We explain what benchmarking is in quality control and what its objectives are. We also explain the steps to do it. Please read other MTV articles for more information. If you share it, it will be of little help to us.
What is benchmarking?
Benchmarking is a technique for measuring and comparing business performance. It consists of finding and comparing certain variables, indicators, and coefficients (called benchmarks) that are representative of the quality of competitors’ performance, and trying to emulate or adopt them within an organization, thereby learning from the success of others.
The origin of the term benchmarking (always written in italics, as it is an Anglicism) dates back to 19th-century Anglo-Saxon surveyors and land surveyors, who made marks in stones to indicate the terrain’s levels and placed an angle iron on each mark, like a bench, to position a leveling bar and ensure the measurement was correct.
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This practice was adopted as a metaphor for corporate benchmarking in quality control beginning in the 1960s, when the first successful organizations dedicated to quality management emerged in the United States. The term became popular almost 20 years later, largely thanks to its adoption by Xerox, and has since been used in various contexts, including the public sector and others outside the corporate world.
In short, benchmarking is a method of continuous organizational improvement that proposes the search for and incorporation of existing good practices outside or even within the company, especially with regard to processes and methodologies.
Objectives of Benchmarking
The purpose of benchmarking is to identify patterns of improvement in the company, based on specialized measurement and comparison with other companies or sectors. More simply put, its purpose is to compare the organization’s processes and functions with those that have been successful in other companies, to offer a greater and more detailed perspective on the positive changes and innovations that could be made.
It is a technique that provides organizations with the necessary guidance to know what or how to change, which is essential for adapting to competitive markets.
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Importance of Benchmarking
Benchmarking is an innovative and useful technique not so much for the comparison it proposes, but for measuring the impact such comparisons can have on organizational behavior.
It is an ideal method for tracking, formulating, and copying (all within the law, naturally) the successes of other companies, whether competitors or even from another sector. This allows for the relocation and often release of resources within the company, allowing it to move toward more efficient models and seek new sources of competitiveness.
Types of Benchmarking
Essentially, benchmarking can be:
Functional Bench marking
Focuses on comparing and improving specific processes within the company, identifying the best possible practices, operations, and functions.
Competitive Bench marking
Focuses on comparing the company’s general and specific indicators with those of leading organizations in its sector, as a competitive analysis.
Internal Bench marking
Focuses on the internal aspects of the organization, with a view to identifying and replicating good practices relevant to one area, in order to distribute them to other areas or different business units within the company.
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Steps for Benchmarking
According to American Robert C. Camp (1935-), responsible for Xerox’s benchmarking processes, every benchmarking process should follow the following steps:
Planning and Data Collection
This initial phase consists of planning the benchmarking study. It is essential to identify which aspect of the organization will be studied (what, who, and how) and what the business function’s output is. The company’s processes must be documented and its performance evaluation systems verified. Based on all of this, comparable companies can be identified based on the type of benchmarking desired. Once this has been determined, a data collection method and a set of available sources can be chosen.
Data Analysis
This consists of studying what was collected in the previous step to determine the current performance gap: the distance between the desired goal and the current situation. This procedure must be carried out in conjunction with a careful understanding of the company’s processes.
Objective Setting
This involves planning the path and effectively communicating the objectives to be achieved to the various areas of the company involved. The latter is key, as their cooperation, commitment, and support will be required to implement the changes.
Establishing functional goals
This involves translating benchmarking findings into functional and actionable goals, i.e., concrete changes in methods and practices that can then be implemented, accompanied by periodic and controlled measurement that allows for an assessment of achievement.
Monitoring the process and recalibrating benchmarks
This involves preparing management reports that reflect the success of the process and allow the initial benchmarks to be updated in light of changing markets. In this way, the process of continuous updating and improvement can be institutionalized and ensure the maturity of the organization within its specific industry.
Benchmarking Examples
Below are two simple examples of benchmarking applications:
First example
An appliance store realizes that its competitor, despite being in a worse geographic location, is monopolizing the area’s customers. Management decides to apply a benchmarking process to assess customer preference and invests in a series of surveys to determine the most attractive areas of the competitor’s business, which turn out to be: 1) product presentation, 2) modern payment methods, and 3) credit plans offered. These indicators were broken down and transformed into short-term objectives.
These three indicators are then compared with those of the initial store, and a marketing specialist is hired to redesign the windows, print new promotional materials, and plan the store’s relaunch. In addition, investments are made to modernize the payment processing equipment and new installment credit plans are negotiated with a local bank. In this way, the store’s relaunch is successful, and its sales exceed previous margins, given that it also has a better location than the competition.
Second example
A local publishing house begins to lose sales massively to a newly arrived multinational company. Despite its loyal and consistent customer base, sales are trending downward, so they conduct product-focused benchmarking and determine that: 1) competing books have better and more attractive designs; and 2) competing books use cheaper paper and therefore cost less, although they are less durable. These indicators become medium-term change goals.
The publisher then decides to invest in new designs, realizing that its books are outdated for the new sensibilities of a young audience. They relaunch collections, redesign covers, and, while preserving the traditional quality of their products, invest in a paperback collection with affordable paper. In this way, they manage to attract both young and traditional audiences, and their sales recover.
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References
All the information we offer is supported by authoritative and up-to-date bibliographic sources, ensuring reliable content in line with our editorial principles.
- Benchmarking: What It Is and How to Apply It to Your Industry by IEBS Business School.
- What Is Benchmarking in the Aula CM Online Marketing Dictionary.
- Benchmarking (Government) in The Encyclopaedia Britannica.
- What It Is Bench marking, Concept, Objectives, and Examples – concepto.de
