Chapter 6

Benchmarking
 Benchmarking is the process of
comparing and measuring an
organization's operations or its
internal processes against those of
a best-in-class performer from
inside or outside its industry.
 There is a clear distinction between
benchmarking and competitive analysis.
 The reason is that competitive analysis
involves comparing your product with
your competitors.
 On the other hand, benchmarking goes
into more detailed comparison that
includes how the product is engineered,
manufactured, distributed and supported.
Key Points About Benchmarking
 Benchmarking is an increasingly popular
improvement tool.
 Benchmarking concerns processes and practices.
 Benchmarking is a respected means of identifying
processes that require major change.
 Benchmarking is done between consenting
companies that may or may not be competitors.
 Benchmarking compares your process or practice
with the target company's best-in-class process
or practice.
 The goal of benchmarking is to find "secrets of
success" and then adapt and improve for your
own application.
Rationale for Benchmarking
 The most important reason why
benchmarking has become an effective
means for every organization is the
process of continuous improvement.
 The rationale is that benchmarking can
show which processes are candidates for
continuous (incremental) improvement
and which require major (one shot)
changes.
 Furthermore, benchmarking offers the
fastest route to significant performance
improvement.
 It can focus an entire organization on the
issues that really count.
 Some factors that drive companies to
benchmark are commitment to total
quality, customer focus, product-to-
market time, manufacturing cycle time
and financial performance at the bottom
line.
Key Points About Benchmarking As
It Relates to Continuous
Improvement
 Today's competitive world does not allow time for
gradual improvement in areas in which a company lags
way behind.
 Benchmarking can tell a firm where it stands relative to
best-in-class practices and processes and which
processes must be changed.
 Benchmarking provides a best-in-class model to be
adopted, or even improved upon.
 Modern customers are better informed and demand the
highest quality and lowest prices. Companies have a
choice to either perform with the best or go out of
business.
 Benchmarking supports total quality by providing the
best means for rapid, significant process/practice
improvement.
Benchmarking Approach and
Process

 The benchmarking process is a

relatively straightforward but steps
must flow in sequence.
 This process contains 14 steps.
 These 14 steps represent the three
phases of benchmarking:
preparation, execution and post
execution.
Fourteen Steps for Benchmarking
Approach and Process

 **Refer to MS Word notes.

Role of Management in
Benchmarking

 Management plays a crucial role in

the benchmarking process. The
most important element in the
benchmarking process is the
management's commitment either
in terms of time or money.
 This is shown through the approval
given by the management.
 There are five areas where the role
of management can be seen:
i) commitment to change
ii) funding
iii) human resources
iv) disclosure
v) involvement
Prerequisites for Benchmarking
 Will and Commitment
 Will and commitment to
benchmarking will ensure that the
organization can proceed.
 Don't waste time or the time of a
benchmarking partner in the
absence of a commitment and a will
to benchmark on the part of the
company's top management.
Vision/Strategic Objective Link
 Benchmarking objectives must link
to the company's vision and
strategic objectives.
 This is important since
benchmarking requires a strong
focus to avoid it going off in
numerous different directions.
Goal to Become The Best - Not
Simply Improved

 In order to guarantee the success of

the benchmarking process, the
organizations must set a long-term
goal and not just merely hope for
an incremental improvement.

Openness to New Ideas
 A company must be open to new
ideas for benchmarking to provide
value.
 This is because benchmarking is
capitalizing on the work and ideas
of others.
Understanding of Existing Process,
Products and Services
 It is mandatory that organizations
understand its own processes, products,
services and practices thoroughly so that
it can determine what need to be
benchmarked.
 In addition, it is necessary to have a solid
understanding of your process in order to
make meaningful measurements against
that of the partner.


Processes Documented
 Processes need to be documented based on three
reasons:
 i) documentation can ensure that everybody
involved in the benchmarking process have a
common understanding
 ii) a documented starting point is important
against which to measure performance
improvement after benchmarking changes have
been implemented
 iii) documentation can give clear understanding to
the people (partners) who are not familiar with
the organization's processes
Process Analysis Skills
 People with the skills to characterize and
document processes are needed to
guarantee the success of the
benchmarking process.
 Furthermore, these people also play a
role to analyze the benchmarking
partners processes and help to adapt
those processes to the organization's
needs. These people can be the
employees themselves or consultants.
Research, Communication and
Team-Building Skills
 Additional skills required include
research, communication, and
team-building. Research is required
to identify the best-in-class process
owners.
 Communication and team building
are required to carry out the
benchmarking both on an internal
basis, and with the partners.
Obstacles to Successful
Benchmarking

 The following are some of the

common obstacles to successful
benchmarking as drawn from the
experiences of dozens of
companies:
Internal Focus
 An internal focus limits visions. If a
company is internally focused (as many
are), it may not even realize that its
process is 80 percent less efficient that
the best-in-class company.
 Is someone better? Who is it? Such
organizations don't even ask the question.
This situation can destroy the
organizations
Benchmarking Objective Too Broad

 An overly broad benchmarking objective

such as "Improve the bottom-line
performance" can guarantee failure.
 In contrast, the benchmarking team
needs something more specific and
oriented such as "how" instead of "what".
A narrower target can give the team a
clearer idea of what they can go after.
Unrealistic Timetables
 Benchmarking is an involved process that
cannot be compressed into a few weeks.
Patience is the key point in order to take
advantage of benchmarking.
 The acceptable shortest schedule for an
experienced team is four to six months
whereas for a normal team it will take
about six to eight months.
Poor Team Composition
 Poor team composition can also be the
obstacle to success. People who should
really be involved in the benchmarking
process should be the ones who know the
most about how the process really
operates.
 Furthermore, they should be the one who
can most readily detect the often-subtle
differences between your process and
that of the benchmarking partner.
Settling for "OK-in-Class"
 Too often organizations choose a
benchmarking partner who is not the
best-in-class. There are three reasons for
this:
 The best-in-class company is not
interested in participating
 Research identified the wrong partner
 The benchmarking company got lazy and
picked a handy partner
 At the conclusion of the benchmarking
project with your partner, data analysis
will have produced both quantitative and
qualitative information.
 Between these two types of information,
quantitative data are always sought and
used.
 But, qualitative information has its own
value as it describes the atmosphere and
environment in which best-in-class
processes can be developed and
sustained.
 At the end of the benchmarking
process, if the partner's process is
significantly superior, the
organization must modify its own
process such as implement it or
adapt it so that it can be
competitive in the marketplace.
 The benchmarking process is not a limited or
specific period process.
 To be the best-in-class organization requires
continuing effort.
 In other words, the organization needs to stay
up-to-date with best-in-class organizations
through all means at its own disposal, stay
current with its own processes as it is continually
improved and benchmarking the weaker
processes.
 In conclusion, the benchmarking process is a
never-ending process.