BENCHMARKING

MADE BY:

Ritika Bhatia
Isha Tyagi
Richa Sharma
 CONTENTS
INTRODUCTION 1.1
Benchmarking: Definition 1.2
Benchmarking: Objectives 1.2
BENCHMARKING FUNDAMENTALS
Practices and Performance Levels 1.3
THE 10-STEP BENCHMARKING PROCESS
Phase 1: Planning 1.3
Phase 2: Analysis 1.3
Phase 3: Integration 1.3
Phase 4: Action 1.3
Phase 5: Maturity 1.4
Benchmarking Triggers 1.5
Benchmarking Teams 1.5
STEP 1: WHAT TO BENCHMARK 1.5
Documentation 1.5
STEP 2: WHOM TO BENCHMARK 1.6
Internal Benchmarking 1.6
Competitive Benchmarking 1.6
Functional Benchmarking and World-Class Leaders 1.7
Partnering 1.7
STEP 3A: COLLECT DATA 1.7
Internal 1.7
External 1.7
Original 1.8
STEP 3B: CONDUCT THE SITE VISIT 1.8
STEP 4: ANALYZE THE PERFORMANCE GAP 1.9
STEP 5: PROJECT PERFORMANCE LEVELS 1.10
STEP 6: COMMUNICATE FINDINGS 1.12
Decide Who Needs to Know 1.12
Select the Best Presentation Vehicle 1.12
Organize Findings 1.12
Present Recommendations 1.13
STEP 7: ESTABLISH FUNCTIONAL GOALS 1.13
Revise Operational Goals 1.13
Analyze the Impact on Others 1.13
Secure Management Approval 1.13
STEP 8: DEVELOP ACTION PLAN 1.14
Set Implementation Priorities 1.14
Show Revisions to the Performance Gap 1.14
Develop Action Plans 1.15
STEP 9: IMPLEMENT PLAN AND MONITOR RESULTS 1.16
STEP 10: RECALIBRATE BENCHMARKS 1.16
SUCCESS FACTORS AND MANAGEMENT CONSIDERATIONS 1.18
Behavioural Benefits 1.19
Competitiveness 1.19
 INTRODUCTION
Benchmarking is an on-going investigation and provides a vast learning experience.
It ensures that the best practices are found, adopted and executed. Benchmarking
involves industrial researches that allows managers to perform inter companies
comparisons of processes and practices. It enables managers to adopt “best of the
best” practices to attain a superiority and competitive advantage.

Benchmarking is a method of establishing performance goals and quality

improvement projects that are based on industry best practices. It is an upcoming
tool in industry that helps in searching out the best that involves motivation of
everyone who is involved and helps in producing breakthrough results. It is a positive
process that helps in changing operations in a structured fashion in order to achieve
superior performance.

DEFINITION

Benchmarking is a continuous process of measuring products, services and

practices using company’s toughest competitors or industry leaders as standard.

OBJECTIVES

The purpose of benchmarking is based on the need to establish credible goals and
pursue continuous improvement. It is a means by which the practices that are
needed to reach new goals are discovered and understood. As the external
environment changes so rapidly, goal setting which is internally focused, fails to
meet what customers’ expectations from suppliers.

Benchmarking is an important ingredient in strategic planning and operational

improvement. In order to energize and motivate people an organisation should follow
these three things:

 Establish that there is a need for change

 Identify what should be change
 Creating a picture of how an organisation will look after the changes.
So, benchmarking identifies the gaps between the organization and competition by
helping understand how leaders work. Benchmarking creates a picture of how the
organisation should look after the change.

BENCHMARKING FUNDAMENTALS

Benchmarking activity requires acceptance of following fundamentals:

 Know the operation and access its strengths and weaknesses. This step
should involve the practices and process steps used.
 Know the industry competitors and leaders.
 Incorporate the best practices. Adapt and integrate these best practices to
achieve a leadership position.

PRACTICES AND PERFORMANCE LEVELS

Benchmarking can be divided into two parts –

 Practices
 Performances Levels

10-STEP BENCHMARKING PROCESS

The 10-step process for conducting benchmarking investigations consists of the

following five essential phases:

PHASE 1: PLANNING

 Decide what to benchmark.

 Identify whom to benchmark.
 Plan the investigation and conduct it.

PHASE 2: ANALYSIS

 Full understanding of internal business processes is required in order to

compare it to external organizations.
 Project the future performance levels and compare the performance levels
and determine how to achieve performance edge.
PHASE 3: INTEGRATION

 Redefining of goals and incorporating them into planning process.

 Communication of benchmarking findings and gaining acceptance from
upper management.
 Revision of performance goals.
 Goals that reflect projected improvement are necessary.
 The targets and strategies should be integrated into business plans.

PHASE 4: ACTION

 Best practices are implemented and periodically re-calibrated as needed.

 Developing and implementing plans.
 Monitor the progress
 Recalibrate the benchmarks.

PHASE 5: MATURITY

 Determination of when the leadership is attained.

 Maturity is achieved when best practices are incorporated in all business
processes.
 Assessment of benchmarking as on-going process.

BENCHMARKING TRIGGERS

Events that cause a benchmarking project initiation usually fall into three groups:

Problem: Crisis that occur within an organization such as major cost overrun or
major customer threatening to cancel an existing contract requires an improvement
project.

Innovation: When organization becomes aware of the requirement of innovative

technology, practice or process employed by another organization, this information
causes an organization to start a benchmarking study.

Policy: A well-established quality management effort includes a strategic planning

process.

BENCHMARKING TEAMS
Benchmarking conducted by teams consisting of individuals with direct operational
experience and knowledge of process. The members of the team should possess
analytical, research, process documentation and team facilitation skills.

STEP 1: WHAT TO BENCHMARK

 Identify the product or output of the business process or function.

 Each function’s broad purposes should be broken down into specific outputs
to be benchmarked.
 Outputs should be documented to a level of detail necessary for analysis of
key tasks, handoffs and both-in-process and end result measurements.
 Good way to determine outputs are in need of benchmarking pose a set of
questions that reveal current issues
DOCUMENTATION
The team must describe the work currently performed by preparing detailed
flowcharts.

STEP 2: WHOM TO BENCHMARK

A successful approach encompasses internal, competitive and functional

benchmarking.

INTERNAL BENCHMARKING : Within any organization exists another department

that may perform identical work to that of the benchmarking team.

COMPETITIVE BENCHMARKING : Competitive benchmarking is an essential part

of any external comparison. Benchmarking is not industrial spying but it is collection
of industry information. One approach is to collect information without having a direct
contact with the competitor. The technique to avoid ethical and legal problems in
comparing the best practices among industries is to focus on process information
and not on the company data. Competitors sometimes minimize the difficulties of
other industry members by arranging a joint venture conducted by a third party. A
consultant is appointed by a group of competitors to collect and analyse data,
protecting the sources of information and publishing industry-wide information.

FUNCTIONAL BENCHMARKING AND WORLD CLASS LEADERS: Benchmarking

study should not be restricted to only one industry when on one side an organization
in different industry is trying to achieve superior results in a similar kind of function.
The search is not restricted to a common application, but to a unique method or
practice within a process that can be adopted and adapted to a specific process.

After identifying the sources of best practices, they should be used in the specific
team benchmarking project. The teams should identify which all are comparative
organizations internally, competitively, functionally and innovatively.

PARTNERING

The organization with which the other party is benchmarking ie comparing standards
is called a “partner”. The partnership is important because it should have something
in exchange for both the parties. There could be a common interest in a particular
process or the partners may ask for arrangement of benchmarking visit with another
department of the requesting organization.

STEP 3A: COLLECT DATA

INTERNAL:

Internal sources for collecting data includes :-

 Company library that is accessible to each and every one.

 Contacting the authors of most prominent articles.
 Reviewing internal market research or competitive studies.

EXTERNAL:

External sources for collecting data includes:-

 Professional associations
 Trade shows
 Speeches before public audiences

ORIGINAL:

Original sources for collecting data includes:-

 Contacting directly the benchmarking partners through mails.

 Responses received and detailed questionnaire are mailed.
STEP 3B: COLLECT DATA

Conducting a site visit is important. Extensive preparation is required in order that

visit comes out to be productive and useful. Penetrating questions should be asked
during the site visit, the types of questions are:

 Open-ended
 Multiple Choices
 Forced Choices
 Scaled questions

The agenda for the site visit should be prepared and exchanged, a benchmarking
protocol should be agreed in order that the questions about what information should
be exchanged and what documents will be available are answered before going to
the visit.

Once the industrial site visit is done, the benchmarking team should write a visit
report. The report should include the answers that are recorded during the scribe, as
well as impressions and information from other team members.

STEP 4: ANALYZE THE PERFORMANCE GAP

 Analyse the information collected to identify gaps or differences in

performance between the team’s process and that of the best-in-class and
that of world-class organizations.

 It should include which inputs, outputs, processes, or steps within a process

are superior, and by what measure.

 The team also needs to understand how the targeted operation would perform
if all the best practices observed were adopted.

 As a result of this comparison of best practices, the full extent of the

opportunity to achieve superior performance will now be known.
  Compare each of the steps of its process and determine the results achieved
by the benchmarking partners in context of the following for each of the key
steps of the subject process if the project team were to adopt the best
practices of the organizations studied:

 The value
 The performance advantage
 The cost advantage

 Visually compare the flowcharts employed by each of the benchmarked firms

for the benchmarked processes which will reveal important improvement
opportunities.

 Compile a “best-of-best practices” chart for the benchmarked process.

STEP 5: PROJECT PERFORMANCE LEVELS

In the analysis step, the relative position today is defined, but industry practices are
not static and continue to pursue improvement. The team must also project where
the benchmark and gap are likely to be in the future.

Historical data (from the organization and from the overall industry) and projected
improvements can be compared and analyzed to determine:

 Recent market trends

 Size of the performance gap
 Why the performance gap exists
 If the gap is widening or narrowing in the future and why

 The team should decide what improvements the industry is capable of

achieving in the future and plot those industry trends along with improvements
the team expects to secure during the next 2 to 5 years.
  The impacts need to be identified and implications of the proposed changes to
be shared with the affected groups to ensure that they have ample opportunity
to absorb and adjust.

 The financial effect needs to be calculated so that the value of implementing

the best practices is identified and conveyed to the affected groups.

 The operational and financial benefits of implementing best practices into the
contribution they will make to the organization’s goals and objectives and
realizing the organization’s vision should be translated to the higher
authorities.

STEP 6: COMMUNICATE FINDINGS

The benchmarking team has the responsibility to secure management’s approval for
the recommendations deduced from the research. Thus, the team’s task is to
communicate its findings in such a way as to obtain acceptance.

 DECIDE WHO NEEDS TO KNOW :

The team must decide who (by name) needs to know about its findings,
what they need to know, and why they need to know it from amongst
the suppliers, staff, and associates with whom the teams works.

 SELECT THE BEST PRESENTATION VEHICLE:

The team must choose the form of presentation which is the most
accepted all over the organisation, which may be an executive
summary along with an informal discussion or an oral presentation.

 ORGANIZE FINDINGS:

The team should capture its findings in the best practices report which
should include descriptive and quantitative data; present facts, stress
 performance gains, and include a preliminary estimate of the cost to
implement the recommendations.

 PRESENT RECOMMENDATIONS:

The presentation of best practices should be made with the complete

benchmarking team in attendance with various portions of the
presentation delegated. Questions should be raised and answered on
various parts of the presentation and issues should be identified and
resolved well before the final presentation.

STEP 7: ESTABLISH FUNCTIONAL GOALS

After management approves the recommendations, the impacts of practice changes

must be identified and communicated to the affected individuals.

 REVISE ORGANIISATIONAL GOALS

The changes should be reflected in a revised set of goals and

objectives of the organisation and its units.

 ANALYZE THE IMPACT ON OTHERS

The impact of these changes and the effects that result from those
changes on the affected groups (customers, suppliers, management,
staff, and associates) should be analysed.

 SECURE MANAGEMENT APPROVAL

The management must support, approve and also endorse and to

some extent implement the changes brought about by the
benchmarking effort.
STEP 8: DEVELOP ACTION PLAN

The benchmarking team must develop an action plan, and when the approval for the
plan has been secured, proceed to implementation. Taking following steps enhances
the team’s opportunity for success.

 SET IMPLEMENTATION PRIORITIES

Implementing best practices will be done in stages. Choose the criteria by

which a best practice should selected. Once the criteria have been defined, the
selection of the practice to implement may be straightforward.

 SHOW REVISIONS TO THE PERFORMANCE GAP

The benchmarking team now needs to reflect on the staging of implementation
and its effect on the performance gap. The logic here is that the projection of gap
prepared earlier must be modified to reflect the phased implementation.

 DEVELOP ACTION PLAN

The team needs to complete the following:

 Describe the specific tasks that must be completed and the results expected.
 Sequence the tasks chronologically and designate a targeted completion date
for each.
 Assess the resources required to implement the best practices. This covers
items such as budget, people, equipment and materials.
 Assign responsibilities to specific individuals for each action item. Explain how
to complete the task.
 Establish a monitoring system to track progress and alert the team when
corrective action is required.
STEP 9: IMPLEMENT PLAN AND MONITOR RESULTS
The implementation plan has been approved, team must move towards instituting
best practices. The team should first pilot one best practice before a whole-sale
implementation is begun.
The pilot may be as simple as a simulation of the new processes, in which paper is
passed around to represent the various steps in order to understand the flow of
information and the activities that would be performed.
In a more complex process, an actual trial run would be conducted in which data or
material are subjected to the new work methods.
The team needs to establish measurements to gauge implementation progress.
These process measures include cost, time, quality and measures that determine
customer satisfaction.
The seven basic and seven management tools should be employed to ensure that
data are captured and analysed to reflect the performance of the new best practices.

STEP 10: RECALIBRATE BENCHMARKS

To ensure success and effectiveness, benchmarks must be planned and
recalibrated. Several approaches can be pursued, targeted studies can be done to
fill information gaps. A complete reassessment of all critical benchmark targets and
best practice findings can be done.
A complete reassessment must be done to ensure that information remains relevant
and timely.
One approach is to recalibrate benchmarks annually.
Each business unit and benchmarking teams needs to determine the frequency of
recalibration on the basic of its own industry and needs. Rapid external change
argues for more frequent benchmarking updates.
Recalibration is performed by exercising the 10-step benchmarking process.
It is imperative that all steps are re-examined. Feedback from internal sources
should readily reveal deficiencies and areas where new information is needed.
The full value of recalibration is not only in refining the output of the benchmarking
process, but also making the process more efficient and responsive to benchmarking
needs.
SUCCESS FACTORS AND MANAGEMENT CONSIDERATIONS

Successful benchmarking is not done by separate staffs, but the actual

benchmarking is done by process owners or process representatives, with
assistance.
There are several considerations for managing benchmarking activities. Among them
is the way benchmarking is communicated. When continuous improvement is used,
it means that all must work together to improve how things are done so that a
stronger organization results.
How resources are found to conduct benchmarking must also be considered. There
are resources devoted to continuous improvement in most of the organizations.
Some of these should be devoted to benchmarking. Benchmarking should be looked
as looked as on part of the on-going effort to improve, and as part of the process
owner’s job. It should not be seen as extra work. There are an unlimited number of
best practices, each offering significant potential for improvement, for increased
results, and for superior performance. The process operators should be urged to go
and find them.
To get the most out of the benchmarking, what is not needed is blindly copying other
institutions. That will not get superior performance. Creatively adapting best
practices will. The implementation phase of benchmarking should be the creative
phase .Benchmarking means combining the creative talents of the people running
the processes with best practices. Benchmarking should uncover the best practices.
But their innovative implementation should be the way the organization goes beyond
and establish a competitive advantage.

BEHAVIORAL BENEFITS

Benchmarking is essentially a learning experience. It helps an organization focus

and drive for consensus on what needs to be done and how to achieve it, not argue
over what should be done. Benchmarking can provide the stimulus for improvement
by people at all levels through an externally focused, competitive situation to achieve
world-class performance with increased customer satisfaction. Very few people are
willing to settle for second place once they are aware of what needs to be done and
know how to do it.
COMPETITIVENESS
The bottom-line benefit of benchmarking is improved competitiveness and increased
value in the eyes of customers. Effective use of benchmarking to develop and
implement improvement actions can help organizations achieve superior customer
service levels. This, in turn, will lead to increased market share and improved
financial results.