11.08.2021

Benchmarking - a way to improve the company

Key information:

  • Benchmarking is a method of comparing one company's activities, processes or products with others in the market to improve operational efficiency and gain knowledge of industry best practices.
  • In the process of strategic analysis, it is important to find a reference point for our activities.
  • There are several types of benchmarking, such as process, product, functional, organizational, strategic, internal and competitive.
  • The method requires a methodical approach, following a procedure, and reliability and consistency in aggregating and analyzing data.
  • Benchmarking consists of a preparatory stage, operationalization, data analysis and implementation of changes.
  • In benchmarking, it is necessary to define precisely the object of comparison, i.e. "what", "how" and "with whom" we want to compare.
  • A key step is operationalization, i.e., defining the KPIs that will help measure success in the study.
  • Benchmarking of individual processes allows to identify qualitative and quantitative differences between the studied elements, which allows to identify areas for improvement and implementation of changes.
  • The need for more and more accurate analysis of business operations is due to the ever-changing market environment.

Briefly about benchmarking

Benchmarking (a.k.a. company benchmarking) is a management method of improving one's own company by drawing on the experience of others. We also know that the benefits associated with the use of this method affect many levels of the organization's functioning, and above all increase the likelihood of success. So the question that remains to be asked - what does benchmarking look like in practice and what is benchmarking about?

In order to be able to effectively control the operations of one's company, it is important for a company to be aware of its position in the market. Comparing one's company with other companies in the industry allows one to identify strengths and weaknesses, and to recognize the number of areas of an organization where the company can grow.

Analysis of these areas allows taking strategic decisions regarding further action and improvement to achieve competitive advantage. Comparing one's own company with other organizations is crucial for effective management and long-term success.

Benchmarking has become one of the best methods for improving organizations. It is a widely used method used to improve the efficiency of a company's operations, organizational performance and the overall performance of companies. Continue on to find out, among other things, the purpose of benchmarking and which organizations use benchmarking!

What is benchmarking?

Benchmarking is the process of comparing and evaluating performance of one organization, product or process compared to others. In short, benchmarking allows you to compare your own performance with that of the best in the industry. The process involves identifying the best companies of their industry practices and applying them to improve organizational performance.

Benchmarking is particularly important for organizations that seek continuous improvement and competitiveness, as it allows them to detect areas for improvement and on setting performance targets based on industry best practices. Benchmarking can also be used to monitor progress toward goals and to evaluate the effectiveness of actions taken to improve performance.

Benchmarking objectives

Benchmarking is the process of comparing a company's performance with other companies in the market, or with industry standards. The need to analyze a company more closely stems from the constantly changing market environment.

Above all, benchmarking allows you to look for industry best practices and enable you to make changes that will improve your organization's performance and competitiveness. By benchmarking their performance against the best in the industry, organizations can also set performance goals and develop strategies aimed at achieving them.

Benchmarking is not intended to copy, but to increase the efficiency of the organization's operations, improving the quality of products or services, increasing customer satisfaction, improving the organization's image, reducing production or operating costs, and developing employees by applying best practices in the market.

Through benchmarking, organizations can also gain new insights into their processes and operations, which can lead to innovations and quality improvement. Benchmarking allows you to learn industry best practices and implement them in your organization, which in turn leads to increased competitiveness and profits.

Types of benchmarking

Benchmarking is a method of comparing one's activities or products with the best in the market, in order to improve one's business processes and improve competitiveness. There are different types of benchmarking, depending on the goal you want to achieve. The literature lists several basic types of benchmarking:

  • process benchmarking - This type of benchmarking involves improving operational management,
  • product benchmarking - allows the implementation of imitation strategies in the product field,
  • functional benchmarking - involves looking for benchmarks for the various enterprise functions that we want to improve,
  • organizational benchmarking - helps identify areas for improvement in the company's operations,
  • strategic benchmarking - involves comparing the vision, mission, and strategies of companies to identify key factors in their market success,
  • internal benchmarking - involves comparing the results and ways of performing the same functions in different cells of the organization,
  • competitive benchmarking - Compares our company with competitors in the market.

The most commonly used types of benchmarking are benchmarking competitive (external) and functional. External benchmarking allows us to compare our company with the best in the market, so we can identify areas in which we can improve improve and increase our competitiveness. Functional benchmarking, on the other hand, allows us to find best practices in our industry and adapt them to our company. This allows us to find solutions that are already proven and adapt them to our needs.

To make good use of benchmarking, it is important to carefully define the objectivesThe benchmarks we want to achieve. Then choose the right type of benchmarking and the right sources of comparison. It is important to carefully examine and analyze the benchmarking results and implement appropriate changes in your company. Benchmarking is not a one-time tool, but a process continuous improvement, which should be used regularly to maintain and increase the company's competitiveness.

What to do when you are aiming high?

Best use cases benchmarking we can see in the highly competitive and innovative aviation industry, where it is considered an incredibly useful tool for improving company performance. In addition, an appreciated advantage is the relatively low cost of its implementation.

Southwest Airlines is one of the most profitable air carriers today, but this was not always the case. An inefficient and mismanaged time management system leads to many unpredictable changes and delays, resulting in dissatisfied customers.

To solve this problem, it was decided to start analyzing the market situation of methods benchmarking. It began by comparing its strategy with other similar companies in the industry with better results. In addition, Southwest Airlines also considered time management systems used by non-airline companies known for their efficiency in this area.

What does benchmarking provide?

Among the organizations analyzed, the NASCAR group stands out, having had highly cooperative and efficient, primarily in the area of time management, race maintenance crews. What is the basis of their success?

Accuracy and clearly defined tasks proved to be the key to such good results. In addition, they were determined both by focusing on each employee and by developing teams that work well together. Inspired by this example, Southwest Airlines created its own strategy.

Through the use of benchmarking, SA has optimized and significantly improved the time from the aircraft's stand-in to its departure. The most significant contributors to this were the reduced number of checked bags, standardized aircraft layouts and the fastest possible passenger check-in process.

Ultimately, thinking creatively and not limiting the possibilities benchmarking only to the airline industry, Southwest Airlines itself has become a benchmark for competition. Today, one of the company's strongest and most valued sides by travelers is its punctuality.

From average fast food restaurant to quality expert

Benchmarking has become such a popular tool that not only companies in trouble are using it to find solutions. Companies considered role models are themselves stepping forward, offering their expertise and experience.

A privately owned quick service restaurant chain, Pal's Sudden Service serves customers at 17 locations within a 60-mile radius of Kingsport. The formula created has achieved a high level of product and quality service, making Pal's a major player in the regional market.

The restaurant chain was the first in the restaurant industry to receive the Malcolm Baldrige Award, an American quality award. Even during the uncertain economic situation in the market, the turnover of Pal's Sudden Service did not stop growing.

Other organizations noticed how the restaurant chain was changing and, naturally, wanted to know how it had achieved this. Thom Crosby, now serving as the company's president, decided to offer a benchmarking session to interested companies. Interest in the course was so great that seats sold out on the first day.

Benchmarking offered by Pal's Sudden Service was intended to create a global center of excellence in the region. Today, Pal's Business Excellence Institute (BEI) offers a variety of courses based on management systems used in restaurants. These are helpful not only for businesses, but also for institutes such as non-governmental organizations and foundations.

Stages of applying benchmarking

Benchmarking is a method that enables companies to improve their productivity, efficiency and competitiveness. For this method to be effective, it is necessary to use methodical approach, in accordance with procedure, reliability, and consistency in aggregating and analyzing data.

Standard benchmarking It consists of four stages: preparation, operationalization of Benchmark creation, summary and analysis of data, and implementation of changes based on the acquired information.

At the stage preparatory the scope, form, methods and subject of the comparison should be specified. It is also necessary to provide a detailed, exhaustive describing the functioning of the component under study In your own company. At this stage you should also find a company with which you can exchange information according to a well-defined "scenario" and clear and specific rules.

Stage operationalize term KPIs (Key Performance Indicators), which form the basis for measuring and comparing elements. These indicators should be defined precisely so that the relevance and reliability of the entire study is ensured.

At the stage summaries and data analyses, a comparison of the results between the elements under study is made. The final step in the process benchmarking is to implement changes based on the information gained. It is worthwhile here to introduce the practices of the best companies into the strategy of your own enterprise. Correctly designed and conducted Benchmark allows you to determine the differences Between the benchmark element and the element being compared to it.

Through benchmarking, companies can identify differences in labor productivity, its costs, the efficiency of technology, the amount of errors, shortages, downtime, or defects that arise in the process. Benchmarking also makes it possible to observe quality deviations in the division of labor, the qualifications and competencies required to perform it, the authorizations and tools.

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    Benchmarking, or see for yourself!

    To summarize, benchmarking is a process that is widely used by companies to compare the company's performance with others in the industry. It involves analyzing and comparing the processes and performance of a company. Benchmarking allows you to determine the number of your own organization's strengths, weaknesses and areas for improvement.

    Companies using benchmarking seek to access data on the performance of companies operating in a given market, the performance and strategies of other companies in order to assess their own performance and identify areas where they can make improvements.

    By systematically comparing the performance of a given company with industry best practices, it is possible to achieve gains in efficiency and competitiveness. Benchmarking is a valuable management tool, enabling companies to gain knowledge and inspiration to improve their processes and achieve better results.

    In Poland and around the world; in small companies and in huge corporations; in every industry and in every sector - well-used benchmarking helps everyone achieve what may at first seem impossible.

    The most common form of benchmarking to help identify competitors' best practices is competition analysis. Sometimes we have solutions given to us like on a platter, as in the case of BEI training, but most often you have to find inspiration yourself among your competitors to create your own effective plan with long-lasting results. As the examples show, despite the necessary effort, it really is worth it!

    Veronika Płatek

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