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APM syllabus

Learning Sheet: Benchmarking 4 / 10

Benchmarking for ACCA APM

Overview

Benchmarking is a systematic process of comparing an organisation’s performance, processes, or practices against industry leaders or best practices to identify gaps and drive improvement.

In ACCA APM, benchmarking is a critical tool for evaluating performance management systems, aligning operations with strategic goals, and recommending enhancements, especially in complex organisational contexts like public sector or multinational entities.

Structure and Types of Benchmarking

Benchmarking can be categorised into several types, each serving a specific purpose:

  1. Internal Benchmarking

    • Definition: Compares performance within different units or divisions of the same organization.
    • Role: Identifies best practices internally (e.g., comparing two factories’ efficiency).
    • APM Relevance: The June 2021 Examiner’s Report noted its usefulness for consistent standards.

  2. Competitive Benchmarking

    • Definition: Compares performance against direct competitors.
    • Role: Assesses market position (e.g., cost per unit vs. a rival).
    • APM Relevance: The September 2022 Examiner’s Report highlighted its role in strategic analysis.

  3. Functional Benchmarking

    • Definition: Compares specific processes with similar functions in other industries.
    • Role: Adopts cross-industry best practices (e.g., customer service from retail).
    • APM Relevance: The March 2023 Examiner’s Report praised its innovation potential.

  4. Generic Benchmarking

    • Definition: Compares universal processes (e.g., supply chain) across unrelated sectors.
    • Role: Seeks world-class standards (e.g., lean manufacturing from automotive).
    • APM Relevance: The December 2020 Examiner’s Report encouraged broad application.

How Benchmarking Works

  • Process:
    1. Identify key performance areas (e.g., cost, quality).
    2. Select benchmarking partners (e.g., top performers).
    3. Collect and analyse data (e.g., financial ratios, process times).
    4. Compare and set targets (e.g., reduce costs by 10%).
    5. Implement improvements and monitor progress.
  • Purpose: Drives continuous improvement, enhances competitiveness, and aligns with strategic objectives.
  • Integration: Combines quantitative (e.g., 5% efficiency gain) and qualitative (e.g., staff morale) insights.

Example: A pharmaceutical regulator benchmarks its drug approval time (e.g., 30 days) against a global leader (e.g., 20 days), targeting a 25% reduction.

Application in APM Exams

Benchmarking is tested in APM to assess your ability to:

  1. Analyse performance gaps using comparative data.
  2. Recommend strategic improvements based on benchmarks.
  3. Evaluate the feasibility and limitations of benchmarking in a given context.

Insights from Examiner Reports

  • December 2020 Examiner’s Report: Candidates lost marks for generic comparisons without context. The report stressed selecting relevant benchmarks (e.g., industry-specific metrics).
  • June 2021 Examiner’s Report: Weak responses failed to justify benchmark choices. The examiner recommended linking benchmarks to organisational goals.
  • March 2022 Examiner’s Report: High-scoring answers used competitive benchmarking to propose cost reductions, aligning with strategic priorities.
  • September 2023 Examiner’s Report: Candidates were advised to consider data availability and cultural differences, a common oversight in benchmarking exercises.
  • June 2024 Examiner’s Report (Question 1, Part ii):
    • Many candidates scored poorly (underdeveloped responses) due to ignoring the structured requirement (security, reliability, cost effectiveness).
    • Security (e.g., breach events) was well-addressed
    • Reliability (e.g., 91 vs. 53 downtime days) saw weak analysis, with few calculating the 72% gap correctly
    • Cost effectiveness (e.g., cost per transaction) was poorly handled, with few calculating (e.g., Vatten’s fixed costs vs. Snizort’s 46% variable)
    • Problems of benchmarking (e.g., different industries) were brief, with few identifying functional benchmarking, losing marks.
    • Professional skills marks were missed due to unstructured answers.

Marking Scheme Guidance

  1. Application (50-60%): Apply benchmarking to a case
  2. Analysis (30-40%): Identify gaps and insights (e.g., 10% slower than benchmark).
  3. Evaluation (10-20%): Assess benefits and challenges (e.g., cost vs. accuracy), supported by evidence.