Essay Two

Adugna J. GENETI
BA642 Quality and Operations Management
Essay One, Exam 2
December 15, 2010

Benchmarking: A permanent Process for Excellence

Benchmarking is a process in which organizations evaluate various aspects of their

processes in relation to best practices, usually within their own sector. It is also a process of

identifying other organizations that are best at some facet of our operations and then modeling

our organization after them (Operations Management, 9/e, Jay Heizer & Barry Render). It

selects a demonstrated standard of performance that represents the very best performance for a

process or activity. Benchmarking is `the continuous process of measuring products, services and

practices against the toughest competitors or those companies recognized as industry leaders,

(that is) ... the search for industry best practices that will lead to superior performance (Camp,

1989, 10). According to these definitions benchmarking helps organizations increase their

performance. They compare and measure their policies, practices, philosophies, and performance

measures against those of high-performing organizations. Benchmarking could be a onetime

event but rather a continuous process in which organizations continually seek to challenge their

practices. It is a continuous, systematic process of measuring products, services and practices

against organizations regarded to be superior with the aim of rectifying any performance ``gaps’’

because of the existence of strong dynamics in the current business world. The aim of

benchmarking is to identify competitive targets which render the weak points of the

benchmarking organization visible and to establish means of improvement. In other words, it is

not to find out ``by how much others are doing better but, rather, how they make it to do better in

certain areas'' (Horvath and Herter).

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There are steps in developing benchmarks. These are determining what to benchmark,

forming a benchmarking team, identifying benchmarking partners, collecting and analyzing

benchmarking information, and taking action to match or exceed the benchmark.

There are different types of benchmarking but the primary types are: internal,

competitive, functional and generic (Benchmarking for Best Practices). Internal benchmarking is

a comparison of a business process to a similar process inside the organization. Competitive

Benchmarking is direct competitor to competitor comparison of a product, service, process or

method. Functional benchmarking is a comparison to similar or identical practices within the

same or similar functions outside the immediate industry. Generic benchmarking broadly

conceptualizes unrelated business processes or functions that can be practiced in the same or

similar ways regardless of the industry.

Benchmarks are the performance measures considered during benchmarking process.

These measures include How many? How quickly? How high? How low? Benchmarks are facts

(Benchmarking For Best Practices, By Barbara Harison). Performance measurement is a

method by which organizations evaluate results. Performance measuring gives numerical

information quantifying performance dimensions (Performance measurement systems for

benchmarking in the construction industry, Costa, Formoso,). This information is useful for

process control and establishing feasible and challenging goals. The result we get from

performance measurement, through the process of benchmarking, can be analyzed and compared

to other organizations performance to get more insights. Hence performance measuring is the

information used as a benchmark in the benchmarking process to show how organizations

perform relative to others.

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Benchmarking methodoly

One of the world’s renowned and leading organizations in benchmarking, APQC,

indicated that organizations use benchmarking to improve productivity and lower costs,

accelerate and manage change, achieve breakthroughs and innovation, set performance targets,

and create a sense of urgency. The benchmarking methodology being used in this organization

consists of four phases and has its flexibility in application and rigor.

• Planning to establish the project scope and developing the data collection approach and

requirements, and set the criteria for peer groups.

• Collecting data.

• Analyzing and validating information collected to identify performance levels, leading

practices, enablers, and proven templates and other tools.

• Adapt—report and develop action plan for change.

The PDCA cycle of (W. Edwards Deming) proposes that business processes should be

analyzed and measured to identify sources of variations that cause products to deviate from

customer requirements. Business processes should be placed in a continuous feedback loop so

that managers can identify and change the parts of the process that need improvements. PDCA

represents “Plan, Do, Check, Act”. “PLAN” refers to designing or revising business process

components to improve results. “DO” refers to implementing the plan and measuring its

performance. “CHECK” refers to assessing the measurements and reporting the results to

decision makers. “ACT” refers to decision making on changes needed to improve the process.
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Therefore, the “Plan, Collect, Analyze, Adapt” model of APQC actually conforms to

Deming’s PDCA model.

Out-Of-The-Box Benchmarking

Performance benchmarks must match the industry's value drivers. Usually a business

benchmarks itself against best-in-class performers within its industry. At the same time, the

comparison of an organization's performance against that of its peers in the market can help it

determine the level of performance common in its competitive environment. Internal

comparisons may only provide parity or a similar or slightly improved practice.

Out-of-the-box benchmarking is the process of benchmarking with unrelated business so

that best practice can be applied in similar ways regardless of the industry. The practical

advantage of comparing with non-competitors is that information can be obtained much easier

since companies more readily release information they would not, normally, give to direct

competitors. This type of benchmarking helps in gaining insight into excellent work process and

enhances innovation. A number of breakthrough improvements can come from approaches used

by completely different business and industries.

Therefore, Out-of-the-box benchmarking has got considerable advantages even not

limited to what is mentioned in this essay and it should be encouraged though it doesn’t seem to

be commonly used. As it entails dealing with completely different industry there could be a

tendency of getting overwhelmed in what is being done in that industry and leading to minimized

or no result in the process of benchmarking. Businesses should focus on the “how” instead and

learn from the selected best practices.

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References

Benchmarking and performance measurement in public sectors towards learning for agency

effectiveness. Alexander Kouzmin, University of Western Sydney. Elke Lo Èffler and Helmut

Klages, Post-Graduate School of Administrative Sciences of Speyer. Nada Korac-Kakabadse,

Cranfield School of Management, Cranfield, UK

Camp, Robert C. "Beg, Borrow And Benchmark"- Business Week, November 30.

Camp, Robert C. and Colbert, Dan N. "The Xerox Quest for Supply Chain Excellence," Supply

Chain Management Review, Spring 1997, pp. 82&91.

Ebersole, Phil. "Setting a mark to aim for", Democrat & Chronicle, March 12, 1996.

Gutner, Toddi. "Better Your Business: Benchmark It," Business Week, April 27, 1998.

Inter-Agency Benchmarking and Best Practices Council, www.va.gov/fedsbest

Performance Measurement Systems for Benchmarking In the Construction, Dayana B. Costa.

Performance Measurement, Department of Trade Industry, www.dti.gov.uk/quality/performance

The Benchmarking Exchange (TBE) Aptos, CA, www.benchnet.com

The International Benchmarking Clearinghouse at the American Productivity and Quality Center

(APQC), www.apqc.org