Chapter 10 Benchmarking

1. Chapter 10Benchmarking Team #1: John Boyd, Greg DeYoung, Tusi Marshall and Dave Wilson Benchmarking - Chp 10

2. Introduction To Benchmarking • It is a tool that is used by many businesses • To gauge their performance with best-in-class businesses within their own industry • This tool allows for the standardized measurement of business and organizational metrics • To use this comparison with best-in-class business and organizational metrics Benchmarking - Chp 10

3. What Is Benchmarking? • Can yield great benefits in the education of executives • And in the realized performance improvements of operations • In addition, benchmarking can be used to determine strategic areas of opportunity • In general, it is the application of what is learned in benchmarking that delivers the marked and impressive results so often noted • The determination of benchmarks allows one to make a direct comparison: any identified gaps are improvement areas. Benchmarking - Chp 10

4. Benchmarking Defined "Benchmarking is the continuous process of measuring products, services and practices against the toughest competitors or those companies recognized as industry leaders (Best in Class)" Source: The Xerox Corporation Benchmarking - Chp 10

5. Reasons to Benchmark • To identify, understand and implement Best Practices • To overcome complacency • To build and reinforce broad commitment to change • To achieve quantum leaps in improvement Benchmarking - Chp 10

6. What Is “Best Practice”? • Documented strategies and tactics employed by highly admired companies • These companies are not "best-in-class" in every area - such a company does not exist • But due to the nature of competition and their drive for excellence, the profiled practices have been implemented and honed to help place their practitioners as the most admired, the most profitable, and the keenest competitors in business. Benchmarking - Chp 10

7. What Benchmarking Is NOT • Merely competitor analysis: Benchmarking is best undertaken in a collaborative way. • Comparison of league tables: The aim is to learn about the circumstances and processes that underpin superior performance. Benchmarking - Chp 10

8. What Benchmarking is NOT • A quick fix, done once for all time • Benchmarking projects may extend over a number of months and it is vital to repeat them periodically so as not to fall behind as the background environment changes. Benchmarking - Chp 10

9. What Benchmarking Is NOT • Copying or catching up • In rapidly changing circumstances, good practices become dated very quickly. Also, the fact that others are doing things differently does not necessarily mean they are better. Benchmarking - Chp 10

10. To Benchmark Successfully • A shared, common vision of the performance improvement goals and objectives • Open and committed high level support • The commitment of all stakeholders in the process to progress and change • Ability to critically examine ONE’S own practices • The ability and willingness to co-operate and share information and expertise with others • Able to learn from others’ best practices • Flexibility to implement the necessary changes • Procedures to monitor subsequent progress Benchmarking - Chp 10

11. Types of Benchmarking • Internal • External (competitors) • External (same industry) • External (generic) Benchmarking - Chp 10

12. Benchmarking Process • Identify activities and practices to benchmark • Collect data from organizations that have recognized accomplishments in the activity • Suitable "benchmarkers" may include primary competitors, other divisions in a larger organization, and "world class" performers in a particular area • Be prepared to share as much information as you receive from benchmarking partners. Benchmarking - Chp 10

13. Benchmarking Process • Integrate and analyze the data • Act on the information collected by implementing features that can be adapted to your own organization • Monitor improvements and conduct ongoing benchmarking Benchmarking - Chp 10

14. Benchmarking Process Summary • Decide what to benchmark • Understand current performance • Plan • Study others • Learn from the data • Use the findings Benchmarking - Chp 10

15. Deciding What To Benchmark • Diversity in “Best of Class” levels • Where are you? Benchmarking - Chp 10

16. Quiz Scores • Excellent! • Your company is at the creative vanguard. We're going to do two things right now: buy some of your stock, and see if you have any job openings. Benchmarking - Chp 10

17. Quiz Scores • Not bad! • The firm is probably attracting enough good people and generating enough creative thinking to stay in the game. It sounds like management is at least trying, so maybe you should pitch in and help this crew move up the scale. • Get out of Dodge, pardner. • The Surgeon general has determined that the company you work for is hazardous to your physical and mental health. Benchmarking - Chp 10

18. Quiz Scores • Nahh....Can't be! • Those (d) answers were supposed to be jokes. You know, jokes, like the pointy-haired guy in that comic strip? • Deficient – Soon, the board is going to send in a turnaround team. Let’s hope they turn it around in the right direction. Update your resume & don a life jacket. • Very good – Your company gets it (or most of it, anyway). You’d have to look long and hard to find a better place to work. Benchmarking - Chp 10

19. Approaches to Benchmarking AT&T 12-step Process: • Determine who the clients are – who will use the information to improve their process • Advance the clients from the literacy stage to the champion stage • Test the environment. Make sure the clients can and will follow through with benchmarking findings Benchmarking - Chp 10

20. Approaches to Benchmarking AT&T 12-step Process (cont): • Determine urgency. Panic or disinterest indicate little chance for success • Determine scope and type of benchmarking needed • Select and prepare the team • Overlay the benchmarking process onto the business planning process Benchmarking - Chp 10

21. Approaches to Benchmarking AT&T 12-step Process (cont): • Develop the benchmarking plan • Analyze the data • Integrate the recommended actions • Take action • Continue improvement Benchmarking - Chp 10

22. Approaches to Benchmarking Xerox 10-step Process: • Identify what is to be benchmarked • Identify comparative organizations • Determine data-collection method and collect data • Determine current performance gap • Project future performance levels Benchmarking - Chp 10

23. Approaches to Benchmarking Xerox 10-step Process (cont): • Communicate benchmark findings and gain acceptance • Establish functional goals • Develop action plans • Implement specific actions and monitor progress • Recalibrate benchmarks Benchmarking - Chp 10

24. Example of Benchmarking Results Norwest, the nation’s largest mortgage company, embarked on a benchmarking campaign, and was able to quantify the following benefits: • Sales brochure consolidation: $430,000 in savings; • Customer and direct mail consolidation: $1 million in savings; • Opportunity lending: $20 million in added growth; • Teller referrals: up 15%, 33% of which result in additional sales; • Use of sales road maps: sales increase up to 102%; • Use of partner letters: 150% increase in commercial sales; and • Performance Coaching: 5.08 products per new customer. Benchmarking - Chp 10

25. Understanding Current Process • To compare practices it is important to determine, understand and document the current practices • Can be helpful to chart and diagram flow and processes • Important to clarify normal routine processes with special exception processes • Important to quantify a process with a unit of measure Benchmarking - Chp 10

26. Planning • If not already chosen – a benchmarking team should be picked • Choose your type of benchmarking • Internal • Competitive • Process • Identify the best firms to find a benchmark • A “short list” of possible benchmark partners Benchmarking - Chp 10

27. Studying Others • Benchmarking studies look for two types of information • Description of how best-in-class processes are practiced • And the measurable results of these practices • Techniques for conducting original research • Questionnaires • Site visits • Focus groups Benchmarking - Chp 10

28. Learning the Data • Involves answering a series of questions • Is there a gap between the organization’s performance and the performance of the best-in-class organization • What is the gap? How much is it? • Why is there a gap? • What does the best-in-class do that is better? • If best-in-class practices were adopted, what would be the resulting improvement? Benchmarking - Chp 10

29. Learning the Data • Benchmarking studies can reveal three different outcomes • A negative gap • Equal or parity • Positive gap • Identifiable benchmark gaps must be described and quantified • Determine the root causes of the gaps Benchmarking - Chp 10

30. Using Findings • Generic steps for the development and execution of action plans • Specify tasks • Sequence tasks • Determine resource needs • Establish task schedule • Assign responsibility for each task • Describe expected results • Specify methods of monitoring results. • Goals and objectives should be consistent with the execution of the action plan – end result is process superiority Benchmarking - Chp 10

31. Pitfalls & Criticisms • Benchmarking for the sake of it • Focusing entirely on comparisons of performance measures rather than the processes and activities that enable the achievement of good practice • Expecting that benchmarking will be quick or easy Benchmarking - Chp 10

32. Pitfalls & Criticisms • spending too long on one part of the process at the expense of other key parts particularly, obtaining support for your recommendations • expecting to find benchmarking partners comparable in all respects to your organization Benchmarking - Chp 10

33. Summary • Benchmarking is not a panacea, a strategy, or business philosophy • It is an improvement tool • To be effective, it must be used properly • It is a source of ideas from outside the organization • Benchmarking forces an organization to set goals and objectives based on external reality Benchmarking - Chp 10

34. Class Exercises • Identify the three main types of benchmarking? • What is a metric? How are metrics used? Benchmarking - Chp 10