Benchmarking - Essay Example

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The writer of the essay "Benchmarking" aims to analyze types of benchmarking and its importance. Benchmarking involves the process of studying the general industry and the competitive practices. It is used as a way of gauging a company’s success and pinpointing the company’s shortcomings…
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Extract of sample "Benchmarking"

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 operation (Watson, 2007). The benchmarks are set standards that are higher with which companies use as yard sticks in determing their performances. It is additionally a way businesses evaluates the healthiness of their processes and business. Basically benchmarking involves the process of studying the general industry and the competitive practices. It is used as a way of gauging a company’s success and pin pointing 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 clearly designated office with the mandate of benchmarking. Additionally benchmarking is used in identifying gaps in the system so as corrective measures can be undertaken and therefore enhance performance. There are various types of benchmarking which 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. The external benchmarking involves the comparison of an organizations processes and performances to that of other organizations within the industry (Mard, 2004). Benchmarking is further distilled into other three more forms of benchmarking which include process, performance and strategic benchmarking. Process benchmarking involves review how other companies handle a similar functions and objectives. Comparison is only with top performance within the industry to try evaluating how far behind a company is regarding 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 its performances with set performance metrics. Additionally performance benchmarking takes the form of reviewing the company’s income statements and balance sheet to ensure they are made in accordance with the required standards. The performance gaps identified can be prioritized, corrected and follow up can be made to ensure improvement in performance. 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 adopting them to the organization strategies. Strategic benchmarking is majorly utilized by the top level management.
Importance of benchmarking
There are several key advantages of benchmarking. One major advantage is that it leads to cost cutting for the businesses. Benchmarking lower the labor costs as a company can identify that a top company is used technology instead of labor. Based on this review the company can adopt the technology has aid in cost cutting. Benchmarking boosts a company’s product quality. A company can decide to purchase a rival company’s products for review. The information that will be acquired may utilize in developing a product whose quality is similar or even better compared to that of the competitors (Mard, 2004). Benchmarking can aid in increasing a company’s sales and profits. A company that is involved in benchmarking tends to improve its products, services and even processes. Based on this changes customers are more likely to notice the improvements which ultimately leads to increase in sales and hence productivity.
Mard, M. J. (2004). Driving your company's value: Strategic benchmarking for value. Hoboken, N.J: John Wiley & Sons.
Watson, G. H. (2007). Strategic benchmarking reloaded with Six Sigma: Improve your company's performance using global best practice. Hoboken, NJ: John Wiley & Sons. Read More
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