Benchmarking - Oxford Reference

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Subscriber: null; date: 28 August 2016

benchmarking

Source:
A Dictionary of Business and Management
Author(s):
Jonathan LawJonathan Law

benchmarking 

The process of identifying the best practice in relation to products and processes, both within an industry and outside it, with the object of using this as a guide and reference point for improving the practice of one's own organization. Benchmarking can take place within an organization, when it may form part of a total quality management (TQM) exercise; in relation to direct competitors, although such organizations may be unwilling to divulge the details of their practices; or in relation to organizations in totally different fields, in which case the main value of the practice is that it forces people to look outside their established patterns of behaviour.

Most of the early work in benchmarking was carried out in manufacturing but the technique is now applied in a wide range of organizations. Typical areas in which benchmarking can be expected to bring benefits to an organization include:

  • Customer satisfaction. An organization wishing to improve some aspect of its performance (e.g., its website) might ask customers how this compares with that of competitors. By identifying and making improvements the company can expect to improve sales in the long run.

  • Cost reduction. The benchmarking exercise may identify an area in which the organization has higher costs than competitors. Potential savings may be identified, such as reducing the number of suppliers or making better use of technology. Benchmarking can be applied to all departments.

  • Increased efficiency and effectiveness. Benchmarking can help to streamline processes and identify ways of delivering a better service.

Before introducing benchmarking an organization will have to identify the costs of the exercise and the potential benefits and cost savings. The most significant cost will be the management time.

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