Chapter 8

Benchmarking
Rachal Roach
Tim Hyder
Chris Green

Introduction
Book definition: Benchmarking is a

systematic method by which

organizations can measure themselves
against the best industry practices
Benchmarking is a standard that
companies compare themselves to and
strive to be that good

Benchmarking
What is your definition of benchmarking?
What is the process for benchmarking?

Benchmarking Concept
What is our performance
level?

What are others' performance

levels?

How do we do it?

How did they get there?

Creative
Adaptation

Breakthrough
Performance

Benchmarking Concept
Concept has been around for a while
2 Key elements

1) Units of measure (to measure performance)

2) Managers need to understand why their company's
performance differs

Reasons to Benchmark
Promotes continuous improvement
Makes companies search for the best practices,

innovative ideas, and highly effective operating

procedures
Can notify a company if it has fallen behind the
competition
Inspires managers to compete
Allows goals to be set objectively

Reasons to Benchmark
Weaknesses

Organizations must continue to innovate

as well as imitate.

6 General Steps to
Benchmarking
1) Decide what to
benchmark
2) Understand current
performance
3) Plan
4) Study others
5) Learn from the data
6) Use the findings

Deciding What to Benchmark

Think about the mission and critical

success factors
Decide the scope
Devise charts that will pin point the exact
problem
Decide on a numerical measure to show
improvement

Understanding Current
Performance
Understand and document current

processes
Form a benchmarking team
Decide on a way to numerically measure
findings

Planning
Decide what type of

Identify which

benchmarking to
perform (internal,
competitive, or
process)
Choose the type of
data to be collected
Devise a method of
collection

organizations to use
as your benchmarks
Make a timetable to
adhere to for each
task
Have a desired
output for the study

Studying Others
Use internal sources
Apply data in the public domain
Utilize original research
Combining all or some of these

Learning from the Data

Is there a gap between the organizations

performance and the performance of the bestin-class organization?

What is the gap? How much is it?

Why is there a gap? What does the best-in-

class do differently that is better?

If best-in-class practices were adopted, what

would be the resulting improvement?

Learning from the Data

Studies can reveal 3 outcomes:

Negative gap
External

process better than internal

processes

Parity
Process

performance approximately equal

Positive gap
Internal

process better than that found in

external organizations

Learning from the Data

At least two ways to prove a superior

practice:

Analyzed quantitatively
Summary

measures and ratios (activity costs,

return on assets, or customer satisfaction
levels)

Market analysis
Does

the market prefer one process over

another?
Price outside services

Using the Findings

When a benchmarking study reveals a

negative gap in performance, the

objective is to change the process to
close the gap
Two groups must agree on the change:

Process owners (those who run the

process)
Upper Management (incorporating
changes and providing resources)

Using the Findings

Generic steps of Action Plans:
1.
2.
3.
4.
5.
6.
7.

Specify tasks
Sequence tasks
Determine resource needs
Establish task schedule
Assign responsibility for each task
Describe expected results
Specify methods for monitoring results

Using the Findings

Goals and objectives should be

consistent with the execution of the

action plan so that the end result is
process superiority
The best results are obtained when the

process owners fully participate in the

design and execution of the plan

Using the Findings

The next step is to repeat the

benchmarking process
The benchmarking process must be

used continuously to pursue emerging

new ideas

Pitfalls & Criticisms

Idea of copying others

How can an organization be superior if it

does not innovate to get ahead? How can
an organization even survive if it loses
track of its external environment?

Not a strategy or business philosophy

It is an improvement tool

Not a substitute for innovation

It is a source of ideas from outside

Pitfalls & Criticisms

Avoid

Benchmarking for the sake of it

Focusing entirely on comparisons of
performance measures rather than the
processes and activities that enable the
achievement of good practice
Expecting that benchmarking will be quick
or easy

Questions for Discussion

What are the six core techniques of the

benchmarking process?
1.

Decide what to benchmark

2.
3.
4.
5.
6.

Understand current performance

Plan
Study others
Learn from the data
Use the findings

Questions for Discussion

Efficiency has been defined as doing

things better and effectiveness as

doing better things.
Describe how benchmarking can be

used to improve both efficiency and

effectiveness

Questions for Discussion

Explain how an organization might

benefit from benchmarking organizations

in a completely different industry

Questions for Discussion

Identify and explain the three types of

benchmarking
In what circumstances would each type

be most appropriate?

Questions for Discussion

How are critical success factors

important in benchmarking?

Questions for Discussion

Benchmarking studies are a search for

two types of information

An understanding of best-in-class
processes
The metrics that result

Which piece of information is more

important and why?

Questions for Discussion

Why is it important to understand internal

processes before studying those of other

organizations?
What tools are useful in examining

internal processes?

Questions for Discussion

Who in the class has experience in the

benchmarking process?

Thanks for your time!

Rachal
Tim
Chris