A review of the benchmarking process for best practice. Another tool for continuous improvement.

1. Michael Barger Benchmarking For Best Practice

2. What is Benchmarking? A tool for continuous improvement Compliments Lean and Six Sigma activities Lean and Six Sigma projects develop improved processes Benchmarking finds best processes already developed

3. Benchmarking’s Roots The term “benchmarking” was originally a land surveyor’s term used in topographical surveys A benchmark was a distinctive mark made on a rock, a wall, or building that served as a reference point in determining one’s current position and altitude This was a sighting point from which additional measurements could be made

4. Definitions Benchmarking: A strategic and analytic process of continuously measuring an organization’s products, services and practices against a recognized leader Best Practices: A process or a practice that causes performance as measured by a specific metric to be superior

5. Best Practices Benchmarking Best Practice Benchmarking is straight forward for an organization that already uses metrics to track processes Best Practice Benchmarking can be used instead of a Six Sigma Project or can compliment one

6. Types of Benchmarking Process benchmarking - investigates business processes The goal to identify the best practices from other benchmark firms Activity analysis used to benchmark cost and efficiency Often applied to back-office processes Financial benchmarking - performing comparative financial analysis to assess overall competitiveness and productivity Performance benchmarking - competitive analysis by comparing products and services against target firms

7. Types of Benchmarking (continued) Product benchmarking– focused on product improvement Can involve reverse engineering which is taking apart competitors products to find strengths and weaknesses Strategic benchmarking - observes how others compete Usually not industry specific Best to look at other industries Functional benchmarking - focus on a single function to improve its operation Complex functions such as human resources, finance, accounting and IT are unlikely to be directly comparable May need to focus on sub-processes to make valid comparison

8. The Four Phase Benchmarking Model Phase I: Plan Phase II: Do Phase III: Act Phase IV: Track

9. I: The Plan Phase

11. Select and prepare the benchmarking team

12. Identify benchmarking partners

13. Research information sources for best practices

14. Rank potential partners [1-50]

15. Select the final partners [1-5]

17. Motivation Justification: Where is the pain? Resources Return on investment Result of current path

18. Building the Team Establish the team and the role of the team to align with the overall goals and objectives Identify formal and informal roles Team building process

19. Team Building Process Careful member selection (skills, motivation, personality, availability) Establish Ground Rules: The team’s role and responsibilities The organization’s role and responsibilities Other key issues in the team building process Develop a Team Charter Adopt the characteristics of a high performing team

20. A High Performing Team Clear vision Full participation Clear Communication Process improvement plan Clearly defined roles Collaborative behavior Well-established Decision Process Established Norms Team Management Process

21. Team Introductions Name Job title & position Professional/Career Goals General Background information (hobbies, marital status, family information, sports etc.) Knowledge/experience with benchmarking activities Two-minute interviews & briefings by colleagues

22. Formal Roles Champion Team leader Team member Facilitator Senior management representative Information manager Technical expert

23. Team Process Roles Team Leader Facilitator Scribe Timekeeper Roles can be rotated

24. Team Documents Team Charter Working Agreement Code of Conduct Team Roles and Processes Communications Plan

25. Communication Plan Communication Plan is essential Establishes roles and responsibilities Addresses both internal and external information Documents how information will be communicated (meetings, issues, deliverables, resources, project status, reports, etc.) Documents to whom information will be communicated

26. Communication Plan (Continued) Informs the leaders and others on what to expect in terms of how the teams BM project may impact other projects-efforts within the organization Creates an a sense of shared commitment & ground rules within team Encourages a culture of openness, trust and acceptance, and provides an opportunity to exchange information, ideas and information in a timely manner

27. Frame the Problem Develop a problem statement Use an Ishikawa Diagram or 5 Why methods Establish a root cause Avoid presupposing the solution Establish a clear vision of the outcome Build consensus

28. Stakeholders Identify who the stakeholders are in your organization Reach a group consensus From the group consensus identify which stakeholders will support your benchmarking team Plan to brief these individuals on the approach, progress and the benchmarking findings at critical milestones These individuals can help determine the success of the benchmarking effort.

29. Develop an Information Briefing Vision Plan Methods Expected results

31. Dun and Bradstreet

32. Business lists

33. Personal knowledge

34. Current business partners

35. Rank potential partners [1-50]

36. Establish selection criteria

37. Poll or survey the potential partners

38. Score information against selection criteria

40. Partner Selection Criteria (Continued) Does the partner have similar customer expectations? Does the partner have comparable organization and divisional structures? Does the partner have comparable inputs (supplies & ingredients)? Is the partner part of a comparable market sector (public, private, government)? Does the partner have comparable logistics (similar set-up & workflow)?

41. II: The Do Phase

42. The Do Phase Determine the data collection plan Collect and analyze the data Train team members in skills & tools as necessary Determine performance gaps and strengths Analyze performance gaps & strengths Produce a benchmarking report

43. How will Data Be Collected? What metrics will provide the data to compare current and benchmarked processes? What kind of information or measurement is necessary? (accuracy, quality, customer satisfaction, speed, etc.) What data exists on the internal process? How should the team collect the internal data? Who on the team will collect the data?

44. How will the Data Be Collected? (Cont.) How will the team check its results? How much time will be needed to collect the data? How will the data be consolidated and analyzed? How will the satisfaction of the stakeholders be evaluated during the process? What method(s) should be used to collect data from the benchmarking partners?

45. Research Methods Internet-based information searches Interviews/focus groups Archival data Observation Surveys Selecting and establishing metrics Internal experts

46. Some Examples of Metrics Productivity, by transactions per unit Accuracy, by the error rates Speed, by the cycle time Product stability, by the number of engineering change orders per month Process financial contribution, by the value-to-cost ratio Product availability, by fill rate Product quality, by first-pass yield Capacity, by volume managed Service, by the on-time delivery

47. Considerations for Metrics Reliability - consistent measurements Validity – measuring the right things

48. Reliability of Metrics EUI* for Five Manufacturing Plants for Three Months *Energy Use Intensity (Kwh/sf/month) Note that the best plant cannot be determined. Analysis of Variance indicates that most of the variation is due to measurement error.

49. Validity of Metrics Does it make sense to the experts? Does it have a strong relationship with other metrics that are similar? Does it have weak or dissimilar relationships with metrics that are different? Is it free from other influences that might be causing the results?

50. Sample Considerations Sample Selection Nearest Neighbor Bias Success Bias Selection Bias

51. Sample Selection Sample should be representative Processes should be comparable Should represent a range of practices Objective: Discover what differentiates best from the rest

52. Nearest Neighbor Bias “There are known knowns; there are things we know we know. We also know there are known unknowns; that is to say we know there are some things we do not know. But there are also unknown unknowns -- the ones we don't know we don't know. And if one looks throughout the history of our country and other free countries, it is the latter category that tend to be the difficult ones.” -Donald Rumsfeld Look beyond organizations that you already know about. Include organizations that are unfamiliar, but relevant, if possible.

53. Success Bias Avoid selecting only highly successful firms A range of success is needed Differentiation is the key

54. Selection Bias We are often unaware that we are sampling the survivors This produces a biased sample The results may be misleading Finding results for organizations that did not survive can help understand what is differentiating a best practice

55. Data Collection Establish the purpose for the data Define the type of data to be collected Determine when and how will data be collected Determine who will collect the data

56. Control Charts Multi-attribute Utility Analysis Triangulation Errors to Avoid Check Sheets Histograms Pareto Analysis Scatter Diagrams Fishbone Analysis Process and Tools

57. Some Pitfalls to Avoid Small sample bias Attribution bias Correlation vs. causation Confirmatory Bias Groupthink Hidden Profiles

58. Small Sample Bias Conclusions drawn from a small sample of observations The observations may be outliers or random fluctuations Larger samples are needed to draw stable conclusions

59. Attribution Bias An incorrect conclusion that A is causing B because it stands out Example: innovation is attributed to a strategic planning process when the planning process has little to do with it Collecting more data and seeking the root causes can help avoid this bias

60. Correlation vs. Causation Two variables are related but A does not necessarily cause B Need to have a better root cause explanation than simply observing the relationship Seek out a clear rational explanation for the relationship to ensure causality

61. Confirmatory Bias Once an initial idea is accepted we tend to seek out only confirmatory information We avoid or disregard disconfirmatory information Can lead to invalid conclusions Facilitator and team should be aware of this tendency

62. Groupthink A feature of groups, particularly when they are cohesive Need a “devil’s advocate” to challenge too ready acceptance of ideas and conclusions Self-censorship and majority view does not necessarily indicate unanimous consensus

63. Hidden Profiles Team members often bring different information to meetings In many cases not all of the relevant information is shared Good facilitation can overcome this bias

64. Determine Gaps and Strengths Analyze the gaps/strengths in your current business process against your benchmarking partners and determine areas to target for improvement Do a performance gap analysis with a detailed comparison of the current process to the best-in-class List the best practices and the strengths where benchmarking partners display superior performance showing parity where there are no significant differences

65. Determine Performance Gaps (Cont.) Describe where your internal practices are superior to the benchmarked partners Produce the analysis necessary for the benchmarking report and prepare to make recommendations to the process owners based on that analysis Determine reasons for the gaps projecting any future competitive gaps

66. III: The Act Phase

67. ACT Phase - Implementation Develop an Action Plan for implementation Communicate the Action Plan Execute the Action Plan Recalibrate benchmarks

68. Transfer/Implementation Strategically and tactically plan how you will incorporate best practice within your organization and record, analyze and evaluate findings

69. Implementation & Transferability Plan Build awareness and communication Ensure that there are sufficient resources Build relationships between the source and the recipient of the knowledge Assure Timely implementation Link to a strategic plan

70. Develop an Action Plan Plan How to: Achieve desired results Measure the results Monitor feedback on the process changes Identify tasks necessary to implement the process changes Identify necessary training

71. Obtain Stakeholder Approval The following should be asked before implementation: Is the plan clear? Does the plan show how gaps in performance will be closed? Will it lead to sufficient changes? Has the management supported the team and recognized its accomplishments? Is the organization ready to implement successfully the changes to the process? Is the process in place to implement the plan? Are there sufficient resources for the plan?

72. Implementation of Best Practices Build awareness and communication Ensure sufficient time and resources Build relationships between the source and the recipient of the knowledge Adhere to a suitable schedule Strategically and tactically plan the implementation of the best practice Record, analyze, and evaluate findings

73. IV: The Track Phase

74. Track Phase – Monitoring the Implementation Review the Effectiveness of the Best Practice Implementation Modify the Action Plan as Necessary to Improve Implementation Review the Effectiveness of the Best Practice Continually Monitor Means for Improvement

75. Evaluation of Implementation Follow-up Surveys Quasi-Experimental Designs Single-group interrupted time series design Interrupted time series design with control groups

76. Recalibrate Benchmarking Need for advancement still exists Reset targets New values become internal measurements for the next benchmarking effort Establish a new process baseline Continue to monitor your current best practice against others

77. Monitor the Benchmarked Process Confirm strategic alignment Continually monitor customer satisfaction Determine if any additional world-class process has emerged

78. Repeat the Cycle Conduct ongoing visits with benchmarking partners Consider recalibrating annually Perform the steps of the benchmarking model