Despite all that has been written on the topic of benchmarking there is still a great deal of ignorance about what it actually is. Some see it as copying ideas while others it as a way to compare operations with a competitor. Some even view it as a form of industrial espionage.

In its simplest form benchmarking involves understanding important strategic gaps between the current practices of an organization and the best practices that others have been able to achieve in the same area.

How Successful Companies Create Competitive Advantage

The term benchmark is a surveying term used to denote a notch representing a given altitude and against which other heights could be 'benchmarked.' Today it has come to mean any standard against which something can be compared. It involves learning, sharing information, and adopting best practices. It is a process in which a company examines how another performs a specific function in order to improve how it can perform in a similar area.

Benchmarking allows for the discovery of gaps in performance when compared with other firms doing similar operations. Studying gaps alone though will not improve performance. The payback comes from changing what to improve operations and as change is often difficult, the actual benchmarking is the easy part of the equation.

Once a gap has been determined from this process the key question becomes: 'How much of the gap is it practical to close?' It is particularly important to determine what the benefit from any change is and what it will cost.

Benchmarking Typically Encompasses

• Comparing aspects of processes with others
• Identifying gaps in performance
• Developing performance improvements to close the gaps
• Implementing those Improvements
• Monitoring progress
• Reviewing the benefits

These are the simple questions on which successful benchmarking How do we do it? How do they do it?

What Benchmarking is Not

Although benchmarking involves making comparisons of performance, it is not:

• Industrial tourism - It is not just anther reason to get out and visit others.
• Only competitor analysis - Benchmarking is best accomplished when it involves collaboration.
• A quick fix done just once - Benchmarking projects can extend over a number of months or even years. It is important to repeat them periodically as the environment changes.
• Copying – The operative term here is adapt, not adopt.
• Spying - Openness and honesty are vital for successful benchmarking.

The underlying reason to benchmark is to learn how to improve processes and thereby increase competitiveness. Organizations choose to benchmark outstanding companies whose business processes are similar to their own. This means they can often be in different industries.

Benchmarking allows companies to identify those practices that have led to superior performance successful and can be adapted to their own business. This makes benchmarking an operational process that involves continuous learning and adaptation with the result being the improvement of competitive position.

The copyright of the article Benchmarking for Improved Performance in Business Management is owned by Paul Larson. Permission to republish Benchmarking for Improved Performance in print or online must be granted by the author in writing.