The term ‘benchmark’ originally meant a surveyor’s mark out in a rock used as a point of reference. It has come to mean anything taken as a point of reference or comparison. In general sense, therefore, benchmarking mean setting standards which acts as a point of reference. In business, benchmarking has come to mean variety of things. It has assumed a very special significance in today’s competitive world. It is now recognised as an effective approach towards improvement of productivity, quality and other dimensions of performances that are determinants of competitiveness. Benchmarking is one of the many techniques that one can employ to gather management information.
Inits general sense, benchmarking has been with us since business has bee in operations. From earlier times, traders have sought to compete by offering better, cheaper and wide range of products. In order to do this they used to compare with standard norms. After the advent of Industrial revolution, the business processes have become more complex. For measuring the performance of business processes, a whole range of scientifically based methods like operations research, work-study, organisation and methods, statistical quality control etc. were evolved. Even though those methods have sought to measure and promote improvement of performance, they often lacked any external reference or benchmark, thereby making only constant small improvements. These methods could not give a quantum leap in the performance of business processes. Since benchmarking is based on reference (mainly external), the company could recognize the competition which in turn forces the organisation to learn from the best processes and make a quantum leap in their performance to gain competitive advantage.
The role of benchmarking is to provide management with knowledge of what constitutes ‘best performance’ or ‘superior performance’ in a particular field. Best performance relates to output, efficiency, quality and any other measurement relevant to performing the job. Benchmarking not only investigates what best practice means in terms of performance yardsticks but also examine how best practices is achieved. Benchmarking is, therefore, not only the practice of obtaining measurements but also involves understanding the conditions, resources and competence necessary to deliver top performance.
No individual, team, or operating unit-no matter how creative or prolific can possibly parent all innovation. No single department or company can corner the market on all good ideas. In view of this reality recognizing human limitations, it makes eminently good sense to consider the experience of others. Those who always go it alone are doomed to perennially reinvent the wheel, for they do not learn and benefit from others progress. By systematically studying the best practices and by innovative adaptations an organisation can accelerate the progresses of improvement.
Total Quality Management is a long-term commitment to satisfying customer requirements in every aspect of business operations. It is a philosophy, which has been adopted by many organisations who wish to enhance customer satisfaction and thereby increase market share. The basic principle is that individuals are responsible for improving the service they provide to their customers, be it external customers (outside the orgaisations) or internal customers (inside the organisation).
Companies who adopt a TQM approach make a commitment to continuous improvement. Often a team approach is adopted under the TQM banner to identify areas of improvement generate and implement solutions. Increasingly, benchmarking is being adopted by organisations that are striving for continuous improvement because it offers an external perspective in the quest for service quality. That’s why Benchmarking progammes often take place as part of total quality management.
Benchmarking is a tool in the armory of Business Process Re-engineering. Process Benchmarking exposes organisations to state-of-the-art practices, thereby acting as a catalyst for improvements in performance through emulation of best practices. Effective benchmarking cannot take place unless the organisations’ existing process is well understood. Benchmarking and process improvement are therefore fundamentally linked.
Re-engineering is “radical redesign of business processes” whereas benchmarking is “finding and implementing best practices”.
Through Benchmarking best practices can be unearthed and when these practices form basis for the new design of the process then it is called Re-engineering. Thus Benchmarking is essential to Re-engineering but still a necessary stand-alone tool.
The radical re-design of business process is useful for continuous improvement whether it radically affects business processes or not.
“Find and implement best practices for high performance processes that full satisfy customer needs”.
“Benchmarking is the search for industry best practices that lead to superior performance”
Benchmarks are measurements to gauge the performance of a function, operation, or business relative to others.
