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Benchmarking
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Benchmarking
Expert Opinion
Research Data
Example Cases
Measure and Evaluate
Self-Assessments
Summary
References

Expert Opinion

Why Benchmark?

A commonly held view is that the prime value of benchmarking is to assess the performance of various aspects of an organisation’s processes and systems with a view to determining which of its activities are strong or weak [1]. A secondary value would then relate to how much improvement can be made. The basic premise is that once the area that needs improvement has been assessed, benchmarking information can help in the subsequent development of goals.
Although this view of benchmarking supports the concept of performance benchmarking (i.e., comparing performance levels), it fails to adequately acknowledge the greater value of best practice benchmarking (understanding why another organisation is performing better). The rationale behind best practice benchmarking is simple: whatever the process or activity being considered, it is likely that another organisation will be achieving superior levels of performance. As such, it is possible to learn from their experience.

Professors Zairi and Al-Mashari [2] summarised the operational and cultural benefits of benchmarking in the following way:

  • Removes the need to ‘reinvent the wheel’;
  • Leads to ‘outside-the-box’ thinking, encouraging organisations to look for ways to improve that come from outside;
  • Forces organisations to examine current processes, which can often lead to improvement in itself;
  • Accelerates change and restructuring by using tested and proven methods and creating a sense of urgency when gaps are identified;
  • Allows the organisation to focus externally and constantly capture opportunities and counter potential threats;
  • Helps prevent complacency and inertia within the organisation and its people by setting stretch goals and stimulating new ways to plan for the future;
  • Promotes the emergence and evolution of a ‘learning culture’ throughout the organisation;
  • Promotes the development of a customer-centric culture by constantly reminding people of the customer and focusing on critical processes that add value;
  • Overcomes the ‘not-invented-here’ mindset by offering evidence that ideas invented outside the organisation can and do work.

Approaches to Benchmarking

It is important to distinguish between performance benchmarking and best practice (or process) benchmarking. Performance benchmarking refers to the comparison of process output as a means of identifying opportunities for improvement, setting performance targets, and understanding relative positioning in comparison to other organisations. Best practice benchmarking refers to the comparison of the actual processes, practices and procedures (as opposed to just performance levels) in order to gain detailed knowledge of how improvements can be made. Research studies [2] [3]have suggested that there are four commonly accepted approaches to (or ‘types’ of) best practice benchmarking. These are as follows:

Internal Benchmarking: This refers to benchmarking that takes place within a single organisation. Within multinational and multidivisional organisations, different locations or operating units typically have similar functions, and these lend themselves to benchmarking. Internal benchmarking is generally considered to be the easiest form of benchmarking, since co-operation and data are readily available and concerns about confidentiality and trust can be easily overcome. Furthermore, internal benchmarking is a good starting point for organisations to be able to understand and develop their own benchmarking methodology prior to undertaking external benchmarking. However, internal benchmarking does not guarantee the identification of industry best practices, since the learning and sharing is limited internally.

Competitive Benchmarking: This refers to the comparison and identification of performance gaps in relation to an organisation’s direct competitors. As a process, competitive benchmarking on its own may be limiting, since it is difficult to obtain useful and accurate information from competitors. When adopting this approach to benchmarking, it is important to ensure that data gathered is comparable and that consideration is given to fundamental differences in operations and operating environments. Organisations have developed different ways to overcome this challenge of accessing data and facilitating competitive benchmarking. These include ‘blind’ comparisons, using intermediaries and benchmarking areas of mutual concern that are likely to be less competitively sensitive (e.g., the areas of health and safety, the prevention of money laundering and the reduction of insurance fraud).

Strategic Benchmarking: This refers to the comparison of long-term strategies and general approaches that have enabled high-performers to succeed. It involves considering high-level aspects such as core competencies, the development of new products and services, and improving capacity for dealing with changes in the external environment. This type of benchmarking is useful for realigning business strategies that have become inappropriate.

Generic Benchmarking: This refers to comparisons with non-competing organisations that are known to have best practices in specific functions. The organisation to be benchmarked may or may not be in the same industry but the functions to be compared need to have some similarity. When the benchmarking partner is located outside the company’s own sector, the comparison should take into account cultural, geographical and other factors. With this approach to benchmarking, there are fewer concerns about confidentiality and it is often easier to share data and information.

Culture Change

The purpose of benchmarking is to learn from others and not reinvent the wheel. It is about obtaining a change in culture that enables employees to become open-minded and develop an external outlook to capture new ideas that lead to the improvement of a process or activity. The prime drawback of best practice benchmarking is that projects are resource intensive, typically taking from three to six months to complete, which means that few employees are able to participate in them. Therefore, to obtain culture changes, simpler approaches to ‘learning from others’ should also be encouraged. These will include learning from experts (through seminars, conferences and literature) and discussing ideas and sharing experiences with process stakeholders (such as suppliers, customers and partners). Many resources exist to help in best practice learning, including websites, associations, and consultants that can help to facilitate networking and benchmarking projects.

Benchmarking Process

There is no single benchmarking process that has been universally adopted. The wide appeal and acceptance of benchmarking has led to various benchmarking methodologies emerging. However, Adebanjo [3] has identified four phases that underpin the benchmarking process, whatever the methodology used. They are:

  • Planning – the identification of business process or function to be benchmarked, benchmarking partners and protocol;
  • Analysis – the actual collection of data and analysis of performance gaps;
  • Action – the communication of findings, setting of targets and implementation of specific improvement actions;
  • Review – the identification of learning points, evaluation of the benefits of the process and the continuous monitoring of improvements.

Table 1 identifies the steps in 5-, 10- and 12-step methodologies proposed by Robin Mann [4], Robert Camp [5] and Sylvia Codling [6].

Step  Mann’s TRADE Methodology   Camp’s Methodology  Codling’s Methodology

 1

Terms of reference (plan the project) Identify what is to be benchmarked Select subject ahead

 2

Research (research the current state) Identify comparative companies Define the process

 3

Act (undertake data collection and analysis) Determine data collection method and collect data Identify potential partners

 4

Deploy (communicate and implement best practices) Determine current performance ‘gap’ Identify data sources

 5

Evaluate (evaluate the benchmarking process and outcomes) Project future performance levels Collect data and select partners

 6

  Communicate benchmark findings and gain acceptance Determine the gap 

 7

  Establish functional goals Establish process differences

 8

  Develop action plans Target future performance

 9

  Implement specific actions and monitor progress Communicate

 10

  Recalibrate benchmarks Adjust goal

 11

    Implement

 12

    Review/recalibrate
 Table 1. Comparison of three benchmarking methodologies

Usually, site visits to benchmarking partners are the most valuable stage of a benchmarking project. They enable an organisation to learn and understand more about its partners’ processes, and give a broader and more complete picture of the systems and culture in place than other benchmarking methods such as questionnaires. It is often a case that seeing is believing. Site visits provide an opportunity for the most sceptical members of a benchmarking team or organisation to witness, first-hand, better practices in action.

The BPIR Improvement Cycle

The BPIR improvement cycle also facilitates the process of benchmarking best practice. This 9-step cycle has some core similarities with the methodologies presented in Table 1. The BPIR cycle consists of the following:

  1. Identify/select an area for improvement;
  2. Measure performance;
  3. Benchmark performance;
  4. Identify a relevant improvement approach or strategy;
  5. Learn how to implement;
  6. Identify best practice organisations;
  7. Research further information;
  8. Implement a best practice approach;
  9. Review and calibrate.

 A key advantage of the BPIR model is the availabilityof extensive on-line resources to guide the practitioner through each of the stages. These resources are of valueto both experienced and novice benchmarking practitioners and help to reduce the time it takes to undertake a benchmarking project.

Achieving Benchmarking Success

Organisations should consider the following in order to increase the chances of benchmarking success:

  • Determine where the responsibility for carrying out benchmarking projects will lie. Some large multinational organisations have dedicated benchmarking teams that work with process owners and other stakeholders to carry out projects. Other organisations form benchmarking teams in response to organisational needs. These teams are made up of stakeholders (i.e., those that will be affected by the change, including process owners, customers and suppliers).
  • Identify the most important process to benchmark. It is a good idea to align this with key organisational or operational objectives (e.g., a reduction in supply chain cost, an increase in customer responsiveness or improved employee efficiency). There are a number of methods that can help in the selection of an area of focus for benchmarking projects. These can include findings from customer and employee surveys, quality and process audits, or business excellence self-assessments.
  • When researching a best practice, it is important to carefully evaluate the suitability of the practice to your organisation’s culture and working environment. This is because a “best practice” at a leading organisation may not be a best practice for everyone else. In addition, increasingly competitive business pressures mean that today’s best practice may not be best practice in the future. [1]
  • Avoid the initial urge to copy the best business practice from the benchmarking partner. It is generally better to approach the subject by carrying out an analysis to identify the underlying reasons for the success of the practice in the benchmarked company. As a result of this, the operating principles of the business practices can then be adapted to your own organisation. [7, 8]
  • Manage the benchmarking process efficiently. This involves a number of considerations including the following [3]:
    • Gain the support and ensure the participation of senior management. This makes sure that enough resources are available to initiate, support and maintain benchmarking. If feasible, appoint a benchmarking champion from the leadership team. The champion can then smooth the way where resources are concerned and be accountable for progress;
    • Identify sources of potential benchmarking partners. It may be a good idea to join a networking organisation in order to identify suitable benchmarking partners. Benchmarking networks exist in many countries and the BPIR.com resource is a good starting point for identifying a network.
    • Develop benchmarking skills in the people who will be carrying out the activity. It may take time for the team to be comfortable with the process but it is important that they possess the right skills from the outset.
    • Entrench benchmarking in the organisation by showcasing and rewarding success, and involving process owners in the activity. It is often valuable to first target a short-term project that is certain to bring quick rewards – even if those rewards are modest. Publicise the success internally, so that the benchmarking process will gain early credibility among staff.
    • Seek assistance from more mature, experienced organisations or people if difficulties arise.

Assistance in Applying Benchmarking

A number of resources are available for those organisations that need further assistance with benchmarking, including:

  • The Business Performance Improvement Resource (BPIR) (https://www.bpir.com/). BPIR contains thousands of case studies and benchmarks from the private and public sector that can be used to identify benchmarking partners or directly screened for best practices;
  • The Global Benchmarking Network (GBN) https://www.globalbenchmarking.org/. GBN is a global membership-based organisation whose members promote and support benchmarking in their respective countries. The network was formed in 1994 and more than 25 countries are currently represented. GBN aims to promote and support benchmarking worldwide, as well as to facilitate the international exchange of best practices. The network may be a good resource for organisations that require training or assistance with benchmarking. GBN membership includes many of the world’s leading experts in benchmarking; its President is Dr. Robert Camp, the founder of benchmarking;
  • A number of benchmarking codes of conduct advise organisations on the protocols and ethics of benchmarking. The two main codes of conduct are those proposed by the European Foundation for Quality Management (EFQM) and the American Productivity and Quality Centre (APQC). A Benchmarking Code of Conduct is available on BPIR.com in the non-members area (see “Core Concepts” and “Benchmarking”);
  • Many books are available to assist with benchmarking. These include Dr. Camp’s book, which was the first book on benchmarking, published in 1989 [5], and Sylvia Codling’s 1992 book, which was the first European book on benchmarking [6].

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