What & Why To Use Benchmarking In Business Management.

 

 

What is Benchmarking?

Benchmarking is the comparison of performance either financial or non-financial related to part of the business segment, product, process or whole business with other divisions or whole business inside the business group (internal benchmarking), competitors or other business (external benchmarking) having similar characteristics in terms of objectives, process, size, culture and geo-location.

 

Why to Use Benchmarking?

Benchmarking is used to evaluate performance for rewarding managers for its performance, identification of performance gaps for improvements but it does not gives solutions for problems. It also helps to identify strengths and weaknesses of the business, so that suitable strategies can be devised to achieve business objectives. In practice, business use benchmarking to identify successful role model to become successful by improving important area of the business indentified by the market leader.

 

Pros of Benchmarking.

1. It is based on the actual performance results rather than forecasted results is which subjective based on assumptions. So that no objections can be raised.
2. It encourages learning and healthy competition which promotes productivity and efficiency.
3. Appropriate use of benchmarking highlights critical success factors for the business that can lead to success or failure of the business.

 

Cons of Benchmarking.

4. Benchmarking requires the identification of some part or whole of the business, internal or external to the group which is the best. It also difficult to find business with similar characteristics, without which result become obsolete.
5. Benchmarking requires the use performance measures is which available in both businesses.
6. If competitor information is needed, it may not be available because of confidentiality issues. However, mutual understanding that it will to both businesses may help.