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Topic Description




Benchmarking is a product of the last decade of the twenty – first century. This management approach to identify who is best and what makes them so successful has experienced increased popularity, both by manufacturing and services companies. In management science, benchmarking is usually positioned as being and extension of an existing total quality programme, and as being a way in which to establish new more relevant and efficient standard performance. The increased interest in benchmarking has been stimulated with the publication of Xerox’s Manager, Robert Camp’s book on benchmarking (Camp, 1989). Since then, the phenomenon of benchmarking has been discussed by many authors primarily, in the form of management guide books (Spendolini, 1992; Watson, 1992; Zair, 1996; Cross, 1998).

Benchmarking has developed into a popular organizational improvement tool that has come to be regarded as an essential component of internationally respected business excellence programmes and good management practice. The simple concept of improvement based on observed or perceived exemplary performance elsewhere is not at all novel as it is observably a universal human trait. What is remarkable is the degree to which benchmarking has become associated with organizational improvement in the post modern era.  In this context, it is also important to confine the locus of benchmarking to ‘organizations’ since there are other loci, such as computer science, surveying and geology, where the terms ‘benchmark’ and ‘benchmarking’ may not always convey exactly the same meaning or sense of purpose (Alstete, 2008).

Fierce competition, globalization and the development of new information and communication technologies have forced organizations to continuously search for and adopt new configurations (process and structures) by which to exist. In other words, organizations are undergoing changes to evolve, survive and compete in their respective industrial environments. The explosion of management tools and techniques in the 1990s has helped organizations successfully: Change, is the evidence of this situation. Prominent among these techniques is benchmarking, which has proved to be valuable in various sectors in developed economies. It would therefore be vital to examine the prospects of benchmarking process in developing countries with a view to helping individual companies evaluate their competitive position relative to their competitors. The Xerox corporation was one of the first companies to develop and apply benchmarking techniques as a legitimate aspect of their organizational quality programme. To this day, Xerox, along with many other organizations are still applying and developing benchmarking in order to learn competitive practices from the rich diversity of organizations that exist (Lee et al, 2006).

Benchmarking is recognized as an essential tool for continuous improvement of quality. There are numerous definitions that have been proposed for benchmarking by different authors. Modern benchmarking practice is aimed at importing and implementing best practices across organizations (Sarkis, 2001). Kyro (2003) held the view that, a benchmarking is classically seen as a tool to improve organization’s performance and competitiveness in business environment. Benchmarking is a multifaceted technique that can be utilized to identify operational and strategic gaps, and to search for best strategies that would eliminate such gaps. In this context, benchmarking has both internal and external dimensions in an attempt to examine and identify the best practices in their environment (Yasin, 2002).

According to Gani (2004), benchmarking is about establishing company’s objectives using practices of best in class, and as such in an effective performance management instrument. These characteristics need proper communication on the objectives, and the success of implementing of a benchmarking system relies on employees performing with the view of meeting those objectives. In the late 1990s, research based on case study in USA have been reported that all fortune 500 companies were using benchmarking on a regular time basis (Kumar and Chandra, 2001). Today, benchmarking’s popularity has grown.

The study by Brah et al (2000) revealed that the success of benchmarking was measured by the extent to which practitioners of benchmarking have attained their objectives, justified costs by the benefits attained from benchmarking and their perception of the overall success of the process. They also exposed that the achievement of the benefits of benchmarking are significant and among the respondents, indicated the existence of other means of improving their operations such as TQM, reengineering, ISO certification, balanced score card, continuous improvement, cultural change, knowledge management, learning organization, management by objective (MBO) outcome based evaluation programme, programme evaluation and strategic planning, etc. (Akanwa, 2009).  In order to benchmark effectively, a company needs a strong strategic focus and some flexibility in achieving management’s goals. To effectively implementing benchmarking, adequate planning, training, and open interdepartmental communication is needed. Developing and using measures help to identify the current performance and monitor the direction of changes over a period. Measures identified during the planning stage of benchmarking may also help to determine the magnitude of the performance gaps and select what is to be benchmarked (Vaziri, 1992; Karlof and Ostblom, 2003).

However, a poorly executed benchmarking exercise will result in a waste of financial and human resources as well as time. Ineffectively executed benchmarking projects may tarnish an organization’s image (Elmuti and Kathawala, 1998). As highlighted in the earlier section, there are best practices, which could affect the effectiveness of benchmarking. Unfortunately, literatures that directly address the best practices of benchmarking effectiveness are lacking.

Commercial banks assaulted by the pressures of globalization, competition from non-banking financial institutions, and volatile market dynamics are constantly seeking new ways to add value to their services. The question, “What drives performance?” is at the top of the minds of managers and policy makers alike, as the first step in understanding superior performance and, hence, striving for it. Substantial research efforts have gone into addressing this question, starting from the strategic level and going down to operational detail. The commercial banking industry in Nigeria has come of age since its inception in 1894 of indulging in commercial banking, rendering services such as opening accounts, acceptance of deposits, granting of loans and advances, automate transfer of funds, notification of account balance through GSM, provision of ATM machines for payment, on-line banking system and indulging in transaction in bills and letter of credits, a lot is yet to be done.


Some authors now believe that benchmarking process has been as abject failure and that it may result in high cost with little return (Leatt et al., 1997:8). Others have found a gap between promise and performance while some have gone as far as suggesting that benchmarking process can result in serious adverse outcomes.

Benchmarking like many management innovators. Continues to have its supporters who claim that its principles are sound that the problems are in the method of its application to business problem. Even though the outcomes of benchmarking may include new cost efficiencies, enhanced quality and improved innovations. Each of these reports however is based on only single case or small sample and none includes comparative evidence. Therefore this study is an attempt to fill this gap.

The ability of organizations to adapt to new customer requirement on a global market is of vital importance for long-term success. During the last decade, this has influenced many banks to work with quality issues on a strategic level and benchmarking process has frequently been used as a management strategy to develop the banking quality strategies and initiative. However, many banks do not realize that the implementation of benchmarking process in most cases is a comprehensive organizational change as a consequence, of which several banks have not succeeded as expected. Based on this experience of which some authors have expressed doubts whether the implementation of benchmarking process is beneficial. Benchmarking process has been recognized and used during the last decades by banks all over the world to develop a quality focus and improve banking performance.  Thus the study focuses on benchmarking and organizational performance.


The main thrust of the study is how the benchmarking process can be used to improve the performance of the commercial banks in southwestern states of Nigeria. The specific objectives include:

  1. To determine if the benchmarking process can be used to improve the performance of the commercial banks.
  2. To ascertain if there is a relationship between internal factors and the best practice factors in the selected Nigerian banks, in terms of the cost of performing their activities;
  3. To determine if there is a relationship between critical benchmarking and organizational competitive advantage.
  4. To determine the impact of the benchmarking process on organizational performance of the commercial banks.
  5. To ascertain the relationship between benchmarking process and benefits to be derived by managers, workers and stakeholders in the Nigerian banking sector.
  6. To check the relationship between the benchmarking process in the commercial banking industry and the cost of performance; and

This research work is going to attempt to provide answers to the following questions:

  1. Can the benchmarking process be used to improve the performance of the commercial banks studied?
  2. Is there a relationship between internal factors and the best practice factors in the selected Nigerian banks, in terms of the cost of performing their activities?
  3. Is there a relationship between the critical benchmarking process and performance in the banking sector?
  4. What is the impact of the benchmarking process on organizational performance of the commercial banks?
  5. What is the relationship between benchmarking and organizational competitive advantage.
  6. What is the relationship between the benchmarking process in the commercial banking industry and the cost of performance?