Benchmarking is a continuous, systematic process for comparing performances of organisations,functions or processes against the "best in the world", aiming to not only match those performance levels but to exceed them (DGIII, of the European Commission, 1996)

Put simply, it is a management tool that helps managers objectively identify areas for improvement within their own operations and to work with others to improve them.  One of the key issues facing managers today is the difficulty in making decisions.  Very seldom is all the information available to them.  Benchmarking allows decisions to be made based on FACTS, objective information relating to key performance areas.

BENCHMARKING IS A LEARNING OPPORTUNITY

Benchmarking provides a basis for learning.  If a company or organisation sees that it has an area for improvement then it has started the learning process.  It is not enough to just know that your performance levels are lower than your competitor; you need to learn how you can address the issue.  The analogy has been made to medicine, that benchmarking is like the Diagnosis, the second stage in improving the patient is in the Medicine, what steps are taken to improve performance. Benchmarking provides the opportunity to learn with others how to improve your operations.

The best companies and organisations in the world today, truly World Class organisations, exhibit high levels of practice use and performance achieved.  These same organisations are often front runners in adopting and developing current best practice.  Learning from their own internal experiences as well as from the shared experience of others.  These leading organisations are using benchmarking to check their positions relative to others in their own sector, region, country or on a world-wide basis. Even more importantly for them they are taking the opportunity to learn from and with other leading organisations, organisations who themselves are pushing the boundaries of efficiency and effectiveness.  Today's market conditions are changing continuously.  To survive an organisation needs to adapt and innovate, to acquire new strengths, abilities and new ideas.

LEVELS OF BENCHMARKING

The evolution of benchmarking can be presented as a series of five steps.

1. Analysis of competing goods: Reverse engineering - the benchmarking concept during this phase was concentrated in the comparison of characteristics, functionalities and performance of competing products.

2. Competitive Benchmarking: First developed by Rank Xerox when starting to analyse its own manufacturing costs and verifying they were as high as its competitors' sales prices.  Now the emphasis is on processes' efficiency and not only comparing products.

3. Process Benchmarking: During the 80's, managers started to realise that they also could learn with organisations from other sectors (benchmarking out of the box).  The amount of information and knowledge available amongst non-competing companies, a priori, higher than between competitors.

4. Strategic Benchmarking: A systematic process to evaluate alternative scenarios, to implement strategies and improve performance through the understanding and adaptation of successful strategies by the partners (competitors or not).  It differs from process benchmarking because its scope is larger and deeper.

5. Global Benchmarking: The next generation concept.  It is an even more global concept because it includes and analyses cultural differences between companies at world-wide level.  It also takes into account the conditions (legal, administrative, education, social, environment) which affect the localisation of companies.