Benchmarking The Information Systems Function (2023)

Benchmarking The Information Systems Functionby Steven GordonCIMS Working Paper Series 94-08

Steven Gordon is an Associate Professor of Information Systems
Babson College
Babson Park, Massachusetts 02157-0310

November, 1994
Center for Information Management Studies (CIMS)
Babson College
Babson Park, Massachusetts 02157-0310
Phone 617-239-4531 FAX 617-239-6416

BENCHMARKING THE INFORMATION SYSTEMS FUNCTION
What Is Benchmarking?

Professionals in the computer industry have used the term benchmarkingsince the early 1960s. [1] Initially benchmarking meant comparingthe processing power of products produced by competing manufacturerswithin a realistic business or scientific environment. Computermanufacturers published their benchmarking results in their salesbrochures and their marketing literature. To resolve competingclaims, academic and commercial concerns developed benchmark standardssuch as whetstones and dhrystones. [2] Software companieswhose products' speed was an important competitive consideration,such as vendors of database management software and sort programs,also used the term "benchmarking" to describe the comparisonof their products' performance. [3]

By the late 1970s, information systems (IS) professionals beganto broaden the meaning of benchmarking to extend beyond the product-to-productspeed comparison of individual hardware and software componentsto the comparison of total throughput and efficiency. [4] Initially,since they could not easily compare their data with competitors,they compared it to their own experience from year to year, trackingsuch measures as the total MIPS of their processing systems andthe number of transactions per second they could handle. Later,IS professionals also sought practical measures of productivityand output that could be compared to industry norms. Generally,organizations used broad measures, such as the ratio of IS budgetto sales or expenses, the return on investments in informationtechnology (IT) and systems, and the percentage of IS projectscompleted on time and within budget. Some organizations complementedthese measures with more group-specific or task-specific onesto evaluate individual services or products. For example, toevaluate the help desk, they might use measures such as the ratioof help-desk workers to the number of help-desk calls and thepercentage of problems reported to the help desk that are resolvedon the initial call.

Norms for broad measures such as the ratio of IS expenses to saleswere established by trade organizations that collected such datafrom their membership. Additionally, many organizations, unhappywith the broad comparisons published by trade organizations, formedconsortia of relatively similar companies to share each others'measures confidentially. Consultants who collected metrics fromclients and other sources also, for a fee, sold such information,aggregated to protect confidentiality, to interested parties.

The term "benchmarking" was first applied to businesspractices by Xerox Corporation circa 1979. [5] As the term "benchmarking"gained popularity among the general business community, many ISprofessionals began to wonder if non-IS professionals definedthe term the same way, and if not, whether and how IS professionalshould react to the new meaning. Most of this confusion was causedby the fact that in the popular press "benchmarking"retained two meanings. One, commonly called metric benchmarking,is indeed what IS professionals have been used to. Metric benchmarkingis the use of quantitative measures as reference points for comparisonagainst prior experience, industry norms, or best-in-class organizations. The other meaning, commonly called best practice benchmarking,is the identification, and potentially the adoption, of best practicesor techniques for performing common tasks. The next section comparesthe pros and cons of these two types of benchmarking, recognizing,of course, that one type of benchmarking does not preclude theother. In subsequent sections we focus on best practice benchmarking,although not to the exclusion of metric benchmarking. This focusreflects the large volume of existing research and publicationconcerning metric benchmarking and the relative absence of andneed for similar information about best practice benchmarking,particularly in the field of information systems.

Metric Vs. Best Practice Benchmarking

The major drawback to metric benchmarking is that it fails toidentify the cause of and possible solutions for sub-par performanceon any measure. For example, suppose a company finds that, relativeto the norm, a low percentage of its help-desk calls are resolvedon the initial call. It may conclude that its help-desk staffis insufficiently trained, that its systems are relatively complexand hard to diagnose, or that the norm has been established atcompanies whose help desk is so poor that users, in frustration,have learned to work around it when faced with complex problems. Each of these conclusions implies a different solution. In contrast,best practice benchmarking of the help desk function, rather thanrelying on statistical measures, would involves a detailed studyof help-desk processes at other organizations. This type of benchmarking,rather than simply identifying areas for improvement, is morelikely to produce a plan for continuous improvement or radicalreengineering of the process or processes under study.

Several drawbacks to best practice benchmarking may limit itsusefulness. First, the level of effort required to study evena few processes is high relative to metric benchmarking. As aresult, the returns to the benchmarking effort have to be substantialin order to justify its undertaking. Second, as this form ofbenchmarking studies only a small number of organizational units,there is no guarantee that it will uncover exemplary, or evenrepresentative practices. Third, benchmarking partners may bewary of sharing their knowledge, especially if they believe itto be a source of competitive advantage. Finally, considerablejudgment is required to ascertain whether the practices that workwell in one organization can be effectively transplanted to anotherorganization, especially when industry, culture, size, and functionmay differ.

Why Benchmark?

(Video) Different types of benchmarking: Examples And Easy Explanations

Although companies benchmark IS/IT functions for a variety ofreasons, the reasons most commonly cited include justifying thecompany's investment in IT, evaluating the performance of theIS group and its management, and improving the IS functions withinthe organization. Benchmarking also often occurs as one componentof a more extensive cost assessment or cost reduction effort,a total quality management (TQM) program, or a strategic planningeffort.

The budgeting process periodically motivates IS managers to performsome benchmarking. Most organizations subject development andacquisition of new systems to stringent return-on-investment hurdles. With the increasing popularity and availability of outsourcingservices, many organizations require a justification of existingsystems as well. Metric benchmarking allows a company to compareits investment in IT and IS to other similar companies. A companythat spends less than similarly sized companies in the same industrymay be operating more efficiently than its competition. Alternatively,it may be spending less because it has neglected to use IT toachieve competitive advantage, to match its competitors' services,or simply to save more money elsewhere in its budget. Benchmarkingmight spur such a company to increase spending in IT or it mayhelp the company identify a low cost IT strategy that works effectively. Conversely, a company that spends more than similar companiesin the same industry may be operating less efficiently than itscompetition, using IT to achieve competitive advantage, or investingin IT to reduce other expenses.

Another reason to benchmark is to assess job performance and toset performance goals. The satisfaction of supervisors, subordinates,and peers is, of course, a key measure of job performance. However,if a company is complacent, its urge to achieve satisfaction islikely to entice it to set goals that are too easy to reach. In the absence of objective measures and external comparisons,lack of performance may not be noticed until it is too late torecover. Complacency is a potential problem at all levels ofmanagement. Every manager should be asking the question, "howhigh can I realistically set goals for my direct reports?" Internal benchmarking helps to identify trends relevant to answeringthis question. However changes in technology reduce the valueof such trend analyses. For example, the use of software productivitytools makes historical records of software development productivityobsolete; replacement of mainframe systems with LAN-based systemsmay render historical statistics on down-time obsolete. One trueway to assess your performance when you are in a high state offlux is to compare your performance to others in a similar state.

Finally, benchmarking is a cornerstone of continuous improvement. It supports answering questions such as "what functionsare most in need of improvement" and "how are othersdoing the same thing better?" The hallmark of a good manageris a healthy level of dissatisfaction with the status quo. Benchmarkingenables this dissatisfaction to be channeled into productive change.

What Do IS Groups Benchmark?

Fairly significant differences exist between the types of processesbenchmarked by companies doing metric benchmarking and those searchingfor best practices. Companies doing metric benchmarking seekout processes that are easily measured and for which comparisonswith representative companies are likely to be available and meaningful. Figure 1 provides a list of such processesand some common measures on which they may be benchmarked.

Benchmarking for best practices has been shown to be most profitablewhen applied to functions that are semi-stable and repeatable. [6] Processes that are done once or twice a year, such as budgetingthe IS function, and those that are not repeatable, such as thedevelopment or purchase of a particular piece of software or equipmentare not likely candidates for benchmarking.

Xerox uses the ten questions listed in Figure2 to identify areas for best practices benchmarking. First,and most importantly, benchmarkers should identify what factorsare most critical to the success of the IS function and the organizationas a whole. These factors are not necessarily the same. Forexample, the factor most critical to the success of the IS functionmight be to keep costs low while the factor most critical to thesuccess of the organization might be to keep customers satisfied. These critical success factors might point to several differentprocesses to benchmark, and all should be considered. In selectingamong these, preference should be given to those that have themost potential for improvement and those that currently causethe greatest problems. The questions in Figure 2, by focusingon the combination of importance and potential improvement, canhelp companies identify processes to benchmark.

Figure 3 displays the results of a 1992 studyby the Society of Information Management (SIM) and Ernst &Young of the benefits, by industry segment, of improving differentpractices. [7] Prototyping, cross-functional teams, joint applicationdesign, and business process reengineering were the top four practicesmost often identified in this study for providing value and improvement. These and the other items in this figure offer some suggestionsas to possible benchmarking opportunities. However, this studycaptured the state of the industry at just one point in time. As industry experience with many of these processes and as technologyand tools evolve, different processes and products come to theforefront. Furthermore, what is most important for the majorityof companies may not be important for your company, or your companymay already have achieved superior performance in the areas identified.

Who Initiates Benchmarking?

(Video) Benchmarking : Concept, Steps, Application, And Types With Examples

The motivation for benchmarking often determines who in the organizationbegins the process. For example, if the motivation is to justifythe IS/IT budget, the CIO or the manager responsible for the budgetwill likely initiate the process. Alternatively, the mandatemay come from someone such as the President or CEO who has theultimate authority for allocating budgetary resources. Questioningthe CIO's budget, he or she may ask, "how does this compareto what our competitors are spending in IT?" or "can'tthe proposed initiatives and operations be accomplished withoutsuch a large expenditure."

When benchmarking is done as part of a continuous improvementeffort, it may be initiated a "Quality Office" or "QualityOfficer" either within the IT organization or outside. OnceTQM becomes embedded in the organizational culture, benchmarkingwill likely become part of the problem-solving toolset of allmanagers. These managers may then initiate a benchmarking effortas needed to address problems they observe. In addition, metricbenchmarking will likely be institutionalized and performed periodicallywithout any apparent champion.

Who Performs The Benchmarking?

Benchmarking is generally performed by a team of employees, sometimeswith the assistance of an outside consultant who has had previousexperience with benchmarking and the process or processes beingbenchmarked. The team usually includes a project manager, datacollectors and analysts, a facilitator trained in benchmarkingwho may or may not have expertise in the area being benchmarked,and various support personnel who work only part-time with theteam. Among the support personnel, the benchmarking team shouldprobably include a lawyer for dealing with the legal issues surroundingthe sharing of competitive information, personnel from libraryservices or others specifically trained in searching for informationoutside the organization, clerical and administrative workers,and senior management.

Who Do IS Organizations Benchmark Against?

IS organizations can benefit in different ways from differenttypes of benchmark partners. In this section we look at the advantagesof benchmarking within the IS organization, within the companybut outside IS, against competitive organizations, and againstthe best of breed (also known as best in class or BIC).

The benefits of benchmarking within the IS organization itselfare that such benchmarking establishes a baseline, data are readilyavailable, cooperation can likely be assured, and priorities forexternal benchmarking can be developed. Figure4 identifies some other reasons to benchmark internally.

Some processes that occur within the IS organization, such aspurchasing and quality assurance, may also occur in other divisions,other business groups, or other business units within the samecompany. Other processes may be analogous to processes that occurelsewhere within the company. For example, the operation of thehelp desk may be similar to the operation of a customer supportdesk for the products that the company manufactures. The existenceof parallel or nearly parallel processes at many places withinan organization provides an opportunity for benchmarking withinorganizational boundaries. Such benchmarking can be performedmore expeditiously than benchmarking across organizational boundaries,and the benefits of the lessons learned are magnified becausethey affect so many parties internally. They also offer an opportunityto recognize and reward excellence within the organization.

Another source of benchmarking is the competition. Indeed, insome sense, the competition is the best source for determininghow well you are doing. But, who competes for the services youprovide? Don't make the mistake of looking to the IS organizationof your company's competitors. The competition for internal informationservices groups consists of outsourcers of IS/IT services. Ifthey can provide the services you provide more efficiently thanyou can, then you have something to learn from what they do. If you fail to learn, you may not survive -- your function, too,may be outsourced. Unfortunately, the number of companies thatprovide IS outsourcing services are relatively few, most are large,and most feel that they have little to learn from companies whosebusiness is not the provision of IS services. As a result, itmay be hard to find an outsource provider to benchmark against.

Finally, best of breed benchmarking looks at superior IS organizationsin other companies. It really doesn't matter whether or not theother company is a competitor. However, the other company shouldbe one that faces similar information systems needs and providessimilar services. It should also be reasonably similar in size,degree of globalization, and management complexity. [8] Surprisingly,research indicates that if you are just beginning to benchmark,looking at the best organization may not be as satisfactory aslooking at organizations that are better than you but not toofar ahead. Apparently, looking too far ahead may be demoralizingand result in attempts at change that the organization is notprepared to make.

(Video) iTWO benchmark - Simple and Powerful Benchmarking and Conceptual Estimating

How Can You Find External Benchmark Partners?

Organizations searching for benchmarking partners most commonlyconsider those that have received special awards, citations, ormedia attention; those referred to or cited by professional associationsand independent reports; and those recommended by other professionals,associates and consultants. [9] Among formal awards and citations,the Malcolm Baldridge National Quality Award, Deming ApplicationPrize, and the European Quality Award are given to organizationscommitted to total quality and who excel at implementing a TQMapproach. Even though recipients of these awards have not beenjudged exclusively on their information systems, their IS processeslikely reflect the organizational focus on quality, increasingchances that they would be good partners for best practices benchmarking. However, receipt of a Baldridge or Deming Award, or a similaraward for business practice excellence does not guarantee excellencein overall IS practice and certainly does not guarantee excellencein every phase of information processing and technology. Benchmarkingcompanies must carefully evaluate the potential contribution ofpartners identified in this fashion.

One award more narrowly focused on IS is the Partners in LeadershipAward from SIM International. This award recognizes the jointefforts of a CEO or senior line manager and a senior IT executivein such areas as "improving the quality and speed of customerservice, shortening cycle times and reducing costs, differentiatingproducts and services, and improving business processes leadingto improved financial and business performance." [10] Anotheraward focused on IS is Computerworld's annual Premier 100,a ranking and rating of the IS effectiveness of publicly tradedcorporations earning over $300 million. Unfortunately, the judgesfor Computerworld assess companies largely on statisticalmeasures, and some of these are inconsistent with measures normallyused to benchmark excellent performance. For example, Computerworldconsiders a high ratio of IS budget to total revenue to be a positivefactor in its award (reportedly as evidence that the company iscommitted to technology) [11] whereas most organizations consider lowvalues of this ratio to be indicative of IS efficiency. CIO, in conjunction with Booz-Allen & Hamilton, conveys theESPRIT Award honoring companies for "excellence in strategicpartnering for return from information technology." [12] Computerworld'sSmithsonian Award recognizes companies for their innovative applicationof technology.

Trade and professional journals such as Computerworld,Datamation, CIO, Information Week, Client/ServerComputing, DBMS, Journal of Systems Management,and others often highlight organizations that have applied informationtechnology in a new, unusual, or exemplary fashion. Often theseexperiences relate to fairly narrow applications or processes,such as software quality testing, database backup procedures,the application of CASE tools, or the tuning of LAN servers. You may need to read widely or use an electronic index such asAB/Inform or Dialog or a printed index such as theComputer Literature Index to find companies noted for theprocesses that you wish to benchmark. However, this effort maybe worthwhile because it allows you to select partners who haveworked hard on the areas you wish to benchmark.

Professional associations such as Babson's CIMS and Boston SIMprovide a forum where practitioners and consultants with expertisein one area of IS relate and evaluate their experiences with newprocesses and tools in that area. Attendants at such conferencescan easily identify companies that are potential benchmark partnersand consultants who, because of their experience, can help themidentify such partners. In addition, reports produced by theseorganizations often identify either metrics, best practices, orboth in specific areas.

Finally, the American Productivity & Quality Center (AP&QC)based in Houston, Texas, maintains a database for to its membersof companies that have done benchmarking in a variety of areas. This database, including abstracts of the benchmarking studies,can be searched on line, and additional information about priorstudies and best practices can be obtained through face-to-facemeetings. Similar databases are being developed by other companiesfor whom benchmarking is central to their TQM efforts. [13]

How Do Companies Measure The Success Of A Benchmarking Effort?

Surprisingly little has been written about how organizations judgethe success of their benchmarking efforts. Many, in their evaluation,subsume benchmarking under the umbrella of a broader TQM or reengineeringeffort and make no attempt to individually assess its contribution. Others measure the success of benchmarking by the extent to whichit produces change. Unfortunately, while change can be measuredfairly easily, the impact of change is measured over time, andcan rarely be attributed to the success of a single initiative. If benchmarking is viewed as a learning process, its successmust be measured individually by its participants as well as collectivelyfor the organization..

How Likely Are Companies To Achieve Success?

According to one study, companies have been successful by theirown measures in approximately 70 to 90 percent of their benchmarkingefforts. The highest rates of success come when performing metricbenchmarks of the IS/IT infrastructure and the lowest successrates when performing metric benchmarks on strategic issues. Best practice benchmarking achieved success rates between 80 and88 percent, again depending on what types of practices were benchmarked. [14]

(Video) Benchmark Assessment Overview and Oral Running Records Demonstration

What Are the Keys to Success?

Perhaps the most important key to the success of a benchmarkingeffort is to view it primarily as a learning process. [15] The implicationof this perspective is that the IT process owners should comeaway from the benchmarking effort with new insights about theirown practices. These insights may or may not immediately leadto specific change, but they should prepare participants for understandingwhen such change is appropriate and enable them to recognize whatalternative are applicable.

Experienced practitioners often note that one key to success isto start small. The major danger of starting with too large aneffort is that too many resources are consumed in the benchmarkingeffort before any results can be realized. In addition, the demandfor change may be more than the organization can assimilate ina short period of time. Companies that start small build a historyof success and gain the experience required to undertake moresubstantial efforts.

Another key to success is to have the commitment of top management. Benchmarking can be costly and time consuming. Upon completionof a benchmarking effort, more time and possibly more financialresources are needed to implement recommendations that come fromthe benchmarking team. Even more time passes before those recommendationsproduce a return. If management is not committed to benchmarking,initiatives may be cut short before they can have an impact onthe organization.

Finally, success requires that organizations act on their benchmarkingresults. Benchmarking studies should not be sitting on bookshelves. They should contain concrete recommendations that can be translatedinto action. Lack of action leads to demoralization among thebenchmark team members and leaves future benchmarking teams withoutany incentive to find new opportunities.

ENDNOTES
  1. See, for example, E. O. Joslin, Application benchmarks: The key to meaningful computer evaluations, Proceedings of the ACM 20th National Conference (1965): 27-37.
  2. R. P. Weicker, An overview of common benchmarks, IEEE Computer (December, 1990): 65-75.
  3. See, for example, Charles Babcock, Vendor skewing DBMS tests, Computerworld (May 9, 1988): 1,125; and David Kull, Strictly software: Beware the benchmark, Computer Decisions (February 9, 1987): 48-51.
  4. See, for example, S. J. Walljaper, Benchmark, in Encyclopedia of Computer Science and Technology, Vol 3, eds. J. Belzer, A. G. Holzman, and A. Kent (NY: Marcel Dekker, Inc., 1976): 235-249.
  5. Robert C. Camp, Benchmarking: The Search for Industry Best Practices that Lead to Superior Performance (Milwaukee, WI: ASQC Quality Press, 1989): 6.
  6. Richard W. Swanborg, Jr., Benchmarking IS leading practices, American Programmer (Arlington, MA: Cutter Information Corp., 1993): 4.
  7. SIM International and Ernst & Young, SIM Benchmark Report 1.1 (Ernst & Young, 1993).
  8. John Thackray, Putting a value on benchmarking, Information Week (August 1, 1994): 25-32.
  9. Michael J. Spendolini, The Benchmarking Book (NY, NY: American Management Association, 1992): 115-117.
  10. Marketing literature for the 1994 SIM Annual Conference.
  11. Premier 100: How the best are playing the new business game, Computerworld (September 13, 1993): 45 (Section 2).
  12. M. Blumenthal and M. E. Silverman, Value systems, CIO (January 15, 1994): 30.
  13. Vincent K. Omachonu and Joel E. Ross, Principles of Total Quality (Delray Beach, FL: St. Lucie Press, Inc., 1994): 149.
  14. Charles B. Greene, Benchmarking the Information Technology Function (NY, NY: The Conference Board, 1993).
  15. Op. Cit., Richard W. Swanborg, Jr.: 6.
Figure 1
Examples of Common Metric Benchmarks
Process Benchmarks
--------------------------------------- ----------------------------------------------------------------------CommunicationsPercentage of cost for telecommunicationLAN contention in peak periodsWAN cost per packet, per byte, and per messageCustomer SatisfactionOverall satisfaction of users/managers with info svcsUser satisfaction with contacts with IS organization User satisfaction with response to problemsManager satisfaction with cost & speed of developmentFinancialIT expense as a percent of revenueIT investment as a percent of assetsTotal system costAverage cost per jobAverage cost per input screenAverage cost per report producedHelp Desk Percentage of problems solved by 1st contactAverage time to problem solutionNumber of problems handled per FTENumber of problems handledOperations Availability (% of time) Mean time between failure CPU Usage (% of capacity)Disk Usage (% of capacity)Average MIPSNumber of jobs handledQuality Assurance Defects found per 1000 lines of codePercentage of erroneous keystrokes on data entryStaffing Percentage of professional staff with college degreePayroll as percent of IS budgetPercentage of staff with advanced degreesSystem Development Projects completed in periodAvg function points per employee per periodLines of code per employee per periodFraction of projects done on time & on budgetTechnology Percent of IS expense in R&DPercent of employees having a workstationTraining Courses taken per IS employee per yearAverage courses taken per IS employeeAverage IS courses taken per non-IS employee
Figure 2
Xerox's Questions to Identify Processes
for Best Practice Benchmarking
  1. What is the most critical factor to my function's/organization'ssuccess (e.g., customer satisfaction, expense to revenue ratio,return on asset performance)?
  2. What factors are causing the most trouble (e.g., not performingto expectations.)?
  3. What products or services are provided to customers?
  4. What factors account for customer satisfaction?
  5. What specific problems (operational) have been identifiedin the organization?
  6. Where are the competitive pressures being felt in the organization?
  7. What are the major costs (or cost "drivers") inthe organization?
  8. Which functions represent the highest percentage of cost?
  9. Which functions have the greatest room for improvement?
  10. Which functions have the greatest effect (or potential) fordifferentiating the organization from competitors in the marketplace?

Source: Michael J. Spendolini, The Benchmarking Book (NY,NY: American Management Association, 1992): 71.

Figure 3
Practices Most Identified for Providing Value/Improvement
by Industry

GRAPHIC UNAVAILABLE

Source: Richard W. Swanborg, Jr., Benchmarking IS leading practices,American Programmer (Arlington, MA: Cutter InformationCorp., 1993): 5.

Figure 4
Why to Benchmark Internally
  1. To detail existing processes and activity networks -- establishbaseline
  2. To identify gaps in performance in similar internal processes
  3. To bring all internal operations up to the highest possiblelevel of performance given existing constraints and assumptions
  4. To identify the first round of improvement efforts -- cherrypicking
  5. To establish common practice and procedures
  6. To open up communication lines within the organization
  7. To create organizational commitment to benchmarking
  8. To spearhead the total benchmarking process
  9. To prioritize benchmarking opportunities
  10. To identify and classify the key performance drivers intoinherent, structural, and performance categories

Source: Kathleen H.J. Leibfried and C.J. McNair, Benchmarking:A Tool For Continuous Improvement (NY, NY: HarperCollins Publishers,Inc, 1992): 61.

FAQs

What is benchmarking in information systems? ›

Benchmark tests are used to evaluate the performance of information systems and to test their compliance with user requirements. In early project phases benchmark tests help to make build-or-buy decisions and to estimate the acceptance and performance an information system can achieve in a given environment.

What is the purpose of the benchmarking? ›

Benchmarking is a tool for assessing and comparing performance in order to achieve continuous improvement. It is part of a total quality management process, and includes the following key elements: Focuses on processes rather than outcomes; Encourages information sharing; and.

What role does information technology have in benchmarking? ›

Information technology benchmarking is a process wherein companies involved in information technology (IT) compare and measure their products and services against each other. This helps companies determine whether they are competitive enough and if there are aspects within the company that need improving.

What are the 4 types of benchmarking? ›

There are four main types of benchmarking: internal, external, performance, and practice.

What is benchmarking explain with example? ›

What are benchmarking examples? Benchmarking examples are instances of companies or departments measuring their results against other departments or others in their industry, a practice that can help them understand how they're performing compared to their competitors.

What are the 3 objectives of benchmarking? ›

Organizations use benchmarking technique for the following objectives.
  • To improve its performance.
  • To understand relative cost position and to identify opportunities for improvement.
  • To gain strategic advantage by focusing on capabilities critical to building strategic advantage.

What is the purpose and benefits of benchmarking to business? ›

Businesses can use benchmarking in their operations to measure themselves against internal or external standards. Benchmarking can be used to measure internal progress, performance against competitors and how your processes rank against world-class organizations.

What are the 5 steps of benchmarking? ›

Benchmarking Process Steps
  • #1. Identify the components to benchmark. ...
  • #2. Analyze the components. ...
  • #3. Integrate operational goals. ...
  • #4. Formulate an action plan. ...
  • #5. Incorporate the best practices. ...
  • Improve the quality of the product. ...
  • Monitor organization's performance effectively. ...
  • Maximize sales and profits.
21 Aug 2018

What are the six steps in benchmarking? ›

The Six Benchmarking Steps You Need
  1. Introduction.
  2. Step One: Select the process and build support.
  3. Step Two: Determine current performance.
  4. Step Three: Determine where performance should be.
  5. Step Four: Determine the performance gap.
  6. Step Five: Design an action plan.
  7. Step Six and Beyond: Continuously improve.
11 Mar 2001

What are the 10 steps in the benchmarking process? ›

The 10 Steps of Benchmarking
  1. Determine processes to be benchmarked.
  2. Determine organizations to be benchmarked.
  3. Gather data.
  4. Locate deficiencies.
  5. Determine future trends.
  6. Reveal results and sell the process.
  7. Achieve consensus on revised goals.
  8. Establish procedures.
22 Feb 2016

What is meant by benchmarking meaning? ›

Benchmarking is defined as the process of measuring products, services, and processes against those of organizations known to be leaders in one or more aspects of their operations.

Why is it called benchmarking? ›

Benchmarking means evaluating or checking something by comparison with a standard. Etymologically, it derives from the term benchmark, a surveyor's mark used as a reference point in measuring altitudes.

What are types of benchmarking? ›

The Four Main Types Of Benchmarking
  • Generic Benchmarking. ...
  • Functional Benchmarking. ...
  • Internal Benchmarking. ...
  • Competitive Benchmarking. ...
  • Process Benchmarking. ...
  • Strategic Benchmarking. ...
  • Performance Benchmarking.
25 Jan 2021

What are the three types of benchmark? ›

Three different types of benchmarking can be defined in this way: process, performance and strategic. Process benchmarking is about comparing the steps in your operation versus the ones that others have mapped out.

What are 4 of benchmarking best practices? ›

6 Benchmarking best practices
  • Start early. If you want to be the best, it's never too early to start benchmarking. ...
  • Have a timeline. ...
  • Choose an appropriate peer group. ...
  • Look outside your industry. ...
  • Stick to meaningful metrics. ...
  • Focus on improving operations.
18 Aug 2017

What is benchmarking and its advantages? ›

Benchmarking can allow you to:

Gain an independent perspective about how well you perform compared to other companies. Drill down into performance gaps to identify areas for improvement. Develop a standardized set of processes and metrics. Enable a mindset and culture of continuous improvement. Set performance ...

What are some examples of benchmarks? ›

Some of the most popular benchmarking methods include:
  • Peer benchmarking. ...
  • Best practice benchmarking. ...
  • SWOT analysis.
  • Process benchmarking. ...
  • Performance benchmarking. ...
  • Collaborative benchmarking. ...
  • Call center. ...
  • Technology.

What are the characteristics of a benchmark? ›

A good benchmark will have transparent set of public rules and, therefore, predictability for investment managers. » Appropriate. The benchmark is consistent with the manager's investment style or area of expertise. » Reflective of current investment opinions.

How is benchmarking done? ›

Competitive benchmarking is the process of comparing your company against a number of competitors using a set collection of metrics. This is used to measure the performance of a company and compare it to others over time. This will often include looking at the practice behind these metrics as well.

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