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Benchmarking

Benchmarking is widely used in strategic management, where managers develop new business models in order to copy another company’s processes. Benchmarking is usually treated as an ongoing process where organizations continually seek to improve practices. The usual performance measures of benchmarking are quality, time, and cost. Performance is measured using a specific quantitative indicator: examples include cost per unit, productivity per unit, and defects per unit. Managers identify one process from another company that they idolize as the best in the industry and then compare their own processes in an effort to learn how to perform more efficiently.1

Boxwell’s “Benchmarking for Competitive Advantage” was written in 1994 as a guide offering a seven-step approach to benchmarking. Additionally, Robert Camp developed a 12-stage approach to benchmarking.1 The twelve steps are: select subject, define process, identify potential partners, identify data sources, collect data and select partners, determine the gap, establish process differences, target future performance, communicate, adjust goal, implement, and review.1

The three main costs associated with benchmarking are: visit costs, time costs, and benchmarking database costs. Visit costs are incurred when company employees have to travel and visit the organization that they are trying to benchmark. These costs include hotel rooms, travel costs, meals, and lost labour. Time costs are also incurred by organizations. Some time costs include the benchmarking team being taken away from their routine duties to study and implement new processes. Also, additional staff may be required to fill in their positions. Lastly, benchmarking database costs are for hiring people to maintain and refresh the newly created database as well as computer software and hardware purchases.

 

 

Reference:
1. Camp, R. (1989). The search for industry best practices that lead to superior performance. Productivity Press.

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