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Benchmarking: Favoured Quality Management Tool

A 2004 survey of 600 CEOs in the manufacturing, service, healthcare and education sectors, conducted by the American Society for Quality (ASQ), revealed that:

  • Total Quality Management (TQM) was both the most familiar (83.1%) and the most frequently used (59.3%) of the quality techniques and practices, followed by Benchmarking (82% and 60.7% respectively), ISO 9000 (59.7% and 27.7% respectively), Quality Circles, (51.3% and 28.5% respectively), Six Sigma (47.6% and 15.6% respectively) and Baldrige (40.1% and 8.1%);
  • In terms of sector, manufacturing led the list, while the service sector was less familiar with all of the techniques than the healthcare and education sectors;
  • 99% of the respondents believed quality contributed to the bottom line. Most respondents mentioned the reasons for this as being increased revenue through repeat business, referrals and customer loyalty, less work needing to be redone, and savings on labour and materials;
  • A number of different measurement methods were used by respondents, including customer satisfaction surveys, cost benefit analysis, trend analysis, audits, benchmarking, Six Sigma, tracking studies, returns on investment, bottom-line profitability, and warranty returns [10]. To obtain an update on these figures, visit the Bain and Co. website, which indicates that the 2006 usage of benchmarking was 81%, ahead of outsourcing (77%), knowledge management (69%), supply chain management (66%) and lean operations (54%).

Benchmarking is a TopBusiness Improvement Tool

An examination of data from the Benchmarking Exchange Posting Board [12] database revealed that the top ten business process improvement tools used by members in 2002/03 were:

  1. Benchmarking;
  2. Cause and effect analysis;
  3. Change management;
  4. Control charts;
  5. Decision making;
  6. Customer driven processes;
  7. Design of experiments;
  8. Knowledge management;
  9. Performance measurement;
  10. Process mapping.

Benchmarking Models and Benchmarking Skills

A 2004 survey [2] of 227 organisations in 32 countries identified the various benchmarking models used by corporations. Of the respondents, 35% used a benchmarking model, whereas 65% did not. The models used, in order of frequency, were as follows:

  1. Developed own model (24%);
  2. Robert Camp (13%);
  3. Business Excellence Model, MBNQA (11%);
  4. International Benchmarking Clearinghouse - APQC (10%);
  5. Xerox 10-Step Model (10%);
  6. Consulting Company provided (e.g., Arthur Anderson, Kaiser Associate, etc.) (9%);
  7. National Guideline (e.g., CBI Probe, UK or Local Government Guides, Australia (5.5%);
  8. Benchmarking Centre (Sylvia Codling) (4%);
  9. Kaplan’s Scorecard (2.5%).

The same survey investigated the approaches used to acquire benchmarking skills, as well as the effectiveness of these approaches. Respondents reported the following as being highly effective, very effective or effective approaches to acquiring benchmarking skills:

  1. Reading benchmarking books, articles, and/or other publications (70.9%);
  2. Informal liaisons with benchmarking experts (64.5%);
  3. Attending external benchmarking training events (49%);
  4. Attending in-house benchmarking training events (46.6%);
  5. Attending benchmarking conferences (43.6%);
  6. Watching a video on benchmarking (21.6%);
  7. Additional approaches reported included:
    a)  Actual participation in benchmarking projects (mainly site visits to other companies);
    b)  Networking with experienced companies – i.e., learning from a sister company, visiting a company with benchmarking experience, collaboration with industry peers or collaborating with research centres or universities;
    c)  Hiring external consultants;
    d)  Internet resources and searches;
    e)  Membership of benchmarking clubs, networks, or communities of practice.

Benchmarking SMEs

Eight Small and Medium-sized Enterprises (SMEs) from a selection of twenty involved in Northern Ireland benchmarking clubs were chosen to participate in a 2000 study. The lessons learned from the study included:

  • Exchanging benchmarking knowledge with other manufacturing SMEs provided a more focused direction to ensure successful learning and continuous improvement;
  • The Business Excellence Model (BEM) of the European Foundation for Quality Management (EFQM) can be applied by SMEs as a foundation for using generic benchmarking, which can then be further developed;
  • When combining the use of BEM and generic benchmarking, SMEs need to address internal people-management and development issues;
  • SMEs need to improve their customer focus in benchmarking. Employees need to learn about providing value to the customers, and customer requirements need to be identified correctly;
  • Benchmarking helps merge theoretical principles with an understanding of the social environment in which employees work;
  • The exchange of generic benchmarking can be used to overcome potential restrictions relating to the identi-fication of strategic issues in SME company growth;
  • Organisational feedback from the application of generic benchmarking provides SMEs with a powerful tool for identifying strategic development needs and opportunities [13].

Benchmarking in the South African Financial Sector

A study of financial institutions on the Johannesburg Stock Exchange, South Africa, published in 2004, examined the use of benchmarking in the financial sector. The survey had a response rate of 61% and findings included [11]:

  • 100% of respondents made use of benchmarking;
  • None had formal benchmarking arrangementswith other companies;
  • 82% reported that benchmarking against competitors was the most important form of benchmarking;
  • 55% reported internal benchmarking as important;
  • 37% reported ‘best in the world’ benchmarkingas important;
  • 85% carried out benchmarking by studying information obtained from their competitors;
  • 67% carried out frequent informal visits to competitors to obtain information.

When asked about reasons for using benchmarking, respondents reported:

  • To improve quality (85%);
  • To determine if a process is on a par with with‘the best’ (85%);
  • To determine if products or services could be improved (67%).

Difficulties reported included:

  • Obtaining information from competitors (100%);
  • Obtaining a benchmarking partner (85%);
  • High cost (33%).

Best Practices in New Product Development

In 2004, the American Productivity and Quality Centre (APQC) published a comprehensive study on best practices in new product development. The study considered 113 prescribed practices and gauged the impact of a given practice or solution on a business. Seventeen best-practice topic areas were benchmarked, ranging from new product strategy through to climate and culture and the idea-to-launch process. Some of the best practices that helped separate the best-performing organisations from the worst were:

  • Make project teams accountable for the end-result or performance-result of the project. Build in a post-launch review;
  • Establish ways to make it easier for the team to handle outside-the-team decisions;
  • Establish a convenient information or IT system to enable team members to communicate effectively;
  • Provide team training on how to be a team member, so as to minimise issues arising from conflicts and politics;
  • Make sure that the project team members and the team leader are on the project from the beginning to the end;
  • For every significant project, there should be a clearly assigned project team with members that are drawn from the various, required functional areas, and with a clearly defined project leader;
  • Have a supportive climate for entrepreneurship and product innovation. Many of the businesses that performed best provided creative employees with resources and time off to work on their own projects; and 44.8% provided rewards or recognition to employees who submitted new product ideas [9].


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