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BENCHMARKING OF HR PRACTICES

INTRODUCTION

Benchmarking is a process for identifying and importing best practices to improve performance." Benchmarking is not a simple comparative study, simply copying practices from other organizations, or simply assessing performance.

The International Personnel Management Association and the National Association of State Personnel Executives jointly developed the following definition for benchmarking: A comparison of similar processes across public and private organizations to identify best practices to improve organizational performance. The characteristics and attributes of benchmarking include measuring performance, systematically identifying best practices, learning from leading organizations, and adapting best practices as appropriate. Benchmarking essentially involves learning, sharing information and adopting best practices to bring about changes in performance. To simplify this, it can be stated as:

'Improving ourselves by learning from others'

In practice, benchmarking usually encompasses:

Regularly

comparing

aspects

of

performance

(functions

or

processes)

with

best

practitioners; Identifying gaps in performance;

 

Seeking fresh approaches to bring about improvements in performance;

Following through with implementing improvements; and

Following up by monitoring progress and reviewing the benefits.

Alan Flower (1997) lists 5 main stages in effective benchmarking:

Selecting aspects of performance that can be improved and defining them in a way that

enables relevant comparative data to be obtained - in effect, producing performance indicators that will make sense to other organizations; Choosing relevant organizations from which to obtain raw or headline data;

Studying the data to identify possible opportunities for improvement;

Examining the procedures of the best-performing organizations to pick up ideas that can

be adopted or adapted to achieve performance improvements; and Implementing new processes.

Organizations usually benchmark performance indicators (e.g. profit margins, return on investment (ROI), cycle times, percentage defects, sales per employee, cost per unit) or business processes (e.g. how it develops a product or service, how it meets customer orders or responds to enquiries, how it produces a product or service). For human resources, three types of benchmarks are particularly appropriate (Matters, 1993).

Broad measures of performance which take an organization-level view of HR

management, using broad productivity measures like sales per employee, profit per employee, volume per employee, number of employees per HR specialists, and other relevant "output-over-input" ratios; HR practices focusing on how effectively HR programs and practices are implemented,

and making comparisons with other organizations; and HR competencies tracking the knowledge, skills and abilities.

PURPOSE OF BENCHMARKING

Have an experienced HR Consultant 24/7- just a phone call away. Establish solid HR Systems. Ensure compliance with Federal and State Employment laws. Get difficult, focused HR projects done accurately and quickly. Maintain HR Systems on an ongoing basis. Recommend systems and establish a timeline for project. Establish workers compensation reporting, drug testing procedures, and establish working relationship with company doctor or clinic. Assist with staffing the company as needed.

Provide assistance with interviewing, reference checking, and benefits sign-up and initial orientation of new employees.

Provide ongoing Human Resource support as needed and requested either on-site or off- site. Train an on-site administrative person to handle day to day Human Resource tasks such as monthly benefits administration, etc. Set up personnel files and recordkeeping systems such as Personnel Action Request Forms, Performance Review systems, job descriptions, etc.

NAVIGATING HR BENCHMARKING

Benchmarking Model

Benchmarking is the search for industry best practice which leads to superior performance. The pioneer of competitive benchmarking was the American company, Xerox Corporation. The company demonstrated the usefulness of observing and learning from superior performers by benchmarking their competitor. Through the knowledge they gained they managed to dramatically improve their productivity and significantly reduce their cost of production.

Based upon the Xerox experience, Robert Camp has developed a model which can be modified and adapted to suit any functional area, including HR management.

The Benchmarking Process

The Benchmarking Process Phase One: Planning Camp has broken the process of benchmarking into 10 steps

Phase One: Planning

Camp has broken the process of benchmarking into 10 steps which progress through 4 phases:

Step 1:

Identify what functions, products or outputs are essential practices and should be

benchmarked.

Step 2: Identify external organizations or functions within own organization with superior work practices for comparison.

Phase Two: Analysis

Step 3: Determine what data sources are to be used. If an organization has up to date personnel/payroll systems it should be able to measure a range of HR practices and outputs relatively easily. Valuable information may also be available through personnel records, surveys or even interviews.

Step 4: Determine the current level of performance. This will enable the gap in performance to be identified. Camp emphasizes the importance of a "full understanding of internal business processes before attempting comparison with external organizations." Baseline measurement also provides an objective basis upon which to plan and act.

Phase Three: Integration

Step 5: Develop a vision for future operation based on the benchmarking findings. Focus should be directed on the quality of best practice procedures/practices and how these can be not just emulated, but improved upon by the organization.

Step 6: Report progress to all employees on an ongoing basis. Communication and feedback are crucial components of benchmarking.

Phase Four: Action Step 7: Establish functional goals linked to the overall vision for the organization.

Step 8 & 9: Develop action plans and implement the best practice findings. This should be the responsibility of the people who actually perform the work. Periodic measurement and assessment of achievements should be put into place.

Step 10: Update knowledge on current work practices. This is, in essence, the crux of continuous quality improvement.

The remainder of this paper will focus on how to begin step one, the planning phase, of an HR benchmarking process, i.e. Identifying what to benchmark.

The discussion will primarily deal with the quantitative measurement of human resource management. Although qualitative assessment can be a valuable and informative benchmarking tool, the ease with which agencies can define, and in many cases obtain, quantitative information makes it a practical starting point from which to develop a benchmarking process.

Steps of a Benchmarking process:

The basic steps of a benchmarking effort are:

  • 1. Decide what process to benchmark.

  • 2. Study the process in your own organization.

  • 3. Identify benchmarking partners.

  • 4. Analyze the processes of benchmarking partners to identify differences that

account for

superior performance.

5.

Adapt and implement "best practices."

  • 6. Monitor and revise.

BENCHMARKING THE HUMAN RESOURCES FUNCTIONS

The Global best practices HR tool examines 44 performance measures in 5 key areas:

  • 1. Cost and Staffing: Compare a series of cost measures, including the total cost of the human

resources department, in addition to a series of staffing measures, including the number of HR

staff to total employees.

  • 2. Recruitment:

Assess

turnover

rates.

Determine

the

timeliness

and

efficiency

of

the

recruitment process.

  • 3. Training and Recognition: Review types of training offered and use of incentive plans.

  • 4. Benefits: Understand methods used to communicate benefits information and the extent to

which contributions are made to retirement plans.

  • 5. Technology and Organization: Examine the types of human resource information systems

used, as well as methods of effective communication and employee feedback.

DIFFERENCE

BETWEEN BENCHMARKING AND BEST PRACTICES

Are benchmarking and best practices the same?

No, they are not the same. Benchmarking is the process that allows one to identify potential best practices, i.e. by identifying the best performers; one knows where to look for practices that might improve their own performance. However, there are different types of benchmarking and some organizations engage in benchmarking in order to identify performance targets for their own organizations rather than to look for practices that make other organizations so successful.

What distinguishes a best practice from a better practice or a good idea?

A best practice is not simply a new idea, but rather a Best Practice is one that meets the following seven criteria:

  • 1. Successful over Time: A best practice must have a proven track record.

  • 2. Quantifiable results: The success of a best practice must be quantifiable.

  • 3. Innovative: A program or practice should be recognized by its peers as being creative or

innovative.

  • 4. Recognized positive outcome: If quantifiable results are limited, a best practice may be

recognized through other positive indicators.

  • 5. Repeatable: A best practice should be replicable with modifications.

it should establish a

clear road map, describing how the practice evolved and what benefits are likely to accrue to

others who adopt the practice.

6. Has local importance: Best practices are salient to the organization searching for improvement. The topic, program, process, or issue does not need to be identical to the importing organization, however.

7. Not linked to unique demographics: A best practice may have evolved as a result of unique demographics, but it should be transferable, with modifications, to organizations where those demographics do not necessarily exist.

FACTORS ENHANCING THE CHANCES OF SUCCESS FOR A BENCHMARKING EFFORT

A well-designed benchmarking process is essential. However, there are some other critical success factors, including:

Senior Management Support;

Benchmarking training for the project team;

Useful information technology systems;

Cultural practices that encourage learning; and

Resources, especially in the form of time, funding, and useful equipment.

BENEFITS OF BENCHMARKING HR PRACTICES

Affirmative Action Plans.

HR Policy and Procedures Manuals.

Employee Handbooks.

Interviewing Guides and Training.

Human Resource Department Audits.

General on-site and off-site Human Resource Support.

Organizational development.

Teambuilding.

Performance Review Systems.

Attitude Surveys.

Wage & Salary Surveys.

Supervisory Training.

Does HR Benchmarking Have a Real Role to Play?

The question, which is most interesting about the HR function, is the basis on which it determines what it does and does not do. To what extent do we, as a function, systematically assess those initiatives, which will impact most on organizational performance? Or do we become involved in operational issues, which have little lasting value added impact on the success of the organization. The methodology by which we determine what we do and don‟t do in managing the HR function is called HR strategy. An example is when we become involved in detailed selection activities, but don‟t have time to understand in detail our level of labour turnover (how it varies by occupational group, organizational unit and tenure, etc). Consequently, we do not analyze the reasons for labor turnover (poor selection techniques, poor induction, mismatched expectations, lack of career options, quality of management support, etc) to develop HR initiatives to address the problem. We are so busy on the treadmill of selection that we don‟t have time to understand what necessitated the selection exercise. We are so busy with urgent work that we don‟t have time to deal with important issues, which will impact on subsequent activities. To support the articulation of strategic HR priorities for an organization it is important to determine performance indicators to measure the impact of our HR strategy. The HR strategy is likely to include both people management priorities for the organization (eg. developing a customer responsive culture) as well as generic priorities for the HR function. It is important for the HR strategy to have this dual focus on people and HR function priorities as well as ensuring that the HR/people management priorities are aligned to, and driven by, the business priorities of the organization. This process is becoming more interactive because increasingly, people issues are fundamental inputs into developing the

business plan of an organization. The formulation of HR/People related performance indicators becomes a focus for ensuring the organization is driven by the HR strategy. Without a focus on five to ten key performance indicators we are more likely to regard the HR strategic plan as a general guide to our daily activities, rather than something, which should drive our performance. The existence of HR/people performance indicator categories is only the first step in ensuring that we have a “driven” culture within the HR function. The first requirement is to assess our existing performance in each of the key HR/people performance indicators. This information will typically come from our HRIS with some information likely to come from our finance and production systems. These key performance indicators may consist of both specific indicators - such as the ratio of transfers to promotions, and ratio of internal to external recruits - and

broader measures, such as labour turnover rates, absence rates or revenue per employee. Once an organization knows its performance on the selected performance indicators, it is then essential to set a target performance as part of the HR strategic planning process. It is my belief that it is illogical for an organization to set targets for its strategic HR/people If an organization, say in the Finance Industry, has identified that combining cost reduction with a stronger customer focus culture is core to its business strategy, then it may identify that its absence rate is a key performance indicator. If the organization then determines that its absence rate over the past twelve months for the total organization has been 4.0%, the next stage is to set a target performance for the organization. It is impossible to set a target performance on the strategic Key Performance Indicators without reference to some benchmark norms. The historical performance of the organization is useful, but not sufficient as a basis to establish a target. The benchmarking program is able to provide competitive yet realistic targets for our strategic HR key performance indicators. We may also want to compare the results of other industries to assess the possibility

of setting more challenging (but achievable) targets. We may set the Manufacturing 10th percentile of 1.3% as a long-term target (which we can update on a continual basis to ensure a competitive target is maintained). When investigating the desired benchmark standards, we may need to look at international benchmarking standards for our industry. This is particularly critical in international industries if we assess that our performance of 4% absence is a long way from our targeted performance, and then we may wish to investigate best practice initiatives to assist in reaching the desired target. In this case, the best practice investigation will include talking to organizations, which record optimum performance levels within the benchmark area. A key point is that the best practice investigation must be in an area where we have established a KPI to support our HR strategic plan. The best practice investigation may be within our own industry, or preferably, include other industry sectors.

We are not involved in best practice investigations in areas not strategic to us, nor are we investigating best practice unless there is a significant performance gap between our results and the benchmark target. By restricting our investigation to these two criteria, we minimize the prospect of engaging in industrial tourism under the guise of best practice. It is my belief that organizations must know their performance on the HR/people KPIs, which have been identified as supporting their HR strategy. Then they must set targets for these KPIs. Benchmarking plays a critical role in providing achievable but demanding targets for these HR/people key performance indicators.

In addition to setting targets for the key HR/people indicators, HR benchmarking can also play an important role in allowing organizations to monitor their performance on a wider range of benchmark measures. Organisations should continue to monitor their performance on a wide range of organizational and HR indicators. If their performance is outside the desired range, the

organization should then assess how critical this is and whether this should be the catalyst to initiate any action, or if it is appropriate/acceptable to have performance out of range with best practice. Whichever decision is made, it is a more informed decision than that which would be make with no HR benchmark reference.

The most common form of HR benchmarking is only restricted to salary surveys principally because of two essential reasons;

1) The difficulty of finding standard and acceptable performance indicators

2) The reluctance of companies to divulge sensitive information about their employees retention, employee costs and so on

3) The fundamental belief that a personnel is a mysterious and complex art. As a result, only those who perform it can judge the full value of the work

4) Measuring the effectiveness of Human Resource Management is inappropriate as HRM is devoted to stimulating and supporting human happiness and development. Making Benchmarking Effective If benchmarking is to make a difference in performance it has to move beyond a narrow focus on comparing figures to looking at the processes used by successful organizations. This does not however involve the „industrial tourism‟ of current industrial mythology. In particular much more attention has to be paid to cultural issues such as getting people to accept that there are better ways of doing things and see the need for change. This involves starting with something simple and showing early gains. Employers can introduce initiatives to improve staff‟s quality of working life, or improve efficiency by changing working practices.

Prescriptions for Action

HR managers should consider carefully the following factors when establishing a system for determining the effectiveness of their activities or departments:

1) It is important to recognize that the underlying purpose of a performance management system is change and organizational change of any type requires the active support, preferably involvement, of the topmost management. At a minimum, HR managers should have

  • a) A clear understanding of what the company‟s principal strategic objectives are

  • b) Which proposed or actual HR policies and practices contribute to their achievement.

  • c) The measures that are or will be linked to these HR policies or practices.

2) Change programs require clarity of purpose and a good measure of initial momentum in order to achieve success. It is therefore advantageous to focus initial efforts on those HR practices, which can be affected by individuals who will be subject to the measurement system. The least desirable course of action is to install monitoring activities that cannot be influenced by the persons involved. By this token, corporate training and development should not allocate costs to divisional managers if these individuals have no control over training and development activities in their units.

3) The performance management‟s measurement systems should be robust. The principle of triangulation i.e. the use of multiple measures to bring a target issue or event under control also

permits managers to gain a broader sense of the HR practices that contribute to company‟s

goals, since the likelihood is greater that one measure among the set will relate effectively to their issues and concern.

4) HR managers can avoid the measurement trap by monitoring key performance indicators, and only key performance indicators. The measurement trap springs shut when HR managers are busily occupied monitoring sundry measures, which have little impact in the organization. An open questioning, even dissenting work culture should be encouraged which challenges the last best idea set forth.

5) Line managers need to be actively involved when developing and monitoring and HR performance measurement system. One of the great pitfalls of HR performance measurement system is opened when HR managers begin argue that their HR actions are undiscussable so long as their performance targets are met. For HR managers to have real impact in the organization, dialogue about the meaning and relevance of programs, activities and measures must remain open. The dialogue can be enforced through the use of a cross-functional team, which monitors the system and ensures that relevant measures are being used and understood.

6) Communication is the sine qua non of effective change efforts. HR managers should be prepared to regularly communicate, with a proactive attitude, the purpose of specifics to performance management system to all involved employees, and be prepared to clarify repeatedly the measures in use

7) Analyze the data regularly, at a rate compatible with their impact on decision-making, and draw appropriate conclusions by comparing the key performance indicators over time. These comparisons may be made between business units, and/or against predetermined targets. Current

benchmarking efforts assess the HR performance of business units against comparable units within the same industry, or against units and organizations that are considered best in class.

8) Finally, the measurement should be flexible if a particular indicator fails to achieve business goals, or if the costs of collecting and analyzing data exceed the potential benefits of their use. The discipline needed to discontinue irrelevant performance measures should not be underestimated. The benefit of keeping the same measures for a period of time lies in the historical comparability thus afforded, and perhaps in the longitudinal evaluation of the impact anticipated by the HR practice.

LITERATURE REVIEW.

Decision makers are constantly on the lookout for techniques to enable quality improvement. Benchmarking is one such technique that has become popular in the recent times. Though benchmarking is not new, it has now found more subscribers, and occupies a prominent place, helping quality upgradation. Quite often, the benchmarking concept is understood to be an act of imitating or copying. But in reality this proves to be a concept that helps in innovation rather than imitation, as stated by Thompson and Cox (1997). Many authors have contributed to the literature on benchmarking resulting in more than 350 publications as of June 2002. Considering the growth of publications, some attempts have been made in the past to review the literature. It is essential that the present attempt is different from the earlier reviews and more broad based in coverage. This paper, besides providing a review of literature on benchmarking, covers the following objectives:

(1) Arranging the publications in an orderly manner to enable easy and quick search;

(2) Classification of literature;

(3) Scrutiny of outcome of publications; and

(4) Identifying gaps and providing hints for further research.

However, it is not the intention here to provide any overview or summary of benchmarking technique. Readers are suggested to look into the cited literature, for example Camp (1989a, b, c, d, e, 1990, 1992, 1993), Fuld (1989), etc., for learning about the basics of benchmarking. This paper first provides a comparison among the earlier reviews on benchmarking and highlights the outcome in each case. Next, a new methodology for classifying the literature is suggested. The growth and categorisation of publications are presented in a graphical form for easy understanding. The papers have been closely examined and scope for further work has been identified. Earlier reviews of literature on benchmarking It was found out during the current research that at least six literature reviews have been made in the past and all but one were studied by the authors. The different reviews in chronological order are:

(1) “Roadmap to current benchmarking literature”, Andrew E. Jackson, Robert R. Safford and

William W. Swart, 1994, Journal of Management in Engineering, November/December, pp. 60-

7.

(2) “A review of key publications on benchmarking: part I”, Mohamed Zairi and Mohamed A.

Youssef, 1995, Benchmarking for Quality Management and Technology, Vol. 2 No. 1, pp. 65-

72. “A review of key publications on benchmarking: part II”, Mohamed Zairi and Mohamed A.

Youssef, 1996, Benchmarking for Quality Management and Technology Vol. 3 No. 1,pp. 45-9.

(3) “Benchmarking: a select bibliography”, S.N. Vig, 1995, Productivity, Vol. 36 No. 3,

October/December.

(4) “A review of benchmarking literature”, Czuchry, A.J., Yasin, M.M. and Darsch, J.J., 1995, International Journal of Product Technology, Vol. 10 No. 1/2, pp. 27-45.

(5) “A framework for benchmarking in the public sector literature review and directions for future research”, Jeffrey J. Dorsch and Mahmoud M. Yasin, 1998, International Journal of Public Sector Management, Vol. 11 No. 2/3, pp. 91-115.

(6) “Theory and practice of benchmarking: then and now”, Mahmoud M. Yasin, 2002,

Benchmarking: An International Journal, Vol. 9 No. 3, pp. 217-43.

Out of the six publications cited here, the fourth one, namely “A review of benchmarking literature” by Czuchry et al. (1995) was not available to the authors at the time of preparation of

this article and hence the authors could not use the valuable information of this publication for a comparative study. Further, a comparison among the earlier attempts to review literature on benchmarking is made using certain attributes.

The attributes considered for comparisons are:

Focus and objectives: this refers to a brief coverage of the publications in terms of the content and the applicability.

Number and type of publications covered: the number of publications listed and whether they are text books, journal papers, conference proceedings or periodicals.

Review methodology: this looks at the way in which the literature has been reviewed and classified.

Over the last five years, the authors had several opportunities to collect and study literature pertaining to benchmarking. Two main reasons are:

(1) Interactions with industries with focus on quality management; and

(2) One of the author pursuing doctoral studies in the field of quality management. As a part of the research it was decided to classify and analyse the literature in detail. The course of action included the following steps:

(1) Updating the database to ensure that literature is as current as possible. The collection of literature has been reviewed till June 2002.

(2) For literature search, both hard copy search in established libraries electronic search in World Wide Web were made.

in

.India and

(3) Developing a classification scheme was the next step. First a bibliographical list of all publications was developed and a file was created in Excel spreadsheet. (4) Keeping these observations in mind the authors decided to approach the review process in a different way, as illustrated in the next part of the paper

BENCHMARKING: LITERATURE REVIEW OF ATTITUDES

Once the policies and practices on plant maintenance spares had been obtained, a simple questionnaire survey to assess the attitudes to benchmarking was conducted. The survey was sent to 360 staff and 18 managers in plant maintenance, from which 98 (27 per cent) and four (22 per cent) responses, respectively, were obtained and to 18 staff and four managers in purchasing with nine (50 per cent) and three (75 per cent) responses obtained, respectively. The respondents were positive (79 per cent) in their attitude to benchmarking, with a further 16 per cent believing that benchmarking would benefit the business but not themselves. Only 5 per cent thought that benchmarking would harm both themselves and the business. These findings were mirrored when the respondents took a longer-term view, except that their view tended to harden, with respondents either becoming more positive or more cynical. Those respondents who have been active in the business quality improvement initiative or have attended benchmarking training had the more positive attitudes. It is interesting to note that the

participation in a benchmarking exercise appears to have been of little influence in affecting the perception of employees. In general, staff who had access to information on benchmarking and continuous improvement were more positive and wanted to know more. Even among the minority of respondents (5 per cent) who expressed a negative attitude towards benchmarking, 75 per cent wanted to know more about the subject. The critical factors appear to be the relevance of the material to them and the processes for which they are responsible. The people expressing the more positive views are managers and staff working within the purchasing function. In summary, there is a positive attitude towards benchmarking, with staff being prepared and willing to make the concept work. However, the actual numbers who have actively participated in the benchmarking process are still relatively small and their attitudes are, in general, neutral. Hence, there is a need to sustain and build on the goodwill which is currently present. Care will need to be taken to ensure that the expectations of staff are met by timely feedback of relevant information. In addition, further efforts will need to be made to ensure that the minority of employees who currently hold negative views on benchmarking are exposed to relevant information, either internal or external, on the subject.

THE BENCHMARKING PROCESS

PLANNING: CLARIFICATION OF GOALS AND OBJECTIVES

The company‟s approach to benchmarking follows the ten-step process, described by Camp (1989). Following the examination of the spares procurement process the formalized benchmarking process commenced with the formation of the benchmarking team. The first meeting of the team, in addition to agreeing its working methods, sought to establish consensus on:

• the organization‟s goal for the benchmarking study; • customers‟ requirements; • current processes; and • critical success factors.

While it had been assumed that obtaining agreement on these matters would be straightforward, it quickly became apparent that there was a wide diversity of opinion between the team members. For example, there was no agreement as to what the actual customer requirements were, although it was agreed that formalized customer requirements should be laid out within the existing SLAs. An examination of these agreements revealed a lack of clear and relevant performance criteria, with no linkage between the requirements of the ultimate customer (operations), and the plant maintenance and purchasing departments. A comparison of how the procurement processes should operate with how they actually work in practice were discussed at length. While there was a broad measure of agreement, some of the more critical observations sparked controversy between team members. It was eventually agreed that objective data rather than subjective opinion would be required if the team were to reach any rational conclusion. Consequently, it was decided that the measurement of

procurement cycle time and an audit of stock holdings within plant maintenance should be undertaken. As the benchmarking study proceeded it became apparent that a more detailed specification would have highlighted the differing perceptions and made its goals and objectives much clearer. The differing perceptions as to the true nature of the problem were:

• The head of purchasing was aware of a stock management problem within plant maintenance,

the complexity of which had prevented earlier attempts to put all stock management out to

contract. Previous attempts to tackle the problem of procuring and distributing spare parts to plant maintenance had come to nothing. First, the outsourcing of the stock management to a third party deliberately excluded plant maintenance stocks because of the bewildering range of possible spares requirements. Second, the findings of an internal plant maintenance study aimed at improving availability by identifying and stocking critical spares, had to be abandoned due to the high cost of implementation. The purchasing manager hoped that the benchmarking study would help to define what the problem was and “to provide a baseline” from which he could work.

• The plant maintenance manager was acutely aware that spares‟ availability was a major

problem and frustration for his staff. He sought a solution which would improve availability, but also accepted that there was scope for improvement in the way staff managed the stock situation.

A further complication came from the fact that the original impetus for the project had come from purchasing, but the actual benchmarking was to be carried out in plant maintenance. The result was a unique situation where the impetus for process improvement comes not from the customer but from the supplier. Notwithstanding the problems of defining

the goal and requirements of the benchmarking study, the team members were all agreed that they faced two problems. First, there was the existing spares holding which, if managed in a more effective manner, had the potential to save money through smaller stock holdings and improve availability through the sharing of resources. However, in the longer term, it was also agreed that if procurement cycle times could be both shortened and made more reliable, the need for most forms of stock holding could be eliminated. Hence, this second factor was considered to be the more important of the two. Following the measurement exercise on the procurement cycle it was further agreed that it was the order fulfilment element which was most likely to cause problems and delays. The assumption was made that the principal aim was to eliminate stock holdings by developing an effective just-in time supply system, but that some low value/high turnover parts would need to be retained as stocked items. At this point, it was agreed that the projects should be divided into two. First, plant maintenance should, in the short term, seek to improve its stock management with the critical success factor being increased stock turnover. Second, and in the longer term, purchasing should seek to reduce the order cycle times. The project selection and specification problems encountered with the benchmarking study are not unique and have been aired in a number of texts on benchmarking. However, the available advice on selecting benchmarking targets is not good (Lincoln and Price, 1996). Camp (1989) does suggest that the benchmarking team should start with an examination of the company‟s mission statement and within a large company such as the utility in question, this may indeed be a suitable starting point for a strategic benchmarking exercise. However, there is no guidance as to how this might be translated into practical guidance for a functional department such as plant maintenance, where there may be competing goals and objectives, such as saving money

versus improving service. Alternatively, Karlöf and Östblom (1993) suggest an examination of the broad issues before refining the benchmarking project to more specific issues, but again this is beyond the scope of functional managers in a utility of the size which is the focus of this study. The contention by Micklewright (1993) that in large companies strategic benchmarking projects cascade down to form functional benchmarking projects is not supported by the research reported in this paper. In addition, there appears to be no literature dealing with the need to translate strategic benchmarking goals and objectives into process-related benchmarking projects.

PLANNING:

IDENTIFICATION

OF

BENCHMARKING

PARTNERS

FOR

STOCK

MANAGEMENT

The most basic and readily available comparative information related to the management of stores holdings in the utility, are the stock holdings that are reported in the annual reports and accounts of similar utilities. The assumption being that the utilities being compared have broadly similar business practices and are reporting to common accounting standards. The only significant difference being the relative sizes of the various businesses, however, comparable figures can be obtained by expressing the stock holdings as being a percentage of turnover. Data were available to carry out this analysis for the last five years and by this means it was hoped to identify “best-in-class” performance. Using published sources it showed that the host utility‟s stock holdings, relative to its turnover, were about twice the utility average and four times the “best-in-class” level. However, the fallacy of this approach became evident with the detailed examination of the host utility‟s plant maintenance stock holdings. While stock did

exist, none was held on account and did not form part of the data that had gone into the company‟s annual report and accounts. Using the criteria used in these accounts, plant maintenance‟s nil stock, in theory at least, represented the perfect system. Although the utility may well have problems with the wider issue of stock control, there is no direct link to any problems that might exist with the supply of spare parts to plant maintenance. Comparative data were collected on the plant maintenance stock holdings to facilitate an internal benchmarking exercise. The data collected were crude, taking no account of the type or age of the plant which is supported and had to be made on the assumption that there was a broad similarity between the different maintenance units. This internal benchmarking of plant maintenance stock holdings revealed a wide disparity in the level relative to turnover, which in turn highlighted the potential savings which are possible if “best-in-class” levels of performance could be achieved across the whole of plant maintenance. However, the solution to this problem does not appear to lie within the plant maintenance function. Given the ad hoc nature of the current stock management systems and the lack of reliable data, this internal benchmarking exercise does little more than establish a crude form of performance gap, which if closed would see stock holdings decline by some 82 per cent to 96 per cent (£568,000 to £666,000). However, the analysis gives no indication as to why certain maintenance units perform better than others. Nor does it explain why disparities in “just-in-case” holdings of high value stock exhibit such a wide range of values, although the measurement of the procurement cycle time has shown that there are problems with the implementation of a (just-in-time) JIT supply system. Hence the need was clearly identified to benchmark a stock management system for low value stock and to benchmark procurement systems which will significantly reduce procurement cycle times. Owing to the lack

of formalized stock management procedures and data it was necessary to make a number of assumptions when considering potential external benchmarking partners. It was assumed that:

the vast majority of stock, by line item heading, would be of low value; the stores would have to be geographically close to the point of consumption and hence would be widely dispersed around the region; and extra resources for the employment of fulltime storekeeping staff was unlikely. Hence, it was decided to benchmark a stores‟ management which is unsophisticated, inexpensive and simple for allgrades of staff to operate with the minimum of training. It was decided to benchmark the military accounting system, known as “expense stores”. Used in all army units and sub-units, this stock management system is normally operated by soldiers from a non-stores background, both in barracks and on operations, using simple stock cards. The main findings of this exercise were that the military stock management system was a simple and robust system that could be introduced into the utility without too much difficulty but that in order to manage the accounts properly a full-time storeman would be required, per store. In addition, to be fully effective the management system required some form of standardized stock code system. It was estimated that the expense stores would need to be reduced by about £206,000 per maintenance unit to justify this additional manpower. As average stock holdings were only £20,000 this additional expenditure on manpower could not be justified. It was therefore recommended that the current system, despite its imperfections, be retained. In addition, where individual maintenance units stocks appeared to be abnormally high it was recommended that a process of educating staff be undertaken. It was also suggested that it may be cost effective to employ a technical expert who could advise managers and provide liaison between the plant maintenance and purchasing functions.

PLANNING: IDENTIFICATION OF BENCHMARKING PARTNERS PURCHASING

As was the case with stock management, it was decided to benchmark organizations which were perceived to face similar procurement problems rather than attempting to benchmark more conventional and routine procurement problems. The criteria used being an organization that was required to support a wide diversity of non-standard plant which was crucial to the operation of the business. Potential benchmarking partners were discussed by the benchmarking team and it was agreed that the operations of electricity generation and nuclear waste reprocessing face problems similar to those experienced by the host utility. However, enquiries made to assess the willingness of companies in these types of businesses to get involved in this benchmarking study coincided with the detailed examination of the extended times that existed within the procurement cycle. For example, this revealed long delays on routine services such as electrical motor rewinds, a service normally completed within 24 hours. In an interview with the head of purchasing it was agreed that this analysis showed that either the data were highly inaccurate or that there were serious supplier failings in the fulfilment of their contracts. It was also confirmed that no form of vendor rating was operated or planned and that the purchasing department in the main reacted only to customer complaints. Given that there was a need for more reliable data, monitoring of procurement performance criteria and vendor rating, all of which were basic procurement functions, the

step changes in performance which an external benchmarking exercise would identify was considered to be premature. It was jointly agreed by the team members that the benchmarking exercise should be postponed until purchasing had improved some of its basic processes.

RESEARCH METHODOLOGY

STUDY This research project is a descriptive type of study on the topic “BENCHMARKING OF HR

PRACTICES”.

RESEARCH DESIGN:

Research Design is simply the framework or plan for a study, which is used as a guide in collecting and analyzing the data. It is the blueprint that is followed in completing a study. As the objective of the research is descriptive in form, the research design must be made accordingly:

Formulating objective of the study. Designing the method of data collection. Selecting the sample size. Collection of data. Analysis.

Conclusion. Descriptive research includes websites, books, magazines, observations and fact-finding enquiry

of different kind.

DATA COLLECTION

PRIMARY DATA: Primary data helps in validation of the knowledge gathered from secondary data. Primary Data are those, which are collected afresh and for the first time. In our study we collected primary data or information from the ten manufacturing units. The methods adopted for it are as under:

Observation Method

Questionnaire

SECONDARY DATA: Secondary data provides the knowledge about the topic of the research and the company in terms of facts and figures. Secondary data are those, which are collected through someone else, and users can obtain from websites, books, magazines, and articles in newspapers.

DATA ANALYSIS OBJECTIVE OF THE STUDY:

The objectives of the study are as under:

To study the purpose of benchmarking the HR practices.

To study the process and steps of benchmarking.

Defining the factors enhancing the success of benchmarking efforts.

To know the benefits of benchmarking.

To analyze the trends and best practices for using HR for competitive advantage.

METHOD OF DATA COLLECTION: The study is based on the secondary data. The research tools are the magazines, journals and websites.

RESULTS & DISCUSSIONS

The literature refers to some key findings from research and lessons learned. These include:

The most striking increases in high-involvement work practices are in the use of on-line work teams and off-line problem-solving groups. Higher levels of managerial tenure had a positive and statistically significant association with greater increases in the use of high-involvement work practices. In newly industrialized countries, investments such as increased training, performance- based pay, the elimination of status barriers, and more selective recruitment and hiring practices were assessed by the corporate parent. High-involvement work practices may represent "competence-destroying" change, which is difficult to implement, and may lead to worsened performance in the short-term.

Plants that undergo a major disruption in their operations creating opportunity for various organizational changes - were more likely to adopt high-involvement work practices. Manufacturing technology is necessary but insufficient, without work force commitment to performance. Any competitive advantage will not be sustained without a skilled, motivated, and committed management team and work force. Organizations must enhance work force ability to improve productivity. Technology without a talented work force is an opportunity that has not been utilized enough.

NEW ROLE FOR HR PROFESSIONALS

The role of HR departments is being transformed as line managers assume greater responsibility for a number of people management activities and as HR specialists focus more closely on integrating HR and corporate strategy. It will become increasingly important for HR specialists to demonstrate that they can contribute to organizational efficiency and effectiveness in both the short and long term.

HR professionals can now play a more proactive role by:

Demonstrating that they understand these employment changes has an impact on

employees and that employee‟s experience organizational change in different ways.

Realigning the expectations of managers and other employees within their organizations. HR practitioners are responsible for communicating the need to understand the changing nature of work and the impact of such changes on the organization. Monitoring how well employees are coping with employment changes where many employees do not feel that they are effectively making the transitions when organizational changes and flexible work practices are introduced. Providing advice to executive management to adopt a long-term strategic approach to HRM that is more conducive to the development of employment relationships based on mutuality of organizational and individual goals and expectations.

Only two of Camp‟s (1989) ten steps were completed and of these it was theidentification of what was to be benchmarked which was the most problematic.Even after the benchmarking team had agreed a framework for the project theirdiscussions were hampered by the lack of objective non-fiscal data on which they could take decisions. For example, if plant maintenance stocks had been included in the annual report and accounts, reported stocks would have been boosted by 3 per cent. In addition to this problem it was clear that some of the maintenance units‟ spend profiles were being massaged. This lack of reliable data, necessitated the abandoning of the competitive benchmarking exercise using published sources of data and meant that the external functional benchmarking of the purchasing function had to be postponed. However, it did precipitate the internal audit and benchmarking of the plant maintenance stock holdings. Even the cost of implementing the findings from the external functional benchmarking of the military stock management system could not be calculated until the value of the plant maintenance stock holdings could be assessed. This supports the views of Dick Homes (Rank Xerox European manufacturing director) in the need to get a fundamental data-gathering system in place if improvement processes are to succeed (Coyne, 1989).

Camp‟s (1989) benchmarking model was time-consuming and resource intensive, this was due to the

methodical nature of the process as well as the need to access, collect and analyse data for which there were no established retrieval procedures. It did, however, eventually produce the desired results. The

benchmarking process did, however, force a full and detailed review of the spares‟ procurement process

and the logic which underpinned it. This supports Tucker‟s (1993) contention that the value of the benchmarking process is “from results”. In addition, the nature of the benchmarking process ensured that only those elements which were seen to be viable proceeded beyond the initial

planning stage. As a result, a considerable amount of nugatory effort was probably saved in the latter stages of the study, as well as highlighting areas for improvement within the existing processes which were being examined. Within the procurement cycle the critical success factor, the lack of reliable data and scope for simple improvements to the existing process, meant that it was difficult to determine where the real problems lay. This, in turn, led to the postponement of a benchmarking exercise on this function and a recommendation that its basic processes be simplified and improved. Although a failure in

the short term, the benchmarking of purchasing is still a viable option for the future. If Harrington‟s (1991) approach of applying business process improvement to procurement‟s problems had been applied,

with benchmarking study used only as an adjunct, nugatory effort would have been avoided. When the scope of the benchmarking was more limited, as in the examination of the plant maintenance stock management system, it can be regarded as a success, however, there are still potential problems with implementing the findings. Any new stock management system will have to be developed from scratch, but because there is no current management input into the project, it will require additional human resources. Care will also have to be taken when selecting these resources, as the system will only work if it is applied in a disciplined and consistent manner. These additional human resources have a cost, be it a direct or opportunity cost, which when multiplied by the 18 maintenance units could be considerable. Hence, the potential savings derived from the benchmarking of the plant maintenance stock management system could easily be absorbed in

establishing and maintaining the system. When the potential stock savings that would accrue from a more efficient procurement system are also considered, the business case for implementing a stock management system within plant maintenance looks increasingly unsound. Hence, the benchmarking of the plant maintenance stock management system can, on the one hand, be judged a technical success in that the military stock management system was far superior to that currently operated by plant maintenance, but, on the other hand, to be a commercial failure in that the system would cost far more to implement and maintain than it would save. With hindsight it is clear that the benchmarking project would have benefited from improved targeting of resources. The benchmarking literature holds possible solutions to this type of situation, but only within the wider context of a complex business environment. It is also clear that benchmarking in all its various forms has a role to play. The key is the conventional planning model, but using the various benchmarking techniques to add focus, clarity and measurable performance targets at each level. In each case the benchmarking process would not be a substitute for effective management but used sparingly it can help to identify and quantify the means of making breakthrough improvement. This would not only help the managers directly involved in the process, but also guide other managers. It would also ensure that benchmarking projects cascade down through the organization, each supporting the findings and implementation of the benchmarking project on the strata above. Such an approach would also mean that scarce resources, such as information technology, could be planned and allocated in a logical and coherent manner. Micklewright (1993) suggests that this concept is already applied in some large companies, the challenge is to ensure that it is applied to all benchmarking projects. Whether the benchmarking project is judged to have succeeded or failed in bringing about improvements to the plant maintenance spares procurement process, there can be no doubt that it has focused managers‟ attention on the problem. During the five months or so in which the research was conducted, no practical or tangible solutions were implemented within the company as a result of the benchmarking project. The three primary reasons for this lack of progress lay with difficulties experienced in gaining

reliable and objective data, the lack of clear business objectives and poorly-defined customer requirements within the supply chain. Nevertheless, application of the benchmarking process methodology forced a systematic reappraisal and review of all these issues and of the procurement cycle as a whole and many lessons were learned, the main ones of which are indicated below:

Customer requirements. Managers, having lived and worked with their internal customers for years, believed that they understood what their customers‟ requirements were but when challenged on this were

unable to translate these requirements into any form of objective or coherent requirement that could be applied to the whole of the plant maintenance function. The use and application of SLAs has started to rectify this weakness; however, with one exception, these have yet to address the key customer requirements. In the case of plant maintenance this translates into: what level of plant availability is required? and how rapidly must repairs be effected? Until these fundamental questions are addressed, it will not be possible to benchmark the service provided by plant maintenance to operations or to assess whether the existing spares procurement service provided by purchasing is satisfactory. This same principle applies down the supply chain with purchasing benchmarking the performance of their suppliers and this will be dependent on the quality, price and speed of delivery demanded of them by plant maintenance.

The procurement cycle. As a result of the analysis and discussions that took place during the project planning phase, the procurement cycle (i.e. the time from a spares requirement being identified to the time when the spares requirement has been satisfied) was judged to be the critical success factor. This was because a significant reduction in the time taken actually to deliver the spare parts and services required by plant maintenance would address two of the key problems: non-availability of spares when they were required and the holding of excessive stocks, which are directly attributable to non-availability of spares.

PURCHASING.

The identification of the purchasing function as being the critical success factor and the failure to benchmark it highlights the need for managers to have a clear understanding of their business processes before they attempt to undertake a formal benchmarking activity. This is not to say that the managers within purchasing have failed to seek and achieve meaningful improvements in the service they provide. The introduction of framework agreements and innovative developments such as the planned introduction of smart charge cards that can be used by the FSEs, means that many purchases will be both faster and cheaper. However, the reliance on performance measure such as the order placement time, which is peripheral to the main procurement cycle, means that the procurement function has become dependent on customer complaints as the sole method of measuring the effectiveness of the contracts it places. This is clearly inadequate as the feedback is neither objective nor uniform and relies on the FSEs having full access to and understanding of the contractual implications of the order that has been placed. While these various problems will undoubtedly benefit from the management focus that benchmarking has brought to them, it is probable that similar results would have been achieved had any quality management tool or technique been applied. In this case the benefit was derived from the management focus rather than the application of the benchmarking methodology.

CONCLUSION

There is significant evidence in the literature to indicate that a strategic approach to HR policies and practices in Australia has been largely pre-occupied with strategy in its narrowest form. An explanation of this may be that strategic HR practices have been used opportunistically rather than strategically, and the approach by HR specialists and their CEOs has been overridden by the need to survive and grow in an increasingly complex and volatile economic environment. Unlike their financial counterparts, HR

specialists are often ignored when strategic business decisions are made. This supports the belief that the material considerations for long-run strategic decisions placing HR as the critical function in corporate strategy do not exist.

Organizations that continue to seek solutions to their competitive challenges by downsizing, outsourcing and weakening their organizational culture are now "on borrowed time" and will not be sustainable. Organizations need to match HR policies and practices with long-term business strategies required to compete in the global market place, and generate employee commitment and retention over the long-term. HR practices are required that are incremental and collaborative and provide the opportunity to employees to make decisions affecting their work and to share in the rewards of their creative efforts.

Looking back on the research, it is clear that there are few tangible gains for the effort expended on the benchmarking project. The benefits, where they have been accrued, are mostly in the form of lessons for the future. These being:

• A need for clear business goals for the benchmarking project; A need for clear customer requirements with objective measures; and The need to understand and improve current processes, before attempting to benchmark them.

If these points had been taken into account it would have avoided the false start in the benchmarking of the procurement cycle and lack of benefits so far derived from the benchmarking of the plant maintenance stock management system. However, the project has proved to be an extremely useful tool in enabling the plant maintenance and purchasing functions to come together and focus on where they need to improve. It has also helped to motivate purchasing staff to action those areas identified as needing improvement.

Had there been a greater clarity and a better understanding of the underlying processes, this benchmarking study would probably not have been undertaken. Rather, the rationale for plant maintenance and the levels of service it provides to operations would have been more clearly defined. In turn, the repair process needs to be subjected to close analysis in order to determine if and why it is failing to meet the expected performance levels, which in turn may highlight problems with the supply of spare parts. This process of improvement could then be extended to the procurement cycle which needs to identify why there appears to be a problem with overdue orders. Having completed this basic process of improvement, managers would have a far better understanding of their business processes, a pool of accurate data on these processes, and a sound foundation for the step change that the benchmarking process offers.

In this context, the benchmarking process should be subjected to the same rigour as is applied to other business processes. Resources should only be devoted to those parts of the business most suited to benchmarking and which will afford the most benefit. From this perspective the benchmarking study was a case of the “cart coming before the horse” with the result that some of the effort was probably nugatory. The business quality manager of the utility believes that it is legitimate to use a benchmarking methodology to smoke out improvement opportunities which are then acted on outside of the benchmarking process. He considers it useful to capitalize on the good name which benchmarking has. This approach has been used with considerable success across the utility but, as with the case of this project, it often does not result in a successful benchmarking exercise, in theory. It also creates problems in maintaining a high degree of rigour and integrity when applying the initial steps of the benchmarking process. The benchmarking process started with the formation of a cross-functional team. Its first major task was to establish what the goals and objectives of the utility were in relation to the project and how they related to the internal customers‟ needs. Despite a belief that these goals, objectives and requirements were clear, it soon became apparent that this could not be translated into a clearly-defined unity of purpose. Similarly, there was a broad consensus as to

how the spares procurement process should work, but perceptions as to how it worked in practice differed. The team all concurred that more objective data were required if there was to be a rational examination of the spares procurement process and agreement on methods of improving it. There was also agreement that a critical success factor was to improve the management of the plant maintenance stores, but in turn this would be dependent on improving procurement cycle times to produce a JIT supply situation. It was possible to examine some of Camp‟s (1989) “Ten-steps benchmarking model”. This showed that when applied to specific processes such as stock management, benchmarking can and does work, but that the methodology during the preparatory stage can be very time-consuming. It demonstrates that when focused on specific issues, the benchmarking process is capable of identifying and promoting measurable improvements in business efficiency is to be made of the considerable management effort that is expended. The research also shows that unless a benchmarking study is put into the wider business context its efforts can prove nugatory. There is, for example, no point in expending time and effort improving the management of stock within plant maintenance if improvements within purchasing will deliver a genuine JIT supply system and so eliminate the need for plant maintenance to hold any stock. The attitude survey of all staff within both purchasing and plant maintenance shows a general acceptance of the benchmarking concept and a desire to know more. Most staff expressed a belief that the benchmarking process would benefit both themselves and the business. This finding was reflected in discussions and interviews with individuals. Almost without exception, regardless of position, employment or department, individuals were genuinely open and helpful. When challenged on subjects which could be perceived as being detrimental to their own performance or that of their department, some naturally became defensive. However, when pressed on these weaknesses they usually conceded scope for improvement, both for themselves and for others.

There is a proliferation of literature on the topic of benchmarking in the last 15 years, as revealed in this literature review. Considering the gamut of publications it can be said that the benchmarking technique has seen a steady growth and appears to be heading towards maturity level. A scrutiny of the publications

show that several aspects of benchmarking along with many interesting and diversified applications, have been covered in sufficient detail. These publications can serve a great deal towards quality improvement. Thus academicians, practitioners and researchers have a good number of sources in the form of more than 300 articles, to study, discuss and debate over many aspects of benchmarking. The present review of literature on benchmarking, carried out as a part of on-going research, has identified certain issues which have not been satisfactorily addressed or not been addressed at all. These issues can be regarded as inadequacies and they offer scope for further research and exploration.

The issues identified are as follows:

COST ASPECTS OF BENCHMARKING.

The overall cost incurred in carrying out a benchmarking exercise needs to be established, say in terms of cost models or cost equations. This would enable the decision makers to decide upon financial commitment before embarking on the benchmarking exercise. Further it would allow to estimate the return on investment, and to convince the top management. While a precise model is difficult, because of variability of factors involved, an approximate method would be quite useful.

DURATION OF BENCHMARKING EXERCISE.

Guidelines regarding setting up of a time frame for conducting benchmarking are not available. If a method can be described to decide upon the total time involved in benchmarking exercise, it would prove very helpful in setting targets and deadlines.

HUMAN RESOURCES IN BENCHMARKING ACTIVITIES.

Rationale behind formation of cross-functional benchmarking teams, identification of tasks of benchmarking teams, and responsibility sharing among benchmarking teams, have not been discussed in sufficient detail. The human role in benchmarking activities needs to be clarified in complete depth to ensure better teamwork in a benchmarking project.

SELECTING BENCHMARKING PARTNER.

Selection of partner or superior performer, their duties and responsibilities, legal and business aspects are to be further elaborated. Sometimes, the superior performer as recognised in terms of market leadership or achievements/success rate, may not be willing to disclose the business practices. This could be a major deterrent in the benchmarking process. Further best practices followed in a certain successful organisation may not necessarily be the best when adopted by other organisations. Eventually, success rate may also significantly differ across organisations. These issues need to be resolved to make benchmarking a preferred technique in the quality improvement efforts. The resource requirement for full-scale benchmarking exercise needs to be carefully established particularly for small and medium enterprises. These organisations which are normally tight on budget cannot afford to venture investing sizeable resources. Therefore, any commitment towards benchmarking has to be justified in terms of assured returns. No doubt, benchmarking is a wonderful tool for quality improvement, assuring success as proved by the rich literature cited in this

paper. Applying the rule of continuous improvement, benchmarking tool can be further sharpened. It is hoped that this paper has thrown light on certain dark areas of benchmarking thereby demanding further exploration on the topic, to make it more useful and a versatile tool in the quality toolbox.

BIBLIOGRAPHY:

Camp, R. (1989) Benchmarking: The Search for Industry Best Practices That Lead to Superior Performance, Milwaukee: ASQC Quality Press

Eccles, R. (1991) “The Performance Measurement Manifesto”, Harvard Business Review, January February, 131 137

Fitz Enz, J. (1984) How to measure Human Resource Management, New York: McGraw Hill

Article Reviews:

www.ere.net

HR Practices for High Performance Organizations.

Flower, Alan. 1997. How to: Benchmarking? Personnel Management. 12 June.