Chapter 8BenchmarkingRachal RoachTim HyderChris Green

IntroductionBook definition: Benchmarking is a systematic method by which organizations can measure themselves against the best industry practicesBenchmarking is a standard that companies compare themselves to and strive to be that good

BenchmarkingWhat is your definition of benchmarking?

What is the process for benchmarking?

Benchmarking ConceptCreativeAdaptationBreakthrough PerformanceWhat is our performance level?How do we do it?What are others' performance levels?How did they get there?

Benchmarking ConceptConcept has been around for a while2 Key elements1) Units of measure (to measure performance)2) Managers need to understand why their company's performance differs

Reasons to BenchmarkPromotes continuous improvementMakes companies search for the best practices, innovative ideas, and highly effective operating proceduresCan notify a company if it has fallen behind the competitionInspires managers to competeAllows goals to be set objectively

Reasons to BenchmarkWeaknessesOrganizations must continue to innovate as well as imitate.

6 General Steps to Benchmarking1) Decide what to benchmark2) Understand current performance3) Plan4) Study others5) Learn from the data6) Use the findings

Deciding What to BenchmarkThink about the mission and critical success factorsDecide the scopeDevise charts that will pin point the exact problemDecide on a numerical measure to show improvement

Understanding Current PerformanceUnderstand and document current processesForm a benchmarking teamDecide on a way to numerically measure findings

PlanningDecide what type of benchmarking to perform (internal, competitive, or process)Choose the type of data to be collectedDevise a method of collectionIdentify which organizations to use as your benchmarksMake a timetable to adhere to for each taskHave a desired output for the study

Studying OthersUse internal sourcesApply data in the public domainUtilize original researchCombining all or some of these

Learning from the DataIs there a gap between the organizations performance and the performance of the best-in-class organization?

What is the gap? How much is it?

Why is there a gap? What does the best-in-class do differently that is better?

If best-in-class practices were adopted, what would be the resulting improvement?

Learning from the DataStudies can reveal 3 outcomes:Negative gapExternal process better than internal processesParityProcess performance approximately equalPositive gapInternal process better than that found in external organizations

Learning from the DataAt least two ways to prove a superior practice:Analyzed quantitativelySummary measures and ratios (activity costs, return on assets, or customer satisfaction levels)Market analysisDoes the market prefer one process over another?Price outside services

Using the FindingsWhen a benchmarking study reveals a negative gap in performance, the objective is to change the process to close the gapTwo groups must agree on the change:Process owners (those who run the process)Upper Management (incorporating changes and providing resources)

Using the FindingsGeneric steps of Action Plans:Specify tasksSequence tasksDetermine resource needsEstablish task scheduleAssign responsibility for each taskDescribe expected resultsSpecify methods for monitoring results

Using the FindingsGoals and objectives should be consistent with the execution of the action plan so that the end result is process superiority

The best results are obtained when the process owners fully participate in the design and execution of the plan

Using the FindingsThe next step is to repeat the benchmarking process

The benchmarking process must be used continuously to pursue emerging new ideas

Pitfalls & CriticismsIdea of copying othersHow can an organization be superior if it does not innovate to get ahead? How can an organization even survive if it loses track of its external environment?Not a strategy or business philosophyIt is an improvement toolNot a substitute for innovationIt is a source of ideas from outside

Pitfalls & CriticismsAvoid Benchmarking for the sake of itFocusing entirely on comparisons of performance measures rather than the processes and activities that enable the achievement of good practiceExpecting that benchmarking will be quick or easy

Questions for DiscussionWhat are the six core techniques of the benchmarking process?1.Decide what to benchmark2.Understand current performance3.Plan4.Study others5.Learn from the data6.Use the findings

Questions for DiscussionEfficiency has been defined as doing things better and effectiveness as doing better things.

Describe how benchmarking can be used to improve both efficiency and effectiveness

Questions for Discussion

Explain how an organization might benefit from benchmarking organizations in a completely different industry

Questions for Discussion

Identify and explain the three types of benchmarking

In what circumstances would each type be most appropriate?

Questions for Discussion

How are critical success factors important in benchmarking?

Questions for DiscussionBenchmarking studies are a search for two types of information An understanding of best-in-class processesThe metrics that result

Which piece of information is more important and why?

Questions for Discussion

Why is it important to understand internal processes before studying those of other organizations?

What tools are useful in examining internal processes?

Questions for Discussion

Who in the class has experience in the benchmarking process?

Thanks for your time!

RachalTimChris