BENCH MARKING

Benchmarking is not a new concept. It shares many elements with a multitude of

activities, ranging from competitive analysis and Total Quality Management to ancient
warfare. Since its inception as a formalized process at Xerox in 1979, it has evolved into a
technique used by the majority of Fortune 500 companies. Not all companies that try it are
pleased with success, but many are. Some companies have embraced the practice and
want to share their experiences by offering training to others. Notable amongst this group
are AT and T, IBM and Motorola. What began as a process to improve the design and
manufacture of copiers is now used in variety of industries and functions. Today this
diversity of applications has gone well beyond manufacturing industries and now includes
studies in Government, Education, Agriculture, Health Care, and Financial Institution. In
India, this concept is slowly picking up, and there are many organizations who have initi-
ated this concept very successfully.
The purpose of this note is to answer some of the question about benchmarking and
to help people understand why such attention is being focussed on the process. More
importantly, it provides guidelines to help teams to get started (8-Steps Benchmarking
Process) and describes pitfalls to avoid for teams that began the journey. After going
through this note the leader of Benchmarking team can prepare an activity chart identify-
ing the milestones, schedules and persons.

BENCHMARKING AND COMPETITIVE ANALYSIS

Benchmarking can be confused with competitive analysis, which is a related but
different exercise. Benchmarking shares many elements with competitive analysis. It of-
ten seeks information in the public domain and looks for creative ways to obtain and
analyze data. There are significant differences, however. Two key distinguishing charac-
teristics of Benchmarking are that the organization being studied (Benchmarked) is coop-
erating as a partner in the study and the focus of studying is on process and practices, not
just performance measures. The table given below summarizes the major differences for
organizations looking at external environment.

Characteristics of Competitive Analysis versus Benchmarking

Characteristic Competitive Analysis Benchmarking

Approach Independent Partner
Performed by Individual Team
Target Competitor ‘‘Best’’ Practice
Focus Performance Measures Processes and Practices
Objective Competitive Process improvements
Intelligence

Bench Marking — Categories

Today we have wide array of ‘‘Benchmarking’’ categories. Many of these distinction
are quite orbitary and have nothing to do with the process itself, but deal more with the
partners chosen and area of business being analysed. The Benchmarking process does
not vary significantly with the three categories of partners that can be selected : Internal
organisations, direct competitors, or non-competitors. There are two forms of Benchmarking :
strategic and functional or operational. Operational Benchmarking focuses on the opera-
tional processes and practices and service offered by an organisation. Strategic
benchmarking focuses on strategic marketing, financial, organisational and technological
issues facing an organisation.
Benefits of Benchmarking
❦ Benchmarking is particularly helpful in validating proposals for change.
❦ Benchmarking of ten results in creative imitation and the adoption of new
practices that overcome previous industry barriers.
❦ This search for diversity and for innovative breakthroughs applied elsewhere is at
the core of benchmarking benefits.
❦ By sharing information, all parties benefits, because it is difficult to excel in all
activities.
❦ Sharing information and data is often the first hurdle to be overcome in the
Benchmarking process.
❦ Do not, however, attempt benchmarking in areas in which trade secrets or
sensitive information determines the outcome of the process.
❦ Benchmarking, used in conjunction with other quality techniques or used alone,
can influence how an organization operates.
❦ If the search for ‘‘Best’’, or just ‘‘Better’’ practices is performed correctly, then the
likelihood of successful outcomes is quite high.
❦ Success however, assumes that pitfalls are avoided and prerequisites have been
met before Benchmarking is initiated.

Some of the Prerequisites for Success

❦ Management commitment and support can overcome many of the barriers to
successful benchmarking.
❦ The key requisite for success is the organization’s readiness to accept change,
given than it comprehends the needs for change.
❦ Rather than resting on their laurels and previous success, organizations must
become receptive to new ideas.
❦ Sufficient resources need to be allocated, and both awareness and skills training
need to be available.
❦ Benchmarking shares success factors with other quality management processes.
❦ Teamwork, analysis of data, decisions based on facts, focus on processes and
continuous improvements (KAIZEN) are shared characteristics.
❦ The need for leaderships, a customer focus, and empowered employees are equally
important.
❦ As in other Quality Management activities, there needs to be someone to manage
the introduction and application of benchmarking in the organization.
❦ Benchmarking teams need a clear understanding of both internal and external
customer needs and expectations. Without this they will have difficulty selecting
important subjects.
❦ An understanding of competitive strengths and weakness provides additional back-
ground that aids the selection processes.
❦ Strategic and competitive assessments not only tell the team what is important to
focus on, but also give them an idea of how effectively they are currently achieving
important goals.

Some Common Misconception about Benchmarking

❦ Benchmarking is not casual. It is a planned, systematic operation designed to
achieve certain specific goals.
❦ Benchmarking is not a quick fix. It is an on-going process of setting increasingly
higher goals for performance.
❦ Benchmarking is not copying others. It involves recognizing practices, which will
fit into your operation, and adapting them.
❦ Benchmarking does not stand-alone. It is a facet of a broad Total Quality Program.
The process must be integrated with rest of the TQM approach. (Ex. Malcolm
Baldring Award, JRD QU, CII-Excellence award, BPR, and Process Improvement
etc.)
Forming the Team and Project Road Map
❦ A team needs to be formed and a project road map developed.
❦ These are integral activities in the subject selection step.
❦ The team should include four to eight members who are subject matter experts
and represent the various functions affected by the project.
❦ Teams often include several people in an advisory capacity. The project sponsor or
‘‘customer’’ and a benchmarking ‘‘coach’’ (an internal or external consultant).
❦ The road map serves several purposes : It keeps the team on track and it docu-
ments activities and decisions.
❦ This helps to educate others and to document the team’s process for later use.
❦ Another advantage is that clearly defined projects help teams to ensure that the
project scope is achievable.

❦ Basic elements of the road map include.

• Project scope and objectives.
• List of activities.
• List of deliverables.
• Individuals roles and responsibilities.
• Meeting and review schedules.
• Issues.

The Eight Most Common Benchmarking Errors

1. Lack of Self-Knowledge. Unless you’ve thoroughly analyzed your own operations,
your benchmarking efforts will not pay off. You have to know how things work in
your company, how effective your current processes are, and what factor are criti-
cal. That’s why internal benchmarking is an important first step.
2. Benchmarking everything. Be selective. Benchmarking another company’s employee
food service will usually not be worth the time, energy, and cost. Your TQM effort
as a whole will point out the areas where benchmarking is most likely to pay off.
3. Benchmarking projects are broad instead of focused. The more specific the project,
the easier it is and the more likely it will generate useful ideas. Benchmark a
successful company’s hiring procedures, not their entire human resources operations.
Focus on accounts receivable handling, not the accounting department as a whole.
4. Benchmarking produces reports, not action. Studies have indicated that 50% of
benchmarking projects result in no specific changes. The process is not an aca-
demic exercise. It should be geared toward generating and implementing actual
changes.
5. Benchmarking is not continuous. Benchmarking is a process. Even before you reach
the benchmark you’ve set, you should take another look at your partner’s perform-
ance, or at other companies. New goals should be established and new techniques
adopted. The process never ends.
6. Looking at the numbers, not the issues. While the measures are important, they are
not the heart of the process. At some companies, benchmarking is used to set
goals, but not to generate the important changes needed to meet them.
7. Participants are not motivated. Make sure benchmarking team members have the
time to do the job. Even if the project is simply added on their regular jobs, make
sure each has a stake in the success of the project. Don’t consider benchmarking
as ‘‘busy work’’ to be assigned to a group of low-level employees.
8. Too much data. Action are what’s important, not information for its own sake. Don’t
measure benchmarking success by quantity of information. Always focus on key
issues.

Common Pitfalls in Benchmarking

• Lack of management commitment and involvement.
• Not applied to critical areas first.
 • Inadequate resources.
• No line organisation involvement.
• Too many subjects ; scope not well defined.
• Too many performance measures.
• Critical success factors and performance drivers not understood or identified.
• Potential partners ignored : Internal organisations, Industry leaders, or friendly
competitors.
• Poorly designed Questionnaires,
• Inappropriate data : Inconsistent data.
• Analysis paralysis, excess precision.
• Communication of findings without recommendations for projects to close gaps.
• Management resistance to change.
• No repeat Benchmarking.
• No Benchmarking report/documentation.

Eight Steps Benchmarking Process

The Benchmarking process consists of three general activities : Planning, Analysis,
and Integration/action.
Overall, the process follows the Plan-Do-Sudy-Act Cycle of all quality processes.
It is recommended to use eight steps benchmarking 7 process as mentioned below :
Eight Steps Benchmarking Process

Benchmarking And TQM

Benchmarking is a tool that can be exceptionally useful in a TQM program. It is
closely related to customer orientation. The companies that you select as benchmarking
partners are those, which excel at satisfying customer in a given area.
Benchmarking is an excellent source of ideas for quality improvement projects. It
provides both ideas about ways of accomplishing tasks, and specific goals in terms of
levels of performance.

Benchmarking
Purpose. To establish a superior performance in the organization by filling the gaps
in performance by putting in place the best available practice.
When to Use. Benchmarking is a tool used while the organization wants to
implement and ensure the prevalence of TQM. This is done when each process is looked
at independently and the performance is compared to that of others.
How to Use. To progressively stimulate an improvement a company can use the
following types of benchmarking.
Internal Benchmarking. The main aim of IB is to optimize performance through
removal of errors the comparison in case of IB is generally between functions and similar
organisation.
 Competitive Benchmarking. This type of benchmarking can be carried out on the
basis of product, functions department or on a co. wide basis this is a cross comparison
with in one industrial sector aimed at establishing best practice through the identification
of gaps between your own and your competitors performance.
Comparative Benchmarking. This type is one where comparison takes place across
all business sectors aimed at establishing the practice in all areas.

The Rocks of Benchmarking

Define Business mission

Identify critical success factors

Identify key business process

to achieve CSF’s Need to achieve missio

Flow chart the process

Identify gaps, dead ends, duplication

Internal customer/Supplier identified

Set standards for meeting performance

Decide measure for process performance

Find out how others perform this process

Fig. 5.1. Steps of Benchmarking