Benchmarking Essay

1723 words - 7 pages

Company Benchmarking for Competitive Advantage
Terry Pilcher Assistant Director – Department of Trade and Industry UK

Before undertaking a benchmarking study a company must be aware of the different types of benchmarking that exist. One of the major reasons for misunderstanding is the tendency to call a wide variety of different activities Benchmarking. The most simplistic form of benchmarking could be one person talking to another and deciding if they have similar areas of interest. At this level people undertakes benchmarking every day. Before listing the different types of benchmarking that exist it might be useful to present some definitions of benchmarking to set the scene. There ...view middle of the document...

These have become established through the needs of companies to answer questions at various levels and regarding different topics. When working with the European Commission I helped to draw a model showing the different levels of benchmarking undertaken. One way of looking at the different types of benchmarking is to look at the various levels of activity undertaken. At the first level we have diagnostic benchmarking which usually takes the form of early performance indicators. This type of benchmarking requires a very light touch and helps companies establish in a holistic way of establishing which processes are worthy of detailed consideration. Tools aimed at this level take a broad look across the company covering financial, hard management and often Business Excellence areas in order to establish priorities against an existing database of best practice. The Benchmark Index (BI), which I helped establish, particularly for Small to Medium Enterprise (SME) use, is know as a world leader in this area. The BI has also been used by larger companies on a cost centre basis as well as with the supply chain. The next step, once areas of interest have been identified, is to move on to what I call real benchmarking and that is process benchmarking. This is the type of benchmarking undertaken by most large companies and focuses on improving specific processes within the company by comparing

them with exemplar companies usually on a global basis. It is this type of benchmarking which will be the subject for most of this article. It is a fairly time consuming and therefore expensive process but undertaken properly can yield significant results. Moving on we come to sector benchmarking which is usually undertaken by Trade Associations and as the name suggests is very sector based. It usually consists of benchmarking the general performance of a sector in one country against that of another country. Therefore it could be that the automotive sector in the UK, USA and Germany undertake such a study to establish their relative positions. Finally we come to framework benchmarking which is usually undertaken by global organisation either companies or governments. This type of benchmarking concentrates on infrastructure and looks to compare such areas as education, transport, health, financial provision etc. As I said earlier, for the purposes of this article we should return to what I call company benchmarking and in particular process benchmarking which is the in-depth study and comparison of particular processes. It is very important at the outset to obtain support for the benchmarking exercise from the highest level within the company. Quite often this type of initiative starts with the quality improvement team who present the proposal to their senior management. The senior managers must be convinced that any work undertaken is in support of the company strategy and will lead to improved performance. Without such support any exercise is doomed to failure...

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