Hagan School of Business

Focus and Approach

The literature on benchmarking contains different focuses and approaches to benchmarking. There are two primary kinds of focus levels: strategic benchmarking and operational-level benchmarking, and primarily two approaches to benchmarking, problem-based and process-based. In his book titled Strategic Benchmarking, Gregory Watson (1993) states that strategic benchmarking is different from operational benchmarking in that it concentrates on:

• Building core competencies that will help sustain competitive advantage.
• Targeting a shift in strategy such as developing new products or entering new markets.
• Developing a new line of business or making an acquisition.
• Creating and organization that is more capable of learning.

In comparison, operational benchmarking is used to understand specific customer requirements and the best practices to achieve customer satisfaction by improving internal organizational processes. This is also called "functional" or "practical benchmarking," and is most useful to mid-level managers because it enables the employees closer to the customer to become the competitor of choice. Examples of operational benchmarking processes can be found in offices such as purchasing, payroll and customer service areas.

Aside from a strategic or operational focus, benchmarking can also have either a problem or process-based approach. This involves how benchmarking is to be initialized and used in the organization. In a problem-based approach, the activity is characterized as uncontrolled because there is no specific plan for the benchmarking effort (Camp, 1995). In this approach, benchmarking is conducted on a problem-by-problem basis as organizational troubles occur. A more thoughtful approach is process-based, where benchmarking is part of an overall quality and continuous improvement effort and should be planned for accordingly. The process-based approach can be successful in bringing order to managing benchmarking within an institution, and for high efficiency it should be applied only to the vital few business processes. It can be inefficient and unwieldy to benchmark too many processes or only certain ones identified by noticeable problems.

Another perspective on benchmarking is that it can differ in the view it provides an institution (NACUBO, 1995). Vertical benchmarking seeks to quantify the costs, workloads, and productivity of a predefined functional area, such as undergraduate admissions or accounts payable. Horizontal benchmarking measures the cost and productivity of a single process that goes across more than one functional area, such as processing a travel request or purchase order. More corporations, non-profit organizations, and institutions of higher education are using benchmarking as the key tool for making both strategic and operational changes, on problem and process based approaches, and horizontally or vertically within their structures.

Camp, R. C. (1995). Business Process Benchmarking: Finding and Implementing Best Practices. Milwaukee: Quality Press.

NACUBO. (1995). Benchmarking Prospectus . Washington, DC: National Association of College and University Business Officers.

Watson, G. H. (1993). Strategic Benchmarking: How To Rate Your Company's Performance Against the World's Best. New York: John Wiley and Sons.