2 Bench Marking

8/11/2019 2 Bench Marking

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Benchmarking



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Benchmarking is a systematic method by whichorganizations can measure themselves against the best industry practices.

It promotes superior performance by providing anorganized framework through whichorganizations learn the best practices andunderstand how these practices differ from theirown.

It is tool for continuous improvement.It is the process of borrowing ideas and adapting

them to gain competitive advantage.



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Definition

Benchmarking is the systematic search for best practice, innovative ideas & highly effectiveoperating procedures.

It considers the experience of others and uses it.

Benchmarking measures performance against that of best in class organizations, determine how the best in class achieve those performance levels.



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Two key elements of benchmarking :

1. Measuring performance requires some sortof units of measures. These are calledmetrics & are usually expressed numerically.

The numbers achieved by the best-in-class benchmark are the target.

An organization seeking improvement then

plots its own performance against target.



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2. Benchmarking requires that managersmust understand why their performancediffers.

Benchmarkers must develop a thorough andin-depth knowledge of their own

processes and processes of the best in-

class organization .



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Reasons to benchmark• It is a powerful & extremely effective when

used for the right reasons & aligned withorganization strategy.

• It is a tool to achieve business & competitive

objective.• It helps organization to develop strength &

reduce weakness.•

It helps to set goals objectively.• It is time & cost efficient because the process

involves imitation & adaptation rather than pure invention.



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ProcessOrganizations that benchmark, adapt the process to

best fit their own needs & culture.

1. Decide what to benchmark

2. Understand current performance3. Plan

4. Study others

5. Learn from the data6. Use the findings



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Decide what to benchmark

It is best to begi n by thinking about the mission& critical success factors.

a) Which process are causing the most problem? b) Which process contribute most to customer

satisfaction & which are not performing up toexpectations.

c) What are the competitive pressure impacting

the organization the most?d) Processes that have the potential fordifferentiating our organization from thecompetition?



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Not to choose larger scope. Be specific in choosingwhat to benchmark.

Pareto diagram, cause & effect diagram, flow chartwill help in this.



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Understand currentperformance

Planning : benchmarking team to be chosen,To decide what type of benchmarking to perform.Type of data be collected.Method of collection

Benchmarking is a learning process



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3 types of benchmarking

Internal Benchmarking : Bell Labs

Competitive Benchmarking : from consumer reportscompanies used to evaluate the financial performance ofothers.

Process Benchmarking : southwest Airlines was unhappywith the airplane turnaround time, it benchmarked auto-racing pit crews & implemented the idea.

Motorola looked Domino’s Pizza for learning best ways tospeed up delivery systems.



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Studying others

Two types of information:A descriptive of how best-in-class processes are

practiced. and

The measurable result of their practice.This can be achieved by conducting research through:

Questionnaire

Site visitsFocus groups



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Learning from the data

Is there any gap between the organizations performance & the performance of the best-in-class organizations?

What is the gap! How much is it?Why is there a gap? What does the best-in-class do

differently that is better?If best-in-class practices were adopted, what would

be the resulting improvement.



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It reveals three different outcomes:

External processes may be significantly better thaninternal process ( a negative gap )a negative gap: demands major improvementsProcess performance may be approximately equal

(parity)Parity requires further investigation to determine if

improvement opportunities exists.

Internal processes better than the external ( positivegap )

Requires recognition for the internal process.



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Using the findings

The objective is to change the process to close thegap. Two groups should agree on the change.

Group 1: the process owner (who run the process)Group 2: upper management- who incorporate the

changes & provides necessary resources.

Process changes are likely to affect upstream &downstream operations as well as suppliers &customers.



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Criticisms of Benchmarking• How can an organization be truly superior if it does not

innovate to get ahead of competition.• It is not a strategy, its an improvement tool.• Benchmarking is not a solution for the quality problems. To

be effective, it must be used properly.• The most persistent criticism of benchmarking from theidea of copying others. Not by innovating.•

Benchmarking is not a substitute for innovation.• Growth of a business depends upon setting & achievinggoals & objectives, benchmarking forces an organization to setgoals & objectives based on external reality.

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2 Bench Marking