BENCHMARKING

Benchmarking refers to the finding out, in an open and aboveboard way, how other firms may be doing something better (cheaper) so that your firm can copy and possibly improve on its technique. Benchmarking is usually accomplished by field trips to other firms. The technique has now become a standard tool for improving productivity and quality at a large number of American firms, including some of the best-known, such as IBM, AT&T, Ford, Du Pont, and Xerox.

Benchmarking requires:

1.  Picking a specific process that your firm seeks to improve and identifying a few firms that do a better job, and

2.   Sending on the benchmarking mission the people who will actually have to make the changes.

Benchmarking can result in dramatic costs reductions. For example, through benchmarking, Xerox was able to cut the cost of processing each order from $95 to $35 and, as a result, save tens of billions of dollars. Similarly, benchmarking allowed Ford to reduce the number of employees handling accounts payable from 500 to less than 200 in a few months. Through benchmarking, the Mellon Bank cut complaints by 60 percent and was able to resolve them on the average in 25 days instead of 45 days. Benchmarking has now become a standard tool to increase productivity and minimize costs at many U.S. and foreign firms. The explosion in interest in benchmarking has led to the formation of many benchmarking associations, councils, conferences, courses, data, and consultants.