BIJ

7,1
52
Benchmarking: An International
Journal, Vol. 7 No. 1, 2000, pp. 52-61.
# MCB University Press, 1463-5771
Best practice benchmarking in
the UK
Matthew Hinton, Graham Francis and
Jacky Holloway
Oþen ln/ters/lv 8us/ness 5·hcc/. M//lcn Kevnes. lK
Keywords 8en·hmar//ng. lmþ/emenlal/cn. lerfcrman·e managemenl. lnnctal/cn. 5u··ess
Abstract Ref/e·ls cn a lhreevear þrcte·l exam/n/ng lhe etc/t/ng nalure cf ´´/esl þra·l/·e``
/en·hmar//ng /n lK/ased crgan/sal/cns The f/nd/ngs des·r//e lhe ·urrenl slale cf
/en·hmar//ng and scme cf /ls adtanlages a·rcss a u/de tar/elv cf þu///· and þr/tale se·lcr
crgan/sal/cns A/sc /ntesl/gales lhe d/s/n·enl/tes lc /en·hmar//ng a·l/t/lv exþer/en·ed /v
þra·l/s/ng /en·hmar/ers. as ue// as lhe fa·lcrs uh/·h /nh///l lhe /n/l/a/ la/euþ cf lh/s le·hn/¡ue
ln add/l/cn. lhe ncl/cn lhal a malur/lv ·urte ex/sls fcr crgan/sal/cns engaged /n /en·hmar//ng /s
exþ/cred
Introduction
Benchmarking increasingly occupies the time and energy of managers and
staff in many UK organisations. Undertaking benchmarking activities leads to
not inconsiderable resource commitments. By contrast, little research has taken
place into the relative costs and benefits, with the benefits often being
intangible. Despite this, the growth of benchmarking in the UK has continued
apace (Yarrow and Prabhu, 1999). Yet there is evidence that in some
circumstances the costs may outweigh the benefits (Lincoln and Price, 1996;
Sheridan 1993). Simpson el a/ (1999) point out that the adoption of
benchmarking concepts in the UK has tended to lag behind developments in
the USA and that the benchmarking literature is dominated by US research.
The degree to which lessons from the USA may translate into UK
organisations is not clear; however, both consultants and government have
sought to close the knowledge gap (Coopers &Lybrand, 1994b; DTI, 1995).
Given these issues, our research has sought to review what is being done in
the name of benchmarking, and more explicitly:
.
to gain an understanding of the factors which influence the outcomes of
benchmarking activities, particularly the factors which contribute to
positive outcomes;
.
to examine the disincentives to benchmark and the problems of
measuring both qualitative and quantitative benefits; and
.
to understand how organisations assimilate the lessons learned from
benchmarking activities and how such lessons may stimulate
organisational innovation.
This paper reports the findings of an ongoing research programme, partly
sponsored by the Chartered Institute of Management Accountants (CIMA). The
data reported here are from the largest survey with 559 respondents from UK
The current issue and full text archive of this journal is available at
http://www.emerald-library.com
Benchmarking
in the UK
53
organisations and from follow-on questionnaires, collected between 1997 and
1999. In the following sections we define what is understood by benchmarking,
followed by the survey evidence which covers the disincentives as well as the
positive factors affecting benchmarking activity.
Defining benchmarking
One feature of our survey was the wide range of activities that emerged as
being undertaken in the name of benchmarking and a variety of definitions
existing, which may partly explain this confusion. Similar findings emerged
from a study conducted by Coopers & Lybrand (1994a). In recognising the key
aspects the authors have arrived at the following definition:
The pursuit by organisations of enhanced performance by learning from the successful
practices of others. Benchmarking is a continuous activity; key internal processes are
adjusted, performance is monitored, new comparisons are made with the current best
performers and further changes are explored. Where information about these key processes is
obtained through a co-operative partnership with specific organisations (rather than via a
third party such as an independently maintained database), there is an expectation of mutual
benefit over a period of time (Holloway el a/, 1999b).
This recognises other definitions of benchmarking, in particular the UK
Government's definition, issued by the Department of Trade and Industry
(DTI):
A systematic approach to business improvement where best practice is sought and
implemented to improve a process beyond the benchmark performance (Partnership
Sourcing, 1997, p. 7).
Zairi and Ahmed (1999) have identified no fewer than eight different categories
of benchmarking. These reflect the different focuses that benchmarking
activity may take. In seeking to describe the nature and extent of
benchmarking activity in the UK, we have made use of Camp's (1995) typology
to classify respondents' practices:
.
lnlerna/. A comparison among similar operations within one's own
organisation.
.
(cmþel/l/te. Acomparison with the best of the direct competitors.
.
Iun·l/cna/. A comparison of methods with those of companies with
similar processes in the same function outside one's industry.
.
(ener/· þrc·ess. A comparison of work processes with others who have
innovative, exemplar work processes.
Alongside this, benchmarking activity can be categorised as either process or
results benchmarking. A further distinction preferred by the Society of
Management Accountants of Canada (1995a; 1995b) is that of strategic,
operational and functional benchmarking. This reflects the level of the
organisation where the benchmarking activity is carried out. In the public
sector, Bowerman el a/ (1999) distinguish between compulsory and voluntary
benchmarking (see also Davis, 1998).
BIJ
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The critical characteristic of all types of benchmarking is the examination of
processes, as it is only through an understanding of how inputs are
transformed into outputs that the attainment of superior results can be pursued
effectively. Furthermore, a benchmarking ``culture'' characterised by a desire to
change processes as well as outputs, and willingness to look externally for
ideas, appears to be a key antecedent factor for successful benchmarking. So
too is a preference for empirical evidence. As Camp states:
Benchmarking is an integral part of the planning and ongoing review process to ensure a
focus on the external environment and to strengthen the use of factual information in
developing plans. Benchmarking is used to improve performance by understanding the
methods and practices required to achieve world-class performance levels. Benchmarking's
primary objective is to understand those practices that will provide a competitive advantage;
target setting is secondary (Camp, 1995, p. 15).
The continuing popularity of performance league tables, especially in the
public sector, and the tendency for ``benchmarking'' and ``benchmark'' (a target
or standard) to be used interchangeably (see also CIPFA, 1996) would appear to
be at odds with the idea of process improvement. An organisation's position in
a league table fails to explain how better performers achieved their status and
hence how to move up the table (Goldstein and Spiegelhalter, 1996). While
targets are an integral part of benchmarking, the notion that there is one best
way to do something and that once this target is attained no further change is
needed runs counter to benchmarking's inherently dynamic nature. Cox and
Thompson (1998) also offer similar criticisms of benchmarking.
The prevalence of benchmarking
One could be forgiven for thinking that this current research is ``shutting the
stable door after the horse has bolted''. After all, benchmarking has been with
us for many years. For some organisations it has indeed become routine and, as
such, is an integral part of their organisational culture. There is evidence in the
literature of the growing popularity and continued adoption of benchmarking
as shown in surveys in the UK and Europe (Partnership Sourcing, 1997; Cook
and Macauley, 1996; Coopers & Lybrand, 1994a; 1994b). This triangulates with
our own surveys, where it was under active consideration in 7 per cent of our
respondents' organisations that were not currently using the approach. Indeed,
organisations who are rapidly adopting the business excellence model (British
Quality Foundation, 1997; European Foundation for Quality Management,
1993) as a framework for performance management across Europe would be
hard pressed to do so effectively without benchmarking. The concept of
benchmarking has been familiar to public services in the UK for some years in
the form of independent reports on best practice produced by the National
Audit Office and the Audit Commission. The actual practice of benchmarking
in local government is set to increase with the forthcoming requirement to use
it to demonstrate ``best value'', the long-awaited replacement for compulsory
competitive tendering (Bassam, 1997; Kite and Davidson, 1997; Bowerman
el a/, 1999).
Benchmarking
in the UK
55
In the next section, we draw on empirical evidence of benchmarking
practice. Quotes from respondents are used to exemplify certain key points
(and respondents are identified in the text by an ID number [cxxx]).
The state of UK benchmarking
Just under half (45 per cent) of the organisations we studied were engaged in
what they described as benchmarking. Table I shows the percentage of
organisations we identified at each stage of Camp's (1995) typology.
Our research has also identified several other basic facts that help to provide
the backdrop for benchmarking activity in the UK. Benchmarking may be seen
as a function of size: the larger an organisation is, the more likely it is to be
benchmarking (see Figure 1). Furthermore, if an organisation is part of a larger
organisational group the likelihood of finding benchmarking activity is raised
even further ± this we call subsidiarity.
Figure 2 shows the percentage of organisations benchmarking per sector.
What is surprising is the low levels of benchmarking in retailing and the
services, and to a lesser degree in manufacturing.
Perhaps surprisingly, benchmarking is seen by many organisations as a solo
effort (internal benchmarking). While this may prove to have some value, not
least in gaining experience of benchmarking, it does limit the opportunities for
organisational learning and process improvement. The main reasons for this lie
in the inability to find ``like'' organisations who are willing to share potentially
competitive information, as well as the mistaken belief that benchmarking can
only take place when like data can be obtained. This point helps to explain the
tendency for organisations to benchmark that which is readily quantifiable.
The focus on unadventurous comparisons means that benchmarkers often
overlook the qualitative aspects of their processes which may be enhanced
by looking at how others operate their activities, what Camp (1995) calls
``functional'' and ``generic'' benchmarking.
Is there a benchmarking maturity curve?
Our work seems to suggest that some organisations exhibit a form of maturity
curve. Organisations that persevere with benchmarking would appear to
progress from simple comparisons of easily-measured discrete activities using
similar or even internal partners, to comparing more complex processes with
dissimilar and/or external partners. Internal benchmarking would appear to be
a natural starting point for large divisionalised organisations, and
``competitive'' is a logical next step (or a starting point for those smaller
Table I.
Nature of
benchmarking activity
Stages of typology Percentage
Internal 25
Competitive 42
Functional 25
Generic process 8
BIJ
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companies that do investigate benchmarking), but the jump to ``functional'' is
arguably a qualitatively different transition. True generic benchmarking
requires a particularly imaginative leap in order to be able to exploit good
practice in what might be at least superficially a radically different situation.
In an attempt to address the problems of comparability in the indicators,
many of our case-study organisations deliberately set out to conceptualise their
activities as more generic processes, thereby broadening the range of potential
benchmarking partners (see Holloway el a/, 1999a). Such process-orientation
has the additional benefit of involving partners who might not regard each
other as direct competitors, thereby enabling an interchange of ideas as well as
indicators (see Francis el a/, 1999).
Thus, one has to conclude that, although many organisations appear to have
travelled along a ``maturity curve'' from relatively uncontentious internal
benchmarking to more challenging and innovative approaches, there is no
80%
70%
60%
50%
40%
30%
20%
10%
0%
<25 26-99 100-250 251-999 >1000
Number of employees
A
c
t
i
v
e

b
e
n
c
h
m
a
r
k
e
r
s
Figure 1.
Benchmarking as a
function of size
Services and retailing
Financial services
Manufacturing
Government
Education
Health
Utilities
0% 20% 40% 60% 80% 100%
Active benchmarkers
Figure 2.
Percentage
benchmarking per sector
Benchmarking
in the UK
57
guarantee that this sort of journey will take place or be effective in all
organisations. Just as there is considerable variation in the nature of
benchmarking there is similar variety in the ways in which that activity
develops. Perhaps a more appropriate characterisation of benchmarking
development is that of moving from looking at results to processes (see also
Trosa and Williams, 1996).
So what facilitates this journey? Our findings suggest that benchmarking is
frequently started by a champion. This is someone who has learned about
benchmarking from a range of sources, most notably practitioner-oriented
literature, networking, sometimes more academic literature, and reflections on
their own practice. A further characteristic is that they are able to be
authoritative when promoting benchmarking to colleagues. However, the
champion can only take benchmarking so far. If it is to be developed in terms of
scope and generic ideas it is clear that a culture of sharing learning throughout
the organisation has to evolve. For example, at Royal Mail, a database has been
developed so that staff can learn from the benchmarking practices of their
colleagues rather than reinvent the wheel. Similarly, at a leading semiconductor
manufacturer, performance improvements of all types are promoted through
the interaction of cross-functional and cross-factory teams. To further speed up
the exchange of good practice an intranet is being developed which will provide
a portfolio of knowledge that can be drawn on by any member of staff.
In fact, it is by no means a certainty that the right conditions will exist to
stimulate benchmarking's progression. In the particular case of a rolled-
aluminium manufacturer, benchmarking activity started at the specific
indicators stage. As continuing benefits are still being found through this
activity, there is little stimulus to move benchmarking on, for the foreseeable
future at least.
Benchmarking problems
The most common problems organisations claim to experience when they
benchmark are the identification of suitable partners as well as identifying
comparable data. A common response (50 per cent) was ``interpretation of
comparative data (i.e. are we comparing apples with apples, or apples with
pears!?)'' [c144]. The inability to be able to compile strictly comparable
information is consistent with our earlier observation that there was an
abundance of internal benchmarking, rather than participation in
benchmarking clubs or networks. This situation is compounded further by the
problem of access to potential partner organisations. It was frequently stated
that problems occurred in areas such as ``collecting base data'' [c502] as well as
the belief that ``no two companies are alike, anyway'' [c474]. Perhaps if
organisations co-operated more on their benchmarking methodology, such
problems could be surmounted. Examining underlying processes can also
remove some of the difficulty with direct comparability. This implies that
organisations are still concentrating on more performance-oriented aspects,
more in tune with the internal and competitive parts of Camp's typology.
BIJ
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Other difficulties include resource constraints and staff resistance. Resource
constraints included time, finance and expertise, although time was by far the
greatest factor. There was a widespread acceptance that ``benchmarking is
quite time-consuming for our staff and quite expensive'' [c219].
Interestingly, 5 per cent of respondents believed that the biggest problem
with benchmarking was that it was insufficiently helpful. As one respondent
asserted:
Reliance on benchmarking breeds a lack of invention, more so than quantum leap thinking.
Companies never catch up with market leaders as there is little or no information on how best
practice performance standards are achieved [c079].
Staff resistance had been problematic at various stages from inception to acting
on the results of benchmarking, indicated by comments such as ``problem of
how to involve all the workforce right down to individual operators'' [c243], and
``increased pressure to reduce costs ± benchmarking is used as a pressure
device'' [c210]. This perhaps reflects mistrust among many employees towards
management techniques which may be used to undermine their own positions
(Holloway el a/, 1999b).
Confidentiality problems such as ``commercial sensitivity'' [c503], ``openness
of some companies in taking part'' [c318] and ``difficulty in making detailed in-
depth comparisons due to commercial sensitivity'' [c220] were cited relatively
infrequently. This may indicate that experienced benchmarkers were well
aware of the need to address this formally at an early stage, particularly if they
were operating within existing codes of practice recommended by the
practitioner literature. Confidentiality is seen as less of a problem once a
benchmarking partnership (and trust) has been established but is often an
impediment to initiating a benchmarking project.
Why do all organisations not benchmark?
So far, we have reported mainly on the experiences of those organisations that
were or have been actively benchmarking. However, the majority of
respondents (55 per cent) had not taken up the opportunity presented by
benchmarking, in spite of the hard sell from many consultants and practitioner
journals. The main reasons given were again resource constraints and
comparability of data. Stephens and Bowerman (1997) have reported similar
findings to this. In addition, many felt that it was inappropriate or that their
organisation was too small to gain anything (see Figure 3). Those who
considered it inappropriate generally appear to have made informed decisions
based on an appreciation of the characteristics of benchmarking and their own
circumstances, rather than merely rejecting it out of hand. There was a
common feeling that most of the examples used in the media focused on the
``successful'' organisations over and over again. This ``industrial tourism'' was
not seen as particularly helpful in starting a benchmarking project. A total of 7
per cent of organisations were currently considering benchmarking; however, a
further 5 per cent of organisations were ignorant of what benchmarking was.
Benchmarking
in the UK
59
Conclusions
We have found that benchmarking is a relatively common tool for performance
improvement in the UK. However, there are various factors which influence
and even inhibit its take-up such as company size, subsidiarity and
organisational sector. Our findings also show that a great deal of
benchmarking activity can be described as ``results'' benchmarking as opposed
to ``process'' benchmarking. While it is harder to develop process measures they
can prove far more valuable in improving performance and help to overcome
problems such as comparability. This suggests that most organisations have
not progressed beyond the first two categories of Camp's typology. Whether
organisations have to build up experience at these earlier levels before they can
move forward to more generic benchmarking is not yet clear. However, a
number of positive factors can be identified. The role that a champion can have
in promoting benchmarking is apparent. Equally, it is important for other
members of an organisation to exchange what they have learned and create a
climate where knowledge transfer is actively encouraged. Given these points,
we would strongly recommend that:
.
Wherever possible benchmarking should not be restricted merely to
comparisons of results but include an examination of the underlying
causal processes.
.
Organisations undertaking benchmarking should seek to ensure that
organisational culture(s) are sympathetic to the ethos of benchmarking.
We would urge potential benchmarkers, and those who seek to improve
the effectiveness of their benchmarking practices, to pay at least as
much attention to the organisational climate as to the technical or formal
steps undertaken.
.
When benchmarking activities are planned, attention should be paid
to training in team working, communications and change management
equal to technical skills associated with the steps of benchmarking.
Figure 3.
Reasons for not
benchmarking
BIJ
7,1
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.
When trying benchmarking for the first time, include somebody with
prior benchmarking experience in the team or as a partner wherever
possible. Prior experience seems to be an important catalyst, so novice
benchmarkers could consider co-opting someone with experience,
working with an experienced partner or joining a benchmarking club or
network.
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