Benchmarking. Best practices.
All these terms are used in business today. But are
they just buzzwords, or do the words have real meaning? Are they useful tools
that can be used to improve business practices today? Let’s begin with some
The Language of Benchmarking
Benchmarking and Best Practices
defines benchmarking as follows:
search for industry best practices which lead to superior performance.
To understand this definition completely,
we must first be clear what is meant by
. They are
practices that enable a company to become a leader in its respective
marketplace. However, Best Practices are not the same for all companies. For
example, if a company is in a declining market, in which the pressures are to
maximize profits with a fixed sales volume, one set of best practices might
allow market leadership. However, if the company is in a growth mode with
profits dictated by gaining rapid market share, a different set of best practices
would be appropriate. Therefore,
is determined by business
conditions, not by a fixed set of business practices.
The second key term in the Xerox
definition is superior performance. Many companies use benchmarking to be as
good as their competitors. However, a company can gain very little if its goal
for benchmarking is merely to achieve status quo. Benchmarking is a continuous
improvement tool that is to be used by companies that are striving to achieve
superior performance in their respective marketplace.
alternative definition for benchmarking is as follows:
An ongoing process of measuring
and improving business practices against the companies that can be identified
as the best worldwide.
definition emphasizes the importance of improving, rather than maintaining the
status quo. It addresses searching worldwide for the best companies. Most
marketplaces have international competitors. It would be naive to think that
best practices are limited to one country or one geographical location. Information
that allows companies to improve their competitive positions must be gathered
from best companies, no matter where they are located.
striving to improve must not accept past constraints, especially the “not
invented here” paradigm. Companies that fail to develop a global perspective
will soon be replaced by competitors that had the insight to become global in
their perspective. In order to make rapid continuous improvement, companies
must be able to think outside the box that is, to examine their business from
external perspectives. The more innovative the ideas that are discovered, the
greater the potential rewards that can be gained from the adaptation of the
third perspective on benchmarking states:
Benchmarking sources “Best
Practices” to feed continuous improvement.
statement adds another dimension to benchmarking, that of having an external
perspective. Research shows that major innovations in any business sector come
from an external sector and are adapted to improve the practices of the
company. In today’s competitive business environment, the need to develop this
external perspective is critical to survival.
one other perspective defines benchmarking as the process of continuously comparing
and measuring an organization with business leaders anywhere in the world to
gain information that will help the organization take action to improve its
performance. The common thread of studying other companies to gain information
that allows the company to become more competitive is clear. Unless a company
clearly understands the processes and procedures that allow a company to become
the best, little value is derived from benchmarking.