Benchmarking:

Benchmarking: The Best Tool Measuring

for Measuring Competitiveness

Competitiveness
11
Mohamed Zairi
Bradford University Management Centre, UK

Introduction
Benchmarking is a term which has grown in use over the past few years,
particularly at senior management level. While its impact is generally speaking,
taken very seriously, nonetheless, many sceptics have referred to it as “another
flavour of the month”, “a fad”, “industrial espionage in disguise”, “industrial
tourism”, among others.
The origins of benchmarking and its meaning are well documented in
various literatures [1-4]. Benchmarking originated in Japan and was first
pioneered in the West by Rank Xerox, in the mid 1980s. It means constantly
emulating the best in order to introduce change and aspiring for superior
performance standards. Benchmarking is a practice which is externally
focused. Unlike self comparison which only determines whether improvements
carried out are effective, benchmarking helps answer the question: are we
competitive? Benchmarking does not improve performance as such but can be
used as a means for preventing unjustified complacency.
Benchmarking gives quality programmes more impetus and motivates
organizations to be constantly externally focused and working on identifying
gaps in performance and developing the right strategies for closing them. It
certainly opens windows of opportunity and makes strategy formulation and
deployment a more systemized process. Since this is the case therefore, why did
it take so long for senior managers in the West to appreciate the powerful
impact of benchmarking?
(1) Senior managers in Western countries have been trained to make
decisions based on financial information only. Financial information on
the other hand tended to have many shortcomings such as:
● its lack of relevance to the processes which deliver value to the end
customer;
● financial information is compiled historically, thus becomes
irrelevant by the time decisions need to be made;
● the methods used for measuring performance are not very Benchmarking for Quality
compatible with a modern business approach and tend to be Management & Technology, Vol. 1
No. 1, 1994, pp. 11-24. © MCB
distorted and mis-used. University Press, 1351-3036
BQM&T (2) Perhaps another important reason why benchmarking was not
1,1 considered seriously much earlier is senior managers’ lack of
understanding of processes which deliver value to the end customer and
their general remoteness from operational activities. The latter tend to
be, very often, delegated to subordinates. The remoteness from “the
process” very often means that external activity tends to be confined to
12 competitor analysis on performance and perhaps product re-engineering
of various competitors.
(3) Another major omission is perhaps the lack of focus on the end customer
and the adoption of a culture which is too internally oriented, where the
motto tends to be: “we think we know what the customer wants – let us
give them what they need”. This approach can be described as “the
throw and catch approach”, where products/services are produced and
thrown in the air and the customers are expected to catch them at the
other end, and be grateful for receiving them.
(4) The marked absence of Total Quality Management (TQM) programmes
often means that the attention is given to optimizing operations,
increasing efficiency and productivity levels and improving productivity
levels (i.e. doing more for ourselves at the detriment of the long-term
relationship with our customers).
The biggest contribution that TQM has made is perhaps the focus on the process
(i.e. activities which add value to the end customer) and focus on the customer (i.e.
determining what the true wants are and concentrating on those activities which
add most value). The interface between organizational capability to deliver to the
customer (i.e the voice of the process and the process) and the voice of the
customer through establishment of clear needs is really what TQM programmes
should deliver. This is through a philosophy of never- ending improvement which
encourages people to eliminate waste and maximize value to the end customer.
Benchmarking is a very powerful tool in helping organizations optimize their
capability to deliver by developing all internal processes to be superior, consistent
and very effective and by optimizing delivery to the end customer so there is a
clear move from merely fulfilling basic requirements to ensuring total satisfaction
and even customer delight. This perhaps can be achieved through offering best
product/service with highest quality, lowest price and with most competitive
approach, as judged by the customer.
Before discussing how to initiate a benchmarking programme that is capable of
measuring true competitive performance and which can give organizations a
clear advantage through ongoing strategic exploitation, two questions need first
be established: how should benchmarking be introduced? and should we focus on
enablers or results or both?

How to Apply Benchmarking

Although some people refer to various types of benchmarking including a cost
type[5], in reality however the types of benchmarking exercises often referred
to[1-4] refer to functional, competitive, generic without emphasis on cost. By
focusing on cost (i.e. how much), short-term results can be achieved in terms of Benchmarking:
the desired reductions sought but a great opportunity of enhancing competitive Measuring
standards can very easily be missed. Competitive standards can only be achieved
through understanding how processes function, why these are superior, where the
Competitiveness
effort is being placed, etc.
In addition, benchmarking can only be applied as an integral part of TQM.
While the latter encourages performance improvement through teams, problem- 13
solving and employee empowerment, benchmarking is a top-down activity for
objective setting and their effective deployment to the teams (via the TQM route)
so that performance gaps can be closed.
It sometimes is the case that organizations carry out benchmarking exercises
without being visibly committed to the introduction of TQM. In this case, this
type of benchmarking can be referred to as “the quick dip approach”[2]. This
approach could be, at the very best, a good barometer. It reflects a “business as
usual” type of culture with no change at all, where TQM very often means
measurable impact on bottom-line results, where there is more interest in internal
activities and pre-determined standards and where the internal standard of
effectiveness is unknown. The quick dip approach could however be a dangerous
one to take, since it may create a false sense of security (managers taking
outcomes of exercise at face value). It is also possible that managers may mis-
interpret the data obtained and develop “stretch objectives” without really
understanding true organizational capability (i.e. voice of process).
The benchmarking methodology referred to in this article is a change agent
where the emphasis is on changing the culture of the organizations concerned
from a “business-as-usual type” to a “best-in-class type”. In this case,
benchmarking is an integral component of TQM where there is high visibility of
tools utilization, systems, working through multi-disciplinary teams and using a
problem-solving approach. It also means that the entire organizational
commitment is to satisfy customer requirements. In this case, the goal of
benchmarking is to extend the internal standard of effectiveness to be highly
competitive.
Benchmarking as a change agent however does require a proper
implementation strategy. It requires time, senior management commitment and
resources. It has to link in very closely to the desired strategic goals critical
success factors (CSF). It has to take a long-term focus, since culture change is time
dependent.
Benchmarking is certainly not a practice to be only associated with model
organizations. It is more applicable to any organization which is committed to
continuous improvement. It is a fallacy to think that benchmarking is only
relevant to organizations wanting to become number one in their industry sector.
Depending on the learning curve, resources committed, pace of achievements,
benchmarking can lead to:
(1) incremental improvements to existing performance standards;
(2) quantum leaps by instigating new practices and ways of working;
(3) the road to excellence: creating the learning organization.
BQM&T
1,1 Sustaining competitive
advantage

Closing the gap

14
Present Intermediate Distant future
future

Base line Entitlement Desired goal

Existing
resources

Figure 1. Additional
resources
A Strategy of Closing
Performance Gap

Objectives (1) to (3) can be achieved through a strategy of closing performance

gap based on determining what the existing standard is (base line), what should
really be the internal standard (entitlement) and developing an action plan for
the immediate future to achieve the entitlement. Very often the latter can be
achieved with existing resources. Benchmarking stretches organizations
further by encouraging them to aspire for superior performance (desired goal).
This is a long-term objective and very often requires additional resources
(Figure 1).

How to Measure Performance – Should We Focus on Enablers or

Results or Both?
Performance measurement is vital to any organization which aspires to achieve
superior levels of effectiveness and competitiveness. In its various forms,
performance measurement really represents the yardsticks which tell people
how well they have done and as such motivates them to achieve higher targets.
Benchmarking is the ideal tool for setting corporate goals and transforming
them into tangibles which are delivered to the end customer. Through sound
programmes of quality policy deployment, goals can become translated at
various stages and results can be achieved.
If one is to learn from Japanese practices, quality deployment takes place in
the following format:
 ● A continuous focus on the customer. Benchmarking:
● A determination to achieve total customer satisfaction (zero complaints, Measuring
100 per cent delivery reliability, best competitive terms…). Competitiveness
● Increase in sales, percentage contribution from new products.
● Profit improvements.
It is very clear from this approach that the Japanese believe that by strongly
15
focusing on the end customer, ultimately the impact will show itself on tangible
results such as increases in sales and increases in profits.
Results therefore are the end of doing everything right first time and focusing
on the right things (i.e. those that the customer values most and is prepared to
pay for them). By focusing only on results this could be very detrimental to the
long-term survivability of business organizations. In a way this is really
encouraging a culture of “doing more of the same”. After all isn’t this what
senior managers, particularly in the West, have been doing for a long time? The
implications of concentrating on short-term results and increases in
profitability levels have been very detrimental to most organizations in the
West. This was not the case however of Japanese companies which have grown
in strength over the years to become global competitors.
There is, however, a growing school of thought which seems to encourage
managers to revert back to focusing on results instead of improving activities
or strengthening business processes which deliver to the end customer.
Competitiveness is about sustainability of clear advantage. Sustainability is
about consistency in delivery to the end customer. Consistency in delivery
comes from having superior capability to respond to customers’ ever changing
needs. Short-term results therefore do not necessarily measure the longevity of
business organizations and are no guarantees of survivability and the ability to
sustain a competitive advantage.
For those people who strongly believe that attention to results is the best way
to achieve high competitive standards, TQM is considered as a distraction, and
as “a convenient escape mechanism for managers avoiding the struggle of
radically upgrading their organizations’ performance”[6]. There is even sharp
criticism directed towards the gurus and pioneers of TQM principles:
The “thinkers” who have invented the latest organizational effectiveness strategies
unwittingly provide new busywork escapes. By putting so much emphasis on processes and
techniques, they have slighted the importance of results. Thousands of employees are trained
in seven-step problem solving and statistical quality control; thousands of managers are
“empowered”; and thousands of creative reward and communications systems are in place. In
the absence of compelling requirements for measurable improvement, however, little
improvement occurs[6].
These comments reflect a lot of confusion and misunderstanding on the
meaning of TQM and its powerful role to bring about better results. TQM is not
a “soft” option which distracts companies from striving to achieve better
results. It is very much a strategic tool and has to be deployed hand in hand
with the wishes and aspirations of organizations (i.e. goals, CFSs). TQM
BQM&T encourages people to eliminate waste, reduce cost, optimize value to the end
1,1 customer and therefore improve profits.
The latter can only be achieved through sound management of business
operations. Sound management can only be achieved through:
● understanding processes and what they do;
● measuring their performance;
16
● improving their performance;
● controlling their performance;
● managing all controllable processes.
TQM is not an “activity centred programme” as has been described[7], it is a
philosophy of optimizing value to the end customer and therefore achieving
better results through a culture of never-ending improvement. Activities
change, are too localized and their true impact can only be felt if they are part of
a total delivery system to the end customer (i.e an internal supplier – customer
chain).
Further criticism was directed at TQM as a “rain dance” and managers who
launch TQM programmes who were described as “those managers who
continue to dance round and round the campfire – exuding faith and dissipating
energy”[7].
TQM should not be introduced as “an act of faith”, it has to be part and parcel
of corporate strategy and a route of deploying the various goals and converting
them into results.
In their criticism, the cynics referred to[6,7] have omitted to mention on a
frequent basis the two key words which lead to results: Process and Customer.
As it was argued earlier, it is only by encapsulating the voice of the process and
the voice of the customer that true results can be achieved.
Benchmarking is the ideal vehicle for determining both and ensuring that
capability and sustainability are present all the time and that longevity together
with short-term results are achieved.
Performance measurement therefore has to focus on the means and results
(ends) or processes and outcomes. Performance measurement can also be
described in terms of practices and metrics.
Practices are characteristics which describe internal and external business
behaviours which tend to lead to the creation of a performance gap. Practices
could be related to:
● the processes themselves;
● organizational structures;
● management systems;
● human factors;
● strategic approaches.
Metrics. These are short-term measures which have to be continually calculated
and reviewed. Metrics can represent:
 ● a financial performance indicator (business performance); Benchmarking:
● a technical performance indicator (productivity measurement); Measuring
● an efficiency indicator (human contribution measurement). Competitiveness
It becomes very clear therefore that by focusing only on results as suggested
in[6,7], more harm than good can be achieved. Metrics are absolutes and do not
explain why things are so good or bad and the decisions made based on 17
absolute numbers/ratios/percentages, could be very detrimental to the
businesses concerned in the long term.
Benchmarking is a strategic tool and as such focuses on closing gaps for
long-term competitiveness. There are easier ways for achieving short-term
results and these do not need to have any link with processes at all.
Benchmarking offers the opportunity for managers to ask questions about
results (how often, how many, how big/small, how good/bad) i.e. the
performance of processes through asking more important questions about
process behaviours i.e. process management (such as what, why, where, when,
how) (Figure 2).
It is only through a discipline of understanding process behaviour (i.e.
practices) and explaining the meaning of the outcomes (metrics) that short-term
results can be achieved alongside long-term competitive advantages. In other
words, for benchmarking to be an effective strategic tool and not detrimental to
the long-term survivability of businesses, it has to focus on the process first
before results.

Benchmarking as a Strategic Tool – A Model

Benchmarking enables senior managers to answer questions such as: Where
are we now? Where do we need to be? How do we get there? How could we
remain there? Indeed, as Figure 3 illustrates, strategic objectives are first
established based on the voice of the process (capability) and the voice of the
customer (true requirements). The desired standards of performance are
therefore to optimize process performance in order to deliver total quality and

Process What, why,

management where, when
and how

How often Figure 2.

Process How many Benchmarking Offers
performance How big/small the Opportunity to Ask
How good/bad Questions about
Process Behaviours, e.g.
Process Management
BQM&T 100 per cent value to the end customer. The achieved (internal standards) are
1,1 continuously compared with the desired standard, and improvements are
carried out to optimize effectiveness in performance. Benchmarking adds the
necessary impetus to ensure that standards of performance are very
competitive, with the possibility of having the following outcomes:
● If and when a gap has been identified, the desired standards are reviewed
18 and new practices, methods, ways of managing processes based on best
performers are introduced to close the identified gap.
● If there is parity or a positive gap in favour of the organization
concerned, giving it an edge over its competitors, benchmarking ensures
that the objectives remain focused on achieving more with a desire for
the ultimate superior in performance. So in true fashion, and as an
integral element of any TQM programme, benchmarking is a continuous
activity and has to be carried out on a regular basis.
The deployment of goals and objectives in any organization has to take a
systematic route. There are various questions that need to be properly
answered in order for results to be achieved. It is often reported that many
strategies fail to deliver. This is because not enough emphasis is being placed
on the deployment, the translation and communication of the desired goals and
objectives.
(1) Perhaps the first important question to ask is about values and principles
that give organizations their raison d’être. Very often values are not

Strategic objectives

Desired standards

Metrics Practices
How much? What is it?
How big is gap? Which process?

Achieved standard

Benchmarking against competitors

Figure 3.
Benchmarking – a
Model to Deliver Superior performance
Total Quality
 explicit and visible enough which makes it very difficult for employees Benchmarking:
and others to identify with companies for which they work. Measuring
(2) The second question is about mission and the need to perform. Usually a Competitiveness
mission represents a set of quantifiable objectives which reflect short-
term, medium-term and long-term aspirations.
(3) Mission leads to policy/strategy formulation – this is therefore the 19
planning stage and the route to carrying out the translation of the
desired goals and the standards that need to be achieved. As Figure 4
illustrates, the mission and strategy are continuously reviewed, based on
feed back from measurement activities both internally (progress
measurement) and externally (benchmarking).

Measuring TQM culture:

self-assessment systems
(EFQM, MBNQA, DEMING)

? Values
C
U
Mission
? (CSFs) S
T

? O
Planning/deployment
M
Team
E
Process
Tools management R ?

Systems
Progress F
? measurement
O
C
Competitive
? benchmarking U
S
Figure 4.
? Best in class A Strategy for the
Deployment of Goals
and Objectives
BQM&T It is important at this stage to emphasize the point that it is
1,1 benchmarking activity which leads to strategic analysis and not, as
thought in many circles, that benchmarking is a derived activity from
strategic analysis.
(4) This is the action stage, i.e. process management, converting customer
wants into tangible products and services, using a process-based
20 approach, modern tools and techniques, a team approach and relying on
enabling procedures and guidelines for doing things right first time and
concentrating on the right things to do.
(5) Performance measurement, as has been discussed earlier, represents
internal performance measurement (i.e. effectiveness) and external
measurement (competitiveness). In addition, many organizations have
started to measure the cultural impact of TQM using self-assessment
systems such as the Malcolm Baldrige National Quality Award
framework (developed in the USA), the European Quality Award
framework developed in Europe and the Deming Prize framework
developed in Japan.
(6) Perhaps the most fundamental question to ask is whether organizations
are externally focused enough and whether they continuously concen-
trate on the end customer.
It is only by capturing the voice of the customer and the voice of the process that
strategic deployment becomes effective and can lead to positive results. This is
the best way to proceed down the road of excellence. Benchmarking instigates
the discipline of continuously asking questions about market conditions,
customer changes in expectations, trends, movements in technologies and so
forth. It brings home the message that “good is not good enough” and that there
is always “scope for doing better”.

Introducing Benchmarking – A Step-by-step Approach

As far as benchmarking methodology is concerned, this is not the area where
problems have been expressed. There are various approaches which are
described in different literatures[1-5] representing 6, 8, 10, or 12 steps for
conducting benchmarking exercises. This section will discuss the implemen-
tation of benchmarking in 16 steps.
Essentially there are two important stages which need to be adhered to if any
benchmarking exercise is to prove successful. Stage 1, as illustrated in Figure 5,
represents “the internal preparation – readiness” for conducting major external
comparisons.

The Effectiveness Stage

This stage is about controlling and managing all internal processes effectively.
Using a culture of never ending improvement through Deming’s cycle of Plan –
Do – Check and Act, the following steps have to be followed closely:
 Benchmarking:
Measuring
Competitiveness
Plan Do
Control and Understand internal
manage processes process 21

7
1
Evaluating current
Set internal performance
standards 6 Effectiveness 2

3 Identifying
5 process limitations/
4
Opportunities
for improvement
Measure and
evaluate
Improve
Act processes Check
Figure 5.
The Internal
Preparation-readiness
Benchmarking Stages
1: Effectiveness

(1) Understand internal processes: using simple charting techniques, what

really does take place has to be established.
(2) Evaluate current processes: everything that we do has to be quantified, if
it is to be managed properly.
(3) Identify process limitations/opportunities for improvement: measurement
is really a precursor to action. Through measurement, limitations can be
identified and therefore solutions can be devised and introduced.
(4) Improve processes: solutions applied to process limitations have to lead
to improvements;.
(5) Measure and evaluate: improvements have to be quantified through
measurement. Efforts of improvement have to be evaluated for further
action.
(6) Set internal standards: through repeated measurements and various
improvements administered to processes, there will come a point when
process performance can be optimized. This is when the standards can
be considered as acceptable.
(7) Control and manage processes: standards of effectiveness have to be
maintained through consistency and repeatability of performance. This
BQM&T is the action of controlling processes. All processes which can be
1,1 controlled have to be managed proactively. Control means no
complacency and certainly does not give managers any excuse for not
making the right decisions.
The Competitiveness Stage
22 As illustrated in Figure 6, this stage represents the conversion of an internal
standard of effectiveness into a competitive one, through benchmarking
exercises.
(8) The reasons why the benchmarking exercises need to take place have
first got to be established. It may well be that the process chosen is a
very good one and the exercise is really to establish that the process in
question is the best in its class. It is also possible that processes are
chosen because they require major improvements to them.
(9) Identify suitable partners: benchmarking is not a must at any cost –
careful selection of similar processes/companies is a pre-requisite
otherwise the exercise will just appear to be futile.
(10) Agree on measurement strategy: the exercise has to be a two-way
beneficial process. There has to be a common methodology and various
limitations in exchange and issues of confidentiality and sensitivity
have to be ironed out.

Select
Plan Apply process Do
benchmarking suitable for
to all bench-
processes marking
Identify
suitable
Repeat experience partners
with same/ 16
new partners 8
on regular basis
15 9 Agree on
Competitiveness measurement
14 10 strategy
Compare
standards 11
13 12 Compare
standards
Change
relevant practices Understand
for improving why difference
performance in performance
Act Check

Figure 6.
Benchmarking Stages
2: Competitiveness
 Benchmarking:
(11) Compare standards: data collection analysis should lead to com-
parisons. Measuring
(12) Understand why difference in performance: determine what the Competitiveness
differences are and try to explain why they do occur.
(13) Change relevant practices for improving performance: this is the action
stage of the exercise and is a measure of the extent of management 23
commitment.
(14) Compare standards: this is in order to establish that competitive gap has
been closed.
(15) Repeat experience with same/new partners on regular basis: ideally other
initiatives have to be initiated with the established partners. It is
painstakingly difficult to persuade other organizations to exchange data
and knowledge freely, if therefore this is established, it will be a missed
opportunity not to exploit the established contacts more positively.
(16) Apply benchmarking to all processes: benchmarking applies to all
processes, regardless of their strategic, operational relevance. Any
process which adds value to the end customer has to be made very
effective and competitive.

Critical Factors in Benchmarking

There are various critical factors which need to be considered very closely when
applying benchmarking:
● Overall impact on customer satisfaction: benchmarking is really to
optimize activities in every respect so that more increased value is given
to the end customer. It is not a futile exercise.
● Extent of contribution to raising competitive standards: benchmarking is
a strategic tool and as such is to be used for raising competitive
standards. It is an extension of internal standards of effectiveness.
● Keeping the organization externally focused: benchmarking is perhaps
the best, the only discipline, which constantly reminds managers and
employees alike that there is a need to focus externally on the market and
the customer.
● Enhancing the pool of knowledge: benchmarking moves the culture from
one where change tends to be evolutionary to a culture where ideas are
based on best practice. By opening up organizational processes to close
external scrutiny, many options become available to managers.
Benchmarking does also help companies conduct objective evaluation of
customer wants instead of the subject assessment, people’s perceptions
and gut feelings as used to be the case.
BQM&T How to Ensure That Benchmarking Remains a Strategic Tool
1,1 Benchmarking adds a new dimension to strategic thinking. It ensures that
strategy formulation/implementation is on the right track by constantly
checking internal performance, process behaviour against those of the toughest
competitors and best in class organizations.
Competitor analysis which is what organizations have been doing for a long
24 time for gathering information on cost differences, products/services, new
launches, etc. The information gathered is often used for strategic formulation.
While it establishes the how much, how big, strategic analysis is not enough as
a catalyst for the introduction of change. It is able to answer questions on what,
how, why, where and when. This is why benchmarking becomes of paramount
importance.
The role of benchmarking through the encouragement of understanding
process behaviour ensures that knowledge is gained in various areas and this is
really the best catalyst that managers could ever wish to have. It can give them
the best confidence to develop strategies which are likely to lead to closing the
gap in the performance levels identified.
Benchmarking has to bring about the discipline of ensuring that:
● there is a strong link between results, critical success factors (CFSs), and
the means for achieving them, critical processes (CP);
● never-ending improvement is closely associated with the external
aspects of businesses (strategic planning) and the internal aspects of
process management and control;
● take the market/customer as a starting point and works inwards by
ensuring that the business process is capable of delivering consistently
to what the market/customer requires.
References
1. Codling, S., Best Practice Benchmarking, Industrial Newsletters Ltd, Dunstable, 1992.
2. Zairi, M., Competitive Benchmarking: An Executive Guide, Technical Communications
(Publishing) Ltd, Letchworth, 1992.
3. Camp, R.C., Benchmarking: The Search for Industry Best Practices that Lead to Superior
Performance, ASQC Quality Press, Milwaukee, WI, 1989.
4. Zairi, M., “The Art of Benchmarking: Using Customer Feed Back to Establish a
Performance Gap”, Total Quality Management, Vol. 3 No. 2, 1992, pp. 177-87.
5. Schmidt, J.A.,“The Link between Benchmarking and Shareholder Value”, Journal of
Business Strategy, May-June, 1992, pp. 7-13.
6. Schaffer, R.H., “Demand Better Results – and Get Them”, Harvard Business Review,
March-April 1991, pp. 142-9.
7. Schaffer, R.H. and Thomson, H.A., “Successful Change Programs Begin with Results”,
Harvard Business Review, January-February 1992, pp. 80-9.

Further Reading
Ryan, J., “Quality as a Board Game”, Quality Progress, November 1992, pp. 41-4.