Benchmarking is the process of comparing one's business processes and performance metrics to

industry bests and/or best practices from other industries. Dimensions typically measured are
quality, time and cost. In the process of benchmarking, management identifies the best firms in
their industry, or in another industry where similar processes exist, and compare the results and
processes of those studied (the "targets") to one's own results and processes. In this way, they
learn how well the targets perform and, more importantly, the business processes that explain
why these firms are successful.

The term benchmarking was first used by cobblers to measure people's feet for shoes. They
would place someone's foot on a "bench" and mark it out to make the pattern for the shoes.
Benchmarking is used to measure performance using a specific indicator (cost per unit of
measure, productivity per unit of measure, cycle time of x per unit of measure or defects per unit
of measure) resulting in a metric of performance that is then compared to others.

Also referred to as "best practice benchmarking" or "process benchmarking", this process is used
in management and particularly strategic management, in which organizations evaluate various
aspects of their processes in relation to best practice companies' processes, usually within a peer
group defined for the purposes of comparison. This then allows organizations to develop plans
on how to make improvements or adapt specific best practices, usually with the aim of increasing
some aspect of performance. Benchmarking may be a one-off event, but is often treated as a
continuous process in which organizations continually seek to improve their practices.

Contents
 1 Benefits and use
 2 Collaborative benchmarking
 3 Procedure
 4 Costs
 5 Technical/product benchmarking
 6 Types
 7 Metric benchmarking
 8 See also
 9 References

Benefits and use

In 2008, a comprehensive survey on benchmarking was commissioned by The Global
Benchmarking Network, a network of benchmarking centers representing 22 countries. Over 450
organizations responded from over 40 countries. The results showed that:

1. Mission and Vision Statements and Customer (Client) Surveys are the most used (by
77% of organizations of 20 improvement tools, followed by SWOT analysis(72%), and
Informal Benchmarking (68%). Performance Benchmarking was used by (49%) and Best
Practice Benchmarking by (39%).
 2. The tools that are likely to increase in popularity the most over the next three years are
Performance Benchmarking, Informal Benchmarking, SWOT, and Best Practice
Benchmarking. Over 60% of organizations that are not currently using these tools
indicated they are likely to use them in the next three years.

Collaborative benchmarking
Benchmarking, originally described as a formal process by Rank Xerox, is usually carried out by
individual companies. Sometimes it may be carried out collaboratively by groups of companies
(e.g. subsidiaries of a multinational in different countries). One example is that of the Dutch
municipally-owned water supply companies, which have carried out a voluntary collaborative
benchmarking process since 1997 through their industry association. Another example is the UK
construction industry which has carried out benchmarking since the late 1990s again through its
industry association and with financial support from the UK Government.

Procedure
There is no single benchmarking process that has been universally adopted. The wide appeal and
acceptance of benchmarking has led to the emergence of various benchmarking methodologies.
One seminal book on benchmarking is Boxwell's Benchmarking for Competitive Advantage
(1994).[1] The first book on benchmarking, written and published by Kaiser Associates,[2] is a
practical guide and offers a 7-step approach. Robert Camp (who wrote one of the earliest books
on benchmarking in 1989)[3] developed a 12-stage approach to benchmarking.

The 12 stage methodology consists of:

1. Select subject
2. Define the process
3. Identify potential partners
4. Identify data sources
5. Collect data and select partners
6. Determine the gap
7. Establish process differences
8. Target future performance
9. Communicate
10. Adjust goal
11. Implement
12. Review and recalibrate

The following is an example of a typical benchmarking methodology:

1. Identify your problem areas - Because benchmarking can be applied to any business
process or function, a range of research techniques may be required. They include:
informal conversations with customers, employees, or suppliers; exploratory research
techniques such as focus groups; or in-depth marketing research, quantitative research,
 surveys, questionnaires, re-engineering analysis, process mapping, quality control
variance reports, or financial ratio analysis. Before embarking on comparison with other
organizations it is essential that you know your own organization's function, processes;
base lining performance provides a point against which improvement effort can be
measured.
2. Identify other industries that have similar processes - For instance if one were
interested in improving hand offs in addiction treatment he/she would try to identify other
fields that also have hand off challenges. These could include air traffic control, cell
phone switching between towers, transfer of patients from surgery to recovery rooms.
3. Identify organizations that are leaders in these areas - Look for the very best in any
industry and in any country. Consult customers, suppliers, financial analysts, trade
associations, and magazines to determine which companies are worthy of study.
4. Survey companies for measures and practices - Companies target specific business
processes using detailed surveys of measures and practices used to identify business
process alternatives and leading companies. Surveys are typically masked to protect
confidential data by neutral associations and consultants.
5. Visit the "best practice" companies to identify leading edge practices - Companies
typically agree to mutually exchange information beneficial to all parties in a
benchmarking group and share the results within the group.
6. Implement new and improved business practices - Take the leading edge practices and
develop implementation plans which include identification of specific opportunities,
funding the project and selling the ideas to the organization for the purpose of gaining
demonstrated value from the process.

Costs
The three main types of costs in benchmarking are:

 Visit Costs - This includes hotel rooms, travel costs, meals, a token gift, and lost labor
time.
 Time Costs - Members of the benchmarking team will be investing time in researching
problems, finding exceptional companies to study, visits, and implementation. This will
take them away from their regular tasks for part of each day so additional staff might be
required.
 Benchmarking Database Costs - Organizations that institutionalize benchmarking into
their daily procedures find it is useful to create and maintain a database of best practices
and the companies associated with each best practice now.

The cost of benchmarking can substantially be reduced through utilizing the many internet
resources that have sprung up over the last few years. These aim to capture benchmarks and best
practices from organizations, business sectors and countries to make the benchmarking process
much quicker and cheaper.
Technical/product benchmarking
The technique initially used to compare existing corporate strategies with a view to achieving the
best possible performance in new situations (see above), has recently been extended to the
comparison of technical products. This process is usually referred to as "technical
benchmarking" or "product benchmarking". Its use is well-developed within the automotive
industry ("automotive benchmarking"), where it is vital to design products that match precise
user expectations, at minimal cost, by applying the best technologies available worldwide. Data
is obtained by fully disassembling existing cars and their systems. Such analyses were initially
carried out in-house by car makers and their suppliers. However, as these analyses are expensive,
they are increasingly being outsourced to companies who specialize in this area. Outsourcing has
enabled a drastic decrease in costs for each company (by cost sharing) and the development of
efficient tools (standards, software).

Types
 Process benchmarking - the initiating firm focuses its observation and investigation of
business processes with a goal of identifying and observing the best practices from one or
more benchmark firms. Activity analysis will be required where the objective is to
benchmark cost and efficiency; increasingly applied to back-office processes where
outsourcing may be a consideration.
 Financial benchmarking - performing a financial analysis and comparing the results in
an effort to assess your overall competitiveness and productivity.
 Benchmarking from an investor perspective- extending the benchmarking universe to
also compare to peer companies that can be considered alternative investment
opportunities from the perspective of an investor.
 Performance benchmarking - allows the initiator firm to assess their competitive
position by comparing products and services with those of target firms.
 Product benchmarking - the process of designing new products or upgrades to current
ones. This process can sometimes involve reverse engineering which is taking apart
competitors products to find strengths and weaknesses.
 Strategic benchmarking - involves observing how others compete. This type is usually
not industry specific, meaning it is best to look at other industries.
 Functional benchmarking - a company will focus its benchmarking on a single function
to improve the operation of that particular function. Complex functions such as Human
Resources, Finance and Accounting and Information and Communication Technology are
unlikely to be directly comparable in cost and efficiency terms and may need to be
disaggregated into processes to make valid comparison.
 Best-in-class benchmarking - involves studying the leading competitor or the company
that best carries out a specific function.
 Operational benchmarking - embraces everything from staffing and productivity to
office flow and analysis of procedures performed.[4]
 Energy benchmarking - developing an accurate model of a building's energy
consumption with the purpose of measuring reductions in usage.
Metric benchmarking
Another approach to making comparisons involves using more aggregative cost or production
information to identify strong and weak performing units. The two most common forms of
quantitative analysis used in metric benchmarking are data envelope analysis (DEA) and
regression analysis. DEA estimates the cost level an efficient firm should be able to achieve in a
particular market. In infrastructure regulation, DEA can be used to reward companies/operators
whose costs are near the efficient frontier with additional profits. Regression analysis estimates
what the average firm should be able to achieve. With regression analysis firms that performed
better than average can be rewarded while firms that performed worse than average can be
penalized. Such benchmarking studies are used to create yardstick comparisons, allowing
outsiders to evaluate the performance of operators in an industry. A variety of advanced
statistical techniques, including stochastic frontier analysis, have been utilized to identify high
performers and weak performers in a number of industries, including applications to schools,
hospitals, water utilities, and electric utilities.[5]

One of the biggest challenges for metric benchmarking is the variety of metric definitions used
among different companies and/or divisions. Definitions may also change over time within the
same organization due to changes in leadership and priorities. The most useful comparisons can
be made when metrics definitions are common between compared units and do not change over
time so improvements can be verified.

SWOT analysis is a strategic planning method used to evaluate the Strengths, Weaknesses,
Opportunities, and Threats involved in a project or in a business venture. It involves specifying
the objective of the business venture or project and identifying the internal and external factors
that are favorable and unfavorable to achieve that objective. The technique is credited to Albert
Humphrey, who led a convention at Stanford University in the 1960s and 1970s using data from
Fortune 500 companies.

A SWOT analysis must first start with defining a desired end state or objective. A SWOT
analysis may be incorporated into the strategic planning model. Strategic Planning has been the
subject of much research.

 Strengths: characteristics of the business or team that give it an advantage over others
in the industry.
 Weaknesses: are characteristics that place the firm at a disadvantage relative to others.
 Opportunities: external chances to make greater sales or profits in the environment.
 Threats: external elements in the environment that could cause trouble for the business.

Identification of SWOTs is essential because subsequent steps in the process of planning for
achievement of the selected objective may be derived from the SWOTs.

First, the decision makers have to determine whether the objective is attainable, given the
SWOTs. If the objective is NOT attainable a different objective must be selected and the process
repeated.
The SWOT analysis is often used in academia to highlight and identify strengths, weaknesses,
opportunities and threats. It is particularly helpful in identifying areas for development.

Contents
 1 Matching and converting
o 1.1 Evidence on the use of SWOT
 2 Internal and external factors
 3 Use of SWOT analysis
 4 SWOT - landscape analysis
 5 Corporate planning
o 5.1 Marketing
 6 See also
 7 References
 8 External links

Matching and converting

Another way of utilizing SWOT is matching and converting.

Matching is used to find competitive advantages by matching the strengths to opportunities.

Converting is to apply conversion strategies to convert weaknesses or threats into strengths or

opportunities.

An example of conversion strategy is to find new markets.

If the threats or weaknesses cannot be converted a company should try to minimize or avoid
them.

Evidence on the use of SWOT

SWOT analysis may limit the strategies considered in the evaluation. J. Scott Armstrong notes
that "people who use SWOT might conclude that they have done an adequate job of planning
and ignore such sensible things as defining the firm's objectives or calculating ROI for alternate
strategies." [2] Findings from Menon et al. (1999) [3] and Hill and Westbrook (1997) [4] have
shown that SWOT may harm performance. As an alternative to SWOT, Armstrong describes a 5-
step approach alternative that leads to better corporate performance.[5]

Internal and external factors

The aim of any SWOT analysis is to identify the key internal and external factors that are
important to achieving the objective. These come from within the company's unique value chain.
SWOT analysis groups key pieces of information into two main categories:

 Internal factors – The strengths and weaknesses internal to the organization.

 External factors – The opportunities and threats presented by the external environment
to the organization.

The internal factors may be viewed as strengths or weaknesses depending upon their impact on
the organization's objectives. What may represent strengths with respect to one objective may be
weaknesses for another objective. The factors may include all of the 4P's; as well as personnel,
finance, manufacturing capabilities, and so on. The external factors may include macroeconomic
matters, technological change, legislation, and socio-cultural changes, as well as changes in the
marketplace or competitive position. The results are often presented in the form of a matrix.

SWOT analysis is just one method of categorization and has its own weaknesses. For example, it
may tend to persuade companies to compile lists rather than think about what is actually
important in achieving objectives. It also presents the resulting lists uncritically and without clear
prioritization so that, for example, weak opportunities may appear to balance strong threats.

It is prudent not to eliminate too quickly any candidate SWOT entry. The importance of
individual SWOTs will be revealed by the value of the strategies it generates. A SWOT item that
produces valuable strategies is important. A SWOT item that generates no strategies is not
important.

Use of SWOT analysis

The usefulness of SWOT analysis is not limited to profit-seeking organizations. SWOT analysis
may be used in any decision-making situation when a desired end-state (objective) has been
defined. Examples include: non-profit organizations, governmental units, and individuals.
SWOT analysis may also be used in pre-crisis planning and preventive crisis management.
SWOT analysis may also be used in creating a recommendation during a viability study/survey.

[edit] SWOT - landscape analysis

The SWOT-landscape systematically deploys the relationships between overall objective and underlying
SWOT-factors and provides an interactive, query-able 3D landscape.

The SWOT-landscape grabs different managerial situations by visualizing and foreseeing the
dynamic performance of comparable objects according to findings by Brendan Kitts, Leif
Edvinsson and Tord Beding (2000).[6]

Changes in relative performance are continually identified. Projects (or other units of
measurements) that could be potential risk or opportunity objects are highlighted.

SWOT-landscape also indicates which underlying strength/weakness factors that have had or
likely will have highest influence in the context of value in use (for ex. capital value
fluctuations).

Corporate planning
As part of the development of strategies and plans to enable the organization to achieve its
objectives, then that organization will use a systematic/rigorous process known as corporate
planning. SWOT alongside PEST/PESTLE can be used as a basis for the analysis of business
and environmental factors.

 Set objectives – defining what the organization is going to do

 Environmental scanning
o Internal appraisals of the organization's SWOT, this needs to include an
assessment of the present situation as well as a portfolio of products/services
and an analysis of the product/service life cycle
 Analysis of existing strategies, this should determine relevance from the results of an
internal/external appraisal. This may include gap analysis which will look at
environmental factors
 Strategic Issues defined – key factors in the development of a corporate plan which
needs to be addressed by the organization
 Develop new/revised strategies – revised analysis of strategic issues may mean the
objectives need to change
 Establish critical success factors – the achievement of objectives and strategy
implementation
 Preparation of operational, resource, projects plans for strategy implementation
 Monitoring results – mapping against plans, taking corrective action which may mean
amending objectives/strategies.[8]

Marketing
Main article: Marketing management

In many competitor analyses, marketers build detailed profiles of each competitor in the market,
focusing especially on their relative competitive strengths and weaknesses using SWOT analysis.
Marketing managers will examine each competitor's cost structure, sources of profits, resources
and competencies, competitive positioning and product differentiation, degree of vertical
integration, historical responses to industry developments, and other factors.

Marketing management often finds it necessary to invest in research to collect the data required
to perform accurate marketing analysis. Accordingly, management often conducts market
research (alternately marketing research) to obtain this information. Marketers employ a variety
of techniques to conduct market research, but some of the more common include:

 Qualitative marketing research, such as focus groups

 Quantitative marketing research, such as statistical surveys
 Experimental techniques such as test markets
 Observational techniques such as ethnographic (on-site) observation
 Marketing managers may also design and oversee various environmental scanning and
competitive intelligence processes to help identify trends and inform the company's
marketing analysis.

Using SWOT to analyse the market position of a small management consultancy with specialism
in HRM.

Strengths Weaknesses Opportunities Threats

Reputation in Shortage of consultants Well established position Large consultancies

marketplace at operating level rather with a well defined operating at a minor level
than partner level market niche

Expertise at partner level Unable to deal with Identified market for Other small consultancies
in HRM consultancy multi-disciplinary consultancy in areas looking to invade the
assignments because of other than HRM marketplace
size or lack of ability