Benchmarking

strategic business management

1. Benchmarking?

2. What is Benchmarking A method for identifying and importing best practices in order to improve performance The process of learning, adapting, and measuring outstanding practices and processes from any organization to improve performance Benchmarking is the process of improving performance by continuously identifying, understanding, and adapting outstanding practices found inside and outside the organization.

3. Benchmarking Definition Benchmarking is the process of continuously measuring & comparing one’s organisational processes against comparable processes in leading organisations, to obtain information, that will help the organisation, identify & implement improvements. (Kaiser Associates) Benchmarking is an essential part of TQM for continuous improvement Search for industry best practices that lead to superier performance. (Robert Camp-Xerox) A standard of excellence or achievement against which other similar things mustbe measured or judged. (sam Bookhart - Dupont)

4. Benchmarking Features Benchmarking has three main features:

5. BENCHMARKING / BENCHMARKS BENCHMARKS Measurements to guage the performance of a function /operation. Best practices benchmarking :- Metrics Benchmarks Operating Statistics Process Benchmarking Practices BENCHMARKING Ongoing search for best practices that produce superior performance when adapted & implemented in organisation .

6. Why Benchmarking?

7. Why Benchmarking? Survival lies in emulating best and not in lagging behind. Bench marking is time and cost efficient because it involves imitation and adaptation rather than pure invention. Prevents the “Re-inventing the wheel”.

8. Why Benchmarking? Benchmarking gives us the chance of gaining: Better Awareness of Ourselves (Us) What we are doing How we are doing it How well we are doing it Better Awareness of the Best (Them) What they are doing How they are doing it How well they are doing it

9. Why Benchmark Identify opportunities to improve performance Learn from others’ experiences Set realistic but ambitious targets Uncover strengths in one’s own organization Better prioritize and allocate resources

10. Benchmarking Becoming More Common There are three reasons that benchmarking is becoming more commonly used in industry ( Boxwell , 1994). Benchmarking is a more efficient way to make improvements. Managers can eliminate trials and errors. Benchmarking speeds up organization’s ability to make improvements. Today, time is of the essence. Benchmarking has the ability to bring your performance up as a whole significantly.

11. Three Major Benefits of Benchmarking Product and Process Improvement Cost Reduction Competitive Strategy

12. Product and Process Improvement In general, by implementing benchmarking activity, organizations can improve their operation process (Slack et al, 2001). For instance, South African Breweries plc had encountered the problem of poor employee skill, which is a significant difficulty to implement the world-class processes. As such, they decided to benchmark strategy from an organization in Geneva. They, consequently, attained the solution (Slack et al, 2001).

13. Cost Reduction Benchmarking facilitates a reduction of operation costs ( Delpachitra et al, 2002). For example, benchmarking helped Australian Financial Institutes to reduce operation costs by outsourcing some operation and alternating distribution channels ( Delpachitra et al, 2002).

14. Competitive Strategy The most significant benefit from benchmarking is that it helps the organization planning and implementing competitive strategies ( Kolarik , 1995). In other words, as benchmarking provides an ability to compare and learn from the best practices in any particular industry, organizations can develop their system to achieve competitive advantages or eliminate their competitive disadvantages.

15. Competitive Strategy Build core competencies that will help to sustain competitive advantage Access to a variety of markets Perceived benefit of product or service will increase Product or service is hard to imitate Low-cost leader Target specific shift in strategy Entering new markets Developing new products To create a firm more adaptable to change

16. BENCHMARKING PROCESS Determine Data collection Method & collect data Recalibration of BM Identify What is to be Benchmarked Identify World class Companies for BM Establish “GAP” & analyse Set targets to bridge the GAP Communicate to all level Analyse driving forces Analyse resisting forces Establish Action plan Implementation & monitoring Planning Analysis Integration Action

17. Benchmarking Process Planning Collecting Data Analysis Improving Practices

18. 1. Planning Determine the purpose and scope of the project Select the process to be benchmarked Choose the team Define the scope Develop a flow chart for the process Establish process measures Identify benchmarking partners

19. 2. Collecting Data Conduct background research to gain thorough understanding on the process and partnering organizations Use questionnaires to gather information necessary for benchmarking Conduct site visits if additional information is needed Conduct interviews if more detail information is needed

20. 3. Analysis Analyze quantitative data of partnering organizations and your organization Analyze qualitative data of partnering organizations and your organization Determine the performance gap

21. 4. Improving Practices Report findings and brief management Develop an improvement implementation plan Implement process improvements Monitor performance measurements and track progress Recalibrate the process as needed

22. Commonly Benchmarked Performance Measures

23. Commonly Benchmarked Performance Measures

24. Commonly Benchmarked Performance Measures

25. Commonly Benchmarked Performance Measures

26. Commonly Benchmarked Performance Measures

27. Benchmarking Costs

28. Benchmarking Costs The three main types of costs in benchmarking are: Database Costs

29. Benchmarking Costs Time Costs - Members of the benchmarking team will be investing time in researching problems, finding best practice companies to study, visits, and implementation. This will take them away from their regular tasks for part of each day so additional staff might be required.

30. Benchmarking Costs Visit Costs - This includes hotel rooms, travel costs, meals, a token gift, and lost labor time.

31. Benchmarking Costs Benchmarking Database Costs - Organizations that institutionalize benchmarking into their daily procedures find it is useful to create and maintain a database of best practices and the companies associated with each best practice now.

32. Benchmarking Ethics

33. Benchmarking Ethics Since the concept of benchmarking can lead to unscrupulous and sometimes unethical behavior, the SPI Council on Benchmarking and the International Benchmarking Clearinghouse have established a general code of conduct (Thompson). The code is as follows:

34. Benchmarking Code of Conduct

35. Benchmarking Code of Conduct