Designing the Benchmarking Process

Introduction

Benchmarking is a method of improving business performance by learning from others. The essence of benchmarking lies in the continuous process of comparing a companys strategies, products and processes with those of world leaders and the best in class organizations in order to learn how they achieve excellence and then setting out to match and even surpass it.

Contd

So benchmarking can be defined as a process for improving performance by constantly identifying, understanding and adapting best practices and processes followed inside and outside the company and implementing the results. The main emphasis of benchmarking is not on best performance but on improving a given business operation or a process by exploiting best practices.

Advantage of benchmarking

How well are we performing compared to other companies? What are best practices? What improvement opportunities should we focus on? Helping to identify the current position of the business and determine priorities for improving. Encourage regular monitoring of progress for improvement. Increase the competitiveness of the organization.

Designing The benchmarking process

Benchmarking can be applied to virtually any business or production process. Improvements to the best-in-the-class levels in some areas will contribute greatly to market and financial success .

Phases in the benchmarking process

Planning Analysis Integration Action Maturity

Planning

i.

This phase questions:

involves

answering

the

following

ii.

iii.

iv.

v. vi.

What is to be benchmarked? Which processes cause the most trouble? Which process contribute most to customer satisfaction and which are not performing up to expectations? What are the competitive pressures impacting the organization the most? What processes or functions have the most potential for differentiating our organization from the competition? To whom or what will we compare? How will the data be collected?

Analysis

Is there a gap between the organizations performance and that of the best-in-the-class organizations? What is the gap ?how much is it? Why is there gap ?what does the best-in-the-class do differently ,that is better ? If best in-the-class practices were adopted ,what would be the resulting improvement ? studies can reveal three different

Benchmarking outcomes 1. Negative gap 2. Parity gap 3. Positive gap

Integration

Integration is the process of using benchmark findings to set operational targets for change . It involves careful planning to incorporate new practices and to ensure that benchmark findings are incorporated in all formal planning processes.

Action
Action plan for updating the benchmark findings and an ongoing reporting mechanism. The generic steps for the development and execution of action plans are: a) Specify tasks b) Sequence tasks c) Determine resource needs d) Establish task schedules e) Assign responsibility for each task f) Describe expected results g) Specify methods for monitoring results

Maturity

Maturity will be attained when best industry practices are incorporated in all business processes, thus ensuring superiority. Benchmarking is a tool for continuous improvement and not to create one permanent improvement.

Xerox 12-Step Benchmarking Process

Phase 1: Planning 1. Identify what to benchmark; 2. Identify comparative companies; 3. Determine data collection method & collect data.

Phase 2: Analysis 4. Determine current performance gap; 5. Project future performance levels. Phase 3: Integration 6. Communicate finding and gain acceptance; 7. Establish functional goals.

The Xerox 12-Step Benchmarking Process

(continued)

Phase 4: Action
8. Develop action plans; 9. Implement specific actions & monitor progress; 10. Recalibrate benchmarks.

Phase 5: Maturity
11. Attain leadership position ; 12. Fully integrate practices into processes.

Benchmarking at JISCO

1n 1996 the company decided to maintain leadership among steel producing countries. They compared its process with British steel which had profit over one Billion per year. Taken help from BSCOS.

Benchmarks against which JISCO was assessed

The study focused on quality of product and quality of service after selling the product. The study focused more on the means of achieving product quality through manufacturing process.

Activities of team

Defining current performance Establishing benchmark of performance Identifying current constraint to achieve benchmark

the

PACE ( Plan and Action for continue excellence) _ Marketing _ Plant performance _ Organization and manpower performance

Cost of Benchmarking

Visit cost: It includes hotel rooms, travel costs, meals, a token gift and lost labor time. Time cost: The member of benchmarking team will be investing time in doing research on finding and analyzing problems, finding exceptional companies to study, visit and implementation. Database cost: Organizations create and maintain a database of best practices and the companies associated with each best practice and keep a track.

Benchmarking Dos

Obtain management commitment Obtain resource commitment Follow code of conduct Provide summary reports Be flexible

Benchmarking Donts

Have too broad a scope Proceed without process modeling Use questionnaires for process Have separate implementation team

Guidelines for successful Benchmarking

Thorough understanding of own processes Emphasis on industry best practices Company or plant visit Selection of appropriate benchmarking partners and techniques Maintain confidentiality of critical information Emphasis on practices and processes, not on end results Commitment towards the adoption and implementation of best practices Strict adherence to the benchmarking

Limitations of Benchmarking

Benchmarking is a tough process that needs a lot of commitment It is time consuming and expensive. Has to commit towards continuous improvement. If not properly modified acc. to environment then can lead to losses. Sometimes result in ignorance of new ideas. May be working environment and culture are different in both the companies.

Pitfalls of Benchmarking

Inadequate resources Scope not well defined To many performance measures Inappropriate data collection method Management resistance to change No repeat benchmarking