What is BMK/Benchmarking?

Benchmarking is the process of comparing one’s business processes and performance metrics to industry bests and/or best practices from other industries. Dimensions typically measured are quality, time, and cost. Improvements from learning mean doing things better, faster, and cheaper.

Benchmarking involves management identifying the best firms in their industry, or any other industry where similar processes exist, and comparing the results and processes of those studied (the “targets”) to one’s own results and processes to learn how well the targets perform and, more importantly, how they do it.

The term benchmarking was first used by cobblers to measure people’s feet for shoes. They would place someone’s foot on a “bench” and mark it out to make the pattern for the shoes. Benchmarking is most used to measure performance using a specific indicator (cost per unit of measure, productivity per unit of measure, cycle time of x per unit of measure or defects per unit of measure) resulting in a metric of performance that is then compared to others.

Also referred to as “best practice benchmarking” or “process benchmarking”, it is a process used in management and particularly strategic management, in which organizations evaluate various aspects of their processes in relation to best practice companies’ processes, usually within a peer group defined for the purposes of comparison. This then allows organizations to develop plans on how to make improvements or adapt specific best practices, usually with the aim of increasing some aspect of performance. Benchmarking may be a one-off event, but is often treated as a continuous process in which organizations continually seek to improve their practices.

Why Should I Benchmark

If you don’t know what the standard is you cannot compare yourself against it. If a customer asks “What is the MTBF on your widget?” it is not enough to know that your Mean Time Between Failures is 120 hours on your standard widget and 150 for your deluxe widget.

You also have to know where your competitors stand. If the company against whom you are competing for this order has a MTBF of 100 hours you are probably okay. However, if their MTBF is 10,000 hours who do you think will get the order?

What can I Benchmark

Most of the early work in the area of benchmarking was done in manufacturing, like the example above. Now benchmarking is a management tool that is being applied almost anywhere. The Fortune Magazine article “Beat the Budget and Astound your CFO” outlines how Rank Xerox even applied benchmarking to their sales effort.