Chapter 10 Benchmarking

TEC 5133 - TQS Benchmarking - Chp 10 1

Chapter 10

Benchmarking

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


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


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.


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


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


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.


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.


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.


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.


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 ONE’S 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


Types of Benchmarking

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


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.


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


Benchmarking Process Summary

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


Deciding What To Benchmark

Diversity in “Best of Class” levels Where are you?


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.


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.


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. Let’s 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). You’d have to look long and hard to find a better place to work.


Approaches to Benchmarking

AT&T 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



AT&T 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



AT&T 12-step Process (cont): Develop the benchmarking plan Analyze the data Integrate the recommended actions Take action Continue improvement



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



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


Example of Benchmarking Results

Norwest, the nation’s 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.


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


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


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


Learning the Data

Involves answering a series of questions Is there a gap between the organization’s

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?


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


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


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


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


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


Class Exercises

Identify the three main types of benchmarking?

What is a metric? How are metrics used?

Chapter 10 Benchmarking

Documents

Transcript of Chapter 10 Benchmarking