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The TQM MagazineEmerald Article: Benchmarking: a process-driven tool for qualitymprovement

Mohamed Zairi, Rob Hutton

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To cite this document:Mohamed Zairi, Rob Hutton, (1995),"Benchmarking: a process-driven tool for quality improvement", The TQM Magazine, Vol. 7 Iss: 3p. 35 - 40

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Introduction

T he adoption of total quality managementhas resulted in many comp anies dramaticallyimproving their competitive position, with afocus on meeting and exceeding customerrequirements while dram atically reducing thecost of non-conformance. However, whiletotal quality produces incremental improve-men ts in all processes, for some organ izations

this may not be enou gh. For some organiza-tions a quantu m leap in process performanceis needed for them to rem ain compet itive.T his was the motive for the developmen t of benchmarking, which was pioneered by Ran k Xerox as a response to a comp etitive crisiswhen traditional competitor analysis wasfound to be inadequate.

Qu ality guru Joseph M. Juran recentlycommented that mu ch of the success of Baldrige Award winners can be put down tothe achievement of stretch goals by bench -

marking. Stretch goals are performance tar-gets that cannot b e attained by the ped estrianpace of the ordinary learning curve, butrequire an organization to signicantly re-engineer the way they do business. T he linksbetween total quality and b enchmarking aretherefore obvious establishing processes andobjectives based on indu stry best practice thatresult in better meeting of the intern al andexternal customer requirements. Benchmark-ing is stimulated b y an organizations drive toaccelerate the cycle of continuou s improve-ment, and t o add an external perspective totheir total quality culture.

T here is, however, considerab le confusionas to what b enchm arking is, how it differs tocompetitive analysis and what is the mosteffective type of benchmarking. T his articleaims to describe the types of bench markingand to h ighlight what is the most effective wayof applying th is powerful and frequent lymisunderstood process improvement tool.

Results-driven and process-drivenbenchmarking

Benchm arking may involve an organ izationaccepting that its performance in certain areasis not competitive and that a dramaticimprovement is needed. Some organizationsstate that they rely solely on the ideas andinnovations of their own people and t hatconsidering other organ izations practices isan ad mission of defeat. As history so painfully

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The TQM MagazineVolume 7 Number 3 1995 pp. 3540

M CB University Press ISSN 0954-478X

M ohamed Zairi and

Rob Hutton

The authorsMohamed Zairi is Unilever Lecturer in TQM at theBradford University European Centre for TQM, whereRobHutton is a Research Assistant.

AbstractSuggests that successful TQM initiatives are frequentlyspurred by stretch goals created by benchmarking anorganizations performance and practices with others.Differentiates results and process-driven benchmarking.Explains how TQM and benchmarking link w ith thephilosophy of continuous improvement

PerspectivesBenchmarking: aprocess-driven tool forquality improvement


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shows, an organization that waits for self-imposed invention in every process may ndthat cr isis arrives before breakthrough, and insuch cases continued arrogance may lead tofailure. M any organizations, of differenttypes, are beginning to recognize that discov-ery is just as good as invention, an d ben ch-marking can p rovide a route to discovery.

However, confusion as to what benchmark-ing actually is has resulted in man y compan ies

using a results or cost-dr iven approach, th eobjectives of such bench marking being toachieve pu rely a cost reduct ion. T his involvesthem comparing some aspect of their perfor-mance with those of superior performingcompetitors, usually using some intermedi-aries such as consultants. This approach ischaracteristic of the short-termism in comp-anies that cite strong nancial management astheir m ajor business strategy.

As the processes which are ach ieving thatsuperior performan ce are not understood,goals are frequen tly set withou t considerationof the as is performance, or the organiza-tions capab ility. N ot surp risingly, t he resultsof this approach are poor. T he performancegap is not closed and goals are not att ained,therefore, ben chmarking in such compan iescan be a very negative experience. Ben ch-marking, when carried for maximum benet,

is a process-driven activity which requ ires anorganization to have a fundam ental und er-stand ing of its as is process and the superiorperforming benchmark process. T his meansin terms of both its outpu ts and practices. T heaim of the ben chmarking exercise is to incor-porate transferable practices into the organ i-zations inferior performing p rocess and inthis way a dram atic improvement in p rocessperformance can be achieved.

Competitive cost-driven benchmarking hasbeen the most comm on type of benchmarkingcarried out in the West, and has been a majorcatalyst in helping comp anies reduce costs.H owever, it is somewhat sur prising that costhas been th e main emp hasis of benchmarkingefforts, considering in most markets productdifferentiation, rather than low-cost produc-tion, will determine success or failure.Process-driven benchmarking when appliedto processes that effect product differentia-tion, can enable companies to improve dra-matically their competitive position byenhancing areas such as produ ct features,quality, new p roduct development,reliability, cu stomer service brand image,etc.

T he contrast between the results-drivenand process-driven, benchmarking approach-es is shown in F igure 1.

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Competitor

Businessorganization

Costs reductions(incremental

improvements)

Results-driven benchmarking

Process-driven benchmarking

Benchmarking

P

C

DA

Benchmarking

Businessorganization

Benchmarkingpartner

Better understandingof process practices

Superiorperformance

Great costreductions

Figure 1 Process-driven and results-driven benchmarking


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Cost-driven benchmarking is frequentlyreferred to as the quick-dip approach, as onlysupercial process understanding is needed.As one o f the essential prerequisites to effec-tive benchmarking is a detailed understandingof business processes, the limitations of thequick-dip app roach can be seen. T his alsohighlights the importan ce of having a totalquality culture in place (with docum ented,measured an d continuously improvedprocesses) before considering benchmarking.

Benchmarking and competit ive analysis

Within man y organizations the den itions of,and differences between, benchmarking andcomp etitive analysis are often con fused.Frequently, organizations carrying out com-petitive an alysis believe th ey are benchm ark-ing. Com pany-wide und erstanding of deni-tions for both are n eeded if that organizationis to gain benet from them .

Comp etitive analysis is a p owerful tool forstrategy formu lation because it quant iescomp etitive gaps in cost, qu ality and timeli-ness. In addition, increased u nderstanding of comp etitors strength s and weaknesses leadsto m ore effective strategy form ulation. It is anessential par t of the strategic planningprocess.

Conventional com petitive analysis is usual-ly conducted as three largely independentstreams o f analysis. T he areas of analysis are:

(1) Reverse produ ct engineering; e.g. prod-uct d esigns, costs, p rocess technology,etc.

(2) Financial analysis; e.g. total businesseconom ics, capacity utilization, pat hs tomarket, resource commitment, etc.

(3) Fieldwork; e.g. interviews with supp liers,distributors, customers to establish howdifferent approaches are being received inthe marketplace.

Competitive analysis is especially useful when

man agement is considering a major strategicchoice, e.g. acqu isition or d ivestiture,make/buy, entry/exit, or business restructur-ing. D etailed and vigorous competitive analy-sis has also been used to t rigger inten siveinternal d evelopment programmes. H owever,competitive analysis often fails to catalyseeffective tu rnaroun d programmes (as foundby Xerox in 197 9). In many companies com-petitive gaps are large and well known, and yetthe lagging company fails to act, frequent ly

because they do n ot know how to attain nearcomparable performance.

A.S. Walleck et al .[1] found that d etailedcompetitive ana lysis, u seful th ough it is, candelay managers from making a rat ional assess-men t of the root causes of inefciency, wasteand lethargy, and can even lead a company off in the wrong strategic direction. T hey iden ti-ed three faults latent in the nature of com-petitive ana lysis, faults t hat very often lead tothe wrong action, inact ion, or delay:(1) Prisoner of own industry : Focus on one

industry can prevent b reakthroughssuggested by the p erforman ce of compa-nies in oth er industries. T he measures arehistorically based, th erefore the bestoutcome is compet itive parity or incre-mental advantage.

(2) M isleading direction: Comp etitive analysisquanties performance gaps, but giveslittle ind ication of how excellent perfor-

man ce is achieved and sustained. It relieson secondary sources of information,therefore, the actions prop osed by com-petitive an alysis may be diametr icallyopposed to th e actions that must be takento close perform ance gaps.

(3) A nalysis paralysis: Analysis of direct com -petitors always raises more q uestions thanit answers. T he comp etitor, almostalways, is buried under a mass of non-competing produ cts and businesses.F inancial data includes them all, is out -

dated, incomplete and therefore largelyinaccurate. T hese conditions can causeend less debate with little relevant analysisand mom entum resulting.

Trad itional competitor an alysis views as athreat on ly companies with the resources toerode margins and m arket share in th e nextplanning period. Resourcefulness, the pace atwhich new competitive advantages are beingbuilt, rarely enter s in. M any managers havefound , to th eir cost, that a bu sinesss initial

resource endowment (whether large or small)is an un reliable indicator of future globalsuccess. Ham el and Prahalad[2] make thefollowing comparison:

Trad itional competitor is like a snapshot of amoving car. By itself, the ph oto yields littleinformation about the cars speed or direction whether the dr iver is out for a quiet Sund aydrive or warm ing up for a grand pr ix.

Comp etitive analysis is obviously a usefulstarting point, but process-based benchmark-

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ing goes far beyond it. While comp etitiveanalysis focuses on d iscrete product andperforman ce comparisons, benchmarkingtranscends industrial boundaries to search forthe best practice operating and managementskills that produce those products.

Benchmarking init iat ing change

Unlike compet itive an alysis, wh ich is usuallycarried ou t by a small group of managers,process-driven benchmarking requires theactive par ticipation of line person nel whoperform that process. Therefore, process-driven benchmarking is more than an analyti-cal procedure, it is tool for the encouragementof appropriate and necessary change.

In the q uick-dip approach, the p erfor-man ce gap is revealed and it may act as a goodbarom eter, bu t the resulting objectives setmay not be appropriate. T he contrast between

benchmarking approaches as change agents isshown in Figure 2[3].Process-driven benchmarking sets stretch

goals based u pon results already achieved byworld leaders in similar activities. T hese goalsare not limited to produ ct results, they extendto the processes that produce those results.

T he fact that many Baldrige Award winnershave already achieved stretch goals demon-strates the power of benchmarking.

Benchm arking can be extrem ely useful inovercoming management complacency aboutthe status quo and in exposing incorrectperceptions about the com panys and com-petitors strengths and weaknesses. It encour-ages managemen t by fact.

T hrough part icipation in structu red eldvisits, managers can be exposed to superioroperational practice, and satisfy them selvesthat t he ben chmarks others achieve are validand com parable. Consequently, a bench-marking exercise can build enthu siasm andcommitment to change far earlier and moreeffectively than reacting to historical dataderived from com petitor an alysis.

Benchmarking and total quality man-agement the links

A market-dr iven organization has beendescribed by Day[4] as:

A commitmen t to a set of processes, beliefs andvalues that permeate all aspects and activities of the organization [.... ] for the p urp ose of achiev-ing superior performance by satisfying cus-tomers better than the competition.

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Business asusual (BAU)

Best in class(BIC)

TQM=

bottom line

TQM=

not visible

Culture=

BAU

Internalstandardsnot known

Goodbarometer

Dangerousapproach

The quick-dipapproach

Measures truecompetitive gap

Requires properstrategy

Process-drivenbenchmarking

TQM = tools, systems,empowerment

Corporate culture ofcontinuous improvement

Commitment = satisfycustomers requirements

Extension of internalstandard of effectiveness- False sense of security

- Misinterpretation of dataobtained

- Stretch objectives

- Time, resource andcommitment

- Has to link with strategicgoals

- Long-term focus

Figure 2 Benchmarking as a change agent


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In a to tal quality organization the culture isfocused on continuous process improvementto better m eet the needs of intern al and exter-nal custom ers. Total customer satisfaction isthe ultimate aim and the policies and strate-gies are wholly market-dr iven. As a result, theprocesses and activities of the organization arealigned for th e optimization of value-ad dedactivities.

Benchmarking add s an external perspec-

tive to a to tal quality organization. I t ensu resthat the wheel of continuous improvement isturn ing in th e right direction, t hat is, towardsachieving higher stan dard s of competitiveness(see Figure 3). M any companies have adoptedbench marking for this very reason, e.g. Alcoa,AT &T, Kodak, etc.

Many prominent authors on benchm ark-ing[5-8] have stressed that organizations needbenchmarking to have an un derstanding of the extern al environment for the setting of performance goals, and to ensure that theyrespond to the needs of all stakeholders.

The integration of total quality manage-ment, performance measurement and bench-marking comp rises the essential elemen ts of comp etitiveness. It establishes a culture of continuous improvement, provides externalperspective, and en courages the release of theenergies and creativity of an organizationsemployees (see Figure 4).

T his integration con siders the voice of thecustomer b y identifying current an d future

demand s, and the voice of the processthrough establishing the organizational capa-bility to deliver customer wants. In ad dition toadding external awareness, benchmarkingensures th at every process is at least competi-

tive. It moves a total qu ality organization fromcontinuous improvement to continu ous

learning.

Conclusion

Perhaps the major reason for the p roliferationin ben chmarking activity, is the success of themain proponen ts of the art. Benchm arkingwas not developed b y an academic or theor ist,it was developed as an o rganizational-wideactivity by a company facing a com petitivecrisis of staggering propor tions, i.e. Ran k Xerox in 1979 . Benchmarking is now widely

accredited with being one of the main factorsbehind many corporate-wide improvementsin performance.

Process-driven benchmarking looksbeyond the discrete product evaluations of competitive analysis and results-drivenbenchmarking, to compare manufacturingand management processes. It thereforeenables an organization to iden tify not onlywhat is the best performance standard, b uthow it is achieved. It is also a highly visibleway of monitoring comparative performance

over time, t o ensure that any negative perfor-man ce gap is being closed.

Process-driven benchmarking extends thesearch for best practices beyond imm ediatecompetitors to consider organizations fromvarious industries, to reach for the b est of thebest performance levels. Frequen tly, surp ris-ing similarities in p rocesses can be foun dbetween compan ies in different ind ustries. Byadapting appropriate ideas from best practice,regardless of its origin, into the o rganizations

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Benchmarking

Involving employees insolutions to work practices

Establishing objectivesbased on best practice

Communicating objectivesand recognizing employees

for performance

Meeting internal andexternal customer

requirements

TQM

Performance teams Performance management

: [3]Source

Figure 3 The links between benchmarking and total qualit y management

: [3]

TQMapproach

Processbenchmarking

Continuousimprovement

Cost

Quality Delivery

Source

Figure 4 The integration of total quali ty management, performance,measurement and benchmarking


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own processes a signicant perform anceimprovement can result. Process-drivenbenchmarking enhances the external p erspec-tive of an organizations tota l quality pro-gramm e and is, therefore, a timely and valu-able quality improvement tool.

A total quality culture represents the idealenvironment for process-driven bench-marking to improve signicantly the p rocessesthat are critical to business success. By intro-ducing such benchmarking, an organizationensures that it knows the performance levelsneeded to b e world comp etitive and u nder-stands the processes by which this can beachieved.

References

1 Walleck, A.S.et al ., Benchmarking world-classperformance ,The McKinsey Quarterly,Number 1,1991.

2 Hamel, G. and Prahalad, C.K., Strategic intent ,Harvard Business Review, May/June 1989.

3 Zairi, M. and Leonard, P.,Practical Benchmarking: The Complete Guide , Chapman & Hall, London,1994.

4 Day, G.S.,Market-driven Strategies: Processes for Creating Value , The Free Press, New York, NY,1990.

5 Camp, R.C., Learning from the best leads to superiorperformance ,Journal of Business Strategy, August,1992.

6 Codling, S.,Best Practice Benchmarking The Man- agement Guide to Successful Implementation ,Industrial Newsletter Ltd, Bedford, 1992.

7 Balm, J.B.,Benchmarking: A Practitioners Guide for Becoming and Staying Best of the Best,QPMA Press,Chicago, IL, 1992.

8 McNair, C.J. and Leibfried, K.H.J.,Benchmarking ATool for Continuous Improvement , Harper Business,New York, NY, 1992.

Further reading

Camp, R.C., Benchmarking: The Search for Industry Best Practices That Lead to Superior Performance , ASQCQuality Press, WI, 1989.

Camp, R.C., A bible for benchmarking by Xerox ,Finan- cial Executive,July/August 1993.

Juran, J.M., Strategies for world-class quality ,Quality Progress, March 1991.

Kearney, A.T.,Turning Trigger Points int o Triumphs ,

Monograph No. 3, A.T. Kearney Business Consultants,July 1992.

Porter, M.E., How competi tive forces shape strategy ,Harvard Business Review, March/April 1979, p. 86.

Porter, M.E.,Competit ive Advantage , The Free Press, NewYork, NY, 1985.

Zairi, M.,Measuring Performance for Business Results ,Chapman & Hall, London, 1994.

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Commentary

Benchmarking was described by one commentator as one of the few comprehensive change capabilitytools, providing a balanced combination of target focus, skill and knowledge input, and the will tosucceed ( see the Quality inside-out and outside-in article in the last article of T he TQ M Magazine ,Vol. 7 N o. 2, Day and Toledano, for more detail).

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