Benchmarking
Benchmarking
Benchmarking
Benchmarking
INTRODUCTION
Benchmarking is a way for organizations to:
It’s a tool for continuous improvement, used by many top companies like
Xerox, AT&T, and Toyota. Benchmarking helps organizations:
It’s like copying from a classmate who gets high grades, but instead of
cheating, you learn from their study habits and techniques to improve your
own grades!
REASON TO BENCHMARK
Here are the main reasons to benchmark:
Benchmarking helps you keep up with the best in the industry and avoid
falling behind.
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BENCHMARKING PROCESS
Organizations adapt the benchmarking process to fit their needs and culture.
While steps may vary, the core process typically involves six steps:
3. Plan:
4. Study Others:
Examples:
AT&T’s 12-Step Process:
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Xerox’s 10-Step Process:
Both companies adapt the core steps to meet their specific needs while
ensuring consistent benchmarking activities.
Examples:
Insurance Company 1: Focuses on customer service, so they
benchmark customer support processes.
Insurance Company 2: Focuses on investment performance, so they
benchmark investment processes.
Scope of Benchmarking:
Broad and Shallow:
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Narrow and Deep:
Metrics:
Use metrics like value added per employee to measure efficiency and guide
benchmarking efforts.
UNDERSTANDING CURRENT
PERFORMANCE
To benchmark effectively, you need to understand your current process.
Here’s how:
1. Map it out:
Use diagrams to visualize the process, including inputs, outputs, and
exceptions.
3. Measure performance:
Identify key metrics (e.g., costs, quality measures) to compare against
benchmarks.
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5. Use accounting data wisely:
Ensure costs are accurately represented, as accounting systems may not
always reflect the specifics of the process.
PLANNING
Planning a Benchmarking Study:
1. Assemble a team:
Choose team members to conduct the benchmarking.
Benchmarking Types:
1. Internal: Compare similar activities within your organization.
Planning Steps:
1. Use public information:
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3. Narrow down candidates:
The goal is to create a focused and efficient benchmarking study that aligns
with your organization’s needs and critical success factors. It’s like planning a
road trip – you need to know where you’re going, how to get there, and who’s
coming with you!
STUDYING OTHERS
To benchmark effectively, organizations need to understand both best
practices and their results. Here’s how to gather this information:
2. Original research:
If needed, use:
2. Site visits: Establish mutual learning, plan the visit itinerary, and debrief
immediately afterward.
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LEARNING FROM THE DATA
When analyzing data, ask:
1. Is there a performance gap between your organization and the best-in-
class?
Negative Gap: External processes are better, and major improvements are
needed.
Parity: Internal and external processes are similar, but there might still be
room for improvement.
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1. Communication: Share findings with those who can make improvements.
Steps:
Steps for developing and executing an action plan include:
1. Specify tasks.
2. Sequence tasks.
4. Establish a schedule.
5. Assign responsibility.
7. Monitor progress.
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2. Limitations: Benchmarking is an improvement tool, not a strategy or
business philosophy. It may not be effective for processes with little
improvement potential, and fails if process owners feel threatened or ignore
findings.
Conclusion:
Benchmarking ensures organizations meet consumer expectations for
quality, cost, and delivery by setting and achieving goals based on external
reality. It’s a tool to improve and stay competitive, not a replacement for
innovation and creativity!
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