Page 111 - DCOM506_DMGT502_STRATEGIC_MANAGEMENT

Unit 6: Organisational Appraisal: Internal Assessment 2

standard. The result is often a business case and "Burning Platform" for making changes in order Notes
to make improvements.
Also referred to as "best practice benchmarking" or "process benchmarking", it is a process used
in management and particularly strategic management, in which organisations evaluate various
aspects of their processes in relation to best practice companies' processes, usually within a peer
group defined for the purposes of comparison. This then allows organisations to develop plans
on how to make improvements or adapt specific best practices, usually with the aim of increasing
some aspect of performance. Benchmarking may be a one-off event, but is often treated as a
continuous process in which organisations continually seek to improve their practices.

Types of Benchmarking

Benchmarking can be of following types:

1. Process benchmarking: the initiating firm focuses its observation and investigation of
business processes with a goal of identifying and observing the best practices from one or
more benchmark firms. Activity analysis will be required where the objective is to
benchmark cost and efficiency; increasingly applied to back-office processes where
outsourcing may be a consideration.
2. Financial benchmarking: performing a financial analysis and comparing the results in an
effort to assess your overall competitiveness and productivity.

3. Benchmarking from an investor perspective: extending the benchmarking universe to also
compare to peer companies that can be considered alternative investment opportunities
from the perspective of an investor.
4. Performance benchmarking: allows the initiator firm to assess their competitive position
by comparing products and services with those of target firms.
5. Product benchmarking: the process of designing new products or upgrades to current
ones. This process can sometimes involve reverse engineering which is taking apart
competitors products to find strengths and weaknesses.
6. Strategic benchmarking: involves observing how others compete. This type is usually not
industry specific, meaning it is best to look at other industries.

7. Functional benchmarking: a company will focus its benchmarking on a single function in
order to improve the operation of that particular function. Complex functions such as
Human Resources, Finance and Accounting and Information and Communication
Technology are unlikely to be directly comparable in cost and efficiency terms and may
need to be disaggregated into processes to make valid comparison.
8. Best-in-class benchmarking: involves studying the leading competitor or the company
that best carries out a specific function.

9. Operational benchmarking: embraces everything from staffing and productivity to office
flow and analysis of procedures performed.
There is no single benchmarking process that has been universally adopted. The wide appeal
and acceptance of benchmarking has led to various benchmarking methodologies emerging.
The first book on benchmarking, written by Kaiser Associates, offered a 7-step approach. Robert
Camp (who wrote one of the earliest books on benchmarking in 1989) developed a 12-stage
approach to benchmarking.

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