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Elnathan, D., T. W. Lin and S. M. Young. 1996. Benchmarking and management accounting: A framework for research. Journal of Management Accounting Research (8): 37-54.

Summary by Mohamed Gomaa
Ph.D. Program in Accounting
University of South Florida, Spring 2002

Benchmarking Main Page | Research Methods Main Page

The authors state three goals for this paper. First, to integrate the literature and propose a research framework in which antecedent, contextual and outcome variables are developed. Second, to discuss the roles that benchmarking plays within the management accounting function. Third, to illustrate how researchers can apply the research framework when conducting studies to determine whether benchmarking an activity based management system has been successful and which variables play critical roles in leading to success.

Benchmarking Practices

Benchmarking is the search for the best practices within and across industries. There are several reasons why organizations engage in benchmarking:

For continuous improvement of internal operations

To become more externally competitive, or

For organizational survival.

Benchmarking is usually undertaken when an organization believes that others outside the organization have superior knowledge about processes, technology, quality or costing methods that are beyond the organization’s current state-of-the-art.

The Benchmarking Process

The benchmarking process has been modeled by practitioners in a variety of forms. Spendolini (1992) compared 24 models and identified a five-stage generic benchmarking model. The five stages are:

1. The organization must decide on which activities and functions will be benchmarked.

2. A benchmarking team is coalesced.

3. Benchmarking partners are identified.

4. An analysis of the organization and its activities is undertaken and data on inputs, outputs, flows and costs are identified and analyzed.

5. The organization takes action.


Continuously comparing an organization’s performance on critical aspects of operations against the best-in-industry or the best-in-class helps determine which activities and costs should be targeted for improvement. The research framework developed by the authors consists of three sets of variables that organizations desiring to benchmark (benchmarkors) others (benchmarkees) should consider before embarking on a benchmarking project. The three sets of variables are:

1. Antecedent variables -They set up the necessary preconditions for success.

2. Contextual variables -They may modify the specific nature of the benchmarking.

3. Outcome variables - Used by the organization to gauge the overall effectiveness of a benchmarking effort.

Research Framework*
Antecedent Variables Contextual Variables Outcome Variables
Results of a Preliminary Competitive Analysis

1. Internal to organization
a. Assessment of performance in relation to target/goals.
b. Philosophy of continuous improvement
c. Management intuition

2. External to organization
a. Industry ranking
b. Industry comparisons
c. Customer/stakeholder feedback

Degree of Organizational Commitment

1. Senior management support
2. Clear set of objectives
3. Long-term commitment
4. Empowering organizational culture

Prior Benchmarking Experience

1. Extent of benchmarking experience
2. Experienced coordinator
3. Extent of training
Scope and Areas Selected

1. Key areas for study
2. Significance of the study
3. Benchmarking gap

Information Gathering and Sharing Method

1. Type of information
a. Product
b. Function (Process)
c. Strategic

2. Method of information collection
a. Unilateral (covert)
b. Cooperative -
Indirect/Third party,

Partner(s) Selected

1. Size
2. Number of partners
3. Relative position
a. Industry newcomers
b. Industry leaders
4. Degree of trust

Non-financial Quantitative Measures

1. Improved quality
2. Greater yield
3. Reduced defectives
4. Increased speed to market
5. Faster on-time delivery
6. Increased Functionality

Non-financial Qualitative Measures

1. Changes in employee decisions
2. Increased motivation and satisfaction
3. Improved cooperation and coordination
4. Better understanding of operations
5. Expanded opportunity set

Financial Measures
1. Reduced cost
2. Increased sales
3. Increased income

1. Traceable costs
2. Non-traceable costs
* Adapted from Elnathan and Lin's Figure 1

Antecedent Variables

There are three general sets of antecedent variables:

1. Results of a preliminary competitive analysis
2. Degree of organizational commitment, and
3. Prior benchmarking experience.

Results of a Preliminary Competitive Analysis

Preliminary competitive analysis can either be internal to the organization or external to the organization. There are three reasons why analysis internal to the organization can occur:

1. An organization could suspect that a product does not meet its design specifications.
2. The organization could be guided by a philosophy of continuous improvement.
3. Management intuition that their products, processes or strategies are not competitive.

Degree of Organizational Commitment

Management support is a critical factor in the success of benchmarking. There are several ways by which management support can manifest itself:

1. It can aid the benchmarking team by giving them the authority necessary to motivate employees to take the benchmarking process seriously.
2. Senior managers can authorize the necessary funding for training in benchmarking, and the costs of benchmarking itself.
3. Senior managers have relationships with other firms that can be used to solicit others’ participation in a benchmarking program.

A clear set of objectives should be developed that will serve as a focal point of the project and allow the organization to monitor its success. Evaluation can be problematic without a clear set of objectives.

The organization should have long-term commitment to the project since most significant organizational changes take up to three years.

A well-defined culture that empowers employees can facilitate the implementation of the new system.

Prior Benchmarking Experience

The organization's ability to identify appropriate areas to be benchmarked is improved with greater organizational experience. This experience helps the organization employ the most effective information gathering and sharing methods. The availability and extent of training to employees who manage and run the program is important to the success of the program implementation.

Contextual Variables

There are three general sets of contextual variables:

1. Scope and areas selected
2. Information gathering and sharing methods, and
3. Partner(s) selected.

Scope and Areas Selected

A manager should clearly identify a manageable process or a product that needs improvement during the initial efforts at benchmarking. If the scope of the first benchmarking process is too large and it fails, then this may discourage future efforts.

Information Gathering and Sharing Methods

There are two dimensions that relate to information gathering and sharing:

1. The type of information which benchmarking organizations collect, and
2. The method of information collection.

There are three major types of information processing: product, function (process) and strategic. The two major methods of information collection for benchmarking are:

1. Unilateral (Covert) benchmarking - Companies independently gather information about one or several other companies that excel in the area of interest.
2. Cooperative Benchmarking - Involves the voluntary sharing of information through mutual agreement. It includes:

Databases: Typically pay a fee to gain access.
Indirect/Third Party: Involves hiring outside consultant to act as a liaison between the firms.
Group: Participants meet openly to discuss their methods.

Partners Selected

Some researchers argue that the size of benchmarking partners should be comparable while others believe it is not a critical requirement.

The number of benchmarking partners in a project follows the law of diminishing returns. Truthful and timely information is essential for successful benchmarking.

Outcome Variables

The incentives for benchmarking the organization need to be understood since decision makers only select courses of action where the expected benefits exceed the expected costs.


The authors suggest that the overarching measure is whether benchmarking objectives were met. Performance measures can be divided into financial and non-financial measures of outcomes or benefits. These measures are presented in figure 1.


The costs can be divided into:

1. Traceable costs - Include out-of-pocket expenditures.

2. Non traceable costs - Those associated with the cultural change in the organization and the potential resistance to change.

Roles for Benchmarking in Management Accounting

Management accounting is usually considered a finance function. Benchmarking in this area is being used in two ways:

1. It is directed towards planning and budgeting processes, billing, accounts receivable, accounting systems development, payroll, credit and collections, financial analysis, and internal auditing.

2. Benchmarking the operations level of both manufacturing and service organizations.

Benchmarking An ABCM System

The development of an ABCM system is done internally and is based on historical costs. The authors argue that information provided by internal ABCM analysis alone is not sufficient since benchmarks derived from this kind of process may be suboptimal and noncompetitive. Therefore, the authors suggest that an organization needs to seek appropriate external benchmarks in order to improve performance and to use ABCM information more effectively.

Additional Research Needed on Benchmarking

The authors briefly discuss five ideas for further research.

1. Empirical investigations of the relative weight or best combination of variables in their framework for successful benchmarking.

2. Studies of various types of benchmarking related to products, functions and strategies as related to management accounting systems.

3. Studies related to the most effective method of information sharing and gathering, and partner selection.

4. Research on modeling of functional cross-industry cooperative benchmarking to test predictions.

5. Studies related to combinations of nonfinancial and financial measures, and costs and benefits.


Related summaries:

Campbell, A. 1999. Tailored, not benchmarked: A fresh look at corporate planning. Harvard Business Review (March-April): 41-44, 46,48, 50. (Summary).

Coburn, S., H. Grove and C. Fukami. 1995. Benchmarking with ABCM. Management Accounting (January): 56-60. (Summary).

Murray, M. A., R. A. Zimmermann and D. J. Flaherty. 1997. Can benchmarking give you a competitive edge? Management Accounting (August): 46-48 and 50. (Summary).