It is often stated that those who benchmark do not have to reinvent the wheel (Parker, 1996). By following others one can make improvements and not focus on stale ideas.  Benchmarking at first glance may be mistaken for a copycat form of developing strategic plans and for making improvements within an organization.  This is not true.  Benchmarking is a process that allows organizations to improve upon existing ideas.  In order to eliminate myths and misconceptions about benchmarking it is important to know exactly what benchmarking is, the different types of benchmarking, the criticisms of benchmarking, and the ethical practices concerning benchmarking

Lankford, William M.

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The Coastal Business Journal Volume 1 Number 1 Article 8 May 2002 Benchmarking: Understanding the Basics William M. Lankford State University of West Georgia Follow this and additional works at: https://digitalcommons.coastal.edu/cbj  Part of the Advertising and Promotion Management Commons, Curriculum and Instruction Commons, E-Commerce Commons, Economics Commons, Higher Education Commons, Hospitality Administration and Management Commons, Marketing Commons, Real Estate Commons, Recreation Business Commons, and the Tourism and Travel Commons Recommended Citation Lankford, William M. (2002) "Benchmarking: Understanding the Basics," The Coastal Business Journal: Vol. 1 : No. 1 , Article 8. Available at: https://digitalcommons.coastal.edu/cbj/vol1/iss1/8 This Article is brought to you for free and open access by the Journals and Peer-Reviewed Series at CCU Digital Commons. It has been accepted for inclusion in The Coastal Business Journal by an authorized editor of CCU Digital Commons. For more information, please contact commons@coastal.edu. The Coastal Business Journal Page 57Volume 1, Number 1BENCHMARKING: UNDERSTANDING THE BASICSWilliam M. LankfordState University of West GeorgiaINTRODUCTIONIt is often stated that those who benchmark do not have to reinvent the wheel (Parker, 1996).By following others one can make improvements and not focus on stale ideas.  Benchmarking at firstglance may be mistaken for a copycat form of developing strategic plans and for makingimprovements within an organization.  This is not true.  Benchmarking is a process that allowsorganizations to improve upon existing ideas.  In order to eliminate myths and misconceptions aboutbenchmarking it is important to know exactly what benchmarking is, the different types ofbenchmarking, the criticisms of benchmarking, and the ethical practices concerning benchmarking.WHAT IS BENCHMARKING?“Benchmarking is simply the process of measuring the performance of one's companyagainst the best in the same or another industry”(Stevenson, 1996).  Benchmarking is not a complexconcept but it should not be taken too lightly.  Benchmarking is basically learning from others.  Itis using the knowledge and the experience of others to improve the organization.  It is analyzing theperformance and noting the strengths and weaknesses of the organization and assessing what mustbe done to improve.The knowledge that is available for comparing operations and processes are vast (Boxwell,1994).  “An organization’s ability to evaluate its practices against specific business strategies andobjectives is critical to leveraging its knowledge capital” (Harper, 1996).  Information is there fororganizations and it should be evaluated, used, and shared.  This is one of the primary goals ofbenchmarking.  It is the process of using all of the knowledge and experience of others to developnew and fresh ideas.  This is basic teamwork, which is the way progressive organizations aremigrating.  Many organizations are realizing how much more can be achieved if there is morecollaboration between leaders in an industry.There are three reasons that benchmarking is becoming more commonly used in industry(Boxwell, 1994). They are:< Benchmarking is a more efficient way to make improvements.  Managers caneliminate trial and error process improvements.  Practicing benchmarking focuses ontailoring existing processes to fit within the organization.< Benchmarking speeds up organization’s ability to make improvements.  In corporateAmerica today, time is of the essence.The Coastal Business Journal Page 58Volume 1, Number 1< Benchmarking has the ability to bring corporate America's performance up as awhole significantly.  If every organization has excellent production and total qualitymanagement skills then every company will have world class standards.Benchmarking is not just making changes and improvements for the sake of making changes,benchmarking is about adding value.  No organization should make changes to their products,processes, or their organization if the changes do not bring benefits.  When using benchmarkingtechniques, an organization must look at how processes in the value chain are performed (Stevenson,1996):1. Identifying a critical process that needs improvement.2. Identify an organization that excels in the process, preferably the best.3. Contact the organization that you are benchmarking; visit them, and study theprocess or activity.4. Analyze the data.5. Improve the critical process at your own organization.All of these things lead to successful benchmarking a product, process, or area within anorganization.  As stated by Bill Krenek, the International Benchmarking Clearinghouse technologycoordinator, “Benchmarking provides the quantum leaps needed to keep on top” (Harper, 1996).TYPES OF BENCHMARKINGThere are three primary types of benchmarking that are in use today.  These are processbenchmarking, performance benchmarking, and strategic benchmarking (Bogan, 1994).  Processbenchmarking focuses on the day-to-day operations of the organization.  It is the task of improvingthe way processes performed every day.  Some examples of work processes that could utilizeprocess benchmarking are the customer complaint process, the billing process, the order fulfillmentprocess, and the recruitment process (Bogan, 1994).  All of these processes are in the lower levelsof the organization. By making improvements at this level, performance improvements are quicklyrealized.  This type of benchmarking results in quick improvements to the organization.Performance benchmarking focuses on assessing competitive positions through comparing theproducts and services of other competitors.  When dealing with performance benchmarking,organizations want to look at where their product or services are in relation to competitors on thebasis of things such as reliability, quality, speed, and other product or service characteristics.Strategic benchmarking deals with top management.  It deals with long term results.Strategic benchmarking focuses on how companies compete. This form of benchmarking looks atwhat strategies the organizations are using to make them successful.  This is the type ofbenchmarking technique that most Japanese firms use (Bogan, 1994).  This is due to the fact that theJapanese focus on long term results.The Coastal Business Journal Page 59Volume 1, Number 1Other types of benchmarking are competitive benchmarking, cooperative benchmarking,collaborative and internal (Boxwell, 1994).  Competitive benchmarking is the most difficult typeof benchmarking to practice.  For obvious reasons, organizations are not interested in helping acompetitor by sharing information.  This form of benchmarking is measuring the performance,products, and services of an organization against its direct or indirect competitors in its ownindustry.  Competitive benchmarking starts as basic reverse engineering and then expands intobenchmarking.  Reverse engineering is a competitive tool used in benchmarking.  It looks at allaspects of the competition's strategy.  This does not just include the disassembly and examinationof the product but it analyzes the entire customers’ path of the organization’s competitor.  This isa difficult thing to do because this information is not easily obtained.  Therefore, it requiresextensive research. It is also important to remember when using competitive benchmarking that thegoal is to focus on your direct competitors and not the industry as a whole.“Cooperative and collaborative benchmarking are the most widely used types ofbenchmarking because they are relatively easy to practice” (Boxwell, 1994).  These forms ofbenchmarking are a more accommodating way of getting information.  In cooperativebenchmarking, organizations invite best in class organizations to meet with their benchmarking teamto share knowledge.  This is usually done without much controversy because these organizations arenot direct competitors.  During this process information flows one way.  From the "best in class"organization to the benchmarking team organizations.  Collaborative benchmarking does theopposite, information flows many ways. With collaborative benchmarking, information is sharedbetween groups of firms.  It is a brainstorming session among organizations.  It is important torealize that not all collaborative efforts are considered benchmarking.  It is sometimes called “datasharing."  Data sharing results do not focus on the process but only the end result, whilebenchmarking focuses on the processes of the organizations (Boxwell, 1994).Internal benchmarking is used to identify the best in house practices in the organization andto disseminate these practices throughout the organization.  Internal benchmarking allows managersin the organization to be more knowledgeable about the organization as a whole.CRITICISMS OF BENCHMARKINGAs with any new concept there are those who are in favor of the idea and those who opposeor criticize it.  Benchmarking should not be used as is a way to set goals.  Those who are responsiblefor meeting specific goals must understand all of the processes that are required to make the goala reality.  One of the criticisms of benchmarking is that it can be considered as spying on thecompetition (Boxwell, 1994).  This is not truth.  Benchmarking is not spying on the competition butkeeping up with what they and the rest of the industry are doing.  In Japan, benchmarking is a partof their manager's job descriptions (Boxwell, 1994).  This is one of the ways that the Japanese areable to keep up with and surpass others in industries such as automobiles, motorcycles, electronics,etc.The Coastal Business Journal Page 60Volume 1, Number 1Another criticism of benchmarking is that it is copycatting.  This is what many think thatbenchmarking is.  They feel that those who benchmark do not develop their own ideas.  Copycattingand Benchmarking are not one and the same.  Copycatting leads to lessened creativity and staleideas.  Benchmarking is not supposed to take the place of managers bringing insight and originalstrategies into the organization.  Although copycatting is an easy trap for managers to fall into, it isimportant for managers to realize that benchmarking will never be an excuse for managers to stopbeing creative and innovative.Some organizations do not utilize benchmarking because they feel that if it’s not broke, don’tfix it.  When a company is doing well financially, they have a tendency to resist change and notworry about competitors ( Harper, 1996).  Many organizations shy away from benchmarkingbecause they do not understand what benchmarking is and they feel that they do not have anythingto gain.ETHICAL PRACTICES CONCERNING BENCHMARKINGSince the concept of benchmarking can lead to unscrupulous and sometimes unethicalbehavior, the SPI Council on Benchmarking and the International Benchmarking Clearinghousehave established a general code of conduct (Thompson). The code is as follows:< When benchmarking with competitors, set up certain rules that state that things willnot be discussed that give either company a competitive advantage.  Establish thepurpose is for both parties to improve or gain benefit.  Costs should not be discussed.< Do not ask competitors for sensitive information.  Do not make them feel that if thedata is not shared the benchmarking process will end.  If you ask the company forsensitive and valuable information, be prepared to give the same in return.< Use an ethical and unbiased third party such as an ombudsman or legal advisor fordirect competitor advice.< Consult with a legal advisor if any information gathering procedure is in doubt.< Treat any information obtained from a benchmarking partner as privileged or “topsecret” information.  Don't give away any information or potential trade secretswithout permission.< Do not misrepresent yourself or your organization as being someone or somethingthat you are not.< Show that you are committed to the effectiveness of the process.  And in doing somaintain a professional and honest relationship with your benchmarking partners.As stated before, benchmarking is not a concept to be taken lightly.  If organizations arelooking for an easy way to make improvements, benchmarking is not the way.  Ethical practicesmust be used when benchmarking is concerned because of the significant margin of error.  Whenbenchmarking is involved, it is important to make sure that things are done in the most professionalmanner possible, if not, problems will arise.The Coastal Business Journal Page 61Volume 1, Number 1XEROX CORPORATIONBenchmarking can be called the management tool that revived Xerox.  Xerox definesbenchmarking as the “continuous process measuring our products, services, and practices againstour toughest competitors or those companies recognized as leaders (Parker, 1996).  The Xerox oftoday is not the Xerox of the sixties and seventies.  During that time period the organizationexperienced market erosion from competitors, primarily Japanese.  These competitors weremarketing higher quality products in the United States at the same price or lower as Xerox.  Xeroxfound that the Japanese were able to assemble quality products at a low price.  This was hard forXerox to grasp because they were the first to develop the photocopy and their name had come to besynonymous with photocopies.  How could the Japanese be beating them at their own game?  Xeroxfound that they had to regroup.  In doing this they used reverse engineering and made competitivebenchmarking a fundamental part of their operations by the early eighties.  Xerox began to studyother organizations within and out of their industry.  By 1983, Xerox had bench marked more than230 process performance areas in their operation.  They looked at all aspects of their business.Identifying the best processes used by others, Xerox adapted them for their own use.  This is howthey regained their core competency and strategic advantage in the photocopying industry (Brogan,1994).CONCLUSIONBenchmarking can be as complex as re-engineering or as simple as thumbing through thequarterly reports of organizations and making comparisons.  Although organizations must usebenchmarking with some caution, it can be informative and foster a spirit of openness andcooperation from indirect competitors(Graham, 1997).  It is not enough to benchmark the costs ofactivities and identify best practices.  When an organization looks at benchmarking they must lookat all aspects of the business, its products, and its processes.  It is crucial for organizations to focuson anything that will impact its performance and quality.REFERENCESBogan, Christopher (1994), Benchmarking Best Practices, McGraw Hill, 1994.Boxwell, Robert (1994), Benchmarking for a Competitive Advantage, McGraw Hill, 1994.Graham, Anne (1997), “Association Publications: Benchmarking Common Problems,”  TheMagazine for Magazine Management, v25, Harper, Kim (1996), “Benchmarking: International Clearinghouse Plays Matchmaker for CompaniesThat Want to Improve,”  Arkansas Business, vol.9, (1996).Parker, Sally (1996), “Measuring up: Size is No Obstacle to Benchmarking for CompetitiveAdvantage,”  Rochester Business Journal, vol.8, 1996..The Coastal Business Journal Page 62Volume 1, Number 1Stevenson, William (1996), Productions/Operations Management, Irwin Publishing Company, 5thEdition, 1996.Thompson and Strickland (1996), Strategic Management - Concepts and Cases, Irwin PublishingCompany, 9th Edition, 1996.

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