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The Value of Knowledge Management 349

Spendolini (1992) further describes three different types of benchmarking, industry
group measurements, best practice studies, and cooperative benchmarking.
Industry group measurements This involves the measurement of various facets of your
operation compared to similar measurements from other companies. Often, the mea-
sures have little to do with productivity, customer satisfaction, or “ best practices. ”
Many industry groups publish comparative data either privately (for members of the
group or service only) or publicly or both. The Institute of Internal Auditors ’ GAIN
(Global Audit Information Network) provides this kind of data privately to subscribers.
The Institute also publishes biannual salary surveys and occasionally special studies
of external audit fees and research on effective audit departments (best practices).
Best practice studies These are studies and lists of what works best. These are useful to
benchmarking research, but they are not useful as metrics. What works best for an
entity in its specifi c environment, may not work the same way in another environ-
ment. These studies can be useful stimulators, but they are not benchmarks per se.
There are books, consultants, and public accounting fi rms that report internal audit
best practices gathered from research and consulting practice. The IIA published a
book for audit committees that was a study of best practices.
Cooperative benchmarking This involves the measurement of key production functions
of inputs, outputs, and outcomes with the aim of improving them. In an internal
audit, we would study, for example, comparisons of costs per audit hour, time elapsed
to distribute fi nal report, and percentage of recommendations accepted. Cooperative
benchmarking is done with the assistance of the entity being studied (the benchmark
“ partner ” ). Often the entity chosen as a benchmark is one that has best practices in
the area of interest, or has won a major national or international quality award. Inter-
nal audit departments are increasingly interested in this method. A version of coopera-
tive benchmarking is collaborative benchmarking. In the collaborative method, both
entities study each other and work together to improve. Some audit departments are
now doing this.
Competitive benchmarking This is the study and measurement of a competitor without
their cooperation for the purposes of process or product quality improvement. The
latter is called reverse engineering. A version of competitive benchmarking is a select-
ing a third party to study a group of competitors and share the results with all. The
third-party consultant is the only one who knows what data belongs to which entity
(you obviously know your own, but not necessarily anyone else ’ s).
It should be noted that in the long term, this approach lacks suffi cient value and
fl exibility, which leads to other measurement tools and techniques eventually being