Post on 20-Dec-2015
Benchmarking:Making Best Practices Your Daily Practice
James W. Cornell, PresidentCBC, CTP, CM&A, CBA, CRA, CPPJanuary 2005
Praxiis Business Advisors Praxiis Business Advisors
Our mission is to help private and corporate business owners
create strategies for high performance & competitive dominance,
drive value growth, and when ready
devise and execute the most profitable exit through a
predetermined succession plan or sale of the business.
Praxiis Business AdvisorsPraxiis Business Advisors
Corporate Renewal, Growth & Transaction Advisors to Small and Mid-Market Businesses and their Stakeholders.
Established as Strategic Corporate Services in 1988.
Primary offices are in Western NY and services are delivered nationally.
Affiliated Professionals possess academic credentials including B.S. Business Management & Economics, Master of Business Administration, Ph.D. in various disciplines, Juris Doctor and numerous professional designations.
James W. (Jim) CornellJames W. (Jim) Cornell
Founder and President of Praxiis Business Advisors 24 years as advisor to $1M - $4B Clients
– Strategy, Turnarounds, Performance Improvement, Value Growth, Exit Planning, M&A, Government Contracting
Principal in numerous mid-market turnarounds, including– National security services firm– Internationally recognized manufacturer of engineered fabric
structures– DOD and Industrial Paint & Coatings manufacturer
Lead advisor for successful turnaround of $50M DOJ Citizenship Benefits Processing program, & $1B+ major government contract wins (TVA, SPR)
BS, Business Management & Economics, and MBA from SUNY Empire State College
Governor, SUNY Empire State Federation Board of Governors Faculty, SUNY Empire State College FORUM Program Chair- Licensure Task Force Alliance of Merger and Acquisition
Advisors
Benchmarking DefinedBenchmarking Defined
To measure the best practices of leading businesses, and learn and adapt them for use in your business
A systematic comparison of two or more companies or units of companies to gauge their performance relative to a peer
Where Did it Start?Where Did it Start?
Xerox Corporation 20 years ago
– Canon was “eating their lunch” Higher quality machines, lower price
Embarked on a systematic campaign
– Reverse engineered products
– Studied competitors
– Studied a wide range of firms in other industries
A Discipline EmergedA Discipline Emerged
Malcolm Baldrige National Quality Award incorporated it a a criterion
Many multi-step recipes emerged, all built around fundamentals..
– In “Benchmarking” by Camp, steps are Planning Analysis Integration Action Maturity
– American Productivity & Quality Center Planning Data collection Analysis Adapting & Improving
Two Types of BenchmarkingTwo Types of Benchmarking
"Metrics" give numerical standards against which a client’s own processes can be compared. Metric benchmarks are of the form:
– Finished-product first-pass yield of 97% – Scrap/rework less than 1% of sales – Cycle time less than 25 hours – Customer lead times less than 20 days – Productivity levels of $150,000 or more per employee – Plant-level ROA better than 15%
These metrics are usually determined via a detailed and carefully analyzed survey or interviews
Two Types of BenchmarkingTwo Types of Benchmarking
“Process Benchmarking" is generally higher-level and less numbers-intensive than metrics.
– Demonstrate how top performing companies accomplish the
specific process in question. – Takes form of research, surveys/interviews, and site visits. – By identifying how others perform the same functional task or
objective, firms gain insight and ideas they may not otherwise achieve.
– A true value-added feature of benchmarking
Benefits of process benchmarking are realized when pursuing a strategy of changed processes – making marked improvements in productivity, costs, and revenues
Best PracticesBest Practices
Tactics and strategies employed by highly regarded companies
Process benchmarking is particularly useful to develop BP, and our focus today
Fundamental tool for driving change in contemporary organizations
Why Benchmark?Why Benchmark?
When done well, benchmarking prominently reveals gaps
between the performance of the benchmarker and
that of a “best practices” leader, and
that leads to developing sustainable competitive advantage
Why Don’t More Businesses Do Traditional Multi-step Benchmarking?Why Don’t More Businesses Do Traditional Multi-step Benchmarking?
Takes too long often six to nine months Its costly The lessons learned may or may not get translated to practice
and improvement – Reports that get shelf space, not action– Cumbersome process to complete– Limits Flexibility - procedures oriented
Put Another Way…..Put Another Way…..
“Its like the mating of pandas: infrequent, clumsy and often ineffective”
Chris Bogan, President and CEO of Benchmarking and Consulting
Creative Benchmarking*Creative Benchmarking*
Start from the customers point of view List each step of the customers buying experience Next, determine which factors most influence customers perception of value at
each step Finally, identify companies that excel at each factor – without regard to their
industry!
* (derived from the work of Dawn Iacobucci and Christie Nordhielm, Kellogg Graduate School of Management)
Entering, Occupying and Exiting a Hotel RoomEntering, Occupying and Exiting a Hotel Room
Enter Lobby– Physical Environment
Functional, economical– Southwest Airlines, the Gap, Target, Sam’s Club
Attractive, luxurious– Virgin Atlantic, Lexus car dealerships
Greeting– Friendly, casual
Wal-Mart, Club Med– Cordial, professional
Nordstrom, Ritz-Carlton– Discrete
Alcoholics Anonymous
Entering, Occupying and Exiting a Hotel RoomEntering, Occupying and Exiting a Hotel Room
Check-In– Fast efficient service, no lines
Express aisles in supermarkets, Hertz– Guaranteed maximum wait
Bennigans Lunch Express– Pleasant Queue experience using pagers
Cheesecake Factory
Bellboy Carries Luggage– Attentive Employees
Benihana Japanese Restaurants– Festive, informal impression
Carnival Cruise Lines, Southwest– Sedate, formal impression
Management consulting firms, Tiffany
Entering, Occupying and Exiting a Hotel RoomEntering, Occupying and Exiting a Hotel Room
Use Shower– Good shower design
Professional sports teams– Reliable plumbing maintenance
SeaWorld
Get Advice on Restaurants– Intelligent agents who know restaurants
Electronic– Yahoo!
Employees– Travel agents
Agents who know their customers– Nordstrom
Entering, Occupying and Exiting a Hotel RoomEntering, Occupying and Exiting a Hotel Room
Breakfast– Room service food arrives promptly, at appropriate temperature
Delivery pizzerias– Courteous delivery personnel
UPS
Check-out– Quick, seamless departure, TV checkout
Sega children’s games Intuits TurboTax
Entering, Occupying and Exiting a Hotel RoomEntering, Occupying and Exiting a Hotel Room
Other areas for hotels to look for best practices….– Choose Hotel– Make Reservation– Travel to Hotel– Park Rental Car– Walk to Hotel– Go to Room– Look Around Room– Require Assistance of a hotel employee– Call Home– Use Business Equipment– Workout– Retrieve Car– Head to Airport– Follow-up
Fast-Cycle BenchmarkingFast-Cycle Benchmarking
Less elaborate than traditional multi-step
More tactical – What do concrete trucks and pizza have in common?
Useful to Identify specific operation problems or opportunities
Rather than simply copy from other firms, use the data to draw useful analogies and stimulate generation of creative ideas
– Mobil and the Penske race team.. gas stations aren’t race teams, but the methods for quick turnaround led to the Speedpass
Figure Out What You Are Looking ForFigure Out What You Are Looking For
Replicate and bring it in, or
Look for practices that can spark ideas, don’t just replicate what you find
Figure out where benchmarking fits in your toolchest, and make an informed decision about the outcome you are really after
Benchmark Companies Roughly at Your Own LevelBenchmark Companies Roughly at Your Own Level
College physics before high school math doesn’t make any sense…– Forget the world class company (unless you are one!)..find a firm of similar
size and situation as yours
Benchmark companies with similar business needs– Common concerns promote a more productive exchange or transportability
of the information learned
Study the Entire System Rather Than One TechniqueStudy the Entire System Rather Than One Technique
Avoid cursory, superficial looks
Mission statements, values and expectations of employees may be expressed as a document or pledge, but
The real value is in how the firm inculcates the meaning in employees, and how they put it to work in their daily practices
High performance systems only work when every single person in the organization is fully committed
When Benchmarking a System, Adapt What You Find, Don’t Just Copy ItWhen Benchmarking a System, Adapt What You Find, Don’t Just Copy It
Conditions are never identical
You can pick up critical variables and apply them …
Create a system – a comprehensive set of reinforcing practices that are responsible for success
Benchmark Subjective Measures and QualitiesBenchmark Subjective Measures and Qualities
Running a business today is far more of a creative process than in the past
Quantitative measures are useful, but not all encompassing
Using a creative process, benchmarking is a directional tool, not just a template
Remember Why You Are Doing ThisRemember Why You Are Doing This
Don’t get wrapped around the axle
Don’t confuse measures with actually delivering a result from the effort
Focus on the principles most applicable to your business
It is not an end in itself, it is but a means to an end
Step-by-Step - 1Step-by-Step - 1
You are the Process Owner
Start by Working Alone– List key ideas and best practices you believe your organization should
consider
– Brainstorm
– List and rate your ideas relative to your organizations mission and strategy
– Identify timeframes within which each idea and practice could realistically be implemented
Step-by-Step - 2Step-by-Step - 2
Share your analysis with other key members of your organization
– Have them create similar lists and incorporate them into a master list
– Discuss individual ratings– Develop consensus for importance and timing
Step-by-Step - 3Step-by-Step - 3
Identify extended team members that are motivated
– Work together to prepare list of top three ideas and best practices that should be implemented immediately
– Identify key benefits expected to be gained from each
– Develop the approach to be used to implement, problems expected, and how you will address them
Step-by-Step - 4Step-by-Step - 4
As Group, list top 3 ideas and best practices that should be considered to implement in the next year
– Identify and assign a key person to take the lead in analyzing implementation feasibility
Step-by-Step - 5Step-by-Step - 5
Meet regularly as a team– Assess progress and identify new ideas
– Discuss how to develop a culture of Entrepreneurship Innovation Accountability
– All to keep the creative energy flowing
Step-by-Step - 6Step-by-Step - 6
If the task seems too daunting
engage a facilitator from outside the immediate organization
to lead the process and
establish accountabilities for the team
Pitfalls When Not Done WellPitfalls When Not Done Well
Failure to consider organizational cultures or circumstances leads to a wrong direction
Insufficient preparation usually results in MBWAA (management by wandering around aimlessly!)
– What are you trying to learn about?
– Why do you want to learn it?
– What will you do with it to make your processes better once you have it?
Recognize You’re Not The BestRecognize You’re Not The Best
Not invented here
Humility and Determination is required to think outside the box
Utilize the best ideas of others to build upon
A What Without a How Can Do More Harm Than GoodA What Without a How Can Do More Harm Than Good
The “hows” underlying the numbers are essential
– They tell you if you are comparing “apples to apples”
– They provide clues to how to alter methods to suit your culture or circumstance
– They may reveal that a best-in-class measure isn’t cost effective, or that outsourcing may be in order
Measure What’s Needed, Not What’s EasyMeasure What’s Needed, Not What’s Easy
Broad measures of performance fail to give you actionable information
You don’t need a 1000 measures, just find the key indicators that serve as critical factors
– eg employee turnover
Finding balance is important..dont let a non-benchmarked metric go bad
– Call center volume vs. hi-margin cross selling
Find the Happy Medium in FrequencyFind the Happy Medium in Frequency
One shot benchmarking doesn’t gain continuing improvement
Too often (weekly, monthly) makes you reactionary slaves to the numbers
Speed of business is increasing, driving the frequency of benchmarking..things change quickly
Involve Implementers from the StartInvolve Implementers from the Start
Getting Buy-in is critical
Involvement from planning to implementation of the people who need to implement findings conveys ownership
Look for Benchmarking Opportunities EverywhereLook for Benchmarking Opportunities Everywhere
Internal and External
In and out of industry
Utilize Trade and other organizations (Runzheimer)
Delivering Excellent Service:Delivering Excellent Service:
Lessons from the Best Firms
Robert C. Ford
Cherrill P. Heaton
Stephen W. Brown
California Management Review Vol 44, NO. 1 Fall 2001
Ten Essential LessonsTen Essential Lessons
1. Base decisions on what the customer wants and expects2. Think and act in terms of the entire customer experience3. Continuously improve all parts of the customer experience4. Hire and reward people who can effectively build relationships with
customers5. Train employees in how to cope with their emotional labor costs6. Create and sustain a strong service culture7. Avoid failing your customers twice8. Empower customers to co-produce their own experience9. Get managers to lead from the front, not the top10. Treat all customers as if they were guests
ResourcesResources
Benchmarking for Best Practices: Winning Through Innovative Adaptation, Christopher Bogan and Michael English, McGraw Hill
www.best-in-class.com – Bogan’s website
The International Benchmarking Clearinghouse, www.apqc.org
www.runzheimer.com
The Business Gateway http://www.bgateway.com/index.asp
Reference Sources and ReadingsReference Sources and Readings
Is Benchmarking Doing the Right Work? David Stauffer, Harvard Business School Publishing 2003
Key Ideas and Best Practices Analysis, Lynda M. Applegate, Harvard Business School Publishing, April 2002
Creative Benchmarking, D. Iacobucci and Christie Nordhielm, Harvard Business Review, 2000
Delivering Excellent Service: Lessons from the best firms, Ford, Heaton and Brown, California Management Review, 2001
The ‘Spider’ DiagramThe ‘Spider’ Diagram
The spider diagram is a means of representing visually just how well or badly you are doing as a company
This process benefits from group input
Identify the 6-8 factors customers use to rate the company (and competitors) – Mark each leg of the spider with one of these factors.
Balanced ScorecardBalanced Scorecard
A new approach to strategic management was developed in the early 1990's by Drs. Robert Kaplan (Harvard Business School) and David Norton. They named this system the 'balanced scorecard'. Recognizing some of the weaknesses and vagueness of previous management approaches, the balanced scorecard approach provides a clear prescription as to what companies should measure in order to 'balance' the financial perspective.
The balanced scorecard is a management system (not only a measurement system) that enables organizations to clarify their vision and strategy and translate them into action. It provides feedback around both the internal business processes and external outcomes in order to continuously improve strategic performance and results. When fully deployed, the balanced scorecard transforms strategic planning from an academic exercise into the nerve center of an enterprise.
Kaplan and Norton describe the innovation of the balanced scorecard as follows:
"The balanced scorecard retains traditional financial measures. But financial measures tell the story of past events, an adequate story for industrial age companies for which investments in long-term capabilities and customer relationships were not critical for success. These financial measures are inadequate, however, for guiding and evaluating the journey that information age companies must make to create future value through investment in customers, suppliers, employees, processes, technology, and innovation."
The balanced scorecard suggests that we view the organization from four perspectives, and to develop metrics, collect data and analyze it relative to each of these perspectives: