Internal Benchmarking

Companies looking to carry out benchmarking studies will often turn internally and compare the performance and processes of business units from within their own organisation. There are a number of reasons why they might take this approach, including the ease of access to data and information, the availability of standardised data, and cost -it is usually less expensive and time consuming than benchmarking a competitor or firm from another industry.

There is, of course, one principal drawback. Operations from within the same organisation tend to be more heterogenous in terms of functionality, performance and corporate framework than those of an industry peer or rival. Potential insights are curtailed by breadth of the organisation itself.

However, provided these limitations are understood and acknowledged, then internal benchmarking can still yield some valuable results.

Through internal benchmarking, a company attempts to learn from their own structure. Similar operations within an organisation that can be defined and measured are compared. This is especially true for medium or large companies with multiple divisions, production facilities or business units. Examples of this in practice might mean, for example, comparing the warehousing and shipping of products at one site with those at another, or assessing the relative performance and processes of an accounting and finance team in Country A with those in Country B.

The idea behind internal benchmarking is not only to promote efficiency but to foster a culture of continuous organisational improvement. That is why it is important that senior management both endorse the process and underline the importance of the exercise as a learning opportunity. Failure to do so risks a “silo” mentality taking hold, whereby different parts of an organisation can, either directly or covertly, refuse to cooperate with the benchmarking exercise, or ignore the teachings from another department, team or business unit whose performance or methods has been judged superior to theirs.

Communication is obviously a key element. The reason for the benchmarking exercise needs to be communicated to all those impacted – and potentially wider within a company – and the perceived advantages clearly spelled-out. The message also needs to be sent that this is a positive, sharing experience, and not a stick which will be used to beat a particular part of an organisation over the head.

One other benefit to internal benchmarking that should be highlighted is that it provides the opportunity to stand back and examine some of the reasons why an operation, business unit or department handles a particular process in the way it does. Often internal ways of doing things evolve over time, until they become accepted practice. There is no recognised methodology, as such, it is just the way “we do things round here”. Benchmarking gives you the opportunity to stand back, look at a process objectively and critically, and ask whether it is the most effective way of delivering the desired outcome or performance.

An effective benchmarking exercise comprises the following main steps:

  • Firstly, identify which processes to benchmark. It is recommended that a company starts with only one, or perhaps, two processes to examine at the same time – perhaps order fulfilment or customer service. To do otherwise, risks focus being lost, internal competition for scarce resources, and, possibly, contradictory results.
  • Then organise the benchmarking efforts, Identify who will take part in the effort, try and ensure, as much as possible, that team members are dedicated to the task, and are not trying to benchmark “around the day job”. Also decide how the benchmarking will take place – for example, organising a small team to visit the company’s major warehouses to learn effective tactics and strategies in place at each.
  • Organise and prioritise the ideas that the team has found, and turn them into a discrete project, which can then implement the best processes and practices on a wider basis. This is a more structured approach to achieve lasting performance gains than adopting a scattergun approach.
  • Finally implement and begin to achieve results.

Once this methodology has been adopted with one key process, the same approach can be used for the next and subsequent processes, until all the major parts of an organisation have been benchmarked. This creates a cycle of continuous improvement, so that a company is always looking to learn and improve its internal processes, with the same exercise repeated every few years or so.

The advantage of internal benchmarking is that it is much easier to get data and information from within one’s own organisation than from a key competitor or industry peer. It is also easier to understand that information because much internal reporting will be standardised, even if the processes or operations which provides that data is different. There are also cost advantages. However, if senior management are not seen to support such initiatives, or fail to communicate the positive benefits of carrying out such exercises, internal politics and resistance can undermine improvement efforts.

Despite this, many organisations would benefit from some form of benchmarking of their internal processes and methodologies, just to give them an objective view of what has often evolved by practice and the passage of time rather than with any applied forethought. Even small changes can lead to increased efficiency, greater employee satisfaction and improvements to the bottom-line.




Leave a Reply