What, Why, and How of Benchmarking for CFOs

What, Why, and How of Benchmarking for CFOs

By CFO Tech Outlook | Monday, September 23, 2019

Benchmarking, competitive analysis, and best practices are the buzzwords that are bussing in the industry right now. If they are really useful to improve business practices, it is necessary to know the what, why and how of benchmarking.

FREMONT, CA: An organizational performance tool can boost the company’s performance by leading it through best practices and attaining a reliable learning experience. Companies can acquaint itself to the best-in-class practices and apply the processes in its organizational structure. The assessment process of benchmarking improves the overall performance, aiming to bridge the gap among the best-in-class competition or even superseding it.

It seems effective but, consumes more time and is a resource-intensive activity that craves for an efficiently defined methodology, planning for identification of competitors, and an implementation strategy. Without all these components, the positive characteristics of the benchmarking study on performance boosting might not be up to the mark. 

Benchmarking is employed—for focusing on strengths and reducing the weaknesses, for conducting a comparative analysis among firm’s competitors within the industry, and for allowing the company to deepen its position in the market. 

The competitors can be better understood by giving more attention to the company’s best practices. These practices refer to how the firms organize the comparative study of performance data, analyzing the competitors’ processes and internal activities, leading to identify the causes that lead to superior performance. Once the difference is detected, the practices must be employed within the company, and when it is conducted correctly, the benefits associated with benchmarking are numerous, including: 

  Measurement and Comparison of the organizational processes in the company against those of its competitors can be carried out
•  Performance gaps can be identified and corrected
•  To instill the similar processes of the leading firms, into the company’s workflow for performance enrichment
  Enhancing resource utilization and future-oriented goal setting
•  Assisting the smooth working of continuous process improvement (CPI)
  Constant lookout for better growth opportunities
•  Learning from the standards established by the industry

Benchmarking is a valuable asset for the company as it reinvents the wheel in a detailed method to make improvements to the present quality. Once the company has acclimatized to the process of benchmarking, its disciplined guidelines are set and followed. If not carried out according to the process flow, reverse effects might be crucial and damaging to the company. 

By efficiently carrying the benchmarking process, the companies can find opportunities for improvement that will add to the munitions in the competition against other players in the marketplaces. Nevertheless, the worthwhile benefits of conducting the process will be observed only after implementing the findings extracted by benchmarking. 

In case the question of a bench marking necessity in the company arises, then the answer should be a “yes.” The tool has the potential to lead the company out into the light by promoting the CPIs in performance and effectively compares the company with other industry leaders.  

Even though the execution of the process needs quite a lot of attention and time to be dedicated to defining the initiatives, the steps must be taken to exercise apt methodology to obtain perfect, expected results. Otherwise, the results that will be collected will display ambiguity.

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