Benchmarking In The Real Estate Industry Construction Essay

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Definition of the research topic

The economic situation in Germany and the globalisation have strongly changed during the past years the real estate economy. The change processes which will continue probably during the next years are come into force by increased competitive terms, but also by new yield chances.

A change in the market situation due to an increased competition were in many branches the origin reason for the implementation of the benchmarking method. It`s used since the beginning of the nineties of the last century for example in the automobile industry, the mechanical engineering industry, but also logistics.

„In the general use a Benchmark is something, after that should be striven. Benchmarking can be described simply as the process to reach this Benchmark. A Benchmark is a reference point of a measured process" (Siebert, Kempf, 1998, p.8).

„A Benchmark is a comparative data, a measuring pole which points out which achievement and which result is accessible in a study object. Benchmarking means „learning of the best through a comprehensive comparison with theme" (Töpfer, 1997).

By transferring these definitions to entrepreneurial activity, benchmarking is a method to put goals for the activity of the company. In the increasing global competition it becomes more and more important for companies to measure their own achievements not only in the expected performance level which is achieved or the level of important competitors, but to the respective best performances in a international context. It is not a matter any more of improving only single achievement parameters, instead, to achieve competitive advantages, it`s also important to improve products, processes or organisational structures. In these requirements benchmarking begins (Sabisch, Tintelnot, 1997, p.11).

The aim of this work is to indicate definitions of possible application fields of benchmarking for current and fundamental problems. On the basis of the formulation of the leading question and problem formulation an overview of the state of the science and technology of benchmarking is given in general and in a real estate context as well. In addition to that it will be given in the last part of this work a short overview of approved methods of scientific research and as a practical example a presentation and critical analysis of selected models of benchmarking which are used in the real estate section and in project developments.

2. Literature review and critical discussion

In the current literature a variety of definitions of benchmarking can be found. But all definitions are based on the theoretical approach to identify the best solutions and on the orientation towards the best solutions:

"Benchmarking is the continuous process of measuring products, services and prac tices against leaders, allowing the identification of best practices which will lead to sustained and superior performance."(Rank Xerox, NHS Benchmarking Reference Center)

"Benchmarking is a structural method for the identification of best performances, as well as of concrete strategies and goal statements, including a logical realisation of measurements in order to reach the aims. Benchmarking in the broadest sense, aims to abolish any not value scooping work" (Eiff, 1994, p.865).

"Benchmarking is a structured process of learning from the practises of others (internal or external) which are recognised as leaders (best) in these fields" (Camp, Grunwald, 1995, p.149)

"Benchmarking is the methodical comparison of processes and products with better competitors. The comparative partners will be found on the basis of similarities in their own or in other organisations. The aim of benchmarking is to improve own processes and products significantly through the comparison with competitors" (Siebert, Kempf, 1998, p.17).

Bogan and English quote Fred D. Bowers: "The second person to light a fire is humankind's first benchmarking (Bogan, English, 1994, p.2) and speaks about principle of

"Innovative Adaptation". Benchmarking is therefore based on understanding results and practices to achieve an advantage for themselves.

The basic literature on the subject Benchmarking has appeared in the decade before the millennium turn. Since that time the essential theoretical basis work has received no new fundamental impulse. The development of this science took place in specific areas, i.e. in the systematic application of branches, functions and specific corporate processes, or through the combination of this method with other management tools, such as the Balance Scorecard (Siebert, 2002; Kreuz, 1997). But unfortunately there are no critical analysis about the concept and the expression "Best Practice". Also it is not explained how to measure "Best Practise".

A possible solution is given by Bodmer, who suggested to talk about "Successful Practise", which could be determined by a ten-point-questionnaire. (Farni, 2002, p.6).

Because of the origin of benchmarking as a methodology, which shows in systematic steps only how to improve something, but does not explain what should be improved, a very broad range of applications has developed, which can be hardly shown extensively. The range is from research and development about procurement up to logistics (Sabisch, Tintelnot, 1997). Other areas of application are product, process and strategy improvements (Kreuz, 1997; Camp, 1998) and in companies, departments and projects (Kreuz, 1997; Rau, 1999). Because of the structural simplicity and content indefiniteness of the methodology a combination with many other management methods is possible as for example Total Quality Management, Change Management, Balance Score Card, Knowledge Management etc. (Komus, 2001).

An important differentiation is whether benchmarking is used unique (e.g., by new developments of products and processes), or continuously (e.g., by advancements of products and processes) because the processes must be aligned differently (Sabisch, Tintelnot, 1997, p.17).

Benchmarking is done as a standardised process, which is usually divided into several steps (Camp, 1998, p.307, 11-Step-Model; Kreuz, 1997, p.51, 7-Step Model). These phase models do not differ basically. They all show a principle which can be easier described by the model which is used at the Fraunhofer Institute (Mertens, 2004, p.39).

The five phases are each related to specific steps and methods. The project launch phase, "objective" is involving the company's strategic objectives and ends with an agreement on objectives, which lead to the further proceedings. The following "Internal analysis" is broken down into the current analysis of the test objects, the modeling and definition of parameters, the development of relevant benchmarks and the creating of a questionnaire. This is defining the frame in which at the beginning of the phase "Comparison" the resembling companies can be selected.

Then is must be done a collecting of data from external sources, the realisation of the comparison, the assessment of the results and the identification of causes of the differences. The task of the phase "Measurements" is to define goals from the results of the previous phase and to translate them into concrete measures. The coordination of the goals and measures with the levels of management and the employees who have to implement them, is extremely important for the success of benchmarking. The phase "Implementation" represents the final step, which must be explained, managed and must be supervised (Mertins, 2004, p.39).







Figure 1: 5-phase-model of benchmarking (Mertins, 2004, p.39)

The explained method of the single benchmarking is the basic principle on which also the continuous procedure is based. In the continuous benchmarking it is tried to make the measures in a circulation.

To have success in benchmarking, there are a number of important factors which must not be relevant for every process, but they could. The biggest and most frequent criticism of benchmarking is that it leads not in generating solutions or real improvements but instead in copying solutions and standardisations. This criticism is absolutely ok, because benchmarking opens exactly these options. But the criticism is directed less against the method by itself, but against the wrong use of it. Benchmarking can only support aims and can only be as good as his users are able to use the method.

3. Evaluation of methodology

As the relevance of benchmarking in general is and the range of definitions are communicated, in this section a brief evaluation of appropriate research methodologies will be done which could be used to investigate the topic. Furthermore a short explanation and critical analysis of selected benchmark methodologies is given which are used in the real estate sector and the project development.

Appropriate research methodologies

Literature and data review

All sources like books, journals, internet etc. have to be utilised for a comprehensive literature and data review.


The topic can be investigated by questionnaires with the player in the markets. The advantage of questionnaires is an approach to the business. The aim of the questionnaires is to get some key information in order to classify the asked parties into different cluster. In order to get comparable and valuable data it should be considered, the choice of interview partner, data protection, check for unambiguousness to get valuable data. For preparation of an interview the questionnaire should be sent to the interview partner in advance.


Subsequent to the evaluation of the questionnaire should be an interview in order to review the answers given in the questionnaire, complete the questionnaire, if answers were incomplete, get profound information, check discrepancies or contradictions that have been found in the questionnaire and to ask motives and reasons.

An open minded discussion also answers questions, which have not been answered until now or related to the answers. In an interview it might be possible to get same information, which in fact of secrecy and confidentiality the asked company would not give.

Case study

A case study is a particular method of qualitative research in the reality (company/market). In cooperation it provides a systematic way of looking at processes, behaviours, collecting data, analyzing information, and reporting about the experience. As a result the researcher may gain a sharpened understanding of why the instance happened as it did, and what might become important to look at more extensively in future research. In fact of data protection is also a statement of confidentiality needed.

Chosen methodologies by the authors

The reviewed authors all investigated the topic with quantitative and qualitative approaches. All of them analysed data obtained in different ways. Some of these data were primary data received from interviews/questionnaires, other were based on secondary data collected from data bases. In the following as a practical example selected appropriate methodologies of benchmarking will be shortly described.

Benchmarking in the real estate industry

In the literature of the real estate economy few works are found on the subject Benchmarking. In the following the contrasting approaches of Reisbeck and Schöne (Reisbeck, Schöne, 2006) and Kyrein (Kyrein, 2002) will be discussed. Some few other models combine benchmarking with other methods of valuation or management.

Based on the discussed principles of benchmarking Reisbeck and Schöne have presented her blueprint for a real estate benchmarking as an instrument of the real estate management. Real estate management is understood as a management system which encloses the whole life cycle of the real estate and also encloses project development, project management as well as facility management.

The suggested model of benchmarking is oriented to the standard practise and is based on the aim to reduce costs and to optimise the yields. The detailed consideration of performance measurement systems has its focus on the production of comparative parameters in the context of different utilisation-, market- and location-situations of real estates. The used performance measurement systems focus on the costs of usage and do not take account to other important parameters for project developments as for example financing, building cost or additional construction costs etc. The concept of the real estate benchmarking is an important methodical contribution for data capture, data processing and benchmarking in the context of real estate use. It shows that data capture, production of comparability and identification of key figure related potentials are representing a big part of the whole process. The process of learning from the underlying practices and the controlling of the success are shown only rarely.

The classification of the concept of real estate benchmarking in the spectrum of possible applications of benchmarking is limited to the product benchmarking. This is due to the fact that the concept was developed in the phase of the usage of real estates and focuses on cost-benefit considerations. Therefore, benchmarking can be used only in terms of optimisation and improvements. The work of Reisbeck and Schön shows that the systematic of benchmarking can have valuable contributions by solving problems of data capture, production of comparability between real estates and the defining of measurable aims and strategies even in the real estate sector. An expansion of the instruments for the use in the project development is still to be created.

From the point of view of land development Kyrein has developed a concept of the „comprehensive benchmarking" which takes into account the systematic thinking. Sys-tematic thinking solves problems from a global and linked point of view. (Top-Down-Approach) The specific aspects and conditions are understood in the context of action and interaction and are formed to a result which is oriented to the users (Kyrein, 2000, p.18). Comprehensive benchmarking has to prove the strategies of all partners, corporate processes and their functions and behaviours. This approach shows a high penetration of different applications of benchmarking and obtaines a complexity which can be hardly described in a short way. They are all combined in a systematic teamwork of the following points:

Benchmarking of strategies (identification of concrete results in order to re-orient the process of development and realisation of land)

Benchmarking of corporate processes (turning away from the functional and institutional thinking towards a process-oriented organisation in which the customer and the user are in the focus)

Benchmarking of functions (small organisations)

Benchmarking of behaviours (active alignment of the behaviour of the project partner to the vision)

Also Kyrein organises the benchmarking along a phase model of seven steps as it is suggests by Kreuz. The model does not differ basically from the above explained model. At the level of the concrete project development Kyrein creates, following to the concept of "Frontloadings" in the automobile industry, the vision of an further benchmarking model.

"Frontloading" is part of the reorganization of the processes in the automobile industry to react to global competition, this means for example shorter production times, to increase quality and to reduce costs for the development of new products.

That the concept of "frontloading" can work, data of completed processes of developments must be made available for future projects, that they can be used in the beginning of other projects or phases. Due to this and supported by computers simulations of products and processes will be made possible.

Kyrein defines as essential for benchmarking in the project development:

Understanding of own and other (external) corporate processes

Understand the major projects

Imitating the best

Gaining superiority

A decisive advantage of benchmarking is for Kyrein the quantification of project objectives. Qualities and processes can be defined on the basis of reference objects to get quickly the feasibility of urban planning and technical ideas, to give parameters to the planning, to have parameters during the planning phase in order to have the possibility to measure the content and progress of the planning phase (Kyrein, 2002, p. 232).

Both the approach of Kyrein as well as the approach of Schöne were developed from concrete problem definitions within the real estate industry. But there are no further systematic developments of benchmarking during project developments.


By benchmarking products, corporate processes, services, methods, companies or the macro economy can be analysed and compared. The view on the own activities offers the company the possibility to make changes and to make a better performance in future. Continuous innovations can be made possible through the critical consideration of the current situation of companies. Benchmarking always pursues the aim of a continuous improvement of own efficiency. In order to this aim it must be learned to understand the competitors, to identify better results other companies and to develop ideas for the improvement of own structures and processes. Finally, the constant inspiration to take a top position in the competition it will be initiated a continuous improvement process. The company becomes a learning company (Siebert, Kempf, 1998, p.43).

From the state of science and technology of benchmarking in general and in the real estate industry in particular and the practical application of the method in project developments it can be made the following conclusion:

Benchmarking as a methodological development is based on the comparison with the bests in traditional learning methods.

Benchmarking enables to identify best practices clearly.

Benchmarking is more than a pure comparison of parameters of performance or the specification of performance goals. It differs from competitive analysis through its systematic recording of qualified data and the possibility of improving performance lacks through a systematic approach, including implementation and controlling.

There is still no systematic theory of benchmarking and testing of benchmarking in project developments. In addition, there is also a lack in a systematic elaboration of possibilities for applications of benchmarking the project developments.

Benchmarking offers through numerous approaches and the use of different applications a variety of benefits for companies.

Benchmarking can lead to concrete targets for improvements and indicates areas where it can be applied (Hildebrand, 1995, p.244).