We live in a world of innovation. Most of the companies today aim at creating new and improved products and services, of which they are sole providers. In this era, competitor information is highly sought for and in the midst of the battle to get ahead of the competition, benchmarking seems to be evolving as the latest management fashion.

The word ‘benchmark’ originally refers to a reference point to compare measures against. There are several theories about where the word ‘benchmark’ came from. In previous times benchmark may have been used in fishing contests where the length of a fish is marked on a wooden bench or it may have originated through a cobbler’s effort to measure size according to a predefined one (Andersen & Pettersen, 1996). In an organisational setting, benchmarking originated with Xerox Business Systems in the late 1970s. But at that time benchmarking was used to make the organisation aware that their performance was not up to the mark as compared to others in the industry. Also, it set an example for Xerox showing them that someone had already made the improvements. Today, organisation performance benchmarking can perhaps best be defined as the practice of being humble enough to admit that someone else is better at something and being wise enough to learn how to match or even surpass them at it (APQC, 1993).

Benchmarking seems to be the latest trend, however only few organisations are regularly practicing this. Perhaps the reason for this may be limited knowledge of the concept itself. Following are few of the most common myths relating to benchmarking:

Myth 1: An all rounder best practice partner can be found

As an old saying goes, ‘no human is perfect in all aspects’. Organisations are made up of people and just like people; it is difficult for an organisation to be the best in all areas of its operations. Looking for an all rounder best practice partner is a misguided waste of resources as in reality there is “no such thing as best practice organisation. No company or plant is good at everything” (Wiarda & Luria, 1998). In order to benchmark effectively, a firm needs to first identify its weaknesses and then needs to look for solutions amongst the benchmarking partners. Finding areas or functions to benchmark proves to be more beneficial than attempting to compare all operations involved (Bhutta & Huq, 1999). By following an incorrect methodology and benchmarking all operations, a lot of time and money is spent, which leads the company to a conclusion that benchmarking is a costly affair. But this is just another myth waiting to be disproved.

Myth 2: Benchmarking is always a very costly affair

It is true that benchmarking requires time and financial resources. In terms of indirect expenses, it may involve considerable spending on travel. Employees’ time may also be spent in meetings and discussions regarding the same. On the other hand research proves that with proper planning, benchmarking costs can be minimized and that benchmarking is not as expensive as it appears to be (Feltus, 2009). According to a study conducted, the average cost of conducting one benchmarking study was $50000 in the year 1992. However due to more accessible and affordable, in the year 1996, this cost dropped to $5000 (Bhutta & Huq, 1999). The process of benchmarking was carried out by Ford Motor Company. After studying Mazda’s accounts payable operations, they managed to cut costs by 5%. The knowledge gained from the benchmarking process is truly worth the small investment towards it.

Myth 3: Competitor benchmarking is impossible, hence benchmarking is not useful

When firms think of benchmarking, the only useful information they can think of is from competitors. Since benchmarking is a two way deal, organisations are sometimes afraid to give out too much information to one’s competitors. Hence benchmarking seems to have no more avenues to explore in this case. But it needs to be noted that some information is usually available in public domains as companies are required to publish such information by law which also can be used for benchmarking (Trimble, 2003). Organisations can learn to be ‘smart’ by giving out selected information in order to facilitate sharing of best practice.

Benchmarking is not only limited to competitors. Successful benchmarking stories across industries are very common to see. One such example is that, if a company that processes insurance claims has 150 offices nationwide, they may want to compare itself with businesses in the retail industry because they face similar challenges of managing multi-office or multi-store businesses.

Success stories, myths and benefits of benchmarking are numerous. But what remains is a belief which Mattew Bond, director of research at Building Owners and Managers Association puts forward: "benchmarking is growing-slowly but surely and it is a process that is continually evolving".

Shilpa Asnani
Service Quality Executive
The International Customer Service Institute

For more information please visit International Customer Service Benchmarking

References

• Andersen, B., & Pettersen, P.-G. (1996). Step-by-Step Instructions: The Benchmarking Handbook. London: Chapman & Hall.
• Bhutta, K. S., & Huq, F. (1999). Benchmarking – best practices: an integrated approach. Retrieved from Emerald database.
• Trimble, D. (2003). Benchmarking - Uncovering Best Practices and Learning from Others. Retrieved September 25, 2009, from http://www.isixsigma.com
• Wiarda, E. A., & Luria, D. D. (1998). The best-practice company and other benchmarking myths. Retrieved from Proquest database.