance; competitor, which compares a company's performance to its industry rivals; and process/activity benchmarking, which compares a company's business processes to best practices of other companies. The document also outlines advantages and disadvantages of benchmarking, as well as a 7-step process for effective benchmarking.
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Benchmarking Theory
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- 2. Benchmarking Internal Benchmarking Process/Activity Benchmarking Competitor Benchmarking Benchmarking is akey strategic analysis tool which identifies areas for improvement through the identification of best practice. Benchmarking is used to understand & evaluate the current position of an organisation in relation to best practice. There are 3 basic types of benchmarking: • Internal benchmarking • Competitor benchmarking • Process/Activity benchmarking
- 3. Benchmarking Internal Benchmarking Process/Activity Benchmarking Competitor Benchmarking Internal Benchmarking Is acomparison using historical internally generated information. Comparing own current performance against previous performance.
- 4. Benchmarking Internal Benchmarking Process/Activity Benchmarking Competitor Benchmarking Competitor Benchmarking Competitor comparisoncan be the comparison of performance against industry rivals or similar industry products. This may be by comparing products with products produced by competitors possibly by purchasing a competitors product and using reverse engineering on it.
- 5. Benchmarking Internal Benchmarking Process/Activity Benchmarking Competitor Benchmarking Process/ Activity Benchmarking Thisis the process of comparing one's business processes and performance to industry bests & best practices from other companies.
- 6. Benchmarking Advantages Encourages continuous improvement Identifiesperformance gaps Learning from the success of others Disadvantages Identifying best practice difficult & costly Management & staff may not committed Differences Other organisations unwilling to share data Best practice continuously changing May pay to much attention to performances Stakeholders misinterpretation of results
- 7. Benchmarking 7 Steps toBenchmarking Step 4: Measure performance of all Step2: Identify KPI Step 6: Specify improvements Step 1: Set objectives & decide areas to benchmark Step 5: Compare performances Step 3: Select organisation/division or process for benchmarking comparison Step 7: Implement & monitor improvements
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