This document provides an overview of benchmarking, including definitions, types of benchmarking, benchmarking methodology, sources of information for benchmarking, benchmarking compliance considerations, and examples of performance measures that can be used for various business functions and processes. Benchmarking is defined as the process of continually searching for best practices and implementing improvements to become best-in-class. The document outlines various types of benchmarking and a six-step benchmarking methodology. It also discusses sources of benchmarking information and compliance considerations. Finally, it provides examples of performance measures that can be used for areas like customer service, products, business processes, support functions, technology, costs, and more.

1. ONSIDERATIONS
CUSTOMER & COMPETITIVE INTELLIGENCE FOR
PRODUCT, PROCESS, SYSTEMS & ENTERPRISE EXCELLENCE
C
DEPARTMENT OF STATISTICS
DR. RICK EDGEMAN, PROFESSOR & CHAIR – SIX SIGMA BLACK BELT
REDGEMAN@UIDAHO.EDU OFFICE: +1-208-885-4410
ENCHMARKING
B

2. Customer Expectation Dilemma
Time
Performance
Expectations
Continuous Improvement
Performance Gap

3. Benchmarking
Benchmarking is the process of continually searching for the
best methods, practices and processes, and either adopting
or adapting their good features and implementing them to
become the “best of the best.”
How is benchmarking used?
• Compare performance of an existing process against other
companies’ best-in-class practices
• Determine how those companies achieve their performance
levels
• Improve internal performance levels
Use benchmarking both for comparison of performance as well as to
understand the potential for improvement

4. Types of Benchmarking
Competitive Benchmarking
Functional Benchmarking
Internal Benchmarking
Product Benchmarking
Process Benchmarking
Best Practices Benchmarking
Strategic Benchmarking
Parameter Benchmarking

5. Competitive
• Industry leaders
• Top performers with
similar operating
characteristics
Functional
• Top performers
regardless of industry
• Aggressive innovators
utilizing new
technology
Internal
• Top performers
within company
• Top facilities
within company
Best Practice
Overlap
Benchmarking Methodology

6. Benchmarking Methodology
Checklist
1. Identify Process to Benchmark
 Select process and define defect and opportunities
 Measure current process capability and establish
goals
 Understand detailed process that needs
improvement

7. Benchmarking Methodology
2. Select Organizations to Benchmark
 Outline industries/functions which perform your
process
 Formulate list of world class performers
 Contact the organization and network through to
key contact

8. Benchmarking Methodology
3. Prepare for the Visit
 Research the organization and ground yourself
in their processes
 Develop a detailed questionnaire to obtain
desired information
 Set up logistics and send preliminary documents
to organization

9. Benchmarking Methodology
4. Visit the Organization
 Feel comfortable with and confident about
your homework
 Foster the right atmosphere to maximize
results
 Conclude in thanking organization and ensure
follow-up if necessary

10. Benchmarking Methodology
5. Debrief and Develop an Action Plan
 Review team observations and compile report of
visit
 Compile list of best practices and match to
improvement needs
 Structure action items, identify owners and
move into Improve phase

11. Benchmarking Methodology
6. Retain and Communicate
 Report out to business management and 6σ
leaders
 Post findings and/or visit report on local
server/6σ bulletin board
 Enter information on benchmarking project
database

12. Library Database Internal Reviews
Internal Publications Professional Associations
Industry Publications Special Industry Reports
Functional Trade Publications Seminars
Industry Data Firms Industry Experts
University Sources Company Watches
Newspapers Advertisements
Newsletters Original Research
Customer Feedback Supplier Feedback
Telephone Surveys Inquiry Service
Networks World Wide Web
Sources of Information

13. Benchmarking Compliance
Policy regarding benchmarking protocol should be
communicated to all employees involved, prior to
contacting external organizations. Guidelines should
address the following areas:
 Misrepresentation – do not misrepresent your identity
in order to gather information
 Information requests – a request should be made only
for information your organization would be willing to share with
another company
 Sensitive/proprietary information – avoid direct
benchmarking of sensitive or proprietary information
 Confidentiality – treat all information as confidential

14. Benchmarking Compliance
 Avoiding inappropriate communication and
contacts with competitors.
 Never propose, enter, or engage in a discussion
related to any agreements with a competitor to fix
prices, in terms or conditions of sale, costs, profit
margins, or other aspects of the competition.
 Keep communications with competitors to a
minimum – make sure there is a legitimate
business reason for all such communications

15. Benchmarking
Best Practices, Processes & Products

16. Benchmarking
(A) The process of identifying and learning from best
practices anywhere in the world is a powerful tool in the quest
for continuous improvement.
(B) The systematic process of searching for best practices,
innovative ideas, and highly effective operating procedures that
lead to superior performance.
Learning by borrowing from the best and adapting their
approaches to fit your own needs is the essence of
benchmarking. It has broad applications in problem solving,
planning, goal setting, process improvement, innovation,
reengineering, and strategy setting. It is a fundamental
business skill that supports quality excellence.

17. Benchmarks & Benchmarking:
Ideas & Definitions
 Benchmarking: is the on-going search for best practices that produce
superior performance when adapted and implemented in one’s own
organization.
 Emphasis: On-going outreach activity
 Goal: Identification of best operating practices
 When Implemented: Produces superior performance.
 Benchmarking: is the actual process of investigation and discovery that
emphasizes the operating procedures as the things of greatest interest and
value.
 Benchmarks: are measurements to gauge the performance of a function,
operation, or business relative to others.

18. Best Practices - the Ends
Enablers - the Means to the Ends
SOFT MEDIUM HARD
Training
Communication
Empowerment
Attitude
Management
Involvement
Goals & Objectives
Sequence
Controls
Measures
Policies &
Procedures
Plant
Suppliers
Money
Technology
Equipment

19. Benchmarks & Benchmarking:
Managing Change
• Best Practices Benchmarking can be described as
the process of seeking out and studying the best internal and
external practices that produce superior performance.
– Don’t reinvent what others have learned to do better!
– Borrow shamelessly!
– Adopt, adapt, advance!
– Imitate creatively!
– Adapt innovatively!

20. Process Benchmarking
• Process benchmarking focuses on discrete work processes
and operating systems, such as the customer complaint
process, the order-and-fulfillment process, or the strategic
planning process.
• Process benchmarking seeks to identify the most effective
operating practices from many companies that perform
similar work functions.
• Its power lies in its ability to produce bottom-line results. If
an organization improves a core process, for instance, it can
then quickly deliver process improvement

21. Performance Benchmarking
• Performance benchmarking enables managers to assess
their competitive positions through product and service
comparisons.
• Performance benchmarking usually focuses on elements
of price, technical quality, ancillary product or service
features, speed, reliability, and other performance
characteristics.
• Reverse engineering, direct product or service comparisons,
and analysis of operating statistics are the primary techniques
applied during performance benchmarking.

22. Strategic Benchmarking
• Strategic benchmarking examines how
companies compete and is seldom industry-
focused. It roves across industries seeking to
identify the winning strategies that have enable
high-performing companies to be successful in their
marketplaces.
• Strategic benchmarking influences the longer-
term competitive patterns of a company.
Consequently, the benefits may accrue slowly.

23. Benchmarking
Code of Conduct

24. Benchmarking Whys & Hows
• Benchmarking represents a versatile process management
tool that helps organizations identify and understand what
constitutes best operating practices.
• Benchmarks are the operating statistics or measures that
define the achievement level of any given practice or system.
• These are not in and of themselves enough since they
provide no insight into the root causes of performance
differences.
• A flexible set of benchmarks reflects full process or
system capabilities. Performance indicators may include
dimensions such as cost, productivity, cycle time, yields,
error rates, waste and turnover.

25. Range of Benchmarks
FOCUS Benchmark Levels Type Improvement
Benefit
STRATEGIC Best-in-World 7 Generic Processes 30%
* Product / Services
* Business Processes
* Business Function
Best-in-Country 6 Functional Areas 30%-40%
PERFORMANCE Industry Leader 5 Direct Competitor 15%-20%
* Customer Satisfaction Norm 4
* Output : Standard 3
--Products & Services
PROCESS Best-in-Company 2 Internal 15%
* Practices & Capability
* Inputs:
-- Material/Supplier Baseline 1

26. Benchmarking Architecture
Performance Measures

27. Dashboard of New Performance
Measures
Capital
Expenditures
Costs
Profitability
Cashflow
Sales
Liabilities
Assets
Debt
Quality
Customer
Retention
Training
Customer
Satisfaction
Defect
Rates
Cycle
Time
Referral
Rates
Employee
Retention

28. Designing Successful Benchmarks:
Effective Performance Benchmarks Reflect the Most Important
Operating Dimensions of a Business Process, System, or Function.
• MEASUREMENT FOCUS
– Determine where in a work area or process that value for the customer is created;
– Determine where value is detracted through high costs, errors, rework, or accidents;
and
– Target benchmarks in areas where performance diverges from designated
standards, or where variation above and below standards is greatest.
• MEASUREMENT PERSPECTIVE
– Leading indicators foreshadow or anticipate future system outcomes. Leading
indicators are thus “proactive” or “preventative”.
– Lagging indicators such as traditional financial measures are “reactive” or
“descriptive” of the actual results of a system or process in a given time period.
– Traditional companies employ lagging indicators while high-performance
companies embrace both types since leading indicators intervene
upstream.

29. • MEASUREMENT CONTROL
– People are always the principal factor affecting the degree of measurement control.
Managers fail at performance improvement when they evaluate individual or system
performance using benchmark measures that are uncontrollable by the people
overseeing the process.
– Therefore benchmarks that are designed for performance improvement must be
crafted to reflect the individual level of authority, responsibility, and skills of those
people expected to work with the benchmarks.
• DATA COLLECTION
– After defining performance measures, managers must be able to readily collect the
data from which performance benchmarks are constructed.
– Many organizations develop interesting performance measures only to discover that
they currently do not collect the required information and do not have the resources
to do so.
– The best performance benchmarks can be collected without excessive investment of
time, systems, staff, or capital.
Designing Successful Benchmarks

30. A Benchmark Design Architecture
The first step in designing a performance
benchmark system is to create measures that will
enable management to achieve the organization’s
strategic objectives.
The second step in designing a benchmark
architecture requires managers to create an
agreed upon vocabulary describing performance
measurement in your organization.
The third step is to develop plans to collect,
process, and analyze the performance measures.

31. Designing a Benchmark Architecture:
Ten Generic Benchmark Categories
Customer-service performance;
Product / service performance;
Core business process performance;
Support processes and services performance;
Employee performance;
Supplier performance;
Technology performance;
New product/service development and innovation performance;
Cost performance;
Financial performance.

32. Customer-Service Performance Measures:
The Best Customer-Related Measures Come from Objective and
Valid Data Collected Directly from Customers
 Customer-service performance measures typically probe
organizational performance in the following areas:
 Overall Customer Satisfaction with Products & Services;
 Customer Evaluations of Sales & Service Representatives;
 Customer Assessments of Your Organization’s Understanding of Customer Needs;
 Customer Ratings of How Clearly Your Organization Communicates Cost Information
& How Well the Organization Suggests Customer Solutions
 Customer Appraisals of Delivery Timeliness;
 Customer Impressions About the Usefulness of Your Organization’s Product &
Service Documentation;
 Customer Feelings Concerning How Easy it is to Conduct Business with Your
Organization;
 The Value Customers Place on Your Organization’s Products & Services.

33. Product/Service
Performance Measures
Product & Service Performance Benchmarks
Include Measures of:
Accuracy, Reliability, Timeliness, Order Ease, Delivery,
Packaging, Ease of Assembly & Use, Documentation, Billing,
After-Sales Service, and Effective Complaint Management.
These May Also Include:
Warranty Exchanges and Returns,
Unit Productivity & Cost, Cycle Time for Key Intervals,
and Market Share.

34. Business Process Performance Measures
A simple process analysis model can help identify your
organization’s most important workflows. This model
reveals that all work can be viewed in
four sequential stages:
1. Inputs (including those from both employees & suppliers);
2. Processes (including internal operations & support services);
3. Outputs (your organization’s products, services, and
documentation); and
4. Customer Satisfaction.
In the following graphic (the input-output process model) we begin with
inputs that can be tangible (such as supplies, raw materials, and
component products) or intangible (such as information) which are
delivered to the work process, which transforms them into some final
output which might be a product or service. The goal of the output is to
create satisfied and loyal customers.

35. Input-Output Process Model
Products
Services
Documentation
Results
Design of
Products/
Services
Production of
Products
Performance
of Services
Delivery of
Products/
Services
People
Raw Materials
Components
Customer
Requirements
Capital
Customer
Needs
Satisfied
Customer
Problems
Solved
Customer
Requirements
Met
Inputs Processing Outputs Customers

36. Common Performance Measures of
the
Input-Output Process Analysis Model
Enhanced customer value - often observed through added product features or
reduced costs;
Production costs, frequently described as cost per hundred, thousand, or
million;
Responsiveness and/or process cycle time;
Defect, error, waste, problem, or failure rates, often formatted as defects per
1000 or million output units;
Productivity & resource utilization, often reflected in transactions per person,
inventory turn rates, or projects operating within budget;
Public safety and / or legal responsibilities, sometimes observed in accident
rates, employee absentee rates, regulatory citations, or litigation rates.

37. Examples of Key Business Processes
IBM Xerox British Telecom
Marketing Information Capture;
Marketing Selection;
Requirements;
Hardware/Software Development;
Service Development;
Production;
Customer Fulfillment/ Relationship;
Service Customer Feedback;
Marketing;
Solution Integration;
Financial Analysis;
Plan Integration;
Accounting;
Human Resources
IT Infrastructure
Customer Engagement;
Inventory Mgt. & Logistics;
Product Design / Engineering;
Product Maintenance;
Technology Maintenance;
Production & Operations Mgt.
Marketing Management;
Supplier Management;
Information Management;
Business Management;
Human Resources Management;
Leased & Capital Asset Mgt.
Legal;
Financial Management.
Direct Business;
Plan Business;
Develop Processes;
Manage Process Operations;
Provide Personnel Support;
Market Products & Services;
Provide Customer Service;
Manage Products & Services;
Provide Consultancy Services;
Plan the Network;
Operate the Network;
Provide Support Services;
Manage Information Resource;
Manage Finance;
Provide Technical R&D

38. Support Processes / Services
Performance Measures
Support services are activities and operations that
enable your organization’s core production and
delivery processes.
They include functions such as finance, software
services, marketing, public relations, information
services, purchasing, legal services, and facilities
management.
Examples for various areas follow.

39. Performance Measure Examples
Accounting
Percentage of Late Payments
Time to Respond to
Customer Requests
Number of Billing Errors
Number of Payroll Errors
Purchasing
Purchase Order Errors
Downtime Due to Shortages
Excess Inventory
Cycle Time (from start of
purchase to receipt in-house)
Information Services
Number of Errors / Code Line
Percent of Reports Received
on Schedule
Number of Rewrites
Number of Errors Found After
System Accepted by Customer
Product Engineering
Project Completion Cycle Times
Engineering Changes/ Document
Number of Errors Found During
Design Review
Number of Errors Found in
Design Evaluation
Quality Control
Percentage of Lots Rejected
in Error
Number of Engineering Changes
Detected After Design Review
Errors in Reports
Cycle Time for Corrective Action
Marketing
Accuracy of Forecast
Assumptions
Number of Incorrect
Order Entries
Overstocked Field Supplies
Contact Errors

40. Employee Performance Measures
Employee Performance Benchmarks Cover a Wide
Range of Employee Activities that May Include:
Employee Development; Employee Education;
Employee Empowerment; Employee Recognition;
Employee Recruitment; Employee Absenteeism;
Employee Turnover; Employee Grievances;
Employee Safety/Accidents; Employee Involvement;
Employee Morale; Employee Performance Appraisal;
Employee Promotion;
Employee Succession Planning.

41. Technology & Innovation Related
Performance Measures
Technology-related measures reflect the productivity,
deployment, and effective use of computers and other
technology in an organization.
Measure range broadly from processing speeds,
deployment percentages, network down time and error
rates.
In turn, innovation-related performance indicators reflect
issues such as product development times, employees’
suggestion rates, new product sales as a percent of total
sales, and process improvement rates.

42. Supplier Performance Measures
Supplier performance measures help an organization
qualify or certify the vendors with which it will work.
These benchmarks then help the organization monitor
and manage on-going supplier performance.
Supplier performance metrics often include measures of
cost, quality, reliability, speed or responsiveness, agreed-
upon service levels, and product specifications.

43. Cost Performance Measures
Cost performance measures are broad and flexible. They
include balance sheet liability requirements and
information drawn from cost centers throughout the
organization.
Companies can develop useful benchmarks by producing
cost ratios for specific products, services, organizational
units, processing steps, inputs, and labor.
A mortgage company, for instance, might use such
measures as cost per loan application, cost per loan
processing,human resources cost per loan, data processing
costs per 100 bills, and service cost per loan.

44. Financial Performance Measures
Financial measure include performance indicators
required by stock exchanges, security analysts, public
accounting firms, regulatory agencies, and other
organizations that may oversee reporting standards in
your organization’s industry.
Many of these measures make up the items on income
statements, balance sheets, and cash flow statements,
including measures such as revenue, gross profit,
operating income, net income, earning per share, long-
term debt, book value, cash flow, debt/equity ratio,
days/ receivables ratio, current ratio, and so on.

45. Benchmarking
Critical Success Factors
Adopt, Adapt, and Advance: A well-designed
performance measurement and benchmark system is
essential, but there are other critical success factors:
 Senior management support;
 Benchmarking training for the project team;
 Useful information technology systems;
 Cultural practices that encourage learning;
 Resource dedication - especially in the form of
time, funding, and useful equipment.

46. Selected
Benchmarking Processes

47. A Generic Benchmarking Process:
The Simple, Consensus Model
From the Strategic Planning Institute’s (SPI)
Council on Benchmarking has developed the
following model:
1. Launch
2. Organize
3. Reach Out
4. Assimilate
5. Act

48. Xerox 12-Step Benchmarking Process
Phase 1: Planning
1. Identify what to benchmark;
2. Identify comparative companies;
3. Determine data collection method & collect
data.
Phase 2: Analysis
4. Determine current performance gap;
5. Project future performance levels.
Phase 3: Integration
6. Communicate finding and gain acceptance;
7. Establish functional goals.

49. The Xerox 12-Step Benchmarking Process
(continued)
Phase 4: Action
 8. Develop action plans;
 9. Implement specific actions & monitor progress;
10. Recalibrate benchmarks.
Phase 5: Maturity
11. Attain leadership position ;
12. Fully integrate practices into processes.

50. Attributes of Benchmarking Studies:
Success vs. Failure
Success Failure
Process Owner Involvement
Customer Driven Objectives
Linked to Strategic Plan
Best Practices & Enablers
Consider Cultural Attributes
Disciplined Methodology
Quantum Change
Clear Project Life Cycle
Integrated with Existing
Quality Efforts
Sponsorship Uncertain
Amorphous Objectives
No Strategic Integration
Performance Metrics Only
“Hard” Data Only
Arbitrary / Casual Approach
Incremental / No Change
Keep Going and Going and …..
A la carte Program

51. Management’s Benchmarking Challenge
Commit required resources to key projects;
Provide focused training / facilitation to project
participants;
Proactively manage the direction and momentum of
benchmarking within the organization;
Create visibility of the benchmarking process;
Recognize benchmarking team efforts.

52. ONSIDERATIONS
C
DEPARTMENT OF STATISTICS
DR. RICK EDGEMAN, PROFESSOR & CHAIR – SIX SIGMA BLACK BELT
REDGEMAN@UIDAHO.EDU OFFICE: +1-208-885-4410
ENCHMARKING
B
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