Benchmarking (Essay Sample)
Anand and Kudali (2008: 266) suggest that: Based on our domain knowledge and experience, we would like to state that, benchmarking should be classified as internal and external benchmarking. All other cases like strategic, product, process, functional, etc. can be listed under these two categories. Discuss whether benchmarking can, or should, be divided into those two categories and what are the consequences. Sources: 8source..
Insert Grade CourseInsert Tutor’s NameDecember 15, 2013
The current economic environment is characterized by some dynamics and players in the economy need to have quick response to the observed changes. There is high level of competition among players in a given industry and each player strives to be the best in terms product quality, fastest in technological advances, and cheapest in terms of operation costs as compared to their competitors (Anand & Kodali, 2008). It may be necessary for the companies to learn and borrow from other organizations the approaches that can be applied in improving operations, functions, and processes. This brings in the concept of benchmarking. Benchmarking is ‘the process of identifying best practices in relation to both the products and the processes by which those products are created and delivered’ (Tutor2U, 2012). The identification of the best practice can be carried out within a given organization that has several units/departments, within a given industry or sector, or outside the industry and outside the geographical region. Benchmarking is carried out to understand the organization’s current position of performance in relation to the best practices adopted by other successful organizations to identify how to bridge the gaps that may exist (Clores, 2007).
Ideally, benchmarking involves an analysis of the performance levels that have been achieved by other successful players outside a given business, industry, organization, country or region in order to understand the strategies and approaches that these organizations have applied to reach this state. It helps an organization to identify the gap that still exists between its performance and the required excellent performance through an identification of the process that contribute to quality performance. Organizations that successfully apply the knowledge that they learn from such analysis of external practices will have improved performance in various functions and processes (Tutor2U, 2012). This will improve on the overall output of the business organization.
In their article ‘Benchmarking the benchmarking models’, Anand and Kodali (2008) provides a suggestion that benchmarking should be categorized into two groups; internal benchmarking and external benchmarking. The duo asserts that the other remaining aspects of benchmarking like products, strategy development, process, or functions, among many others can then be classified into either of these two principal categories. The focus of this paper is an evaluation of the validity of the assertion that benchmarking is internal or external. It further examines the consequences of such a consideration.
Overview of the Benchmarking Process
Benchmarking involves an examination of an organization’s practices and processes in relation to the ‘best practices’ within or outside a given business, industry, country, or region (Stroud, 2012). As such, an organization begins the benchmarking process through an in-depth analysis of its business processes. A benchmark will function like a typical ruler, some form of controlled tool of measurement that enables one to identify his level of performance (Andersen & Pettersen, 1996, p.102). The organization has to understand its operational strategies like the prices, the products, product locations, promotional strategies, or the stakeholder management approaches. An analysis of the different functions within the organization is also helpful. There is need to understand the results that have been achieved within the organization through these strategies. The results can be evidenced by the level of customers’ satisfaction, customer loyalty, employee satisfaction (resulting from good workplace conditions), operational efficiency, and the overall output of the organization. Benchmarking targets are derived from sources like the contacts with suppliers and customers, reading literatures, or through the personal experience of the benchmarking personnel (Ahmad & Benson, 1999, p.20).
After the analysis of the existing business processes, the benchmarking organization then proceeds to examine the business processes and practices that are being applied by the other players within and outside the given business industry. The top management of organizations is often interested in the external benchmarks to help them understand the performance of various executives within their organization (Zimmerman, 2006). It is appropriate to examine the operations of business organizations that are actually successful in their respective industries. Little will be borrowed from organizations that are also struggling to gain a better position in the market. The management strategies as well as the operational strategies, the products, prices, promotions, or product availability measures adopted by these successful organizations need to be considered. There is also need to consider the overall performance of these business organizations. After these considerations, the next challenge is to compare the current business processes that had been observed and the findings from the analysis of operations from other organizations. Besides, to apply benchmarking successfully as a management tool, an organization needs to ‘recycle’ the process. This means repeating the benchmarking process for similar and new areas and not just redefining the benchmarks (Andersen & Pettersen, 1996). The firm will be able to identify the gap that exists between its performance levels and the level of performance in the other successful organizations. It will be positioned to identify mechanisms of bridging this gap, which becomes the other important aspects of benchmarking process. The benchmarking process does not end in identification of the performance gap between an organization and the other players. It involves an identification and evaluation of the procedures that worked well, the difficulties encountered in the benchmarking processes, and the adjustments that need to be made for the next study (Andersen & Pettersen, 1996, p.103). Since the market system is not static, the operational procedures and processes often need to be adjusted to the changing market needs. This implies that the benchmarking process should also be carried on continuously as long as an organization remains in a given business.
It is not guaranteed that carrying out the above procedures will help improve the performance and operations of a given organization. The environment that has been created in the organization will be the key determining factor in the success of the benchmarking process. For successful benchmarking, the organization needs to have some requirements in place. The organization has to be focused on its key stakeholders like the customers and employees (Anand and Kodali, 2008). It has to promote research and development to ensure sustainable and continuous development. Similarly, the management of the organization needs to be flexible and ready to adapt to the changes that are bound to occur (Anand and Kodali, 2008). The benchmarking process will be successful if the top management is in its full support. The process requires a lot of time and other resources, and only support from the management will ensure that processes like gathering data from external sources are carried out effectively. The organization also needs to be ready to share its crucial information with other organizations in order to access crucial external information (Anand and Kodali, 2008). Similarly, there is need for effective communication within the organization that will ensure that a common understanding is achieved by different units within the organization on the corrective measures to be applied. .
Classifications for benchmarking
Benchmarking has been considered an appropriate management tool by many business organizations. various researches have been conducted that reveal that a good proportion of organizations apply benchmarking as a management tool to gain competitive advantage over the other players in the same sector or industry (Anand & Kodali, 2008). The concept has since been extended to other areas like insurance, health services, government operations, as well as in academics. The benchmarking process in business organizations has been considered in different dimensions that form the basis of different classifications that have been used for benchmarking. One such classification, developed by Fong et al (1998, cited in Anand & Kodali, 2008) has been done based on the content of benchmarking, purpose of the relationship, or the nature of referent other.
Based on the content of benchmarking, strategic benchmarking, performance benchmarking, process benchmarking, and functional benchmarking have been cited. Strategic benchmarking is concerned with the assessment of strategic and not operational issues within the organization (Anand & Kodali, 2008). Through strategic benchmarking, an organization strives to improve its performance by examining the operational strategies and approaches that have been applied the successful organizations within or outside a given industry (Tutor2U, 2012). This benchmarking is applicable for an organization that attempts to re-align its failed strategies with the strategies that can help achieve its objectives. It considers the core competencies in the successful organizations and the approaches that the organizations in the management of change. Nonetheless, it should be noted that it might be difficult to implement the changes identified in strategic benchmarking: the strategies that worked for some organization may not necessarily work for the organization in question; and the implementation process may take long
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