In simple terms, benchmarking could be defined as searching for the best practices, innovative ideas and highly effective and efficient systems that lead to superior performance.
What is Benchmarking?
The main objective is simply to learn and benefit from the progress of other individuals and not to reinvent the wheel. Through seeking and researching other wheels one can optimise your own wheel. It is however also important to understand the environment surrounding the wheel and the reasons for the characteristics of the wheel. Having one or two spokes of a wheel loose can make a wheel roll out of balance. The longer the wheel runs out of balance the more damaging the effect on the wheel.
The wheel can be seen as the internal business system of an organisation with the spokes of the wheel representing the internal operational functions of the organisation. The immediate surroundings of the wheel can be seen as the target environment of the organisation, e.g. the “Competitors”, “Suppliers”, “Market”, “Stakeholders” and “Customers”. The external environment of the wheel represents factors such as “Economics”, “Directional Trends”, “Politics”, “Technology Trends” and others. It is not always possible to simply replace the whole wheel at once but the spokes and the direction of the wheel can be altered. The wheel can also be related to a project and the spokes of the wheel to the project events.
The main objectives of different businesses are normally unique with differences in the organisation structure, business rules, operational procedure, infrastructure and technology utilised. However, the objectives for supporting a business such as “Human Resources”, “Finance”, “Procurement” and “Material Management” in one business are fairly similar compared to another business. Through comparing the business systems the organisation can bring it’s own up to standard and the effect could be to have a best practice business system. Bigger benefit could be realised sooner if adjustments are made to line functions versus supporting functions.
Subsequently, a simple example of the main objectives (line functions) and auxiliary objectives (supporting functions) of a Steel Manufacturing Company is depicted.
Example of Line Supporting Function
Individuals, teams or organisations are constantly developing new innovative ideas and better ways of doing things. These business practices, operating tactics, leading edge solutions and winning strategies of others can accelerate one’s own progress and improvement. The possibility that individuals and organisations will reach a point where no new initiatives or ideas are identified is almost impossible as the human mind is just to great.
From the archives of early benchmarking, borrowings of great ideas have been taking place. Henry Ford, from the Ford Motor Company watched men cut meat during a tour and saw carcasses hanging on hooks mounted on a monorail. This is what triggered the initiation of the world’s first assembly line.
The Remington Rifle Company was wrestling with a problem where customers wanted shinier rifle shells. The method of manufacturing such rifle shells was obtained from a cosmetic company that produced shiny lipstick cartridges.
Benchmarking should be seen as a fundamental business system and skill that resides internally within organisations that supports excellence in operation, quality, service and other factors. By exposing people and organisations to new ideas and approaches, the benchmarking experience spurs better insights and breakthrough thinking. Benchmarking has broad applications in problem solving, planning, goal setting, process improvement, re-engineering, strategy setting and other elements.
It is simple; one cannot belief that the engineering of a business system or component of such a business system has been completed if no measurements against other business systems have been performed. This measurement does not need to be performed against business systems in similar organisations or industries. The business system of Project Management in a Construction Company can be compared with the Project Management business system of a Software Implementation Company. New ideas are not always borrowed from similar environments.
In simple terms, benchmarking could be defined as searching for the best practices, innovative ideas and highly effective and efficient systems that lead to superior performance. The term benchmark could be referred to as a sighting point from which measurements could be made or a standard against which could be measured. In more recent terms, benchmarks could be referred to as measurements to gauge the effectiveness and efficiency of a function, process, business area or a business relevant to others.
Firstly, a benchmark may reflect a difference in the internal operation of a business system or a difference in the target and external environment of the system. Secondly, in it self, executing the benchmarking function may reflect a different method of tracking or measuring the performance of a system. In the first instance, a more effective and efficient operational working for a business system could be identified.
In the second instance, a better way of measuring the effectiveness and efficiency of a business system could be identified thus improving the benchmarking function. It is almost as if the benchmarking function is measuring itself.
“ Firstly, it is a process of continuously studying the internal business system and seeking from the most
effective and efficient elements in the internal and target environment of the business system that could
produce leading edge performance. Secondly, implementing the most effective and efficient internal
business system and Thirdly, taking into account the influencing factors of the target and external
environment on a continuous basis.”
The Effectiveness is an indication of how well you measure against a benchmark and is measured by a financial or non-financial performance indicator. The Efficiency is the ratio between the inputs and the outputs of the business system.
The operational working of a project management function could be measured against other similar functions in the same organisation or against functions in organisations with different objectives. The influencing factors on project management at a construction company are vastly different to that of a software implementation company. The influencing factors of the first company are labour availability, material availability, etc. while for the second company resistance to change, scope creeping, etc. are important. However, construction companies can benefit a great deal from implementing an object oriented approach to project management that is being used by leading software implementation companies.
In the context of a project, Benchmarking should be seen as a project event that forms part of the life cycle of each deliverable of a project. Benchmarking supports the objective to ensuring the quality of the project or project deliverables. In the context of a business, Benchmarking should be seen as an internal continuous function that ensures an effective and efficient business or products. Benchmarking is not divorced from Business Engineering or any of its supporting objectives. Just as Benchmarking can be viewed in the context of a project, it also needs to form part of the continuous internal business system engineering function.