Benchmarking

Executive Summary

            Benchmarking has become an essential process for sustaining the competitive advantage of one organization and for going beyond the value creation of the organization’s leading competitors. The concept of benchmarking has indeed grown rapidly since the mid-1980s in consequence of the intensification of the global competition. This paper has discussed benchmarking in relation to performance management, as well as the problems encountered upon the application of benchmarking in organizations especially in arts and cultural organizations.

 

Introduction

            According to Lloyd, Elmuti and Kathawala (1997), organizations use the process of benchmarking in order to uphold organizational growth and achieve world-class competitive status. Benchmarking has become an information tool in pioneering organizations to sustain competition and competitive advantage. Lloyd (1997) adds that effective benchmarking can be achieved by concentrating on the goals and objectives of the organization and collaboration and coordination among the employees and the managers of the organization. For effective implementation of benchmarking, companies must have sufficient planning, training and open communication among its different departments.

            Organizations have been attracted to the idea of benchmarking because of its cost savings in executing operations and its assistance to the budgeting and strategic planning process of the organization. Through the process of benchmarking, an organization will be able to set standards for its products and services and make the essential adjustments in meeting them. Yet, it must be noted that even though benchmarking establish several advantages for the organizations, there are still some limitations and problems that will be encountered upon the implementation of benchmarking in organizations such as inaccurate analyses of statistical data, improper implementation and insubordination among the organization’s employees.

This paper will specifically be outlining the definition of the term “benchmarking” as used within the context of performance measurement. As to the problems encountered upon the implementation of the process, specifically to arts and cultural organizations, they will be thoroughly discussed in the succeeding sections of this paper.

 

Benchmarking

            The last decade has been characterized by the increasing popularity of benchmarking in organizations in consequence of the intensification of global competition (Schmidt, 1992). It can be utilized in several kinds of industries such as service and manufacturing. The process of benchmarking has been defined by Camp (1989) as “the continuous process of measuring products, services and practices against the toughest competitors or those companies recognized as industry leaders” (p. 320).

            According to Liang (2005), benchmarking actually has four different types namely: (1) internal benchmarking, (2) external benchmarking, (3) competitive benchmarking, and (4) non-competitive benchmarking.

            The first type, internal benchmarking, evaluates common operations to one another with one’s own organization. This type of benchmarking assumes that some of the work processes or functions in one aspect of the organization are more functional or efficient than that of in other aspects. Sependolini (1992) notes that the objective of internal benchmarking is “to identify the internal performance standards of an organization” (p. 16). This specific type of benchmarking may facilitate bridging the gaps that divide organizations by motivating internal communications and joint problem solving within an organization (Liang, 2005).

            The second type of benchmarking is external benchmarking which actually includes competitive and non-competitive benchmarking. In contrast to the internal benchmarking, external benchmarking basically searches outside the organization in order to identify the external and competitive benchmarks and practices that may be implemented into the organization’s own operational environment.

            The third type which is competitive benchmarking is used with direct competitors and executed externally. It is more commonly seen in the commercial sector in park and recreation services such as travel and tourism industries. The objective of competitive benchmarking is to compare organizations in the same markets with competing products, services of work processes. Lloyd, et al. (1997) notes that it is to the organization’s advantage to compare an associated organization’s performance; however, information is not always easy to acquire. Thus, organizations rely on public domain information rather than information from the associate company itself.

            Finally, the last type of benchmarking, which is non-competitive benchmarking (also refers to process or generic benchmarking) (Camp, 1989; Camp, 1995; Karlof and Ostblom, 1993; Spendolini, 1992), concentrates on the best work processes wherein similar procedures and functions are benchmarked rather than concentrating on the business practices of the organization. According to Lloyd, et al., (1997), this type may be utilized across dissimilar organizations and is considered to be highly effective. Yet, it is very difficult to implement as it necessitates a broad conceptualization of the entire process and a cautious comprehension of its procedures.

            Organizations have several reasons as to why they implement benchmarking in their organizations. The organization’s reasons may be broad such as increasing the organization’s productivity or specific such as enhancing the organization’s individual design. Some organizations use benchmarking as: (a) continuous improvement tool, (b) enhanced performance tool, (c) enhanced learning tool, (d) job satisfaction tool, (e) growth potential tool, (f) strategic tool, (g) total quality management tool, and (h) performance assessment tool.

            Continuous improvement tool. It must be noted that benchmarking has gained increasing popularity as an organizational tool for continuous improvement. In fact, organizations that have devotedly utilized benchmarking strategies have shown a cost saving of 30 to 40 percent or more. Benchmarking sustains the process of budgeting, strategic planning and capital planning. Furthermore, benchmarking also creates ways of quantifying each department’s units of outputs and costs.

Enhanced performance tool. Benchmarking also allows organizations to discover and learn new and innovative approaches to the concerns facing management, as well as offers a basis of training. It enhances performance by setting attainable aims.

Enhanced learning tool. Lloyd, et al. (1997) notes that companies benchmark to overcome disbelief as well as enhance learning. In example, as the organization, its managers and employees, know about the another organization’s successful operations and processes, the organization itself will believe that there is actually a better way to compete.

Job satisfaction tool. According to Lloyd, et al. (1997), benchmarking is growing and evolving so rapidly that benchmarkers have banded together and developed how-to networks in order to share approaches or methods, success and failures with each other. Benchmarking process has successfully generated a high degree or job satisfaction, as well as learning.  Benchmarking is a methodical and accurate evaluation of the organization’s product, service and work processes quantified against organizations recognized as best in the specific field of industry.

Growth potential tool. As benchmarking is implemented within the organization, there might be a need for change in the cultural context of the organization. After some time in a given industry, the organization may become too practiced at penetrating and finding inside the organization for growth. Hence, the organization may be better off looking externally for growth potential. An outward looking organization is observed to be an organization that is future-oriented which usually leads to an enhanced and fully developed organization with maximized profits.

Strategic tool. Intensive competition may be another reason as to why organizations utilize benchmarking as a strategic tool. Benchmarking enables companies to jump and get ahead of other organizations by using new-found strategies.

Total quality management tool. Benchmarking has also been used by organizations as a total quality management tool as it is an ingredient in any total quality management movement. Organizations wanting to know why or how another organization does better than theirs actually follow the benchmarking concept. The use of benchmarking has pick up the pace among organizations that have adopted the Total Quality Management philosophy.

Performance assessment tool. In the context of performance assessment, benchmarking has been defined as “the process of identifying and learning from the best practices in the world” (Lloyd, et al., 1997). As organizations recognise the best practices, they will be able to know where they actually stand in association with other organizations. This can actually provide organizations an ideal way to learn more from successful organizations. Other organizations can identify the problems in their organizations and provide the possible solutions. When companies benchmark, they utilize patterns in order to share and learn from each other. In addition, through benchmarking, organizations will have a better comprehension of their administrative operations, as well as targets areas for improvement. Furthermore, benchmarking can also eliminate waste and enhance an organizations market share.

 

Benchmarking in the Context of Arts and Cultural Organizations

            There are several definitions and descriptions of benchmarking that gives evidence of it broad interpretations of the practice in arts and cultural organizations.

            Benchmarking is defined as a systematic approach which evaluates the performance of targeted organizations against a common objective measures and draws out the qualitative aspects behind superior performance, with the aim of leveraging those insights to enhance the client’s performance (Cannon Associates, 1994). According to Radbourne (1998), benchmarking and the setting up of the Key Performance Indicators offer invaluable criteria for performing arts center managers in order to quantify a variety of achievements in venue management, audience, development, community service, revenue generation and artistic programming.

Through benchmarking best practices, an arts center or organization will be able to evaluate its performance and then, if necessary, develops strategies that will enhance performance as part of the strategic planning process of the organization (Radbourne & Collyer, 1996).

 

Limitations of Benchmarking in Arts and Cultural Organizations

            As mentioned earlier, benchmarking process has several advantages; yet, it also has some limitations and there may still be problems encountered upon the implementation of the benchmarking process in arts and cultural organizations.

            The most important of these problems is the danger of “copying” especially in this creative and vision-driven environment. Because benchmarking typically involves the assessment of the performance of one organization as compared with another organization’s performance, the organization may run the risk of copying the other organizations creative ideas.

            Another problem encountered within the implementations of benchmarking is the focus on data by the organization instead of the processes used that make that data. Lloyd, et al. (2003) notes that benchmarking should be used as a guide and not for statistical precision.

            Another problem may be the lacking of clarity on data origination. As the organization does not understand fully the sources of the gathered information or data, the whole benchmarking process may be ruined as there will be erroneous comparison notes.

            In addition, the employees of the organization may be resistant to change which can add to the problems of the benchmarking process as there will be employees and staff are will be reluctant to cooperate to new policies implemented within the organization (Lloyd, et al., 1997).

            Another problem that may be encountered is the lacking of proper implementation of the whole benchmarking process. This may actually pose another problem. Like for example, the organization does not involve their managers and employees in the process of benchmarking which will ultimately lead to disorganization of the benchmarking process because employees will need the information to improve the process.

            Next, another problem may be the perception of the organization that the benchmarking process is only a one-time project and not an ongoing process. According to Lloyd, et al. (1997), some organizations actually have difficulty in treating the benchmarking process as an ongoing process. In addition, it should not be vied as a onetime project. Furthermore, some companies even think that a tactic or a strategy not invented by them may characterize them as inferior compared to others. Moreover, some organizations do not even benchmark because it exposes their weaknesses.

            Lastly, a very common problem with organizations implementing the benchmarking process is failing to expand the scope of the organizations studied. It must be very well noted that it is best to benchmark in all industries, including even those that are outside the user company’s industry.

 

Conclusions

            Lloyd, et al. (1997) notes that the very fundamental nature of benchmarking is the identification or the recognition of the highest standards of excellence for products, services or process and then making the necessary changes for improvements in order to reach to standards, also called “best practices”.

            In addition, benchmarking is an approach to move away from the conventional operations. It carefully analyzes the organization into subdivisions and then removes and inserts portions to account for the changing environments. Change will occur as soon as the process has begun and will have to continue to change and mold the organization for as long as individuals are continuously striving to make improvements.

            This paper has discussed the process of benchmarking, the types (internal, external, competitive and non-competitive benchmarking), as well as the reasons as to why organizations utilize the benchmarking process in their organizations. Also, the paper discussed the different problems that may be encountered when the process of benchmarking is applied in arts and cultural organizations.

            To summarize, the problems encountered in applying benchmarking process is (1) the danger of copying; (2) focusing on data instead of the processes that make the data; (3) lacking of clarity on data origination; (4) employee resistance to change; (5) lacking of proper implementation; (6) perception of the organization that the benchmarking process is a one-time project rather than an ongoing process; and lastly, (8) failing to expand the scope of the organizations studied.

 

 

Bibliography

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