In–Depth Analysis of Benchmarking

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Due to rapid changes in the world every business enterprise puts efforts for growth and survival in the market as well as to avoid wrong choices. However, growth and survival are turning out to be increasing difficult in a global economy characterized by rising costs, stiff competition, expanding labor power, growing expectations of a customer, as well as fast-changing technology among many others (Hong et al. 2012). Therefore, business leaders are continuously establishing management techniques as practices to face these challenges (Hughes, 2013). In the present work, the suggested management technique that can help a firm to achieve long-standing success and survival, and implement best practice for the organizations effectively is benchmarking.

2.0 Rationale for Selecting Benchmarking

            The rationale of choosing benchmarking is based on its past performances as for over five decades it has demonstrated to be a catalyst for and contributor to the success of various companies in change interventions (Hughes, 2013). Benchmarking is perceived as the best management technique of measuring of company’s performance and strategies against “best-class-firms” companies both outside and inside the industry (Adebanjo et al. 2010). In other words, benchmarking has evolved into a popular tool for organizational improvement which has come to be perceived as an essential element of internationally good management practice and respected business excellence programmes. Furthermore, according to Adebanjo et al (2010), copying and seeking out the best methods and products have always been a normal way of life since the earliest human to modern organizations. Therefore, for long-standing survival and success, the ability of an organization to translate the successful experience of other firms for its benefit needs a development of learning for implementing the adoption to every situation (MacLean, 2013). Thus, the justification of selecting benchmarking is that it is an appropriate management technique for any organization that aims at grand success in competitive world since it gives a firm an ample opportunity to learn from the management practice of excellent corporations worldwide (Yoswick, 2001). Furthermore, benchmarking allows continuous application of and search for significantly better practices which result in superior competitive performance (Hughes, 2013). Benchmarking also allows a company to compare and measure its key aspect with those leading firms anywhere globally, to discover areas for improvement and develop measures of relative performance (Shamma & Hassan, 2013). However, benchmarking does not merely involve copying or comparing data with the competitors in the market,  but it is more about continuously learning from the rivals, learning more about firm’s weaknesses and strengths in the process and then acting on the learned tips (Powers, 2004). In other words, benchmarking is not simply making improvements and changes for the sake, but also involves value addition to the organization. No company need to make changes to the processes, products, or management style if the changes do not result to any benefits (Shamma & Hassan, 2013).

3.0 In–Depth Analysis of Benchmarking

3.1 Description of the Benchmarking

Many relevant descriptions of benchmarking offer different insights as it is relatively a new management technique and tool. Literature proposes that the descriptions of benchmarking exist at two levels: functional definitions which attempt to define it in terms of its operations and primal descriptions that attempt to define benchmarking in absolute terms (Mohamed, 1992). Furthermore, quite often, the concept is interpreted as an act of copying or imitating, although in reality this proves to be a notion that aids innovation instead of imitation, as stated by Mohamed (1992). However, Powers (2004) defines benchmarking as the process of understanding, identifying, and adapting best practices from inside the firm or any other type of business to help improve performance. Thus, from Powers (2004) definition, it is apparent that the concept of benchmarking need to be viewed as a process of firms’ adaptation, not adoption, which implies that it is not simply a question of imitating other successful organizations in the market, but learning how to improve the company through sharing ideas. Neither is it merely analysis of competitor, but a process which establishes the ground for creative breakthrough, by identifying the highest excellence standards for processes and products, and then making the organizational improvements essential to meet those standards by addressing the operational and management skills accountable for production (Augusto Cauchick Miguel & Monteiro de Carvalho, 2014).  Furthermore, the initial definition of benchmarking utilized by the Xerox Corporation and identified by Hong et al. (2012) is: Benchmarking is the constant process of measuring performance gaps, practices, services, and products against those firms recognized as industry leaders or the toughest rivals in the market. Thus, benchmarking is not a management technique that can be performed once and overlooked thereafter in the belief that the task is completed, but it should be a continuous process since industry or market practices constantly change and the competitors in the industry are constantly getting stronger (Amaral & Sousa, 2009). As a result, benchmarking need to be revised to show internal changes and the changing landscape of competition (Augusto Cauchick Miguel & Monteiro de Carvalho, 2014).

Moreover, benchmarking as a management tool is usually categorized into four types, including functional, competitive, internal, and generic (Hughes, 2013). In internal benchmarking, the organization compares departments or units performance within the company (Mohamed, 1992). Dervitsiotis (2000) asserted that benchmarking with the organization is always appropriate for firms with many branches, as it triggers an easy information exchange in regards to suitable practices. However, some researchers (Augusto Cauchick Miguel & Monteiro de Carvalho, 2014) have argued that in internal benchmarking the procedure be evaluated may not be the paramount practice in the market. In competitive benchmarking, the business practices of a company are re-evaluated in terms of knowledge that their direct rivals have been depicting excellence in some crucial components of productivity or performance such as customer-factors (Mohamed, 1992). However, Hughes (2013) argues that gathering information from the main competitors is usually challenging due to the unwillingness to lose competitive edge. In other words, some of the corporations are reluctant to share their very best practices as they realize the tremendous competitive advantage and economic value they offer the company (Amaral & Sousa, 2009). For instance, companies such as Walmart, Microsoft, and General Electric are known for keeping their best practices as a technique.

In functional benchmarking, the re-evaluation of business practices of a firm are based on companies which demonstrate dominance in some shared elements such as information technology utilization, logistical or administrative processes (Dervitsiotis, 2000). The primary disadvantage of functional benchmarking is that an organization can choose to benchmark a firm which is already flooded by benchmarking from other companies and thus unwilling to take part in benchmarking (Augusto Cauchick Miguel & Monteiro de Carvalho, 2014). Finally, generic benchmarking, the practices of an organization are purposefully contrasted with companies characterized by demonstrably superior performance from similar dispositions or practices (Mohamed, 1992). Generic benchmarking is perceived as the most employed category of benchmarking since it is facilitated by widely related dispositions or practices linked with improved productivity or performance (Dervitsiotis, 2000).

Furthermore, the successes of benchmarking have been well publicized; however, there are some criticisms of its efficacy as it is perceived as a management technique that does not often generate positive outcomes regardless of using significant assets of an organization (Dervitsiotis, 2000). Furthermore, benchmarking needs a successful company as an example, and the extent to which adequately consistent information can be acquired on performance of exemplar is significant element of any implementation process of benchmarking. However, Amaral & Sousa (2009) argues that spending significant effort trying to collect information describing the advantages of other companies, often covertly, a firm might neglect there outstanding features and become susceptible to misdirection and distraction. Besides, Kozak & Nield (2001) claims that the data needed to execute benchmarking declines heterogeneity if the differentiation of product reduces. In other words, benchmarking may be inefficient and is intrinsically retrospective.

Implementation Process

            Inappropriately, there is no consensus of the process for implementing benchmarking practices, and managers are experiencing problems when deciding to implement benchmarking. Effective implementation of benchmarking needs adequate training, planning, as well as open interdepartmental communication. For instance, Adebanjo et al (2010) explained that a number of firms have employed up to thirty-three stages, while some other companies have utilized only four steps. Nonetheless, the primary phases of benchmarking procedure remain comparatively similar, autonomously of the concern given to a particular area, which remove or add a few stages from or to the implementation process.  According to Matters & Evans (1997), various corporations have their benchmarking techniques, but despite which procedure is employed, the main phases included in the implementation process of benchmarking are planning, selection of benchmarking team, collection of information, analysis of the identified gaps, and taking action as discussed below:

            The first stage is planning, where prior to participating in benchmarking, it is imperative that a firm to identify the activities that should be benchmarked. The processes that are likely to be considered in this stage are those core activities with the potential of giving the organization a competitive edge. However, the selected activities for benchmarking need to be measurable to enhance the comparison process. The other factor to consider in planning phase is the firm to be benchmarked. A benchmark can be a collective group of organizations or a single entity which function at optimal efficiency.

The second phase is creating a benchmarking team, where a firm need to select the team from different areas of the company, and all should communicate and cooperate with each to acquire the best results from the overall process (Powers, 2004). The third step is collection of the data, and this stage includes gathering facts on the performance and best practices of the choosen firm (Yoswick, 2001). Before an organization determines the best practice firms, they need to first evaluate their processes, services, and products. Step four is analysis of the identified gaps, and this stage includes evaluating the company relates to the benchmarked organization, as it allows the firm to identify perfomance gaps and their potential causes (Augusto Cauchick Miguel & Monteiro de Carvalho, 2014). The last phase is implementation, where this step involves action taking as well as determining what the needed actions to match the best practice for the benchmarking process (Yoswick, 2001). The implementation is likely to be effective and successful if it is carried out by well-trained practitioners who can explore the practical concerns that are assured to secure a significant degree of trust for benchmarked companies to ensure sensitive performance-contributing aspects are determined (Powers, 2004).

Application by Other Organizations

Benchmarking is a broadly applied and largely accepted management technique of business practice for many companies worldwide (Shamma & Hassan, 2013). However, some firms have adopted benchmarking as part of a Total Quality Management approach (Dervitsiotis, (2000). Xerox, Motorola, AT&T, Alcoa, and Kodak Company are some spectacular examples of benchmark-driven organizational rejuvenation (Dervitsiotis, 2000). Furthermore, around 70% of the leading companies in the United States have benchmarks programs today (MacLean, 2013). For example, towards the end of 1970s, Xerox Corporation was losing a significant share in the market and facing considerable pressure from the rivals in Japan as the direct competitors had the ability to sell their products more competitively than Xerox could make them (Yoswick, 2001). Thus, in efforts to recover its market position, Xerox Corporation adoption management technique which allowed it compare its business operations to those of its rivals (MacLean, 2013). Xerox rigorously evaluated the performance capabilities and product features of competitive machines and the corporation was able to examine the practices of Fuji Xerox in Japan (Yoswick, 2001). The opportunities of improvement that were identified and adopted led to swift turn around for the fortunes of Xerox and resulted in the Best Practice Benchmarking becoming an integral part of Xerox business strategy (Yoswick, 2001). For example, in 1982, Xerox Corporation benchmarked its distribution unit and logistics against retailer L.L.Bean to improve its material handling and warehousing operations (MacLean, 2013).

The other company that has applied benchmarking is Motorola. Most of past emphasis of Motorola’s benchmarking was focusing on non-software related components of manufacturing, and other activities (Kozak & Nield, 2001). However, past technical exchanges and benchmarking for software in Motorola Corporation was conducted in Northern Telecom, AT&T, IBM, and other European, Japanese, and United States companies (Kozak & Nield, 2001). As a result, today Motorola Corporation is a hardware firm gradually evolving to high software content in its products or reliance of software to deliver and produce its products (Kozak & Nield, 2001).

Furthermore, although benchmarking is based on learning from outside, applicability of benchmarking and implementation of best practices vary from one firm often to the other (Amaral & Sousa, 2009). For example, relevant variations in the environment of different nations can make some implementation practices nontransferable (MacLean, 2013). Consequently, some of the benchmarking practices such as quality and cost control, market share and sales maximization, which have applied in some companies in one nation might not be easily applied to firms operating in other (Amaral & Sousa, 2009). Some examples of companies whose benchmarking applicability has been influenced by their initial supply environments are American and Japanese car manufacturers (Dervitsiotis, 2000). Japanese car corporations are situated in locations where oilfield existed and thus, oil was cheap (MacLean, 2013). Accordingly, Japanese firms followed a benchmarking process that increased efficiency of fuel, while the American corporations did not follow the same implementation process to get fuel efficiency (MacLean, 2013).

Applicability of Benchmarking to HipLink Software

            Benchmarking is an integral part of the software industry nowadays as firms look to make sure that they are meeting company’s performance needs and customers’ preferences and expectations (Maxwell & Forselius, 2000). HipLink Software is premier provider of voice communication and wireless text solutions, which was established in 1993 (HipLink | Paging Software | SMS Text Message Software | Notification,” 2018).  As a profitable and stable company with a long innovation’s history in the software development industry, HipLink Software has depicted robust commitment to its customers and products (HipLink | Paging Software | SMS Text Message Software | Notification,” 2018). The corporation has expanded to serve customers all over the world to fulfill the needs for mass notification, management of alarm, IT alerting, business continuity, and emergency response (HipLink | Paging Software | SMS Text Message Software | Notification,” 2018).

The applicability of benchmarking in the Hip Link is very challenging since it is not easy to track and quantify the performance of any IT department in regards to the quality and productivity (Maxwell & Forselius, 2000). To that end, HipLink Software can find it more difficult to compare their information with their main competitors in the industry since the metrics utilized by every firm may differ widely (Flitman, 2003).  In other words, the software community uses a variety of confusing metrics to characterize the perfomance of the marketed products and services (Pai et al. 2015). The confusion is often due to inadequate information to quantify information, credible interpretation rules, accurate models of software workload profile, as well as lack of comprehensible-software-benchmark-design methodology (Flitman, 2003). Thus, due to lack of the aforementioned information, the management of software community can be perceived as a blind process, where decisions are developed without full awareness of their actual outcomes (Pai et al. 2015). For instance, reducing HipLink’s price of software development, with no knowledge of its influence on productivity, might escalate costs of the company due to increase in errors, market share, and productivity improvements (Maxwell & Forselius, 2000). As a result, even if HipLink Software successfully implement a program to record quality and productivity on a routine basis, it can still be hard to examine the improvements of the productivity, market share, and control costs (Pai et al. 2015).

            However, HipLink Software Company can still conduct software benchmarking from the immediate competitors through comparison and collection of data from different sources. Additionally, HipLink Software can benchmark the software process of development to determine if teams are working efficiently as possible. While benchmarking processes of software development, HipLink Software needs to ensure that the company’s data is normalized.

Plan for Implementation

            In the present scenario, HipLink Software needs to conduct benchmarking on organizational aspects such quality, costs, productivity, pricing structures, and software development practices. The chosen companies to benchmark for the aforementioned factors are Microsoft and Oracle corporations.  The relevance of Oracle and Microsoft corporations as companies to be benchmarked is greater since the two firms operates and adopts strategic approach that is comparable of HipLink Software’s strategies to meet their goals. HipLink will also select benchmarking team of around 12 members from all units of the company to visits Oracle and Microsoft Corporations to gain insights into firm’s programs of software development and gain experience of benchmarking. The first visits will be to Microsoft, and later to Oracle Company. Each visit will last two to three days, where most of time will be spent in gaining information from the host corporation. Furthermore, the benchmarking team will be provided with questions that will provide them with framework and focus for the benchmarking investigations.


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January 19, 2024



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