Benchmark is a tool to achieve business and competitive objectives. It is powerful and extremely effective when used for the right reasons and aligned with organisation strategy. It is not a panacea that can replace all other quality efforts or management processes. Organisations should still decide which markets to serve and determine the strengths that will enable them to gain competitive advantage. Benchmarking is a tool to help organisations develop those strengths and reduce weaknesses.
By definition, benchmark requires an external orientation, which is critical in a world where the competitor can easily be on the other side of the globe. An external outlook greatly reduces the chance of being caught unaware by competition. Benchmark can notify the organisation if it has fallen behind the competition or failed to take advantage of important operating improvements developed elsewhere. In short, benchmarking can inspire managers (and organisations) to compete.
In contrast to the traditional method of extrapolating next year’s goal from last year’s performance, benchmarking allows goals to be set objectively, based on external information. When personnel are aware of the external information, they are usually much more motivated to attain the goals and objectives. Also, it is hard to argue that an objective is impossible when it can be shown that another organisation has already achieved it.
Benchmarking is time and cost efficient because the process involves imitation and adaptation rather than pure invention. Benchmarking partners provide a working model of an improved process which reduces some of the planning, testing and prototyping effort. As the old saying goes, “why reinvent the wheel?”
The primary weakness of benchmark, however, is the fact that best-in-class performance is a moving target. For example, new technology can create quantum leap performance improvements such as the use of Electronic Data Interchange (EDI). Auto- mobile makers no longer use paper to purchase parts from suppliers. A computer tracks inventory and transmits orders directly to a supplier’s computers. The supplier delivers the goods and payment is electronically transmitted to the supplier’s bank. Wal-Mart uses bar-code scanners and satellite data transmission to restock its stores, often in a matter of hours. These applications of EDI save tens of thousands of worker hours and whole forests of trees, as well as helping to meet customer requirements.
For functions that are critical to the business mission, organizations should continue to innovate as well as imitate. Benchmarking enhances innovation by requiring organizations to constantly scan the external environment and to use the information obtained to improve the process. Potentially useful technological breakthroughs can be located and adopted early.