Benchmarking
In addition to all their other worries, the functional heads have to consider that the development of benchmarking techniques, in theory at least, now provide their chief executives with a good guide to the relative performance of each function.
In recent years, the concept of ’benchmarking’ has grown in importance without ever being as widely used as it could be. Benchmarking has become one of those concepts that can influence an organization even where it is not being practised internally. For example, the publication of a report a number of years back showing that it cost one American meat packing plant 25 cents to produce an invoice, quite naturally caused concern to directly competitive finance directors, some of whom had an invoicing cost up to 12 times as large. More surprisingly, perhaps, the same report was mulled over by very different organizations, including manufacturing and financial services groups, all over the world. Simply knowing that such a wide disparity could exist in an industry that was made up of simple, apparently easily controllable ’manufacturing’ processes, caused executives to look more closely at their own situation.
benchmarking has become one of those concepts that can influence an organization even where it is not being practised internally
Gradually, an increasing number of such benchmarking reports put pressure on functional heads all over the world, as chief executives sought to explain ever increasing costs. Even where attempts at benchmarking have been badly thought out, or failed for other reasons, the concept has been fully accepted. The key fact in all of this is that benchmarking techniques will continue to improve and gradually functional heads in even quite small organizations will know what is achievable for an organization of their type and size, in terms of costs and service levels. The internet-based Benchnet organization claims over 2500 member organizations in 50 countries and it is apparent that new members offering benchmarking services across a wide range of functions are joining Benchnet every day.
Clearly all heads of functions now have to consider the question of competitiveness much more seriously than their counterparts in 1985. The key question is: what can they do about it?