TOTAL QUALITY MANAGEMENT, VOL. 11, NOS.

4/5&6, 2000, S623 S630

A practical approach to benchmarking in

three service industries
Mike Simpson & Dimitra Kondouli
SheYeld University Management School, 9, Mappin Street, SheYeld S1 4DT, UK

Introduction
The major means to improve quality has been the use of a systematic quality programme.
Benchmarking, as a tool of total quality management (TQM), has received growing concern
from quality aware managers. The importance of benchmarking was further highlighted with
the formation of Benchmarking Centre Limited in 1991. Awareness of benchmarking in the
UK was assisted to some extent by the use of BS7850, the TQM `standard (British Standards
Institute, 1993). However, it was not until the launch of the European Quality Award in
1992 and the UK Quality Award in 1994 that benchmarking gained prominence in the UK.
The primary aim of this work was to study the practical application and eVectiveness of
benchmarking in UK service organizations (Kondouli, 1998).
Methodology
Primary data were collected via structured interviews with senior managers within each of
the three organizations. These organizations were known to have initiated TQM and
benchmarking programmes. Secondary data were collected in the form of annual reports,
benchmarking training manuals, reports and data provided by the companies on their
benchmarking eVorts.
Theory
A de nition of benchmarking developed at the American Productivity & Quality Centre in
1992 represents a consensus among some 100 US companies:
Benchmarking is a systematic and continuous measurement process; a process of
continuously measuring and comparing an organization s business process against
business process leaders anywhere in the world to gain information which will help
the organization take action to improve its performance (APQC, 1993).
At the most fundamental level, benchmarking means learning from others. The major feature
of successful benchmarking is simply sharing (Altany, 1991). Benchmarking is moving more
towards areas that reinforce the role of the employee in the success of the company such as
customer service, quality, teamwork, communication and supplier relationships (Bracken,
ISSN 0954-4127 print/ISSN 1360-0613 online/00/04S623-08

2000 Taylor & Francis Ltd

S624

M. SIMPSON & D. KONDOULI

1992). Many benchmarking models have been used in the past and many companies have
developed their own de nition, model and process, the most famous being the Xerox 10step benchmarking process.

The case studies

Case study 1: Yellow Pages, Reading
Yellow Pages (YP) is a division of British Telecommunications plc (BT) and had a turnover
of 389 million and operating pro t of 166 million in 1996 /97. YP is a directory of
classi ed information designed to give consumers easy access to a range of suppliers capable
of meeting their needs. YP includes: YP Directory, Talking Pages, Business Pages, The
Business Database, Electronic Yellow Pages and `YELL , the web site of YP that provides a
range of classi ed business information in the form of printed directories and electronic
media to both business and residential customers.
YP s primary aim is to be the best business information bridge between buyers and
sellers. Part of this mission is the commitment to continuous improvement and benchmarking
with organizations both inside and outside the classi ed advertising market-place. YP uses
the Business Excellence model and was among the nine nalists for the 1998 European
Quality Award for Business Excellence. The results were announced at the European Quality
Convention in Paris on the 23 October and YP won one of the prizes of the EFQM. YP has
42 benchmarking projects in progress of various types and complexity. The company has 10
years of experience using benchmarking. The benchmarking model used at YP involves
12 steps:
(1)
(2)
(3)
(4)
(5)
(6)
(7)
(8)
(9)
(10)
(11)
(12)

Ensure management commitment.

Process selection.
Selecting your target.
Process mapping.
Start partnership selection.
Successful selection.
Preparation for site visit.
The site visit.
Identify practical solutions and plan action.
Implement.
Keep in touch.
Continuous improvement.

This model is followed in every case, although it is the project manager s responsibility to
decide if all the steps are followed. Generally, the Board of Directors identi es the crucial
benchmarking areas, although this does not stop managers running projects if they feel that
benchmarking can bene t the company.
YP encourages people to use benchmarking mainly through the circulation of the
companys policy and brochure. The company was about to publish a training manual. At
present there is no formal training for benchmarking but the company intends to start a
2-day course for senior managers. Benchmarking and benchmarks are the two terms that
most confuse people at YP. Hence, educating staV to understand the diVerence between the
two and the relationship between benchmarking and processes was seen as the most diYcult
task. Some people did not like external comparisons, as they thought of YP as the best in
class or were afraid of the change. However, after implementation of the rst benchmarking

BENCHMARKING IN SERVICE INDUSTRIES

S625

projects there was a positive reaction. YP selects companies to benchmark against on the
basis of the best in class and criteria such as similar type of structure, lots of businesses and
similar collection period. In general, other similarities are more important than the same type
of business as YP.
The benchmarking project studied for this work was the call centre of Talking Pages.
Talking Pages is a telephone information service based in Bristol that provides up-to-date
details, such as opening hours, payment methods, product details and special promotions,
on businesses, shops and services throughout the UK. It is available by telephone all day and
is provided by specially trained operators. The management wanted to know if the call centre
was the best. The Strategic Development Unit (SDU) had the responsibility for carrying out
the benchmarking project. It held internal interviews, visited the site and issued a questionnaire to determine how the call centre was operated, monitored and how the service was
provided to the customer. With the help of the Benchmarking Centre, the SDU found 17
companies, most from the UK and some from US, that could be used for comparison,
including BT and the Employment Service.
YP designs benchmarking studies using nancial, non- nancial and operational performance indicators. In this case performance indicators such as how it is nanced and budgeted,
productivity, time taken to answer the call, calls received, calls answered, phone resolution time
and queuing were used. Qualitative and quantitative information were combined via site visits.
A questionnaire was sent to managers of call centres of the partner companies. This was
followed by site visits. Performance gaps were identi ed for every aspect of the questionnaire.
A ranking was produced which showed areas that the company had to change, improve or
remain the same. The main ndings from this benchmarking study were that Talking Pages
did not have a strategy or a purpose and as a result the company was not working towards a
particular objective. Many of the workers were employed on a temporary basis and this was
found to be ineYcient because staV turnover was relatively high. This also had a negative
impact on the level of customer service delivered by these staV. Talking Pages has now
produced a development plan to address these issues.
Case study 2: The Employment Service, SheYeld
The Employment Service (ES) is the largest division of the Department for Education and
Employment (DfEE), employing over 30 000 staV in approximately 1050 job centres in nine
geographical regions throughout UK. The ES in its present form was set up in 1987. In
October 1997, the ES gained reaccreditation of Investors in People for a further 3-year period
following the original award in 1994. The ES is committed to continuous improvement and
quality using management tools such as benchmarking, the Business Excellence model, TQM
and the quality assurance framework. In 1997, the personnel division of the ES won the
European Benchmarking Best Practice Award for the project called ``Radically reducing the
elapsed time for lling vacancies . The mission of the ES is: ``. . . to contribute to high levels
of employment and growth and to individuals leading rewarding working lives, by helping all
people without a job to nd work and employers to ll their vacancies .
The ES has 3 years experience of benchmarking and the rst projects were internal
exercises based on the statistical information the organization collects. The selection of
benchmarking projects is not systematic but based on individual sponsorship. Codlings
(1992) de nition is used but has been modi ed to t the organization s culture: ``. . . an
ongoing process of measuring and improving products, services and practices against the best
that can be identi ed world-wide . A diVerent model was applied in each case but the
organization was about to use a generic 10-step process model provided by an external

S626

M. SIMPSON & D. KONDOULI

consultant. Lea ets and internal magazines are used to raise awareness of benchmarking.
The 10-step process model was:
(1)
(2)
(3)
(4)
(5)
(6)
(7)
(8)
(9)
(10)

Decide what to benchmark.

Establish the team.
Identify benchmarking elements.
Identify internal data sources and method of collection.
Collect internal data.
Decide external benchmarking partners.
Collect external data.
Analyse results and re ne gap.
Adjust goals and develop improvement plan.
Review and re-benchmark.

This work reports on the `training eVectiveness benchmarking project of which only the rst
ve steps of the benchmarking process were completed at the time of this research. Training
is one of the core activities the organization provides to its staV, with some 25 million being
spent on training in 1997 /98. The majority of the training was delivered in-house and
questions were raised about the need for this level of training. Hence, the ES Training and
Development Division wanted to investigate whether this was the most eVective way to do
this work. At rst it was seen as an internal benchmarking exercise, but soon ES realized that
they had to look externally at best practices. The test hypothesis was that ``the investment
the ES made in the training and development of its people is oVset by a corresponding
improvement in output and/or eYciency, and has a positive eVect on the running costs of
the agency (Employment Service, 1998).
The project team involved representatives from all parts of the organization. An external
consultant was appointed to facilitate the project. The project team focused the benchmarking
exercise on determining if line managers were identifying training needs and consolidating
training needs satisfactorily. Formal training on benchmarking was given to the members of
the team. Looking internally, it was discovered that the South West region was spending the
most on training and this was re ected in operational improvements via the Annual Performance Agreement (APA) targets compared to other regions. In addition, the South West
region was investigated to see whether it was meeting its training targets better than any other
region. Although two other regions performed at the same level, this was due to the use of
the Business Excellence model rather than to training. Thus, the South West region appeared
to be an example of best practice which required further investigation. Site visits and 26
interviews were carried out to obtain qualitative data in addition to statistical evidence. It
was noted that South West region carried out more appraisal interviews and they were more
formalized than in other regions. A unique aspect of this was the `learning contract. Learning
contracts are a contract signed at the beginning of the year between line managers and
employees, where the annual targets and the training needed to achieve these targets are
identi ed. Some diYculties were encountered in identifying the benchmarking elements and
assigning the performance indicators. The project team concluded that four elements needed
further investigation (see Table 1).
Flowcharts were used to identify any diVerences or gaps. The main conclusions of the
internal study of South West region were (Employment Service, 1998):

Learning contracts were unique to the South West region.

Eighty-three per cent of managers used learning contracts compared with 64%
nationally.

BENCHMARKING IN SERVICE INDUSTRIES

S627

Table 1. The benchmarking elements and performance measures for the Employment Service Training Provision Project
Benchmarking Element

Performance Measure

1. Identifying learning needs.

2. The commissioning of training to

meet those needs.

3. Consolidation and application of

learning.

4. Linking learning to operational

improvement.

Evidence of line manager knowledge of key competencies.

Evidence of use of quarterly reviews.
Use of formal training needs analysis.
Measurement of individual performance gaps.
Product knowledge.
Use of workplace learning.
Course occupancy rates.
Level of pre-course brie ngs.
Trainee days per staV in post.
Evidence of post-course brie ngs.
Evidence of application on return to work.
Use of learning contracts.
How managers measure performance.
Managers perceptions of operational improvement.
Level of performance reviews.
Achievement of Annual Performance Agreement.

StaV were more likely to receive at least three quarterly reviews.

People were aware of the training available to them via the regional training directory.
More managers believed there had been an improvement in operational performance
than in any other region.
South West were the highest `scoring region on APA targets in the period concerned.

The next stage was to make external comparisons. The selection of the partners was based
on the following criteria:
(1) Partners had to be an accredited training organization, with Investors in People and
taking the training and development of their staV seriously.
(2) Partners had to spend the equivalent of 2% of their total payroll costs on training
and developing staV and be familiar with benchmarking.
The rst list contained 11 companies that were reduced to four: YP, GKN Westland
Aerospace, Post OYce and Rover Group. Apart from GKN Westland Aerospace, the ES had
introductory visits to the other companies, while questionnaires were sent to every company.
The next stage was to analyse the performance of the partners and make visits to them,
asking similar questions as the internal study. The ES had faced many diYculties up to that
point, such as: lack of co-operation, problems caused by partner s internal operations,
unwillingness to provide information and organizations measuring things in a completely
diVerent way. The absence of a specialized team or department in the benchmarking partners
led to increased time and resource costs for the project. The next stage will involve
recommendations from the consultant, a pilot study and implementation after further
consideration by the Director of Human Resources at the ES.
Case study 3: North West Water, Warrington
This company was known as the North West Water Authority until the late 1980s, when it
was privatized and became North West Water Ltd (NWW). NWW supplies water to domestic
customers and industrial and commercial businesses. The region it serves is 14 000 km2 and
the water delivered comes from reservoirs in the Lake District, the Pennines and North

S628

M. SIMPSON & D. KONDOULI

Wales, and rivers and boreholes. According to the Managing Director, NWWs aim is to
``. . . exceed our customer expectations for water and wastewater services .
NWW has been using benchmarking for a long time, but in the last 2 years benchmarking
eVorts have intensi ed and the company has had some successful projects. The company is
attempting to obtain ISO 9001, but it is also involved in continuous improvement and recalibration of benchmarks. This might be viewed by some as using contradictory approaches.
NWW does not use a formal de nition for benchmarking. People interested in
benchmarking can obtain a company guidebook or attend courses to help them understand
the diVerence between benchmarking and a benchmark. Additional training and education
is provided for staV involved in any benchmarking project. The benchmarking model used
by NWW is based on the Xerox model (Camp, 1989) and is the same for every benchmarking
project. Successful benchmarking projects have involved customer service reception callhandling and laboratory services. Lessons have been learnt on planning benchmarking
studies, choosing the right performance indicators, involving customers, choosing the right
benchmarking partners and examining processes (Love et al., 1998). Teams manage
benchmarking projects but internal communications problems mean that each team does not
learn from previous company experience. As a consequence, NWW does not have a single
format for benchmarking studies other than the Xerox model.
The maintenance project was selected for this case study. When NWW became United
Utilities plc all non-core processes were subcontracted to another company which looked at
maintenance, payroll, recruitment, training and IT systems. However, maintenance was done
more cheaply by NWW than by subcontractors since NWW had expert knowledge about
their own organization, plant and facilities. Hence, maintenance was retained by NWW. The
maintenance benchmarking project started after a survey was carried out which showed that
NWWs performance was not as good as the company thought and that there were other
companies with better performance indicators. The project was split into two parts: internal
and external comparisons. Internal benchmarking was easier for NWW, as it could use the
Management Information System (MIS) to obtain statistical information of the performance
of all geographic areas. With this system areas that operated better were identi ed quickly
and the results were communicated to the team in charge of the project.
External comparison was more diYcult. Companies interested in benchmarking cooperated well with NWW but other companies were afraid to share information. In one case
another water company was approached with a view to benchmarking with NWW, but
eventually it was omitted from the study. This was because NWW was regarded as superior
in performance and there were many areas where information could not be exchanged due
to con dentiality issues. NWW used the database of the Benchmarking Network of the Royal
Group to select benchmarking partners. A questionnaire was sent to a number of companies,
from which four companies were selected. The selection criteria were geographical spread,
all-day operations and in-depth knowledge of the processes. Rover and Pirelli were among
these companies.
Simple graphical displays were used to communicate performance indicators of processes
being benchmarked (Love et al., 1998). Targets for improved performance were identi ed.
The ratio of planned to reactive maintenance was an important indicator, but related
operational indicators such as response time to breakdowns, planned and reactive work were
used. Qualitative criteria were estimated via satisfaction and other surveys.
The results of this benchmarking project were: lower costs, easier design of improvements, reduced costs of the actual benchmarking exercise compared to previous projects and
a recognition that benchmarking should be part of the company strategy. The site visits were
particularly useful for learning about new ways of working. Improvements were also seen in

BENCHMARKING IN SERVICE INDUSTRIES

S629

Table 2. Summary of results for the three companies studied

Organisation/Issue

Yellow Pages

The Employment Service North West Water

Direction

Mission Statement

Mission Statement

Mission

To be the best business

information bridge
between buyers and
sellers

To contribute to high
Exceed our customer
levels of employment and expectations for water and
growth and to individuals wastewater services
leading rewarding working
lives

Objectives of this
project.

Improvements in:
Customer satisfaction
Quality
Employee motivation
and satisfaction

Improvements in:
Training eVectiveness

Improvements in:
Maintenance
Reduced costs
Ratio of planned to
reactive maintenance
Response time to
breakdowns

Model

Own model

Consultant s model

Xerox model

Level of training

Limited (lea ets and

brochures)

Only to the project team

Mainly the project team.

Guidebook

Experience with
benchmarking

10 years. Over 42 projects 3 years

in progress

Intensi ed in the last 2

years

Organisation and
implementation

Business Information
Group

Departmental basis

Business Improvement
Department

Focus

External

Internal initially and

External

Internal and External

Type

Best practice

Generic

Generic

Stage

End of 1st cycle

1st cycle in progress

End of 1st cycle

Bene ts

Opportunity for
improvements and
corrections Development
plan in progress

Improved communication Employee motivation and

Implementation of good communication. Costs are
internal training practices reducing. Easier design
improvements.

Attitude

Positive

Positive

Positive

Future developments

Organisational eVort

Individual initiative

Organisational eVort

Other projects

EFQM model

EFQM model
TQM

ISO9001

Mission Statement

internal communications. However, there are still internal problems regarding the management commitment to benchmarking. Many processes could be improved if diVerent areas
could exchange information, create links and share experiences and ideas.
Results
The results of this study are summarised in Table 2.
Conclusions
Based on these three case studies, benchmarking is con rmed as highly eVective and
very applicable to service industries. Benchmarking can assist in: strategy formulation,
organizational development and increasing eYciency (e.g. YP); improving training (e.g. ES);
lowering costs, making easier design improvements, allowing people to learn about new ways

S630

M. SIMPSON & D. KONDOULI

of working and improving internal communications (NWW). All three organizations have
considerable experience with benchmarking and have learnt a lot. There is a continuing
commitment to the use of benchmarking for improving performance in these organizations.
Acknowledgements
We would like to thank Benchmarking Centre Ltd, UK, for assisting us in this and other
benchmarking projects. We would like to thank all those managers who took part in this
study.
References
Altany, D. (1991) Share and share alike, Industr y Week, 240, pp. 12 17.
American Productivity & Quality Centre (APQC) (1993) The Benchmarking Management Guide (Portland,
OR, Productivity Press).
Bracken, D.W. (1992) Benchmarking employee attitudes, Training & Development, June, pp. 49 53.
British Standards Institute (BSI) (1993) BS 7850: Total Quality Management, Part 1: Guide to Management
Principles (London, BSI).
Camp, R.C. (1989) Benchmarking: The Search for Industr y Best Practices that Lead to Superior Performance (New
York, ASQC Quality Press).
Codling, S. (1992) Best Practice Benchmarking (Aldershot, Gower Publishing).
Employment Service (1998) Benchmarking the EVectiveness of Employment Service Training Provision-Interim
Report, July 1998 (SheYeld, Training and Development Division, Employment Service).
Kondouli, D. (1998) Benchmarking in the service sector, MBA Dissertation, SheYeld University Management
School, University of SheYeld.
Love, R., Bunney, H.S. Smith, M. & Dale, B.G. (1998) Benchmarking in water supply services: the lessons
learnt, Benchmarking for Quality Management and Technology, 5, pp. 59 70.