Chapter 10 Benchmarking

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Chapter 10Benchmarking

• Team 1 John Boyd, Greg DeYoung, Tusi Marshall
  and Dave Wilson

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Introduction To Benchmarking

• It is a tool that is used by many businesses
• To gauge their performance with best-in-class
  businesses within their own industry
• This tool allows for the standardized measurement
  of business and organizational metrics
• To use this comparison with best-in-class
  business and organizational metrics

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What Is Benchmarking?

• Can yield great benefits in the education of
  executives
• And in the realized performance improvements of
  operations
• In addition, benchmarking can be used to
  determine strategic areas of opportunity
• In general, it is the application of what is
  learned in benchmarking that delivers the marked
  and impressive results so often noted
• The determination of benchmarks allows one to
  make a direct comparison any identified gaps are
  improvement areas.

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Benchmarking Defined

• "Benchmarking is the continuous process of
  measuring products, services and practices
  against the toughest competitors or those
  companies recognized as industry leaders (Best in
  Class)"
• Source The Xerox Corporation

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Reasons to Benchmark

• To identify, understand and implement Best
  Practices
• To overcome complacency
• To build and reinforce broad commitment to change
• To achieve quantum leaps in improvement

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What Is Best Practice?

• Documented strategies and tactics employed by
  highly admired companies
• These companies are not "best-in-class" in every
  area - such a company does not exist
• But due to the nature of competition and their
  drive for excellence, the profiled practices have
  been implemented and honed to help place their
  practitioners as the most admired, the most
  profitable, and the keenest competitors in
  business.

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What Benchmarking Is NOT

• Merely competitor analysis Benchmarking is best
  undertaken in a collaborative way. 
• Comparison of league tables The aim is to learn
  about the circumstances and processes that
  underpin superior performance.

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What Benchmarking is NOT

• A quick fix, done once for all time
• Benchmarking projects may extend over a number of
  months and it is vital to repeat them
  periodically so as not to fall behind as the
  background environment changes.

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What Benchmarking Is NOT

• Copying or catching up
• In rapidly changing circumstances, good practices
  become dated very quickly. Also, the fact that
  others are doing things differently does not
  necessarily mean they are better.

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To Benchmark Successfully

• A shared, common vision of the performance
  improvement goals and objectives
• Open and committed high level support
• The commitment of all stakeholders in the process
  to progress and change
• Ability to critically examine ONES own practices
  
• The ability and willingness to co-operate and
  share information and expertise with others
• Able to learn from others best practices
• Flexibility to implement the necessary changes
• Procedures to monitor subsequent progress

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Types of Benchmarking

• Internal
• External (competitors)
• External (same industry)
• External (generic)

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Benchmarking Process

• Identify activities and practices to benchmark
• Collect data from organizations that have
  recognized accomplishments in the activity
• Suitable "benchmarkers" may include primary
  competitors, other divisions in a larger
  organization, and "world class" performers in a
  particular area
• Be prepared to share as much information as you
  receive from benchmarking partners.

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Benchmarking Process

• Integrate and analyze the data
• Act on the information collected by implementing
  features that can be adapted to your own
  organization
• Monitor improvements and conduct ongoing
  benchmarking

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Benchmarking Process Summary

• Decide what to benchmark
• Understand current performance
• Plan
• Study others
• Learn from the data
• Use the findings

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Deciding What To Benchmark

• Diversity in Best of Class levels
• Where are you?

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Quiz Scores

• Excellent!
•  
• Your company is at the creative vanguard. We're
  going to do two things right now buy some of
  your stock, and see if you have any job openings.
•  
•  

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Quiz Scores

• Not bad!
•  
• The firm is probably attracting enough good
  people and generating enough creative thinking to
  stay in the game. It sounds like management is at
  least trying, so maybe you should pitch in and
  help this crew move up the scale.
• Get out of Dodge, pardner.
•  
• The Surgeon general has determined that the
  company you work for is hazardous to your
  physical and mental health.
•  
•  

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Quiz Scores

• Nahh....Can't be!
•  Those (d) answers were supposed to be jokes. You
  know, jokes, like the pointy-haired guy in that
  comic strip?
• Deficient Soon, the board is going to send in a
  turnaround team. Lets hope they turn it around
  in the right direction. Update your resume don
  a life jacket.
• Very good Your company gets it (or most of it,
  anyway). Youd have to look long and hard to find
  a better place to work.

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Approaches to Benchmarking

• ATT 12-step Process
• Determine who the clients are who will use the
  information to improve their process
• Advance the clients from the literacy stage to
  the champion stage
• Test the environment. Make sure the clients can
  and will follow through with benchmarking
  findings

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Approaches to Benchmarking

• ATT 12-step Process (cont)
• Determine urgency. Panic or disinterest indicate
  little chance for success
• Determine scope and type of benchmarking needed
• Select and prepare the team
• Overlay the benchmarking process onto the
  business planning process

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Approaches to Benchmarking

• ATT 12-step Process (cont)
• Develop the benchmarking plan
• Analyze the data
• Integrate the recommended actions
• Take action
• Continue improvement

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Approaches to Benchmarking

• Xerox 10-step Process
• Identify what is to be benchmarked
• Identify comparative organizations
• Determine data-collection method and collect data
• Determine current performance gap
• Project future performance levels

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Approaches to Benchmarking

• Xerox 10-step Process (cont)
• Communicate benchmark findings and gain
  acceptance
• Establish functional goals
• Develop action plans
• Implement specific actions and monitor progress
• Recalibrate benchmarks

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Example of Benchmarking Results

• Norwest, the nations largest mortgage company,
  embarked on a benchmarking campaign, and was able
  to quantify the following benefits
• Sales brochure consolidation 430,000 in
  savings
• Customer and direct mail consolidation 1
  million in savings
• Opportunity lending 20 million in added growth
  
• Teller referrals up 15, 33 of which result in
  additional sales
• Use of sales road maps sales increase up to
  102
• Use of partner letters 150 increase in
  commercial sales and
• Performance Coaching 5.08 products per new
  customer.

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Understanding Current Process

• To compare practices it is important to
  determine, understand and document the current
  practices
• Can be helpful to chart and diagram flow and
  processes
• Important to clarify normal routine processes
  with special exception processes
• Important to quantify a process with a unit of
  measure

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Planning

• If not already chosen a benchmarking team
  should be picked
• Choose your type of benchmarking
• Internal
• Competitive
• Process
• Identify the best firms to find a benchmark
• A short list of possible benchmark partners

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Studying Others

• Benchmarking studies look for two types of
  information
• Description of how best-in-class processes are
  practiced
• And the measurable results of these practices
• Techniques for conducting original research
• Questionnaires
• Site visits
• Focus groups

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Learning the Data

• Involves answering a series of questions
• Is 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 that is better?
• If best-in-class practices were adopted, what
  would be the resulting improvement?

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Learning the Data

• Benchmarking studies can reveal three different
  outcomes
• A negative gap
• Equal or parity
• Positive gap
• Identifiable benchmark gaps must be described and
  quantified
• Determine the root causes of the gaps

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Using Findings

• Generic steps for the development and execution
  of action plans
• Specify tasks
• Sequence tasks
• Determine resource needs
• Establish task schedule
• Assign responsibility for each task
• Describe expected results
• Specify methods of monitoring results.
• Goals and objectives should be consistent with
  the execution of the action plan end result is
  process superiority

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Pitfalls Criticisms

• Benchmarking for the sake of it
• Focusing entirely on comparisons of performance
  measures rather than the processes and activities
  that enable the achievement of good practice
• Expecting that benchmarking will be quick or easy

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Pitfalls Criticisms

• spending too long on one part of the process at
  the expense of other key parts particularly,
  obtaining support for your recommendations
• expecting to find benchmarking partners
  comparable in all respects to your organization

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Summary

• Benchmarking is not a panacea, a strategy, or
  business philosophy
• It is an improvement tool
• To be effective, it must be used properly
• It is a source of ideas from outside the
  organization
• Benchmarking forces an organization to set goals
  and objectives based on external reality

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Class Exercises

• Identify the three main types of benchmarking?
• What is a metric? How are metrics used?