Benchmarkingggggggggggggggggggggggg.pptx

Chapter 8
Benchmarking
Rachal Roach
Tim Hyder
Chris Green

Introduction
 Book definition: Benchmarking is a
systematic method by which
organizations can measure themselves
against the best industry practices
 Benchmarking is a standard that
companies compare themselves to and
strive to be that good

Benchmarking
 What is your definition of benchmarking?
 What is the process for benchmarking?

Benchmarking Concept
Creative
Adaptation
Breakthrough
Performance
What is our performance
level?
How do we do it?
What are others' performance
levels?
How did they get there?

Benchmarking Concept
 Concept has been around for a while
 2 Key elements
 1) Units of measure (to measure performance)
 2) Managers need to understand why their company's
performance differs

Reasons to Benchmark
 Promotes continuous improvement
 Makes companies search for the best practices,
innovative ideas, and highly effective operating
procedures
 Can notify a company if it has fallen behind the
competition
 Inspires managers to compete
 Allows goals to be set objectively

Reasons to Benchmark
 Weaknesses
 Organizations must continue to innovate
as well as imitate.

6 General Steps to
Benchmarking
1) Decide what to
benchmark
2) Understand current
performance
3) Plan
4) Study others
5) Learn from the data
6) Use the findings

Deciding What to Benchmark
 Think about the mission and critical
success factors
 Decide the scope
 Devise charts that will pin point the exact
problem
 Decide on a numerical measure to show
improvement

Understanding Current
Performance
 Understand and document current
processes
 Form a benchmarking team
 Decide on a way to numerically measure
findings

Planning
 Decide what type of
benchmarking to
perform (internal,
competitive, or
process)
 Choose the type of
data to be collected
 Devise a method of
collection
 Identify which
organizations to use
as your benchmarks
 Make a timetable to
adhere to for each
task
 Have a desired
output for the study

Studying Others
 Use internal sources
 Apply data in the public domain
 Utilize original research
 Combining all or some of these

Learning from the Data
 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 differently that is better?
 If best-in-class practices were adopted, what
would be the resulting improvement?

 Studies can reveal 3 outcomes:
 Negative gap
 External process better than internal
processes
 Parity
 Process performance approximately equal
 Positive gap
 Internal process better than that found in
external organizations

 At least two ways to prove a superior
practice:
 Analyzed quantitatively
 Summary measures and ratios (activity costs,
return on assets, or customer satisfaction
levels)
 Market analysis
 Does the market prefer one process over
another?
 Price outside services

Using the Findings
 When a benchmarking study reveals a
negative gap in performance, the
objective is to change the process to
close the gap
 Two groups must agree on the change:
 Process owners (those who run the
process)
 Upper Management (incorporating
changes and providing resources)

Using the Findings
 Generic steps of Action Plans:
1. Specify tasks
2. Sequence tasks
3. Determine resource needs
4. Establish task schedule
5. Assign responsibility for each task
6. Describe expected results
7. Specify methods for monitoring results

Using the Findings
 Goals and objectives should be
consistent with the execution of the
action plan so that the end result is
process superiority
 The best results are obtained when the
process owners fully participate in the
design and execution of the plan

Using the Findings
 The next step is to repeat the
benchmarking process
 The benchmarking process must be
used continuously to pursue emerging
new ideas

Pitfalls & Criticisms
 Idea of copying others
 How can an organization be superior if it
does not innovate to get ahead? How can
an organization even survive if it loses
track of its external environment?
 Not a strategy or business philosophy
 It is an improvement tool
 Not a substitute for innovation
 It is a source of ideas from outside

Pitfalls & Criticisms
 Avoid –
 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

Questions for Discussion
 What are the six core techniques of the
benchmarking process?
1. Decide what to benchmark
2. Understand current performance
3. Plan
4. Study others
5. Learn from the data
6. Use the findings

 Efficiency has been defined as “doing
things better” and effectiveness as
“doing better things.”
 Describe how benchmarking can be
used to improve both efficiency and
effectiveness…

 Explain how an organization might
benefit from benchmarking organizations
in a completely different industry…

 Identify and explain the three types of
benchmarking…
 In what circumstances would each type
be most appropriate?

 How are critical success factors
important in benchmarking?

 Benchmarking studies are a search for
two types of information –
 An understanding of best-in-class
processes
 The metrics that result
 Which piece of information is more
important and why?

 Why is it important to understand internal
processes before studying those of other
organizations?
 What tools are useful in examining
internal processes?

 Who in the class has experience in the
benchmarking process?

Thanks for your time!
Rachal
Tim
Chris

Benchmarkingggggggggggggggggggggggg.pptx

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