Benchmarking Lecture

BENECHMARKING -DEFINITION
“The continuous process of

measuring products, services, and
practices against the company’s
toughest competitors or those
renowned as industry leaders
BENCHMARKING THOUGHTS
“Benchmarking is the practice of being humble

enough to admit that someone else is better at
something and wise enough to try and learn
how to match and even surpass them at it.”
- APQC, 1998
BENCHMARKING
 In sharp contrast to the
conventional approach of setting
the future goals extrapolated from
the internal practices and past
trends.
 Since external environment and
market conditions change rapidly;
goal setting which is internally
focused can’t be true reflection of
customer’s expectations.
BENCHMARKING
 Customers’ expectations are highly

liquid and are driven by standards
set by best performer.
 Any product or service just below
these standards may not catch the
eyes of customer.
Why use Benchmarking
 Survival lies in emulating best and
not in lagging behind
 Bench marking is time and cost
efficient because it involves
imitation and adaptation rather
than pure invention. Prevents the
“Re-inventing the wheel”.
 Quantum-leaps in performance
Why use Benchmarking
 An effective ‘wake-up call’ and helps to make a
strong case for change
 Practical ways in which step changes in performance

can be achieved by learning from others who have
already undertaken comparable changes
 The impetus for seeking new ways of doing things

and promotes a culture that is receptive to fresh
approaches and ideas
 Opportunities for staff to learn new skills and be

involved in the transformation process from the
outset.
POTENTIAL OF BENCHMARKING IN
PAKISTAN
 Local industry is not yet well developed

and is sprouting its wings.
 Cultural growth and professionalism is
inchoate.
 The leading enterprises are foreign
based whether pharmaceuticals,
automobiles or other FMCGs.
 These transnational companies have
nurtured a professional culture.
PAKISTAN
 The professional culture has paid TNCs

in Pakistan through huge revenues.
 MNCS have small market share volume

wise and high share price wise.
 National companies share is greater

volume wise and fewer revenues wise.
PAKISTAN
 A list of top ten pharmaceutical

companies in Pakistan is filled with
the MNCs
 Same situation exists in the

beverages, automobile, electronics
and FMCGs.
PAKISTAN
 Since TNCs are leading in the

competition, they can be
benchmarked by the striving
national companies.
 Every aspect of the business
where TNCs outperform their local
competitors can be benchmarked.
PAKISTAN
 These aspects include
Organizational culture
Marketing strategies
Operational activities
Financial aspects
Human resource
Or any other aspect
Types of Benchmarking
 Internal benchmarking
 External benchmarking
 Functional benchmarking:
Internal benchmarking
ADVANTAGES:
sharing opinions  Easier to implement

between  Easier to access data
departments
within the same
organisation DISADVANTAGES:
 External ideas blocked

External Benchmarking
Advantages
– Comparison with  Helps to measure
external organisations one’s own performance
to discover new ideas,  Helps to search for
methods, products and best practices
services.
– The gap between
internal and external Disadvantages
practices displays the  Takes time
way where to change  Requires support
and if there is any
 Legal/ethical isssues
need to change.
 Industrial espionage
Functional Benchmarking:
Comparative Advantages:
research to seek
world-class  Discovering innovative
excellence by practices
comparing business
performance not Disadvantage:
only against
competitors but also  Not suitable for every
against the best organisation
businesses operating
in different industry
Other Types of Benchmarking
 Product Benchmarking
 Process Benchmarking
 Strategic Benchmarking
How companies compete, identify the winning

strategies that have enable high-performing
companies to be successful in their marketplaces.
 Parameter Benchmarking
Gap Analysis (Spider chart)
Total customer
satisfaction
Current
performance of
the host for
variable ‘K’.
Best of the best

(current
performance of
the partner for
variable ‘A’.
Current performance of the host
Current performance of the partner

METHODOLOGY OF BENCHMARKING
AT&T
Vs
XEROX
BENCHMARKING ESSENTIALS
– Clearly defined purpose

– Continual analysis & reassessment
– BM methodology must be appropriate
– Significance of results must be clear
– Conclusions must be justified by the data
– Never compromise integrity for the sake
of findings
 Investigation must be systematic

 A high code of ethics is essential
 Successful benchmarking requires a
planned approach
 Requires senior management commitment
 Must establish & enforce milestones
 Must report findings to senior mangment
 Internal training for company personnel

 Access to a benchmarking database
 Professional BM analysts to support

studies
 The process must be institutionalized!
BARRIERS TO BENCHMARKING
1. Fear of being seen as “copying”

2. Fear of losing competitive advantage by
sharing information
3. Arrogance – “we are the best, why
benchmark?”
4. Benchmarking trap – benchmark that which is
convenient, but may not be important.
Adapted from Watson 1992

BARRIERS TO BENCHMARKING
5. Impatience – “A quintessential trait”

6. Excuses are too easy:
– We are too small
– We are too busy
– We are too different
– Nobody else does what we do
– We do it better than anyone else
Adapted from Watson 1992

BENCHMARKING OBSERVATIONS
1. Key is to “Adapt not adopt” – Deming
2. Benchmarking does not come as a natural

process for many – competitiveness does, but
not benchmarking, because benchmarking
requires a team approach.
Legal & Ethical Guidelines
 Keep it legal;
 Be willing to give what you get;
 Respect confidentiality;
 Keep information internal;
 Use benchmarking contacts;
EXAMPLRY SPIDER CHART
FOR BENCHMARKING

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BENECHMARKING -DEFINITION

“The continuous process of

“Benchmarking is the practice of being humble

 Customers’ expectations are highly

 Practical ways in which step changes in performance

 The impetus for seeking new ways of doing things

 Opportunities for staff to learn new skills and be

 Local industry is not yet well developed

 The professional culture has paid TNCs

 MNCS have small market share volume

 National companies share is greater

 A list of top ten pharmaceutical

 Same situation exists in the

 Since TNCs are leading in the

 These aspects include

sharing opinions  Easier to implement

 External ideas blocked

How companies compete, identify the winning

Best of the best

Current performance of the host

Current performance of the partner

– Clearly defined purpose

 Investigation must be systematic

 Internal training for company personnel

 Professional BM analysts to support

1. Fear of being seen as “copying”

Adapted from Watson 1992

5. Impatience – “A quintessential trait”

Adapted from Watson 1992

1. Key is to “Adapt not adopt” – Deming

2. Benchmarking does not come as a natural

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