Benchmarking

Benchmarking is when a company compares its processes or operations and performance metrics to the best practices in the industry or others in the industry to learn a few lessons.

Benchmarking involves management identifying the best firms in their industry, or any other industry where similar processes exist, and comparing the results and processes of those studied (the "targets") to one's own results and processes to learn how well the targets perform and, more importantly, how they do it.

I truly believe the problem arises when companies instead of learning a few lessons, start blindly imitating these best practices.

Why should this lead to problems if these practices have proven to be best practices? One of the most obvious answers to this question (but the one which could be the most difficult to address) is the differences in the cultures of the organisations.

For example: Southwest Airlines versus Continental Lite. Continental Lite was a short lived "airline within an airline" brand of Continental Airlines established in 1993. The airline folded in 1995 after losing was has been reported in the press as between $140 million or (US) $300 million.

Reason for failure: Continental lite tried to copy the business model of Southwest Airlines, but they could not copy their culture, which helped Southwest maintain the business model of being a low cost airline.

Hence what companies should understand before benchmarking is their own culture, the culture of the companies that they are referring to for the best practices and put things in perspective in light of such data.