Question

Although benchmarking is a popular management technique, many firms are not engaged in the
benchmarking process. Why do you think some firms avoid benchmarking? Are any of the reasons
valid? Why or why not?

Answer 1

Benchmarking is an important technique, however, many firms are not engaged in the practice because of the following reasons:

1. Changing standards:

Since there is a continuous change in the standards for some organizations firms do not follow a benchmark. The standards keep on revising hence cannot be measured against a base or a benchmark index.

2. Past data is historic:

Many firms feel that the past data is historic in nature, the world is evolving and the present days' result will have no relevance from the past. It will continuously update in terms of both macro and microeconomic factors in which benchmarking would be not appropriate.

3. Technological Advancement:

There are continuous technological advancements in industries because of which every day a best practice emerges which changes the standards. Example: Chatbots taking over the call center business. In such an evolving world benchmark restricts the growth of the business.

4. Continuous improvement in efficiency:

Some companies look for continuous improvement like from 3 sigma moving to six sigma. In such a scenario there are no real benchmarks within the past performance or in the industry hence benchmarks cannot be created.