Question

In class we discussed internal benchmarking of a process, i.e., gauging process performance relative to worst-, practical-worst-, and best-case performance. An alternative is external benchmarking of a process, where process performance is measured via comparison to another system. What are some pros and cons of both internal and external benchmarking of process performance?

Answer 1

Pros of both internal and external benchmarking-

• Enable better performance
  • The overall efficiency of staff increases as work standardisation motivates them to perform better and enhances their overall output quality.
• Inspire innovation and creativity
  • Effective benchmarking (whether internal or external) paves the way for idea generation and sharing of best practices. People are encouraged to innovate and put their best foot forward. This can be seen as a great learning experience for companies.
• Foster change, growth and development
  • Benchmarking's all about following certain standards of excellence. Change encourages ongoing learning, at each and every level of the organization, and brings about an improvement in overall standards leading to growth and development.
• Enable self-awareness
  • Benchmarking gives you a true idea of your market standing. You get to assess your strengths, weaknesses, opportunities and threats in the process - which is great for planning your way forward.

Cons of both internal and external benchmarking-

• Lack of information
  • Information on certain crucial aspects - e.g. metrics, practices etc. pertaining to rival firms - may not be easily available. This may lead to improper/inadequate comparisons with competitors.
• Incorrect comparisons
  • Sometimes companies make irrelevant comparisons (e.g. between dissimilar industries, metrics, standards etc.) resulting in poor benchmarks.
• Poor understanding
  • Not understanding the real purpose(s) behind benchmarking and copying rivals blindly is also very common to see.
• High Costs
  • Sourcing high quality, relevant and accurate data requires extensive research work and huge costs in terms of time and money. Besides, a team of experienced personnel with excellent analytical skills and expertise is also required - increasing the administrative expenses of the company. Even change implementation involves hefty expenditure...