Benchmarking is a proactive strategy that can provide a high level of
understanding regarding process improvement and customer expectations. It is the
search for the best practices and an understanding of how those are achieved. The
four kinds of Benchmarks are: internal, competitive, functional and generic.
Internal benchmarking compares similar operations within the organization, competitive benchmarking involves the analysis of competitor processes, functional benchmarking involves the analysis of a particular function (say billing) which may be common within an industry, generic benchmarking involves analysis across industries.
Internal Benchmarking compares similar operations within the organization. For example, shipping and receiving at one plant can be compared with shipping and receiving at another. A second example involves demonstration projects where two or more processes are implemented on a temporary basis to determine the best practice.
Competitive Benchmarking involves the analysis of competitor processes. Typically this is done by reviewing trade publications and competitor literature, and by hiring individuals who are familiar with competitor processes (IE former employees, investors, customers, and suppliers). A temporary alliance among competitors may foster Benchmarking.
Functional Benchmarking involves the analysis of a particular function (say billing) which may be common within an industry. This is typical for automated processes that utilize commercially available software. A team of potential software users will visit a business that has agreed to serve as a show case for the software. Functional Benchmarking has become a red flag of sorts to financial officers because of its use in justifying company paid holidays.
Generic Benchmarking involves analysis across industries. For example, an insurance company may Benchmark a bank loan application process against its insurance claims process. While the processes may appear dissimilar, they both require timely and consistent adjudication.
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http://www.eskimo.com/~mighetto/lsbench.htm - last update March 23, 2001.
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