Business Process Benchmarking

What is Benchmarking?
• Benchmarking is a process of comparison of two or more products,
services, processes or organizational practices.
• Business process benchmarking is comparing a business process
with the best process in that area.
• Dictionary meaning of benchmark is “standard point of reference”
• Generic definition of benchmarking “a basis for establishing rational
performance goals through the search for industry best practices
that will lead to superior performance.”
Importance of Benchmarking
• Identifying the current level of performance
of the processes in the organization and
bringing them up to the level of the best
processes.
Examples of Benchmarking
Services
An ecommerce firm benchmarks its average
fulfillment and delivery speed against key
competitors.
Strategy
A social media firm benchmarks its spending
on research & development against close
competitors in the industry.
Triggers for Benchmarking
There are two categories of benchmarking
based on what triggers is.

1.) Problem based benchmarking

2.) Process based benchmarking
Problem Based Benchmarking
• It arises out of a problem in the organization.
The trigger for benchmarking in this category
comes out of a problem that is faced by the
organization such as:
A.) Adverse feedback from customer
B.) Increase quality cost
C.) Alarming error rates
D.) Increase in cycle time
• It is a reactive benchmarking
Process Based Benchmarking
• It is initiated as a part of process improvement
strategy of the organization such as:
A.) Defined mission
B.) Defined objectives
C.) Defined priorities
• It is proactive benchmarking
Types of Benchmarking

• There are three types of benchmarking

1. Internal
2. Competitive
3. Functional
Internal Benchmarking
• The best practices to achieve superior
performance are available within the
organization.
• Studying the best performing division in
house/or the organization.
Competitive Benchmarking
• This type of benchmarking is to improve the
performance of an organization to the level of
competitors.
Functional Benchmarking
• Comparing the methods of different
organizations with similar processes.
Reasons for Benchmarking
• Benchmarking is carried out to bring out clearly
and objectively the real status with regard to the
performance of the organization as well as the
processes.
• Benchmarking is way to improve the processes
and reach the top.
• Benchmarking has to be carried out periodically
so as to maintain leadership position.
Identifying Process to Benchmark
• Every processes in an organization has inputs
and outputs
▫ Inputs are what supplied to the process.
▫ Output is what is delivered.

• What to benchmark is essentially the

performance measures of the outputs of the
processes.
Steps Involved
• The following steps are involved in identifying
what to benchmark:

▫ Select processes
▫ Determine vital measures
▫ Prioritize processes and measures
Select Processes
• It is important to select the right processes for
benchmarking.
• The appropriate processes are those which when
improved will give the highest return on investment.
The return could be improved quality and/or
productivity and the investment is time, resources
and efforts spent on improving the process.
• A few vital processes should be selected for
benchmarking, which will give higher return on
investment.
Determine Vital Measures
• For each selected for benchmarking, the
measures are to be documented.
• Each process could be measured by a number of
measures.
• One should select a few vital performance
measures for each process for benchmarking.
• Improvement of selected measures should in
turn be able to improve the current performance
of the process.
Prioritize Processes
• A team for prioritization should carry out an
objective study. The team assigns priority to the
processes to be benchmarked.
• One of the basis for selecting the processes and
measures is the linkage of the processes and the
measures to the major goal of the organization,
to satisfy the customers.
Benchmarking Partner
• It is the business organization choses as a role
model
• The customers, suppliers and the press could
help in knowing who is performing better In the
industry.
Benchmarking Process
• Here are the steps of benchmarking which must
be carried out systematically.
Selection of Process Improvement
Team
• The management should select a cross
functional team and persons working in the
process and constitute a process involvement
team for benchmarking.
• Essential to involve those engaged in the process
in the benchmarking team.
• A senior manager should head the team
Prepare Project Description
• A project description comprises of the following
i. Purpose
ii. Process Selected
iii. Reasons for Selection
iv. Scope
v. Description of key practices
vi. Process measures identified
vii. Estimated opportunity for improvement
viii. Anticipated impact after benchmarking is
completed
Identification of Benchmarking
Partners
• The team will prepare a list of benchmarking
partners
• Establishing a link with a benchmarking partner
is one of the toughest tasks and quite often the
cause of failure of benchmarking.
• If the benchmarking partner is another division
of the organization, it solves a lot of problems.
Adopt a Suitable Benchmark Process
Model

• A number of models are available for

carrying out benchmarking.
 Act
-After the QC (Quality Circle)
approves it, the process is
institutionalized.
-Periodic measurement are carried out
to confirm effectiveness.
Check
- The new process is
implemented on a pilot
basis.
- The performance of the
improved process is
measured and a report is
prepared.
Plan
- Get sponsorship of the
management and process
owners
- Plan visits to partner
organization
Do
-Visits the partner organization
-Studies their processes and notes
down performance
-Collect information about the
reasons of partner’s success