RUNNING HEAD: BENCHMARKING 1
Research Paper Assignment: Benchmarking
David S. Saunders
School of Business, Liberty University
Acct 521 Advanced Cost Accounting
Dr. Jacent Gayle
September 5, 2025
BENCHMARKING 2
Abstract
This paper will discuss the term benchmarking. “Benchmarking is the process of
measuring products, services, and processes against those of organizations known to be leaders
in one or more aspects of their operation” (ASQ, 2025). Additionally, there will be a review on
the history of benchmarking, as well as the different types of benchmarking, how benchmarking
is implemented, the advantages and disadvantages of benchmarking, and what types of
business benchmarking are most suited for.
Definition
Benchmarking provides insight on how an organization compares with other
organizations even if they are in a different business or if they have a different group of
customers (ASQ, 2025). Additionally, benchmarking can help organizations with the following:
identify areas, systems, or processes for improvement (ASQ, 2025). These improvements can be
small or continuous improvements, or reengineering improvements (ASQ, 2025). With respect
to benchmarking in accounting, benchmarking allows organizations to look at their performance
against standards or peers (AccountingInsights Team, 2024). Benchmarking also allows us to
identify areas for improvement and innovation (AccountingInsights Team, 2024). Businesses can
use this data to gain advantages over their competition.
History of benchmarking
The introduction of the first assembly lines in the automotive industry in 1916 is one of
the first examples of benchmarking (Global Benchmarking Network, 2025). This process was
formulated and implemented by Henry Ford after he visited a large slaughterhouse in Chicago,
in which hog halves were transported from workplace to workplace by a suspension railway
(Global Benchmarking Network, 2025). After studying this process, Mr. Ford introduced
assembly lines in the automotive industry (Global Benchmarking Network, 2025). Mr. Taiichi
Ohno implemented a visual management system that is known as Kanban, and this system was
used to oversee and enhance work processes (Indeed Editorial Team, 2025). This system was
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implemented by Toyota as a part of their production system, and since its adoption, Kanban has
been used in various sectors of business such as software development, research and
development, and other project-driven environments (Indeed Editorial Team, 2025).
From the 1950s to the mid-1970s, companies used a process of reverse engineering,
which was the tearing apart of processes, examining them, and then making improvements on
them before they were put back together and implemented (Global Benchmarking Network,
2025). Then in the mid-1970s, Mr. Gregory H. Watson, the former vice-president of quality at
Xerox Corporation described the evolution of benchmarking in five major phases: reverse
engineering, competitive benchmarking, process, benchmarking, strategic benchmarking, and
global benchmarking (Global Benchmarking Network, 2025). Mr. Watson implemented
competitive benchmarking at Xerox Corporation.
Xerox was the leader of copy machine manufacturing, but in the mid-1970s, their
competitors in Japan were able to manufacture better copy machines than Xerox at a lower
price. Xerox began to lose market share, and the company set out on a mission to discover how
its competitors were building better copy machines at a lower price, and at the same time these
companies improved their operational efficiencies (Global Benchmarking Network, 2025). By
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1989, Xerox Corporation had benchmarked nearly 230 performance areas across multiple
industries. In the early 1980s Xerox Corporation began to switch from competitive
benchmarking to process benchmarking (Global Benchmarking Network, 2025). This allowed
the company to look at other companies that operated outside of their industry, so that
different practices could be adopted to improve areas that needed improvement (Global
Benchmarking Network, 2025). Xerox Corporation examined the warehousing processes at L.L.
Bean which had the best warehousing process in the retail industry in the 1980s (Global
Benchmarking Network, 2025). Xerox Corporation was able to implement these practices and
improve efficiencies in its warehousing processes.
In the late 1980s two new phases of benchmarking emerged: strategic and global
benchmarking. Strategic benchmarking focuses on processes, but it also examined the entire
way a company does business (Global Benchmarking Network, 2025). Global benchmarking
looks at the examination of standards on a global scale (Global Benchmarking Network, 2025).
This would include international trade, cultural processes, and business processes (Global
Benchmarking Network, 2025).
Types of benchmarking
Internal benchmarking deals with the comparison of different departments, teams, or
locations in an organization (Croft, 2025). This process also helps an organization identify the
best practices as well as standardize procedures (ASQ, 2025). For example, a multinational
corporation might look at the financial reporting processes of one of its satellite offices so that
the company can establish a uniform system that improves accuracy as well as efficiency (ASQ,
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2025). When this method of benchmarking is used, knowledge sharing and continuous review
of improvements is important. Additionally, it looks at where resources can be used efficiently,
as well as where to reduce expenses (ASQ, 2025). This process is very useful for a company that
has multiple locations.
Competitive benchmarking looks at an organization’s performance vs. its competitors
(ASQ, 2025). This analysis provides insight into the profitability of a company, how it deals with
cost management, and how efficient its operations are (ASQ, 2025). For example, a retail chain
might review its inventory turnover rate against its competitors, so that it can find areas for
improvement (ASQ, 2025). This analysis will allow a company to set up performance targets as
well as to develop strategies to gain market share (ASQ, 2025). This type of benchmarking
requires access to industry reports as well as financial statements of its competitors (ASQ,
2025).
Functional benchmarking looks at specific functions or processes and compares them
with those of organizations that are known for their excellence in those areas, and they do not
necessarily have to be in the same industry (ASQ, 2025). This approach allows companies to
enact practices from other companies that are in various types of industries (ASQ, 2025). For
example, a manufacturer might look at the logistics processes of an e-commerce firm, so that it
can improve its supply chain efficiency (ASQ, 2025). This would enable a company to discover
new solutions to improve its operations (ASQ, 2025). This method encourages innovation and
adaptability.
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Generic benchmarking is also known as practice benchmarking. This method looks at the
examination of universal processes that can be applied across different types of industries (ASQ,
2025). This method focuses on the identification of common methods that have been successful
in other organizations (ASQ, 2025). For example, a company may look at the budgeting process
of a non-profit organization that has excellent controls over its spending and use their methods
to improve its own spending strategies (ASQ, 2025). This practice is beneficial for companies
looking to improve their processes and to reduce redundancies in different business segments
(ASQ, 2025).
Public domain benchmarking is a method that collects data from public sources for
analysis and reporting purposes (Jurevicius, 2025). The metrics that are used are ones that
measure products and service in terms of customer experience (Jurevicius, 2025). For example,
when comparing automobiles, metrics that would be used are selling price, perception of the
brand, features of the vehicle, its safety rating, and reliability (Jurevicius, 2025). The metrics that
would be excluded from this review would be employee satisfaction, manufacturing
throughput, and distribution (Jurevicius, 2025). Other companies such as ones that sell a host of
products as well as credit card companies use this method of benchmarking as well (Jurevicius,
2025).
How benchmarking is implemented
There are four phases involved in the benchmarking process, and they are planning,
analysis, integration, and acting (Mahalik, 2024). The planning phase is the initial phase, and it is
crucial to the entire process. During this phase, planning must be as error-free as possible, so
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that the rest of the process will be effective (Mahalik, 2024). In the planning phase, a
determination will be made to identify opportunities, prioritize them, and determine what to
benchmark. The top management of a company will decide which processes are critical to the
company. Once the processes are selected; they will need to be prioritized so that the
benchmark process can be implemented.
The next decision that must be made is to decide on the organization whose processes
will serve as the benchmark. Normally, several organizations should be selected for studying.
Then this information on their respective processes should be obtained from various sources,
and then the most suitable organization should be chosen (Mahalik, 2024). Once the decision is
made, then the most time-consuming activity will be the process of information collection
(Mahalik, 2024). While the information is collected, items to look at would be the key business
process of the company being benchmarked, as well as the areas for potential improvement,
and what are the functions that need the most improvement (Mahalik, 2024). Additionally, the
longterm goals of the company should be reviewed, as well as the identification of critical
success factors (Mahalik, 2024). Some other items that should be reviewed are whether all
processes require benchmarking, have the ways of measuring the process been decided on,
have the owners of the processes to be benchmarked been involved in the project, and have the
processes been prioritized (Mahalik, 2024).
The analysis phase has two steps in it. The first one deals with the analysis of all the
information and data that is collected in the planning phase (Mahalik, 2024). The second step is
that all the people selected to be involved in the process have been doing the analysis (Mahalik,
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2024). In the analysis phase the project team should be looking for reasons to implement an
improved process. Additionally, goals should be set up to improve the selected process
(Mahalik, 2024). In this phase, those involved should have analytical skills, as well as creative
skills, and the ability to innovate (Mahalik, 2024). The project team should also have conducted
a gap analysis of the company’s processes compared to the benchmarked organization’s
processes (Mahalik, 2024). Lastly, a cost-benefit analysis should be performed on revisions to be
implemented (Mahalik, 2024). Once this has been done, senior management should give its
approval.
The integration phase is a connector between the planning and analysis phase, and the
final phase (action). This phase takes place after management has signed off on the earlier
phase recommendations. Once this is done, then the proposals should be presented to the
department heads to get their approval. This is the most crucial phase.
The last phase is the action phase. This phase has three steps to it. This is the phase
where the improvement parts have been taken into consideration, a review of the
implementation of these decisions is made, and this process must be continuous so that
changes can be made if warranted (Mahalik, 2024). The action plan must be detailed, and it
should have timelines, a list of individuals who are responsible for carrying out tasks, a review of
any shortfalls in the completion of tasks, and what measures have been taken to fix any
shortfalls (Mahalik, 2024). Once all processes have been finalized, then senior management
must be committed to ensure proper implementation (Mahalik, 2024). Finally, the process as
mentioned before should be continuously reviewed, and changes should be made if warranted.
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Advantages and disadvantages of benchmarking
The benefits of benchmarking are as follows:
•Improved Efficiency: Assists company achieve costs savings and better efficiencies
(Ansari, 2025).
•Innovation: Benchmarking encourages problem-solving as well as the adoption of new
technologies (Ansari, 2025).
•Competitive Advantage: Organizations can obtain information regarding industry trends
as well as the strategies of their competitors (Ansari, 2025).
•Customer Satisfaction and Loyalty: Organizations can obtain feedback and information
from their customers or from their competitors, and this information will provide an
insight into what customers like and do not like (Fallon, 2023).
The disadvantages of benchmarking are as follows:
•It does not measure effectiveness: When a business is examining specific efficiencies,
the company is not measuring the effectiveness of the processes (Zaverbnyj & Nitsenko,
2025). If there are any flaws in the process, this measure will not be effective.
•Benchmarking is treated as a solo activity: Benchmarking is important, but it is not the
only measure a business can take to implement change (Zaverbnyj & Nitsenko, 2025).
Leadership in the company must provide a vision to its employees or those who are
invested in this process and it must be accepted by all parties, or it will not succeed
(Zaverbnyj & Nitsenko, 2025).
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•The avoidance of complacency: One of the big issues with benchmarking occurs when a
company can exceed the standards of its competitors (Zaverbnyj & Nitsenko, 2025). It is
very common for businesses in such a position to fall into the trap of not striving for
more innovation once they reach that point because there is a feeling like they are the
best in the industry (Zaverbnyj & Nitsenko, 2025).
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•Choosing the wrong type of benchmarking: Businesses should use a combination of
internal, competitive, functional, and generic benchmarking (Zaverbnyj & Nitsenko,
2025). If they do not do this, the likelihood of success will diminish (Zaverbnyj &
Nitsenko, 2025).
•It can foster mediocrity: If there is a belief in the company that we are already the best
and there is no need to change anything, then this perception will prejudice the data
that is collected (Zaverbnyj & Nitsenko, 2025).
Conclusion
Benchmarking can be successful in a multitude of areas. Some examples are as follows:
•Financial Benchmarking: A company can look at revenue, cost, financial performance,
and financial position vs. its competitors (Spacey, 2023). This data is usually used by
public companies.
•Marketing Benchmarking: A company can look at its marketing results such as the cost
of acquiring a customer as well as how much a customer is worth to the bottom line of
the company (Spacey, 2023).
•Brand Benchmarking: A company can look at brand recognition vs. its competitors
(Spacey, 2023).
•Customer Experience Benchmarking: A company can look at comparisons of the
customer’s experience, and this can include customer satisfaction as well as customer
service (Spacey, 2023).
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•Quality Benchmarking: A company can look at the value of its products and services vs.
its competition (Spacey, 2023). This area deals with quality and defect issues.
•Operational Benchmarks: A company can look at metrics that are related to its business
processes i.e. inventory turnover, productivity rates, uptime/downtime, and process
efficiency (Spacey, 2023).
•Human Resource Benchmarks: A company can look at measures related to its employees
(Spacey, 2023). Some examples would be absenteeism rates, new hire performance,
employee satisfaction, and cost-per-hire (Spacey, 2023).
•Technology Benchmarks: A company can look at technological metrics vs. its
competitors (Spacey, 2023). Some examples would be IT expenses as a % of its revenue,
IT cost per customer, IT cost per employee, and IT cost per transaction (Spacey, 2023).
•Strategic Benchmarks: A company can look at metrics that are important to strategy and
overall performance (Spacey, 2023). Some examples would be time to market,
cybersecurity incidents, risk exposure, profit margins, and current ratios (Spacey, 2023).
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