Benchmarking

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Benchmarking

  1. 1. BenchmarkingFarhad Zargari, MD, PhDdrzargari@gmail.comJuly 2010
  2. 2. Dr. Zargari
  3. 3. What is Benchmarking?  Benchmarking is the process of improving performance by continuously identifying, understanding, and adapting outstanding practices found inside and outside the organization.Dr. Zargari
  4. 4. What is Benchmarking?  Benchmarking is the process of comparing ones business processes and performance metrics to industry bests and/or best practices from other industries.  Why are others better ?  How are others better ?  What can we learn ?  How can we catch up ?  How can we become the best in our sector ?Dr. Zargari
  5. 5. What is Benchmarking? Benchmarking is Making Best Practices Your Daily Practice.Dr. Zargari
  6. 6. What is Benchmarking? (J. McEvilly-2008)  Benchmarking has three main features:Dr. Zargari
  7. 7. Benchmark  There are many benchmarks in the world including: Processes Design Training Service Rapid product developmentDr. Zargari
  8. 8. Dr. Zargari
  9. 9. Continuous and Breakthrough Improvement ly igh itive H t e mp tion Co tua Si Continuous Improvement Improvement Breakthrough Improvement ing hmark Benc rates Continuous Accele ion at Improvement Innov nge ha an d C TimeDr. Zargari
  10. 10. Background of Benchmarking  Benchmarking was originally defined by D.T. Kearns, the CEO of Xerox Corporation, in 1981 as the continuous process of measuring products, services, and practices against the toughest competitors or non-competitors who is the leader in their industry (Kolarik, 1995).Dr. Zargari
  11. 11. Dr. Zargari
  12. 12. Why Benchmarking?  Benchmarking gives us the chance of gaining:  Better Awareness of Ourselves (Us)  What we are doing  How we are doing it  How well we are doing it  Better Awareness of the Best (Them)  What they are doing  How they are doing it  How well they are doing itDr. Zargari
  13. 13. Why Benchmarking Performance Improvement Meeting Quality Creative Standards Thinking Benchmarking Innovation Keep Pace with In Science and Management Technology Methods Changes Cope with Meeting Competitive Customers Markets ExpectationsDr. Zargari
  14. 14. Three Major Benefits of BenchmarkingDr. Zargari
  15. 15. Dr. Zargari
  16. 16. Types of Benchmarking  On the basis of “What” is being compared with other organizations and “Who” is being compared with our organization, we can classify benchmarking. “What” is being Who” is being compared with other vs. compared with our organization organizationsDr. Zargari
  17. 17. Types of Benchmarking  On the basis of “What” is being compared with other organizations we have four main types. These four major types of benchmarking are evolutionary beginning with product, through to functional (performance), process and strategic benchmarking. Strategic Process Performance ProductDr. Zargari
  18. 18. Types of Benchmarking  On the basis of “Who” is being compared with our organization, we have these categories: Best of the Best Best in Class International Generic Internal vs. ExternalDr. Zargari
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  20. 20.  Many firms perform product benchmarking when designing new products or upgrades to current products. Providing an external perspective on opportunities to improve products, technology, manufacturing and support processes, the product development process, and engineering practices are core activities of product benchmarking.Dr. Zargari
  21. 21.  Performance benchmarking focuses on assessing competitive positions through comparing the products and services of other competitors. When dealing with performance benchmarking, organizations want to look at where their product or services are in relation to competitors on the basis of things such as reliability, quality, speed, and other product or service characteristics.Dr. Zargari
  22. 22.  Process benchmarking focuses on the day-to-day operations of the organization. It is the task of improving the way processes performed every day. Some examples of work processes that could utilize process benchmarking are the customer complaint process, the billing process, the order fulfillment process, and the recruitment process (Bogan, 1994).Dr. Zargari
  23. 23.  Wisdom from “Texas Instruments”: “Unless you change the process, why would you expect the results to change”Dr. Zargari
  24. 24.  Strategic benchmarking deals with top management. It deals with long term results. Strategic benchmarking focuses on how companies compete. This form of benchmarking looks at what strategies the organizations are using to make them successful. This is the type of benchmarking technique that most Japanese firms use (Bogan, 1994). This is due to the fact that the Japanese focus on long term results.Dr. Zargari
  25. 25.  This is concerned with comparing different companies strategies and assessing the success of those strategies in the marketplace. Analyzes the strategies with particular reference to:  strategic intent  core competencies  process capability  product line  strategic alliances  technology portfolioDr. Zargari
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  27. 27.  This refers to the analysis and comparison of one or more units within the same organization. It is often the case when organizations have an in- house best practice area. Sharing opinions Advantage: between Easier to implement departments within Easier to access data the same Disadvantage: organization. External ideas blockedDr. Zargari
  28. 28.  Where examples of good practices can be found in other organizations and there is a lack of good practices within internal business units. Comparison with external organizations leads to discovery of new ideas, methods, products and services. Advantage: The gap between Helps to measure one’s own internal and external performance Helps to search for best practices practices displays the way where to change Disadvantage: and if there is any need Takes time Requires support to change. Legal/ethical issues Industrial espionageDr. Zargari
  29. 29.  Comparisons of business process or functions that are very similar, regardless of industry.Dr. Zargari
  30. 30.  Best-In-Class  Generally, initiator firms will choose to benchmark the best-in-class.  Best-in-class refers to those firms or organizations that have been recognized as the best in an industry based on some criterion.  Objective  The objective of best-in-class is to provide a basis for continual improvement.Dr. Zargari
  31. 31.  Best-of-the-Best  After becoming a best-in-class firm, it may be difficult to gain new insight and information from direct competitors.  Therefore, the next level of improvement is called best- of-the best or best-in-the-world. Don’t limit your effort to players inside the industry only!Dr. Zargari
  32. 32. Dr. Zargari
  33. 33. Types of Benchmarking  There are several other classifications for benchmarking, based on partner type, adoption level and target process, etc. Following are the most used types:  Internal  External  Competitive  Functional  GenericDr. Zargari
  34. 34.  Competitive benchmarking is the most difficult type of benchmarking to practice. For obvious reasons, organizations are not interested in helping a competitor by sharing information. This form of benchmarking is measuring the performance, products, and services of an organization against its direct or indirect competitors in its own industry. Competitive benchmarking starts as basic reverse engineering and then expands into benchmarking.Dr. Zargari
  35. 35.  Competitive Benchmarking is the continuous measurement of the company’s products, services, processes and practices against the standards of best competitors and other companies who are recognized as leaders. It is also important to remember when using competitive benchmarking that the goal is to focus on your direct competitors and not the industry as a whole.Dr. Zargari
  36. 36.  Functional benchmarking - a company will focus its benchmarking on a single function to improve the operation of that particular function. Complex functions such as Human Resources, Finance and Accounting and Information and Communication Technology are unlikely to be directly comparable in cost and efficiency terms and may need to be disaggregated into processes to make valid comparison.Dr. Zargari
  37. 37.  Benchmarking, originally described as a formal process by Rank Xerox, is usually carried out by individual companies. Sometimes it may be carried out collaboratively by groups of companies (e.g. subsidiaries of a multinational in different countries). One example is that of the Dutch municipally-owned water supply companies, which have carried out a voluntary collaborative benchmarking process since 1997 through their industry association.Dr. Zargari
  38. 38.  Performing a financial analysis and comparing the results in an effort to assess your overall competitiveness and productivity.Dr. Zargari
  39. 39. Dr. Zargari
  40. 40. TOP-10 Benchmarking Organizations Organization Ranking Xerox 1 U.S. Army 2 Corning 3 Abu Dhabi Food Control Authority 4 Internal Revenue Service 5 United Technologies 6 DynMcDermott 7 Dubai Municipality 8 Dubai Chamber of Commerce and Industry 9 Allergan 10Dr. Zargari
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  42. 42. General Benchmarking Process Plan Analyze •Select Process •Collect Data •Understand Process •Establish the gap •Select Partners •Identify process changes •Target future goals Act •Communicate actions •Develop improvement plan •Implement •Review ProgressDr. Zargari
  43. 43. 1. IDENTIFY WHAT IS TO BE BENCHMARKED A Benchmarking Process PLANNING 2. IDENTIFY COMPARATIVE COMPANIES 3. DETERMINE DATA COLLECTION METHOD AND COLLECT DATA 4. DETERMINE CURRENT PERFORMANCE "GAP" ANALYSIS 5. PROJECT FUTURE PERFORMANCE LEVELS 6. COMMUNICATE BENCHMARK FINDINGS AND GAIN ACCEPTANCE INTEGRATION 7. ESTABLISH FUNCTIONAL GOALS 8. DEVELOP ACTION PLANS 9. IMPLEMENT SPECIFIC ACTIONS AND ACTION MONITOR PROGRESS 10. RECALIBRATE BENCHMARKS MATURITY • LEADERSHIP POSITION ATTAINED • PRACTICES FULLY INTEGRATED INTO PROCESSDr. Zargari
  44. 44. Xerox Experience-1 (Brogan, 1994)  The Xerox of today is not the Xerox of the sixties and seventies. During that time period the organization experienced market erosion from competitors, primarily Japanese. These competitors were marketing higher quality products in the United States at the same price or lower as Xerox. Xerox found that the Japanese were able to assemble quality products at a low price. This was hard for Xerox to grasp because they were the first to develop the photocopy and their name had come to be synonymous with photocopies.Dr. Zargari
  45. 45. Xerox Experience-2 (Brogan, 1994)  How could the Japanese be beating them at their own game? Xerox found that they had to regroup. In doing this they made competitive benchmarking a fundamental part of their operations. Xerox began to study other organizations within and out of their industry. By 1983, Xerox had bench marked more than 230 process performance areas in their operation. Identifying the best processes used by others, Xerox adapted them for their own use. This is how they regained their core competency and strategic advantage in the photocopying industry.Dr. Zargari
  46. 46. Dr. Zargari
  47. 47. Benchmarking Costs  The three main types of costs in benchmarking are: Database CostsDr. Zargari
  48. 48. Dr. Zargari
  49. 49. Benchmarking PitfallsDr. Zargari
  50. 50. Benchmarking PitfallsDr. Zargari
  51. 51. Give Benchmarking a Chance - It’s Worth It.Dr. Zargari

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