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Benchmarking
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- 2. What is Benchmarking •A method for identifying and importing best practices in order to improve performance • The process of learning, adapting, and measuring outstanding practices and processes from any organization to improve performance • Benchmarking is the process of improving performance by continuously identifying, understanding, and adapting outstanding practices found inside and outside the organization.
- 3. Benchmarking isthe process of continuously measuring & comparing one’s organisational processes against comparable processes in leading organisations, to obtain information, that will help the organisation, identify & implement improvements. (Kaiser Associates) Benchmarking is an essential part of TQM for continuous improvement Search for industry best practices that lead to superier performance. (Robert Camp-Xerox) A standard of excellence or achievement against which other similar things mustbe measured or judged. (sam Bookhart - Dupont)
- 4. Benchmarking Features Continuous methodof measuring and comparing a firm’s business processes against those of another firm. Discover performance gaps between one’s own processes and those of leading firms. Incorporate leading firm’s processes into one’s own strategy to fill the gaps and improve performance. Benchmarking has three main features:
- 5. BENCHMARKING / BENCHMARKS BENCHMARKS Measurements to guage the performance of a function /operation. Best practices benchmarking :- Metrics Benchmarks Operating Statistics Process Benchmarking Practices BENCHMARKING Ongoing search for best practices that produce superior performance when adapted & implemented in organisation.
- 7. Why Benchmarking? • Survivallies in emulating best and not in lagging behind. Bench marking is time and cost efficient because it involves imitation and adaptation rather than pure invention. Prevents the “Re-inventing the wheel”.
- 8. Why Benchmarking? • Benchmarkinggives 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 it
- 9. Why Benchmark • Identifyopportunities to improve performance • Learn from others’ experiences • Set realistic but ambitious targets • Uncover strengths in one’s own organization • Better prioritize and allocate resources
- 10. Benchmarking Becoming More Common •There are three reasons that benchmarking is becoming more commonly used in industry (Boxwell, 1994). – Benchmarking is a more efficient way to make improvements. Managers can eliminate trials and errors. – Benchmarking speeds up organization’s ability to make improvements. Today, time is of the essence. – Benchmarking has the ability to bring your performance up as a whole significantly.
- 11. Three Major Benefitsof Benchmarking Product and Process Improvement Cost Reduction Competitive Strategy
- 12. Product and ProcessImprovement • In general, by implementing benchmarking activity, organizations can improve their operation process (Slack et al, 2001). For instance, South African Breweries plc had encountered the problem of poor employee skill, which is a significant difficulty to implement the world-class processes. As such, they decided to benchmark strategy from an organization in Geneva. They, consequently, attained the solution (Slack et al, 2001).
- 13. Cost Reduction • Benchmarkingfacilitates a reduction of operation costs (Delpachitra et al, 2002). For example, benchmarking helped Australian Financial Institutes to reduce operation costs by outsourcing some operation and alternating distribution channels (Delpachitra et al, 2002).
- 14. Competitive Strategy • Themost significant benefit from benchmarking is that it helps the organization planning and implementing competitive strategies (Kolarik, 1995). In other words, as benchmarking provides an ability to compare and learn from the best practices in any particular industry, organizations can develop their system to achieve competitive advantages or eliminate their competitive disadvantages.
- 15. Competitive Strategy • Buildcore competencies that will help to sustain competitive advantage – Access to a variety of markets – Perceived benefit of product or service will increase – Product or service is hard to imitate – Low-cost leader • Target specific shift in strategy – Entering new markets – Developing new products • To create a firm more adaptable to change
- 16. BENCHMARKING PROCESS Determine Data collection Method& collect data Recalibration of BM Identify What is to be Benchmarked Identify World class Companies for BM Establish “GAP” & analyse Set targets to bridge the GAP Communicate to all level Analyse driving forces Analyse resisting forces Establish Action plan Implementation & monitoring Planning Analysis Integration Action
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- 18. 1. Planning • Determinethe purpose and scope of the project • Select the process to be benchmarked • Choose the team • Define the scope • Develop a flow chart for the process • Establish process measures • Identify benchmarking partners
- 19. 2. Collecting Data •Conduct background research to gain thorough understanding on the process and partnering organizations • Use questionnaires to gather information necessary for benchmarking • Conduct site visits if additional information is needed • Conduct interviews if more detail information is needed
- 20. 3. Analysis • Analyzequantitative data of partnering organizations and your organization • Analyze qualitative data of partnering organizations and your organization • Determine the performance gap
- 21. 4. Improving Practices •Report findings and brief management • Develop an improvement implementation plan • Implement process improvements • Monitor performance measurements and track progress • Recalibrate the process as needed
- 22. Commonly Benchmarked Performance Measures FinancialRatios Productivity Ratios Customer-related Results Operating Results Human Resource Measures Quality Measures Market Share Data Structural Measures
- 23. Commonly Benchmarked Performance Measures FinancialRatios: Such as ROA or ROI are probably the easiest to obtain and compare. Productivity Ratios: Are useful in measuring the extent to which a firm effectively uses the scarce resources that are available to it.
- 24. Commonly Benchmarked Performance Measures Customer-relatedResults: Include customer satisfaction and comparisons of customer satisfaction relative to competitors. Operating Results: Might include cycle times, waste reduction measures, value- added measures, and lead time.
- 25. Commonly Benchmarked Performance Measures HumanResource Measures: May include employee satisfaction measures, training expenditures, turnover, and absenteeism. Quality Measures: These can include conformance-based quality information such as reject rates, capability information, performance information, or other measures.
- 26. Commonly Benchmarked Performance Measures MarketShare Data: Includes shares in the different markets served by the firm. Structural Measures: Include objectives, policies, and procedures followed by a firm.
- 28. Benchmarking Costs • Thethree main types of costs in benchmarking are: B Time Costs Visit Costs Database Costs
- 29. Benchmarking Costs • TimeCosts - Members of the benchmarking team will be investing time in researching problems, finding best practice companies to study, visits, and implementation. This will take them away from their regular tasks for part of each day so additional staff might be required.
- 30. Benchmarking Costs • VisitCosts - This includes hotel rooms, travel costs, meals, a token gift, and lost labor time.
- 31. Benchmarking Costs • BenchmarkingDatabase Costs - Organizations that institutionalize benchmarking into their daily procedures find it is useful to create and maintain a database of best practices and the companies associated with each best practice now.
- 33. Benchmarking Ethics • Sincethe concept of benchmarking can lead to unscrupulous and sometimes unethical behavior, the SPI Council on Benchmarking and the International Benchmarking Clearinghouse have established a general code of conduct (Thompson). The code is as follows:
- 34. Benchmarking Code ofConduct Do not ask competitors for sensitive information. Do not make them feel that if the data is not shared the benchmarking process will end. If you ask the company for sensitive and valuable information, be prepared to give the same in return. Use an ethical and unbiased third party such as an ombudsman or legal advisor for direct competitor advice. Treat any information obtained from a benchmarking partner as privileged or “top secret” information. Don't give away any information or potential trade secrets without permission.
- 35. Benchmarking Code ofConduct When benchmarking with competitors, set up certain rules that state that things will not be discussed that give either company a competitive advantage. Establish the purpose is for both parties to improve or gain benefit. Costs should not be discussed. Consult with a legal advisor if any information gathering procedure is in doubt. Do not misrepresent yourself or your organization as being someone or something that you are not. Show that you are committed to the effectiveness of the process. And in doing so maintain a professional and honest relationship with your benchmarking partners.