Benchmarking seems such a high-falluting word, another business concept that has been used ad nauseam. There’s a justification for that, we’re sure.
But what’s the simplest way to describe benchmarking so even a high school student can understand it?
Our research on benchmarking in process improvement revealed that the concept can be compared to a fitness test. We have no intention of putting benchmarking in minimalist terms, but the comparison deserves attention.
Take your middle-aged individual who doesn’t do much physical exercise except for his 9 holes of golf on the weekend with his buddies. The company physician calls him in for his annual executive check-up, mandatory for all senior personnel.
During his physical, the doctor asks him:
- any problems with drinking/eating?
- when was his last vision exam?
- any trouble sleeping?
- when does his heart palpitations occur?
- does he suffer frequent fatigue, mood swings, compulsive eating?
- what’s a typical work day like?
- what does he do on weekends?
- any interests outside work?
The doctor pokes some more, takes measurements of his girth, weighs him, tests his reflexes. After a few more questions, the doctor tells him that his lifestyle needs to be improved and that these improvements must be done consistently, indefinitely. Only then, the doctor says, can he issue a clean bill of health. The doctor adds, you can’t sit on the bench too long, you’ve got to get up and start moving.
The gentleman’s situation therefore is somewhat like that of an ailing corporation that’s suffering from lackluster profits, disloyal customers, disgruntled employees, and power-grabbing, short-sighted executives.
People with benchmarking experience agree on what benchmarking is. We liked the definition given by Rob Reider in his book, Benchmarking Strategies: A Tool for Profit Improvement (2000).
“Benchmarking can be defined as a process of analyzing internal operations and activities to identify areas for positive improvement in a program of continuous improvement.”
Going back to our weekend golfer, the doctor (a) asked him about his activities and habits (processes), (b) put him through a series of tests (analysis and identification) so (c) he could up with a diagnosis (specific areas of his lifestyle that can be improved) and (d) recommend ways to stay in tip top shape (continuous improvement).
Companies go through the same motions. If you read cases on benchmarking, you will discover that millions of companies who have willingly experimented with Six Sigma principles in sustained fashion have transitioned remarkably well from mediocrity to superior performance. They have employed benchmarking principles to full advantage.
Accounting firm Deloitte takes Reider’s description one step further and explains it more fully within the context of the financial and accounting sector. While benchmarking measures a process, product or service, it is done so internally and externally. In this case, “externally” means that the measurement is performed vis-à-vis a company’s competitors, leading or top companies, or across continents.
Deloitte argues that while benchmarking serves to analyze and measure a process for the purpose of improving it, it is in itself, a process. Before a company utilizes their benchmarking toolbox, they must go through a four-phase process:
- know the reasons for benchmarking (has the quarterly performance of the company suffered a setback which would justify benchmarking, are there new products and new services that will be introduced, has a merger occurred, is the company looking to sell, etc),
- identify those processes to be benchmarked (the first step is to select those processes that are of the highest priority to the organization in terms of costs, time, processes being outsourced and customer dissatisfaction),
- develop an action plan to be implemented (this phase follows the identification of improvement initiatives – what, where, how, why and by whom)
- decide to re-benchmark, if necessary (when an organization undergoes any change that affect one or more processes, re-benchmarking might be in order so that initiatives are not shelved and quickly forgotten).
For the cynical who takes the attitude, “been there, done that”, the value of benchmarking cannot be ignored. A few case studies have mentioned how some multinationals generated enormous savings because of sound benchmarking practices. According to an online article by Business Wire, Rank Xerox witnessed an improvement of its country units from 152% to 328% with $200 million in new revenues.
Author: Peter Peterka Google