Xerox - Benchmarking: A Tool to Use

Benchmarking: A Tool to Use

In today's competitive markets, companies of all kinds and sizes are constantly looking for ways to improve, and even to get an edge over the competition. One thing that has emerged over the past couple of decades, as a means of obtaining this competitive edge, is a process called benchmarking. According to Benchmarking 101 by Allbusiness.com, benchmarking is defined "as a systematic and ongoing process of measuring products, services, and practices against companies recognized as best in class." This process can be used by large and powerful corporations, or by an individual small business owner. however, larger, more structured companies are more likely to have the resources to implement the process of benchmarking in a way to maximize its positive effects. The main goal of benchmarking is to compare your business to the "best of the best", in order to see how your efforts are succeeding. At that point, you incorporate that into your business in order to improve and excel over the competition.

Benchmarking is a relentless process. This process can be long and cost significant money to implement and perform accurately. The Encyclopedia of Small Businesses tells us that "the general procedure involves selection of a target, identifying best practitioners, surveying best practices by interview and other means, analyzing the results, and making whatever changes are deemed necessary internally in order to apply the discoveries made" (p. 114).

Benchmarking is the general term used for the process of comparing, extracting, and implementing. Within this general process, there are subsets of more specific benchmarking methods, which are tailored to meet the individual needs of separate divisions within a company. These methods include, but are not limited to, strategic, operational, and functional benchmarking.

In strategic benchmarking, firms look at other companies' market share and profitability. When companies employ operational marketing, they look more at the products and services that are offered, and the costs to provide them, such as "raw material, labor, overhead costs, and productivity." (Benchmarking 101) Finally, functional benchmarking focuses on the internal workings of other companies to improve departments and operations, such as "maintenance, accounts receivable, customer service, purchasing, and engineering." (Benchmarking 101) The actual process of benchmarking can generally be broken up