Bench marking, Managerial Accounting


In the current business environment, organizations are under a lot of pressure to improve performance and that of their divisions or subsidiaries. Bench marking is therefore becoming more and more popular and can be defined as a systematic analysis of one’s own performance against that of another organization with an overall objective of improving performance by learning from the experience of others.

Bench marking helps an organization to understand its own business operations because of the detailed analysis that has to be carried out. Ideally performance should be compared with organizations known to be the best in the class of activities in question. From such an analysis, best practice can be identified and translated into use in the organization.

Bench marking exercise should concentrate on areas of business which are of key strategic importance to the organization and should be applied in activities where significant costs and efficiency improvements can be made.

Comparison can be made with direct competitors (competitive bench marking) or comparison can be made with the best external practitioner of the activity regardless of the industry within which they operate (functional bench marking). The internal bench marking includes comparing the performance of one part of the business with that of a different part of the same business with the major objective of establishing best practice throughout the organization. Bench marking establishes a desire to achieve continuous improvement and helps to develop a culture in which one admits mistakes and adopts or makes changes.

Posted Date: 12/8/2012 5:02:09 AM | Location : United States

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