The modern business world is highly dynamic and competitive.
It is highly essential to stay on top of the game even to survive in the
industry. This is where benchmarking becomes helpful to all organizations.
Benchmarking is the process of comparing our performance
with the industry best performance and developing strategies to reach that
level. In this process we can identify our weaknesses and limitations and the strengths
of the best performer and try to develop our own strengths.
Benchmarking is threefold,
- Internal Benchmarking
- External benchmarking
- Strategic Benchmarking
Internal Benchmarking
This is where certain departments or sections of an
organization benchmark each other. The significance is that performance
comparison is done within the organization itself. For an example the
production department may have an optimum output of 5 million units, and the
marketing department can benchmark this and try to sell all of the units.
External Benchmarking
This is also known as competitor benchmarking. Yes, this is
where an organization compares its performance with the best in the ‘industry’,
usually the market leader. This will allow the company to really realize the
weaknesses of the organization as a whole.
Eg: Lexus benchmarking BMW and Benz.
Strategic Benchmarking
This is a more ‘ambitious’ approach where a company benchmarks
itself with one of the best in the whole market, despite the industries. This
could be quite overachieving since there maybe companies that have unlimited
potential than the industry our company operates in. However this form of
benchmarking will really give a boost to our company performance.
Despite these benefits benchmarking does have some disadvantages.
The main one being, losing focus on the customer needs. The company maybe
striving to achieve the best performance and amidst all this commotion we may
forget what our customers really want. Also a ‘best practice’ may not remain
for a long time. The best performer will always try to achieve more, so there
will be an endless tailing behind the market leader. Also there is no way to be
sure that industry best performers’ strategies will suit our organizational
culture and structure and this may lead to resistance to change.
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