CIMA P2 Syllabus C. Managing Performance Of Organisational Units - Benchmarking - Notes ^{4 / 4}

Increasingly companies benchmark themselves against their industry rather than against their historical performance.

Benchmarking against competitors can be problematic because of choosing what sector to compare it with.

It is possible to make comparisons, using published government statistics, however, these figures have to be treated with care.

Is the same criteria used?

The shortcomings of industry norm comparisons have encouraged organisations to seek best practice wherever it can be found.

Johnson, Scholes and Whittington comment that ‘the real power of this approach is ... shaking managers out of the mindset that improvements in performance will be gradual as a result of incremental changes in resources or competencies’ .

They give an example of a police force studying a call centre as a way of improving their response to emergency telephone calls.

Benchmarking Limitations

1. You sometimes get what you measure, this can be a problem

   If the original strategy and benchmark is flawed, then the benchmarking will encourage the organisation to continue, perhaps even accelerate, in the wrong direction.

2. It doesn't give reasons

   Benchmarking compares inputs, outputs or outcomes, but not the reasons for poor performance

3. The benchmark does not directly compare competencies

   As mentioned earlier, improvements may be due to external environmental factors, not directly linked to what the organisation is striving to achieve.

Methods of Competitor Benchmarking

• As most competitors will not produce more information than they need to - the FINANCIAL STATEMENTS are often used to compare

Financial performance (including segment analysis)

• KPIs such as ROCE, GP etc
  Then significant differences investigated and competitors products reverse engineered