Chapter 10 Benchmarking Team 1 John Boyd Greg

Chapter 10 Benchmarking Team #1: John Boyd, Greg De. Young, Tusi Marshall and Dave Wilson TEC 5133 - TQS Benchmarking - Chp 10 1

Introduction To Benchmarking n It is a tool that is used by many businesses n To gauge their performance with best-in-class businesses within their own industry n This tool allows for the standardized measurement of business and organizational metrics n To use this comparison with best-in-class business and organizational metrics TEC 5133 - TQS Benchmarking - Chp 10 2

What Is Benchmarking? n Can yield great benefits in the education of n n executives And in the realized performance improvements of operations In addition, benchmarking can be used to determine strategic areas of opportunity In general, it is the application of what is learned in benchmarking that delivers the marked and impressive results so often noted The determination of benchmarks allows one to make a direct comparison: any identified gaps are improvement areas. TEC 5133 - TQS Benchmarking - Chp 10 3

Benchmarking Defined "Benchmarking is the continuous process of measuring products, services and practices against the toughest competitors or those companies recognized as industry leaders (Best in Class)" Source: The Xerox Corporation TEC 5133 - TQS Benchmarking - Chp 10 4

Reasons to Benchmark n To identify, understand implement Best Practices n To overcome complacency n To build and reinforce broad commitment to change n To achieve quantum leaps in improvement TEC 5133 - TQS Benchmarking - Chp 10 5

What Is “Best Practice”? n Documented strategies and tactics employed by highly admired companies n These companies are not "best-in-class" in every area - such a company does not exist n But due to the nature of competition and their drive for excellence, the profiled practices have been implemented and honed to help place their practitioners as the most admired, the most profitable, and the keenest competitors in business. TEC 5133 - TQS Benchmarking - Chp 10 6

What Benchmarking Is NOT n Merely competitor analysis: Benchmarking is best undertaken in a collaborative way. n Comparison of league tables: The aim is to learn about the circumstances and processes that underpin superior performance. TEC 5133 - TQS Benchmarking - Chp 10 7

What Benchmarking is NOT n A quick fix, done once for all time n Benchmarking projects may extend over a number of months and it is vital to repeat them periodically so as not to fall behind as the background environment changes. TEC 5133 - TQS Benchmarking - Chp 10 8

What Benchmarking Is NOT n Copying or catching up n In rapidly changing circumstances, good practices become dated very quickly. Also, the fact that others are doing things differently does not necessarily mean they are better. TEC 5133 - TQS Benchmarking - Chp 10 9

To Benchmark Successfully n A shared, common vision of the performance n n n n improvement goals and objectives Open and committed high level support The commitment of all stakeholders in the process to progress and change Ability to critically examine ONE’S own practices The ability and willingness to co-operate and share information and expertise with others Able to learn from others’ best practices Flexibility to implement the necessary changes Procedures to monitor subsequent progress TEC 5133 - TQS Benchmarking - Chp 10 10

Types of Benchmarking n Internal n External (competitors) n External (same industry) n External (generic) TEC 5133 - TQS Benchmarking - Chp 10 11

Benchmarking Process n Identify activities and practices to benchmark n Collect data from organizations that have recognized accomplishments in the activity n Suitable "benchmarkers" may include primary competitors, other divisions in a larger organization, and "world class" performers in a particular area n Be prepared to share as much information as you receive from benchmarking partners. TEC 5133 - TQS Benchmarking - Chp 10 12

Benchmarking Process n Integrate and analyze the data n Act on the information collected by implementing features that can be adapted to your own organization n Monitor improvements and conduct ongoing benchmarking TEC 5133 - TQS Benchmarking - Chp 10 13

Benchmarking Process Summary n Decide what to benchmark n Understand current performance n Plan n Study others n Learn from the data n Use the findings TEC 5133 - TQS Benchmarking - Chp 10 14

Deciding What To Benchmark n Diversity in “Best of Class” levels n Where are you? TEC 5133 - TQS Benchmarking - Chp 10 15

Quiz Scores n Excellent! n n Your company is at the creative vanguard. We're going to do two things right now: buy some of your stock, and see if you have any job openings. n n TEC 5133 - TQS Benchmarking - Chp 10 16

Quiz Scores n Not bad! n n The firm is probably attracting enough good people and generating enough creative thinking to stay in the game. It sounds like management is at least trying, so maybe you should pitch in and help this crew move up the scale. n Get out of Dodge, pardner. n n The Surgeon general has determined that the company you work for is hazardous to your physical and mental health. Benchmarking - Chp 10 TEC 5133 - TQS n 17

Quiz Scores n Nahh. . Can't be! n Those (d) answers were supposed to be jokes. You know, jokes, like the pointy-haired guy in that comic strip? n Deficient – Soon, the board is going to send in a turnaround team. Let’s hope they turn it around in the right direction. Update your resume & don a life jacket. n Very good – Your company gets it (or most of it, anyway). You’d have to look long and hard to find a better place to work. TEC 5133 - TQS Benchmarking - Chp 10 18

Approaches to Benchmarking AT&T 12 -step Process: n Determine who the clients are – who will use the information to improve their process n Advance the clients from the literacy stage to the champion stage n Test the environment. Make sure the clients can and will follow through with benchmarking findings TEC 5133 - TQS Benchmarking - Chp 10 19

Approaches to Benchmarking AT&T 12 -step Process (cont): n Determine urgency. Panic or disinterest indicate little chance for success n Determine scope and type of benchmarking needed n Select and prepare the team n Overlay the benchmarking process onto the business planning process TEC 5133 - TQS Benchmarking - Chp 10 20

Approaches to Benchmarking AT&T 12 -step Process (cont): n Develop the benchmarking plan n Analyze the data n Integrate the recommended actions n Take action n Continue improvement TEC 5133 - TQS Benchmarking - Chp 10 21

Approaches to Benchmarking Xerox 10 -step Process: n Identify what is to be benchmarked n Identify comparative organizations n Determine data-collection method and collect data n Determine current performance gap n Project future performance levels TEC 5133 - TQS Benchmarking - Chp 10 22

Approaches to Benchmarking Xerox 10 -step Process (cont): n Communicate benchmark findings and gain acceptance n Establish functional goals n Develop action plans n Implement specific actions and monitor progress n Recalibrate benchmarks TEC 5133 - TQS Benchmarking - Chp 10 23

Example of Benchmarking Results Norwest, the nation’s largest mortgage company, embarked on a benchmarking campaign, and was able to quantify the following benefits: n n n n Sales brochure consolidation: $430, 000 in savings; Customer and direct mail consolidation: $1 million in savings; Opportunity lending: $20 million in added growth; Teller referrals: up 15%, 33% of which result in additional sales; Use of sales road maps: sales increase up to 102%; Use of partner letters: 150% increase in commercial sales; and Performance Coaching: 5. 08 products per new customer. TEC 5133 - TQS Benchmarking - Chp 10 24

Understanding Current Process n To compare practices it is important to determine, understand document the current practices n Can be helpful to chart and diagram flow and processes n Important to clarify normal routine processes with special exception processes n Important to quantify a process with a unit of measure TEC 5133 - TQS Benchmarking - Chp 10 25

Planning n If not already chosen – a benchmarking team should be picked n Choose your type of benchmarking Internal n Competitive n Process n n Identify the best firms to find a benchmark n A “short list” of possible benchmark partners TEC 5133 - TQS Benchmarking - Chp 10 26

Studying Others n Benchmarking studies look for two types of information Description of how best-in-class processes are practiced n And the measurable results of these practices n n Techniques for conducting original research n Questionnaires n Site visits n Focus groups TEC 5133 - TQS Benchmarking - Chp 10 27

Learning the Data n Involves answering a series of questions n Is there a gap between the organization’s performance and the performance of the bestin-class organization n What is the gap? How much is it? n Why is there a gap? n What does the best-in-class do that is better? n If best-in-class practices were adopted, what would be the resulting improvement? TEC 5133 - TQS Benchmarking - Chp 10 28

Learning the Data n Benchmarking studies can reveal three different outcomes A negative gap n Equal or parity n Positive gap n n Identifiable benchmark gaps must be described and quantified n Determine the root causes of the gaps TEC 5133 - TQS Benchmarking - Chp 10 29

Using Findings n Generic steps for the development and execution of action plans n n n n Specify tasks Sequence tasks Determine resource needs Establish task schedule Assign responsibility for each task Describe expected results Specify methods of monitoring results. n Goals and objectives should be consistent with the execution of the action plan – end result is process superiority TEC 5133 - TQS Benchmarking - Chp 10 30

Pitfalls & Criticisms n Benchmarking for the sake of it n Focusing entirely on comparisons of performance measures rather than the processes and activities that enable the achievement of good practice n Expecting that benchmarking will be quick or easy TEC 5133 - TQS Benchmarking - Chp 10 31

Pitfalls & Criticisms n spending too long on one part of the process at the expense of other key parts particularly, obtaining support for your recommendations n expecting to find benchmarking partners comparable in all respects to your organization TEC 5133 - TQS Benchmarking - Chp 10 32

Summary n Benchmarking is not a panacea, a strategy, or business philosophy n It is an improvement tool n To be effective, it must be used properly n It is a source of ideas from outside the organization n Benchmarking forces an organization to set goals and objectives based on external reality TEC 5133 - TQS Benchmarking - Chp 10 33

Class Exercises n Identify the three main types of benchmarking? n What is a metric? How are metrics used? TEC 5133 - TQS Benchmarking - Chp 10 34