Benchmarking (Tim Rachal Chris)

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
What is our performance
level?
What are others' performance

levels?
How do we do it?
How did they get there?
Creative
Adaptation
Breakthrough
Performance
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
Identify which
benchmarking to
perform (internal,
competitive, or
process)
Choose the type of
data to be collected
Devise a method of
collection
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 organizations
performance and the performance of the bestin-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.
2.
3.
4.
5.
6.
7.
Specify tasks
Sequence tasks
Determine resource needs
Establish task schedule
Assign responsibility for each task
Describe expected results
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.
3.
4.
5.
6.
Understand current performance

Plan
Study others
Learn from the data
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

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Chapter 8

systematic method by which

What are others' performance

How did they get there?

1) Units of measure (to measure performance)

innovative ideas, and highly effective operating

Organizations must continue to innovate

Deciding What to Benchmark

Learning from the Data

performance and the performance of the bestin-class organization?

What is the gap? How much is it?

class do differently that is better?

If best-in-class practices were adopted, what

would be the resulting improvement?

Learning from the Data

process better than internal

performance approximately equal

process better than that found in

Learning from the Data

measures and ratios (activity costs,

the market prefer one process over

Using the Findings

negative gap in performance, the

Process owners (those who run the

Using the Findings

Using the Findings

consistent with the execution of the

process owners fully participate in the

Using the Findings

used continuously to pursue emerging

Pitfalls & Criticisms

How can an organization be superior if it

Not a strategy or business philosophy

Not a substitute for innovation

It is a source of ideas from outside

Pitfalls & Criticisms

Benchmarking for the sake of it

Questions for Discussion

Decide what to benchmark

Understand current performance

Questions for Discussion

things better and effectiveness as

used to improve both efficiency and

Questions for Discussion

benefit from benchmarking organizations

Questions for Discussion

Questions for Discussion

Questions for Discussion

two types of information

Which piece of information is more

important and why?

Questions for Discussion

processes before studying those of other

Questions for Discussion

Who in the class has experience in the

Thanks for your time!

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