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There are a number of definitions used to describe
benchmarking , all of which may have their place. The European Benchmarking
Code of Conduct defines it as a
technique which is about making comparisons with other organisations and then
learning the lessons that those comparisons throw up
.
In practice benchmarking will involve comparing aspects of an organisation's performance with others ( if possible this will be with what are regarded as best in class ). Using this information areas are identified that require improvement. Sometimes the comparisons will just be with one other organisation or more frequently will be part of a group of organisations ( benchmarking group) who will agree to participate jointly in such an exercise.
The rationale is that if you search for best practices in best in class organisations, then you too will become best in class, assuming you implement the findings of any benchmarking exercise.
Best practice or process benchmarking enables an organisation to compare any of its tasks, activities or functions to those of another organisation. As stated above, often the most rewarding comparisons are done on a group basis. Sometimes organisations will agree and administer this or more commonly an external company, with some expertise in the technique, will set up and administer the process.
In the UK benchmarking has been used widely in financial services in recent times. For example, in the home loans' market lenders have been keen to check that their loan application processing is in line with competitors. A third party company has carried out this exercise providing valuable information on processing capability to all those participating organisations.
Another example of UK benchmarking has seen some government departments comparing themselves to the some financial services organisations in the private sector. A driver for this has been the government's desire to cut out waste and reduce the costs of providing its services.
The argument is that if you don't know what the standard is you cannot compare yourself against it. By benchmarking it is possible to ensure that your processes and business practices are in line or are better than the competition. Without benchmarking, how do you know where you are ?
There are a number of downsides to benchmarking. These include:
