Steps of Evaluating Performance
Discussion Question
Define benchmarking and describe the six (6) steps involved in evaluating performance using this method. What are the benefits of benchmarking?
Benchmarking, an increasingly popular program, is a procedure of evaluating the performance of a firm’s products, processes, or services against those of other organizations deemed optimal within the industry, also referred to as best-in-class. The implication of benchmarking is primarily to categorize internal opportunities for enhancement. Hence, by studying firms considered superior performance, analyzing the strategies that make such outstanding performance plausible, and comparing such procedures to how the corporate operates, the firm can adopt specific changes that would yield substantial enhancements. This could mean modifying the product’s attributes to more closely match a rival’s offering, transforming the company’s scope of services, or installing a novel client relationship management system to allow for highly personalized communications with the targeted clients.
Benchmarking entails openly learning how other companies execute various procedures differently and better than the firm to ensure that it can imitate and essentially enhance its techniques. The benchmarking process typically entails multiple steps, as follows; the first step is identifying the process or area to be analyzed. It must be an activity or process, which has the possibility to control a corporate unit’s competitive edge (Wheelen et al., 2016). The second step in benchmarking is finding output and behavioral measures of the process or area and attaining the measurements. The third step is selecting a reachable set of rivals and best-in-class businesses against which to compare. These could frequently be organizations in entirely diverse industries, though they execute comparable activities. For instance, when Xerox Company desired to enhance its service of order fulfillment, it opted to use L.L. Bean, which is a successful mail-order organization, to help them attain superiority in this department. The next step is calculating the alterations between the firm’s performance dimensions and the one established from the best-in-class and determining the reason for the difference. The fifth step is developing a strategic program for closing the performance gap established for the comparison. The final step is implementing the plans and comparing the novel dimensions with the features of the best-in-class organizations.
Benchmarking assists firms in enhancing three distinct areas: strategies, processes, and performance. Each of these areas aids in enhancing efficiency and promoting business development. The first benefit of benchmarking is that it allows for comparing performance with peers. By joining the regional benchmarking group, the firm can jointly establish and access valuable comparative data, which is highly appropriate to their efforts because of the proximity. This information could be utilized to offer visibility into areas where such firms are over or underperforming as aligned to their peers and identify what the high-performers are executing differently to excel (Purwanto, 2020). Another benefit is it enables comprehension of performance trends. Benchmarking is considered the most effective tool for observing, analyzing, and reporting performance over a particular time frame. Once the performance measure has been established and defined, it could be tracked and benchmarked for consistency over time. Thus, the firms could apply this information as a critical resource to drive evidence-based decision-making resource allocation and facilitate a continuous enhancement culture.
Besides, benchmarking helps the company identify areas for enhancement. Optimism is a significant trend in the company, though even the best-run firms would identify areas that require certain enhancements. Hence, implementing a prompt benchmarking program would aid in identifying such areas; by comparing the critical performance metrics with peers, the firm can fully comprehend where it is underperforming or failing to deliver on key services (Pennekamp et al., 2020). Also, benchmarking offers organizations ultimate insight into the firm’s strengths relative to the standard. Lastly, benchmarking ensures transparency in the firm and keeps up with the present trends in the market.
