Strengths and Weaknesses of Benchmarking in Business

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Table of Contents

Introduction
Strengths of benchmarking
Weaknesses of benchmarking
Problems of implementing benchmarking
Conclusion
References

Introduction

Benchmarking refers to the process of measuring and improving products, services and best practices against the best that can be identified all over the world. It involves the evaluation of different aspects of the processes of an organization in relation to the best practice by the strategic management team. Benchmarking enables the organization to develop plans on how to come up with best practices so that they can increase their performance.

It acts as a tool that organizations uses to improve their performance by enabling them to compare themselves with other organizations thus enabling them to compare their strengths and weaknesses and learn how to improve on their weaknesses and how to maintain their strengths. It involves the process which requires the organizations to compare their processes with other better processes so that they can be able to better their systems. Benchmarking therefore is a means or a measure of performance through which organizations establish goals of high performance and ways of making them come true (Camp, 1989, p. 12).

There are three major types of benchmarking namely; internal benchmarking, external benchmarking and best practice benchmarking. Internal benchmarking involves the participation of partners found within the same company however the organizations may be located in same the regions or different regions. This type of benchmarking is mainly concerned with internal comparison.

It is more easy and convenient since data can easily and quickly be collected, the partners exhibit the same language, culture and practices, there are ready communication channels, the surrounding is familiar and the partners are familiar with one another.

External benchmarking involves partners within the same group but different companies and industries. It involves the comparison with external processes. Best practice benchmarking involves mainly benchmarking against best practice. It requires the organization to search for the leader already identified for the success of the business. It does not require what is best but instead requires what it means to be best when the process being assessed is put into consideration.

There are different aspects of benchmarking which an organization can practice. They include product benchmarking which involves inventing new products and improving the quality of the already existing ones. Process benchmarking which involves examining the activities of the organization to identify the best practices. The third type of benchmarking is performance benchmarking which allows for the process of comparing a firm’s goods and services with those of other already identified firms.

Functional benchmarking is another type of benchmarking and this is mainly concerned with the improvement of performance on a specific function. In this case the organization has to identify a specific function and then work towards improving its performance. In addition, there is financial benchmarking which involves analyzing financial performance and comparing the results with that of other organizations to realize the competitive stand of the organization.

Finally, there is the strategic benchmarking as the last type of benchmarking. This is mainly concerned with making observation on the market competition of other organizations. It is usually specific to a particular chosen industry but it is best used to observe the overall performance of other industries or organizations (Irani, Ezingeard & Grieve, 1997, 702).

Benchmarking process can be applied in different areas in an organization. Such areas may include distribution in logistics, financial results, development of management, warehousing, communication, investment, training, market share, query and complaint handling and manufacturing.

Strengths of benchmarking

Much of the strength of benchmarking is found within the ways and means it uses to direct organizations to consider the cause and the effects of the barriers on the efficiency of their performance. It acts as a way of identifying and incorporating good working conditions to the organization.

Benchmarking is an important tool for management which enables the organization to adopt new methods of doing things and new ideas to enhance their efficiency. It helps the management to resort to effective issues and ways of doing things rather than doing things with the assumption that it is the best because they have always used it. It helps the organization to identify the best organization in the market, what standards they use and who sets these standards for them so that they can also improve on their performance by learning from others (Levitt & March, 1988, p.324).

By promoting a climate of change, benchmarking helps the organizations to adopt a change since it displays new methods of solving problems and new practices which are much better than the one used by the organization. The existence of a gap between the best practice and the current operations of the organization acts as an inspiration towards change. Observing the performance of other best performing organizations, understanding their processes and learning from their practices enables the organization to detect areas where change is required and how that change can be conducted.

Witnessing the best practice which has been applied somewhere else and has proved successful creates a realistic picture which the organization can admire to achieve in the future. This acts as evidence to show that benchmarking definitely creates a climate of change within an organization. Due to its flexibility and competitive analysis, benchmarking has been adopted by most organizations and has thus become a way of life to the organizations that adopt it (Weick, 1990, p. 34).

Benchmarking shows its strength by helping the organizations to move from parity to supremacy. This happens because benchmarking enables organizations to learn from the best experience. Organizations that employ benchmarking in their management processes therefore become world wide leaders in aspects which are essential to the success of the organization. The organization thus acquires a consistently improving competitive periphery.

Benchmarking is advantageous in the sense that it only requires more creativity in thinking to achieve greater and prospective reward. The main aim of benchmarking is mainly directed towards performance improvement. The strategic management mainly uses its key operational processes to determine the vital issues that lead to the success across the whole organization.

Benchmarking acquires its strength from the fact that different businesses have in common several major associated processes as well as some minor associated processes thus making the process of comparison easier. Some of the major associated processes that businesses share in common include manufacturing, warehousing distribution and management improvement. The minor associated processes on the other hand include accounting records, telephone communication, customer service, paper handling, investment and training.

The current business environment is faced with a climate of a series of dynamic transitions and harsh competition from different markets. For companies to survive in such an environment they require effective processes on their systems. Benchmarking enables companies to have an outlook to the external environment and provides them with effectiveness improvement process which enables them to survive in the ever changing business climate and to improve their competition in the market.

Benchmarking as a practice, enables companies to identify, follow and compare their practices with the best practice whenever it occurs in an organization. It involves a process of improvement consistency therefore making a very important part of the organization in terms of improved performance (McHaney & Hightower, 1999, p. 115).

The program of benchmarking gives a very cost effective opportunity to the organizations that are involved with it to compare their operational management processes with the ones for other organizations. This helps them to set targets and deadlines for improving their performance as they will be able to recognize areas where change is required and make necessary changes.

Although the cost of benchmarking may be considered to be moderately expensive, it can be reduced through the use of internet resources that are currently found all over the world. The use of internet in benchmarking is important as it will help capture benchmarks and best practices that are displayed by different organizations. This makes the process of benchmarking a bit faster and much cheaper.

For an organization to be involved in the process of benchmarking it has to know its standards of performance to make the process of comparison possible. Benchmarking therefore helps an organization to know its standard of performance. Benchmarking also helps an organization to know more about their competitors so that they can know which areas to improve and which ones to maintain (Mahmood, 1991, p. 884).

Comparing benchmarking with other procedures for gathering quantitative information about different organizations proves to be a very fast and a cheap process. This is because benchmarking can be done internally, which is within the organization making the whole process easier and convenient. In situation where external benchmarking is carried out, the process still remains cheaper since the most important requirement in the process of benchmarking is the information which is to be provided by the competitors. It therefore has an advantage over other procedures.

Benchmarking especially at international level provides policy makers, researchers and administrators with relevant information aimed at helping improve their performances. Benchmarking studies how successful an organization can be in fulfilling its mission. It does this by putting into consideration the role played by the major stakeholders. It emphasizes on the factors that are important in an organization and that can work towards meeting the mission of the organization (Camp, 1989, p. 231).

Benchmarking has an impact of motivating the staff members. Motivating staff encourages them to work hard and improve their performance. Benchmarking also enables the staff to know areas where their efforts will be more appreciated and areas where the performance of their organization is below that of competitors so that they can put more efforts in such areas. In addition to these, it enables comparison of performances so the staff will definitely be convinced that there are others who perform better than they do thus get more encouraged to work harder to better their performance.

And lastly benchmarking provides a constant evaluation which enables the staff to know the requirements necessary for improvement and realize when their performance will be evaluated so that they can prepare well for it. This is really a strength since staff members usually feel frustrated and discouraged if the effect of their efforts is not given feedback.

Benchmarking helps the organization to know if the cost incurred on meeting customer related services are above or below the average considering the technology and the size of the organization. This is important to the operations of the business as it will enable the organization to determine the profit it acquires from its activities and be able to compare it with the financial position of the competitor thus enabling the organization to work towards improving its financial competitiveness.

Benchmarking process has an advantage over other processes and measures that organizations may employ in an attempt to improve their performance, since benchmarking displays ideas and practices that have already been used some where else and proven effective and thus will be easier to incorporate in the organizational activities (Leonard, 1988, p. 260). The fact that these processes have been found to be effective will encourage the management to adopt them, from them they will be able to picture a realistic and an achievable goal that every organization would want to acquire.

Benchmarking may be of strength due to the fact that it surfaces areas where the organization should improve its performance on and areas where cost of operation should be reduced. This is important to the organization since the organization will be able to relate the cost of production to the benefits and thus create a balance such that the amount used in production corresponds to the amount of return from production. In addition to this it examines to confirm whether the organization is successful in the performance improvement activities. This will help the organization know what steps to take i.e. whether to continue with the same procedures or whether to adopt new ones.

Benchmarking displays its strength in the sense that it does not only help organizations to identify new and better ways of operations but also help them understand how they can adopt it into their organizations and how to effectively use it to improve their performance. Benchmarking therefore is not associated with mistakes that the managers may make in adopting new practices into their practice.

The process of benchmarking also enables the organization to identify areas of opportunities in the external environment and be able to capture them and counter threats that may exist so that they can be prepared to handle those threats effectively. The opportunities help the organization to expand their operations or business size thus catering for areas where there are weaknesses.

The fact that benchmarking only requires understanding to make the process successful gives it an advantage over other measures and processes that organizations can adopt to enhance their operations. Once the process of benchmarking is fully understood, the organization can adopt it and transform it into a process that is suitable to the taste of both the managers and the organization (Khurrum & Bhutta, 1999, p. 262).

This will help in satisfying every person’s interest and needs without ignoring some steps but through a natural combination of some related steps.

Benchmarking process is a very important aspect in the organization as it forms part of the consistent improvement process in an organization. It has an advantage in the sense that all aspects of business performance in an organization can be realized from the moment a good is produced unto the time it is delivered into the market.

The process of benchmarking a part from having direct impact on the improvement of the organization’s performance also helps in motivating the people who are directly involved in the operations of the organization and who can directly influence the performance of the organizations activities (Kolb, 1984, p.39). The results of benchmarking process usually have a positive impact on the management team since what they usually observe from the benchmarking results do reflect what they already believe or what they had earlier observed in their organizational operations.

Weaknesses of benchmarking

Despite displaying several strengths towards the achievement of its purpose, benchmarking just like any other aspect does have some weaknesses. Experiments have reflected some methodological weaknesses that the organizations that employ the practice of benchmarking and intend to use it into the future life of their organizations should focus on. There is an argument that the benchmarking panel selection group is mainly constituted by the United States individual leading to a call for the inclusion of people from other parts of the world in the group to participate in the process of selecting benchmarking panel.

There are also some personalities who have greatly criticized the process of benchmarking. One of these known personalities is Porter. Porter argues that strategy of performance does not lie on the efficiency of the operations of an organization. Porter also feels that benchmarking alone is not enough to make the strategic operations of an organization successful (Hinton, Francis & Holloway, 2000, p. 54).

The practice of benchmarking is inadequate since the best practices can easily be copied. It is therefore not effective in supporting strategic improvement since the competitors will both gain along the productivity line and will not experience any change at the strategic positions of the organization. This is because most benchmarking practices are usually concentrated at the operational level of the business giving little attention to the strategic level of the organization.

The weakness of benchmarking also is in the fact that it gives organizations an opportunity to learn more about the processes and be able to follow the processes of their competitors but not to be able do the same processes in a different way. This is a weakness of the benchmarking process because an effective strategy lies on the ability of an organization to learn from others and be able to do the same processes on a different way or use the knowledge they acquire from other organizations’ processes to come up with their own processes and practices to improve their competitiveness. Benchmarking therefore gives a competitive advantage but only through imitation of competitors work and not through invention of new methods.

Benchmarking has an adverse effect on the image of an organization i.e. the strategic position of the organization. Given that benchmarking process benefits an organization mostly in the line of productivity it seems to benefit the suppliers and the consumers more as compared to the extent to which the organization is benefited making the organization to lose its attractiveness. Once this happens the management will give up their efforts thus will withdraw their commitment towards the achievement of the organizations goals and improving performance of the organization.

Organizations that participate in the processes of benchmarking put more emphasis on ensuring the efficiency of the operational position at the expense of the strategic position thus losing their vision on the strategic operations. This as a result makes the organization to lose its structure, pushing its level of competition in the market down. The strategic function of the process of benchmarking therefore remains questionable as it deteriorates rather than improve (Nevis & Dibella, 1995, p.83).

Another weakness of benchmarking is that it only focuses on the product and productivity. This shows that benchmarking is insufficient since it does not consider all the factors that should determine the success of an organization’s performance. This is a weakness because for the success of an organization’s processes, it is important that the benchmarking process examines all the factors i.e. both tangible factors and non tangible factors which combines to ensure that the organization achieve the best performance. Benchmarking should also involve all the people that are involved in the activity being examined for effective results.

The process of benchmarking involves limiting the practices of an organization to comparative examination thus making the organization to know how bad it is performing as compared to other organizations. This idea of knowing how bad an organization is doing creates negative effect on the people involved in the operations. This as a result kills the morale of the people thus reducing their efforts. In such situation the organization faces challenge of finding out the cause of low performance and making the management team to lead the process of correcting the impact.

The fact that the process of benchmarking involves the direct dealing with the competitor is a limitation on its own. This is because the competitors may not be willing to enter into a discussion with other competitors especially when the other competitors wants to learn more about their products or processes which are more competitive in the market. In such a situation the competitors cannot be depended upon for accurate information since they also have their secrets which they may want to keep from others so that they remain the competitive leaders in the market (Levy, 1965, p. 143).

Before entering into an agreement with the competitors to start the process of benchmarking there are legal processes to be followed. This is because the organizations creating an agreement must create cooperation and a long lasting relationship. For this to happen the organizations must establish a clear legal framework within which the process of benchmarking is going to work. Through this legal framework they will define the information to be shared and the information which cannot be available so that there will not be any misunderstanding in the future.

Problems of implementing benchmarking

Implementation refers to the process of carrying out, practicing or executing a plan, a method, an idea, a model or creating a design for doing something. Relating to the implementation of benchmarking process, it can be defined as the activity which comes after a proper plan has been put in place, a proper analysis carried out, an action taken and a thorough research conducted on the competing organizations and a relevant review carried out to ensure that a performance improvement is realized in the targeted and selected organizations (Cook & Cook, 1994, p. 50).

When implementing benchmarking, the process should not be considered only as a management tool for performing personal projects but should be viewed from a broader perception that involve the development of a consistent advance to learning through proper planning. Implementation of benchmarking is faced by several challenges that the implementers should put into consideration when carrying out the process of implementation. Such challenges are as discussed below.

The problems mostly associated with the benchmarking implementation include lack of knowledge. Lack of knowledge about benchmarking may result from the management team which is concerned with the process of benchmarking. Lack of proper knowledge for benchmarking will hinder the implementers’ ability to understand their own processes thus the process of benchmarking will not be successful. The organization should therefore develop learning activities within the organization to maintain the effectiveness and the spread of benchmarking (Dutton & Thomas, 1984, p. 243).

In an attempt to develop a learning activity, the organization should come up with a benchmarking support unit which should be aimed at creating awareness about benchmarking process to the stakeholders, training the benchmarking partners and preparing them for the projects, supervising the whole process of benchmarking, giving help on different areas concerning the implementation of the benchmarking activities and providing information resources such as books and articles to a successful implementation of the benchmarking process.

The second problem affecting the implementation of benchmarking is lack of motivation of the people that are involved in the process. When the staff involved in the process of benchmarking lack the commitment towards the practice they will not work properly towards the adaptation and implementation of best practices within the organization. The stakeholders will not cooperate with one another when they are not motivated thus will hinder the success of the benchmarking process, since its success depends on the cooperation between partners (Hammer & Champy, 1993, p. 24).

Lack of strategic necessity within an organization affects their efforts of implementing benchmarking process. It is very important that the process of benchmarking be conducted from the higher level of the organization to the lower level. This is important as it pushes the organization towards achieving its goal of advanced competitiveness. It is very unfortunate that most organizations focus their benchmarking activities at the operational level of the organization and put very less or no focus at all at the strategic level. This affects the whole process of benchmarking including the implementation process as the performance improvements will only be experienced at local operational level but not in the whole company.

In addition, lack of ability to identify and adopt outstanding practices in an organization will hinder effective implementation of the benchmarking process. A successful implementation of benchmarking process requires that the organization puts more emphasis on the best practices of the organization therefore when the organization is not able to identify and adopt such practices then the process of implementation will definitely be affected.

The implementation process of benchmarking is also challenged by lack of prioritization (Goh & Richard, 1997, p. 579). When carrying out benchmarking process the organization should give priority to more important positions for the achievement of great results. The process of benchmarking should therefore be focused and not be improvised. This therefore gives an implication that the process of benchmarking can only be effective if it is well matched with the business strategies.

Nevertheless the implementation process of benchmarking is also affected by the factors related to the structure and culture of the organization. Such factors may include choosing wrong partners for the process of benchmarking. The process of benchmarking can only be effective if there is proper and appropriate choice and selection of the members involved in the process of benchmarking and the techniques to be employed in the process of benchmarking. Once selected the benchmarking members should be given empower to make their processes successful.

Inadequate research can also hinder the effective implementation of benchmarking. Inadequate research on the organizations to be involved in the process of benchmarking can hinder effective implementation of the benchmarking processes. This is because when adequate information concerning those organizations e.g. their level of performance or their competitive stand is not obtained then it will not be very easy to do the comparison. As a result there will be failure in the benchmarking process and therefore benchmarking implementation will also fail. A proper research should therefore be conducted to ensure that the organizations chosen for comparison are the best ones for the process of benchmarking.

Another factor affecting the process of benchmarking implementation is lack of commitment by the benchmarking partners and the management team. When the team involved in the process of benchmarking is not committed they will not engage in a continuous benchmarking process leading to poor implementation process (Bower & Hilgard, 1981, p. 70). The process of benchmarking should be consistent to catch up with the ever changing market environment and harsh market competition. Lack of commitment by the management will hinder their involvement in the analysis of the organization’s best practices thus affecting the process of implementing benchmarking.

Focus on a particular area of the organization is yet another factor that hinders effective implementation of benchmarking process. This may occur where the organization selects an area where the process of benchmarking should be conducted. For instance, where an organization chooses to carry out benchmarking process on productivity or the operational position of the organization while ignoring the strategic position of the organization (Elmuti & Kathawala, 1997, p.236). The benchmarking process will not be complete and therefore its implementation will not be effective.

Additionally, lack of proper implementation and follow up strategies will hinder the process of implementing benchmarking. For the process of implementation to be successful the benchmarking team should visit the organizations chosen for the process of benchmarking and ensure that the vital information obtained from the organizations is kept a secret failure to which will lead to distortion of the whole process of benchmarking. These practices should then be tested and the outcome of the implementation process verified to all the stakeholders involved.

Finally, factors related to logistics also hinder the process of benchmark implementation. The personnel involved in the process of benchmarking should be logical in their undertakings to allow for successful and effective implementation of the benchmarking process. The benchmarking team should be ready to share their thoughts and ideas with other team members to make the process easier. The members should also be more involved with the processes and the practices but not the outcome of the practice. And lastly the members of the benchmarking process and the management should be ready to change and adapt the findings of the benchmarking process to achieve the objective of benchmarking.

Benchmarking involves four major stages which must be followed if the process of implementing benchmarking has to be successful. These stages include planning, analysis, action and review. Each of these stages is of great significance to the process of benchmarking and must therefore be thoroughly completed if the process of benchmarking has to effective (Ahmed & Rafiq, 1998, p. 238).

Conclusion

The satisfaction of consumer needs is an important factor that determines the possibility of an organization whether profit or non profit making to stay longer in the business. The consumer needs and means of satisfying those needs are always changing thus exposing the organization to several challenges. For an organization to survive these challenges it should study the performance of other similar organizations worldwide, be able to compare their performance with its performance and identify its areas of weaknesses and strengths and work towards improvement.

All these reflect the process of benchmarking which confirms the fact that it is a very important process to different organizations that are striving to excel in their operations. Though the strengths of benchmarking outweigh the weaknesses of benchmarking, the benchmarking partners must acknowledge the fact they are there and thus the organizations willing to adopt the practice of benchmarking in the future must be able to address them.

A part from the weaknesses, the process of implementing benchmarking is also faced by several challenges which the benchmarking partners must put into consideration before carrying out the process of implementation. The benchmarking process being a continuous process should therefore involve a careful plan, which should be based on the outcome of the study and be followed by implementation and then restarting the whole process since benchmarking is a continuous process.

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