Types of Benchmarking - Essay Example

Benchmarking is a tool widely used in the business world. Companies use this form of management as a point of reference. Benchmarking is a tool that companies use to compare its operation to other operations (Watson, 2007). The benchmarks are set standards that are higher which companies use as yardsticks in determining their performances. It is additionally a way businesses evaluate the healthiness of their processes and business. Benchmarking involves the process of studying the general industry and competitive practices. It is used as a way of gauging a company’s success and pinpointing the company’s shortcomings. Benchmarking is used widely across all kinds of companies; private, public, nonprofit organizations, and even charitable organizations. Large companies have a designated office with the mandate of benchmarking. Additionally benchmarking is used in identifying gaps in the system so that corrective measures can be undertaken and therefore enhance performance. Various types of benchmarking are dependent on a company’s policies.
Types of benchmarking
The two main types of benchmarking include internal and external benchmarking. Internal benchmarking involves the comparison of performances and practices between individuals, teams, and groups within the same organization. External benchmarking involves the comparison of an organization's processes and performances to that of other organizations within the industry (Mard, 2004). Benchmarking is further distilled into other three forms of benchmarking which include process, performance, and strategic benchmarking. Process benchmarking involves reviewing how other companies handle similar functions and objectives. Comparison is only with top performance within the industry to try to evaluate how far behind a company is regarding the completion of specific tasks. Information to assist in benchmarking is gathered through surveys, research, site visits, and interviews.
Performance benchmarking provides a way in which organizations compare their performances with set performance metrics. Additionally, performance benchmarking takes the form of reviewing the company’s income statements and balance sheets to ensure they are made by the required standards. The performance gaps identified can be prioritized, and corrected, and follow-up can be made to ensure performance improvement. Strategic benchmarking ideally is the comparison of companies to the long-term goals and objectives. It additionally involves identifying the winning strategies employed by top organizations and adapting them to the organization's strategies. Strategic benchmarking is majorly utilized by top-level management.
Importance of benchmarking
There are several key advantages of benchmarking. One major advantage is that it leads to cost-cutting for businesses. Benchmarking lower labor costs as a company can identify that a top company is using technology instead of labor. Based on this review the company can adopt the technology that has aided in cost-cutting. Benchmarking boosts a company’s product quality. Read More