Internal benchmarking: Looking in the Mirror

According to www.dictionary.com, benchmarking is “to measure (a rival’s product) according to specified standards in order to compare it with and improve one’s own product.” Benchmarking is typically thought of as external, but internal benchmarking can also be advantageous.

AMR Research splits benchmarking into three categories: Business Process Benchmarking, External Benchmarking, and Internal Benchmarking. Business Process Benchmarking involves one company visiting another for an extended period of time to view generic processes. For example, a company wishing to improve their fresh concrete delivery might analyze a hot pizza delivery process.

External Benchmarking is what most people think of when referring to benchmarking. It requires the comparison of a number of metrics to a peer group within the same industry. Internal Benchmarking involves comparing different divisions to one another to identify generic business practices that consistently outperform others and can be adopted throughout the company.

If Only We Knew What We Know: Identification and Transfer of Internal Best Practices, by Carla O’Dell and C. Jackson Grayson (1), discusses the challenges of accessing the vast, yet untapped, amount of knowledge presently existing in most companies. The previous Lessons Learned, “Best Practices,” summarized the article and offered insights into identifying and transferring internal knowledge.

Benchmarking teams are recommended by the authors as a way to identify the kinds of information lacking throughout the organization. These teams are formed from the top levels of the company, in each of the major functions. Team members work together to assess current positions, identify areas for improvement, then search internally and externally to find solutions being implemented by others.

O’Dell and Grayson remind us that measures and outcomes are not the only items to be benchmarked. A practice that returns outstanding results does not necessarily mean the practice itself is outstanding. Likewise, an operation that yields poor results may be hiding a best practice. Financial and operational processes can certainly be improved, but many other practices should also be benchmarked. History, volume, customer satisfaction, geographical location, and many other items can be assessed.

Internal Benchmarking is advantageous in a number of ways. Data is accessible and correct, contrary to most competitive information. Comparing apples to apples is always more accurate. Interviews with employees and best practice teams uncover lots of information from voluntary, motivated sources, increasing the potential for change. Goals seem more realistic when they are already being accomplished somewhere in the company. Benchmarking current employees provides an opportunity for them to be rewarded for outstanding performance. Finally, internal benchmarking supports continuous improvement.

John Puckett III and Philip Siegel outlined an internal benchmarking process in the May/June 1997 Journal of Business Strategy (2). They advocate looking in the mirror rather than out the window… make heroes within your own company instead of legends out of others.

References:

(1) O’Dell, C. and Grayson, C. J. (1998). If Only We Knew What We Know: Identification and Transfer of Internal Best Practices. California Management Review, 40(3), 154-174.

(2) Puckett, J. and Siegel, P. (1997).Looking in the Mirror. Journal of Business Strategy, 18, 12 –16.