Benchmarking: Aka, Types, Tools, Disadvantages

BENCHMARKING
AKA, TYPES, TOOLS, DISADVANTAGES

,
Submitted to DR Shakil
Submitted by Faisal Waqas

What is AKA?
AKA is known as benchmarking also known as performance tester. Benchmarking process is
used for continuously improvement of quality of a firm’s products and processes. It is utilized to
distinguish and comprehend the activities showed by the best companies and firms. To adjust
and improve those processes and way of working and to arrive at the focused level of greatness
and afterward performing it with even better practice (Cole, 2008).
Importance of benchmarking
In this very competitive industry, companies have to be involved continuously in
improvement of their products, processes and methods to compete and survive in industry.
According to experts, it is a complete requirement to have tools and methods that can compare
the companies against each other’s. Benchmarking has been accepted as a main tool for
continuous improvement and survival (Camp, 1989). Organizations using benchmarking have
obtained benefits and succeeded in their businesses regard their competitors (Denkena et al,
2006).
Also, it makes the organization to become a more open system, increasing interactions
and information flows within its operating field. This also identify requirements of customer,
development of accurate measures of productivity and the establishment of effective goals and
objectives (Bank, 2000). Benchmarking is a performance measuring indicator showing the
performance of a firm against other firms.
Types of benchmarking
Following are the types of benchmarking [5]
1. Internal benchmarking
It is a process of benchmarking in which an organization overview its own company to

determine and try the best methodology or practices for completing an activity. The main
purpose is to find the best method available to get the work complete with least resources and
effort.
2. Performance benchmarking
A business or company consider its position related to a specified company services or

products. That specific information is used for pointing out opportunities and in performance
goal setting.
3. Functional benchmarking
Functional benchmarking methodology is the practice of comparing results of different

industries by identifying the common functions of these companies. This is widely done to
compare output of industries that have achieved the best results in a specified area.
4. External benchmarking
It is process of comparing company’s current business policies to that of a rival organization to

find current and future trends in terms of business practices and employment. Helps in
retaining right kind of talent and control compony cost. It compares compony performance at
strategic level. Strategic KPIs such as inventory turnover, revenue, profit is compared.
5. Strategic benchmarking
Strategic benchmarking view other company’s top management performance, their top
manager capabilities, their strategic initiatives, long term processes and competitive output or
products which are proved successful. Top management are core of a firm operations. These
directions are found in firms annual reports in case of public firms. Top management is easily
approachable if the company that is not a direct competitor.
Disadvantages of benchmarking
Bench marking have the following disadvantages (Freytag, P. V.,& Hollensen,S.2001).
 Sometime firms are unable to collect right information for process. This makes an
inadequate and improper comparison of firm strategies and their output apart from the
actual performances.
 In benchmarking process, the firms tend to be dependent on other organization policies
and strategies to become like them. In such process they lose their uniqueness and
follow the ways shown competitors.
 Benchmarking team needs trained and qualified personnel who have great experience
in that area and good analytical skills. This requires high administrative cost for the firm.
Benchmarking tools
No of tools are used for benchmarking. Following two main tools are mostly used. (Auluck,R.
2002)
1. Peer review
This benchmarking tool uses personnel having good field experience of a specific area to act as
‘friendly critics’ to other firm facing same problem. It makes the firm to see itself as other
impartial personnel see it. To make good use of the experience of the experience people who
have worked or run the same firm in same situation. Following approaches comes under peer
review tool.;
 Mutual Challenge: involving two or more organizations reviewing each other and
assumes the organizations involved have a degree of conﬁdence in each other. West
Sussex and Surrey County Councils have established such a relationship.
 Internal Challenge and Peer Assist: this is essentially concerned with sharing
experiences. Someone in a parallel job within the organization is asked to help prepare,
advise on, or challenge a proposal from a perspective of direct experience in that issue.
 External Challenge: outside the organization peers gives a view on the basis of key
documents and asking relates question from stakeholders and staff. The result from
these are shown to the management and discussed.
 Peer Groups: This involves bringing together people within a department who have
similar tasks or who are at similar stages in a project life cycle, to ensure continuous
exchange of good practice and mutual support.
2. Business Excellence Model
This technique gives a set of measurement against which any firm can evaluate itself and use the
framework to find any gaps. Each criterion is measured, and this is now broadly used as self-evaluation
scoring and in making award submissions. Other strengths of the model are that it:
 Provides a detailed framework of organizational assessment.

 Can be used ﬂexibly and according to need of an firm.
 Is based on self-evaluation means the organization owns the process.
 Enables evaluations across the private and public sectors.
Examples from different countries

1. Xerox is known as a founder for the exercise of benchmarking. Japanese firm were leading the market
share from Xerox. Xerox started studying the rival firms and compared their performance with its own
firm. Xerox also searched same processes of successful firms apart from their own industry. The took
certain measures against these findings. In 1991 Xerox had revised its quality policy against benchmarked
competitors and become the leader in the European industry (Zairi , 2000).
2. Mr. Eyrich in his last assignment at the IBM Rochester, Minnesota site, he led the effort to
structure benchmarking. (Eyrich, 1992)
Today’s global economy dictates that to be best requires a continuous comparison with the
best. Certainly, benchmarking is not the only strategy that will make a firm best, but it is one of
the key initiatives. We must adapt or develop an approach to benchmarking that is effective. A
recommended approach has 6 steps:
 Architecting the business process.

 Structuring the business process.
 Selecting Best of Breed companies to benchmark.
 Comparing the processes with the benchmarked company.
 Analyzing the result and setting goals.
 Implementing the goals, action plans.
References
Cole, M. J. (2009). Benchmarking: a process for learning or simply raising the bar?. Evaluation
Journal of Australasia, 9(2), 7-15.
Camp, R. C. (1993). A bible for benchmarking, by Xerox. Financial executive, 9(4), 23-28.
Denkena, B., Apitz, R., & Liedtke, C. (2006). Knowledge-based benchmarking of production
performance. Benchmarking: An International Journal, 13(1-2), 190-199.
Bank, J. (2000). The essence of total quality management 2nd edition (Harlow.
(5)M, P. (2020, March 7). What is Benchmarking? Definition, Types, Process, Advantages,
Disadvantages, Scope. Retrieved May 12, 2020, from
https://theinvestorsbook.com/benchmarking.html
Freytag, P. V., & Hollensen, S. (2001). The process of benchmarking, benchlearning and
benchaction. The TQM magazine.
Auluck, R. (2002). Benchmarking: a tool for facilitating organizational learning?. Public

Administration and Development: The International Journal of Management Research and
Practice, 22(2), 109-122.
Eyrich, H. G. (1992). Benchmarking to be best. Competitive Intelligence Review, 3(2), 8-10.
Zairi, M., & Whymark, J. (2000). The transfer of best practices: how to build a culture of
benchmarking and continuous learning–part 1. Benchmarking: An International Journal.
Eyrich, H. G. (1992). Benchmarking to be best. Competitive Intelligence Review, 3(2), 8-10.

Nath, P., & Inalini, N. (1996). Best Practices of Research and Technology Organisation: Towards
a More Responsive R&D. Science, Technology and Society, 1(2), 351-362.

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BENCHMARKING

AKA, TYPES, TOOLS, DISADVANTAGES

Submitted by Faisal Waqas

Following are the types of benchmarking [5]

It is a process of benchmarking in which an organization overview its own company to

A business or company consider its position related to a specified company services or

Functional benchmarking methodology is the practice of comparing results of different

It is process of comparing company’s current business policies to that of a rival organization to

2. Business Excellence Model

 Provides a detailed framework of organizational assessment.

Examples from different countries

 Architecting the business process.

Camp, R. C. (1993). A bible for benchmarking, by Xerox. Financial executive, 9(4), 23-28.

Auluck, R. (2002). Benchmarking: a tool for facilitating organizational learning?. Public

Eyrich, H. G. (1992). Benchmarking to be best. Competitive Intelligence Review, 3(2), 8-10.

Eyrich, H. G. (1992). Benchmarking to be best. Competitive Intelligence Review, 3(2), 8-10.

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