Benchmarking

ACCA P5 Advance Performance Management

CIMA Official definition 2006

Benchmarking is defined as:

'Establishment, through data gathering, of target and comparators, that permits relative levels of performance (and particularly areas of underperformance) to be identified. Adoption of identified best practices should improve performance.’

Types of benchmarking

'Internal benchmarking: comparing one operating unit or function with another within the same industry.’

'Functional benchmarking: comparing internal functions with those of the best external practitioners, regardless of their industry.’ (Also known as operational benchmarking or generic benchmarking).

'Competitive benchmarking: in which information is gathered about direct competitors through techniques such as reverse engineering.’

'Strategic benchmarking: type of competitive benchmarking aimed at strategic action and organisational change.

( Operational benchmark, Competitor benchmark, process benchmark, Historical benchmark, Industry benchmark, Best in class benchmark, International benchmark)

Benchmarking process

Ø  Select processes/ activities to be benchmark

Ø  Assign responsibility to benchmarking team (Identify KPIs)

Ø  Identify suitable benchmarking partners – industry leader/club

Ø  Assign activities to partners – debrief and documentation

Ø  Analysis the gap

Ø  Implementation of agreed changes in processes/activities

Ø  Review the performance and benchmarking process

Benchmarking is a continuous program not a one off project.

Benefits of benchmarking:

Ø  Encourage learning and adopting changes

Ø  Helps identify performance gap

Ø  Show that performance targets can be achieved

Ø  Increases management capabilities

Ø  Enables process/activity improvement

Ø  Focuses on changes in external environment

Ø  Generates an understanding of world class performance

Ø  Minimize self-satisfaction with own performance

Problems of benchmarking (Form CIMA Article)

Problems of implementing benchmarking programs and obstacles to deriving maximum benefit include:

Ø  deciding which activities/processes to benchmark

Ø  identifying ‘best in class’ or other suitable benchmarking partners

Ø  overcoming internal staff resistance

Ø  resource constraints

Ø  overcoming confidentiality issues from either benchmarking partner

Ø  recognizing and allowing for performance differences arising from non-transferable process input elements (for example, employees’ skills/knowledge, organisational structure/culture)

Ø  a tendency to focus on what is currently being done, rather than considering potential future practices/innovative breakthroughs.

ACCA Article: Benchmarking

CIMA Article: Benchmarking