Benchmarking Types and Stages

Types of Benchmarking
Most companies do not know how benchmarking can be used as a management tool to improve their performance. Also, the amount of information obtained through benchmarking is sometimes hard to digest. Any company new to benchmarking usually needs to carry out some research first to understand their business totally and how they operate. Once they can isolate the issues they need to address, they can move on to use a benchmarking system.

There are basically 3 types of benchmarking:

  1. Diagnostic - Diagnostic benchmarking looks at areas in the company that the director's suspect requires a wider assessment.
  2. Holistic - Holistic benchmarking simply provides a set of indicators, which allows a company to measure its results and compare its performances against a pre-determined framework. This easily isolates areas that appear to be performing below par and to which the business can focus its attention for improvement.
  3. Process - Process benchmarking should start once the analysis has been completed and looks in detail at areas of the business and compares them against other businesses in the industry. The business can compare its process performance against companies in the same sector, but in some situations it is best to do the comparisons outside of the sector.

Benchmarking and Small Business
Every company is interested in improving its performance and therefore its profitability. It is therefore important to use the system of benchmarking to measure the performance of the business against similar businesses and then bring in to play procedures for improvement.

Large companies can obviously afford to carry out benchmarking because of available resources, but sometimes it's much more difficult for the smaller operator.

Most small businesses will not look at benchmarking at the start, simply because of a shortage of time, money or other resources and of course others have to be convinced of the value of benchmarking in the operation. Nevertheless, it's good for small businesses to undertake some sort of benchmarking, even if only to compare basic performance and basic processes with other similar businesses in their industry.

Benchmarking is very versatile, so to use it to improve product and service processes, as well as customer processes and internal support processes, is of great advantage to the business.

The First Step in Benchmarking
You should not start a benchmarking analysis until you have fully assessed the operations of your own business and understand the function and process of each section that may require assessment. That is, you need to know what you are doing and why you are doing it.

Management needs to get together and brainstorm to dissect the performance as well as the nature of the business, because they need to know in detail how their business operates and what areas need attention. Once benchmarking is complete they need to be able to take the information and use it for comparison as well as developing new strategies that the benchmarking report suggests. It is important to know clearly what steps are required to ensure the success of the business.

The first step is to ask the following questions:

  1. What is your business all about?
  2. What are your most important products?
  3. What makes your business different from other competitors?
  4. Who are your customers and how do they react to your products and services?
  5. What areas are clearly suspect and require a deeper investigation?
  6. Are there any processes that are under performing and may need a fresh look for improvement?