Management

MAN 05.01

Benchmarking

Date: 14 December, 2000

1.General
(1)
as a structured
Benchmarking has been described
comparison and adaption of outstanding ideas, practices and
processes [often in different industries] to help identify areas
of weakness and find ways to improve an organisations
(2)
performance . It is related, but in some ways superior, to
other change techniques such as Best Value Auditing [being
(3)
introduced in UK ], Change Management, Business
Process Re-engineering [BPR], Partnering and job rotation.
Benchmarking is not competitive analysis or evaluation.
Benchmarking can be an internal or an external study. The
former are usually less successful but sometimes form a first
stage review. The benefit of benchmarking is that it
encourages thinking outside the box i.e. outside the current
organisation criteria. A definition of Benchmarking can be,
The process of identifying, understanding and adapting outstanding
practices from organizations anywhere in the world in order to help
your own organization to improve ots performance.

A definition of Benchmark can be,

A reference or measurement standard for comparison.

Benchmarking is therefor a managed change process which,

Uses a disciplined, structured approach

Identifies what needs to be changed

Identifies how to change it

Identifies the potential for improvement

Creates the desire for change

Benchmarking studies start by focusing on what are the key
improvement needs of the organization. Once the need for
change is understood, an examination of best practices and
an identification of the key factors that deliver superior
performance follow.
Any process that can be defined [e.g. srtategic planning,
product comparison, forecasting, goal setting etc.] can be
benchmarked.
2. Introduction
Benchmarking is about comparing business processes rather
than businesses. Identifying common processes is the key to
selecting a benchmarking partner. Its early origin lies in
Demings work in Japan in the 1950s which was developed
by Camp at Xerox in the 70s. Camp set out the ten step, four
phase benchmarking process used there as follows,
Phase
Planning

Analysis
Integration
Action

Steps
1. Identify what is to be benchmarked.
2. Identify comparable companies.
3. Determine method and collect data.
4. Determine current performance gap.
5. Project future performance level.
6. Publish findings and gain acceptance.
7. Establish functional goals.
8. Develop action plans.
9. Implement specific actions.
10. Recalculate benchmarks.

Initially the team must determine what are the key items to
be improved. This will also give an indication of potential for
such improvement and hopefully create a desire for change.
Four levels of performance are,
i] Baseline: Current level.
ii] Achievable: Best achievable gains and savings using
current resources and practices.
iii] Benchmark: Potential attainable level identified in study.
Iv] Long-term Goal: Identified future target.
The scale of benchmarking studies depends on the objective
but better results are achieved if more widely researched,

Internal best practices by function.

Competitors best practice.

Industry best practice including non-competitors.

Functional best practice any company, anywhere.

Benchmarking is a step change process as listed above, the
size of the step taken depending on scope of the search for
best practice undertaken. Breakthrough improvements of
critical performance criteria accelerate innovation and
change.
Any process or practice that can be defined can be
benchmarked. In practice two main types are common,

Competitive Analysis, and,

Best Practice Benchmarking.

Competitive Analysis delivers measures against which an
organization can compare its own performance but does not
discover how performance is achieved. Some methods
[Malcolm Baldrige Method & EFQM model] call for
benchmarking input. It can be divided into two categories,
strategic and tactical. The Strategic approach focuses on
the long term view of the organization and helps them with
the likes of indusry analysis, customer and employee
satisfaction analyses and financial performance. The
Tactical approach allows product positioning and measures
of process performance. Reverse Engineering, where
competitors products are tested and stripped down for
analysis, falls into this catagory.
Focus
Strategic

Market
Industry analysis

Tactical

Product positioning
Reverse engineering

Business
Customer satisfaction
Employee satisfaction
Community conception
Business results
Process performance
Measures

Best Practice Benchmarking goes beyond CA by

uncovering the processes which deliver performance and
can be divided into four categories [Internal: Competitive:
Functional: Generic]. Internal BPB is where a company
searches for BP within its own organization. Data is easy to
collect and barriers fewer but the BP limits are determined by
the best performer within the company. Competitive BPB is
probably the most difficult to perform as competitors usually
wish to maintain their advantage. Functional BPB focuses on
functions not processes and is based on particular aspects of
the organization which have been identified and requires the
difficulty identifying of partners but can produce a great leap
in performance. The biggest step change occurs where
function is not a barrier therefor in Generic BPB an external
partner usually in an unrelated industry with alternative
processes can be used to analyse organization performance.
In summary, the advantages of Benchmarking are that it,

Develops realistic stretch goals and strategic targets

Establishes realistic action objectives for implementation

Encourages a striving for excellence, breakthrough

thinking and innovation

Creates a better understanding of competitors and the

dynamics of the industry

Emphasises sensitivity to changing customer needs.

3. Best Practice Benchmarking
3.1 Investment
Based on a 1992 survey of 80 leading companies by the
International Benchmarking Clearinghouse [IBC], part of the
American Productivity and Quality Centre [APQC], the
average benchmarking study was found to occupy 25% of
team members time and cost 45,000. The variation in
investment depended on the scope of the study, the number
of partners and whether the study was conducted in-house
or with the aid of an outside facilitator.
Continued Man05.02

Management

MAN 05.02

Benchmarking

Date: 29 April, 2001

Continued from Man05.01

3. Best Practice Benchmarking [continued]
3.1 Investment [cont.]
the study also direct benefits of up to five times the
investment costs of the study. Returns included reduced
costs, increased sales, greater customer satisfaction,
enhanced market share.
3.2 Key Elements
Key elements of an on-going benchmarking programme are,

Management support and direction

Systematic approach

Research facilities

Networking

Code of conduct

Training for team members and process owners

Internal data-base of study plans, programme reports

and results

Internal communication to share successes and learning

Small organizations may not require all of these elements.
1] Management support & direction
Senior management support is crucial. Once secured it is
best to appoint an Executive Champion who can then form a
Steering Committee thus ensuring active management
involvement in the process. The role of the Steering
Committee can be summarized as that it,

Guides the selection of benchmarking subjects

Provides contacts with external organizations

Promotes benchmarking among senior management

Supports the benchmarking champion

Integrates benchmarking into different business areas

2] Systematic Approach
Although different practitioners follow different approaches
benchmarking should follow a systematic approach. These
are fundamentally based on Demings [Plan-Do-Check-Act]
cycle and a typical cycle is [Plan-Collect-Analyse-Adapt] nd
can be highly detailed as below,
Rank Xerox Benchmarking Process
Planning
1. Identify what is to be benchmarked.
2. Identify comparative companies
3. Determine data collection method and collect data.
Analysis
4. Determine current performance gap.
5. Project future performance levels.
Integration
6. Communicate benchmarking findings and gain
acceptance.
7. Establish functional goals.
Action
8. Develop action plan.
9. Implement specific actions and monitor progress.
10. Recalibrate benchmarks
APQC Benchmarking Process
Planning the Study
1. Form benchmarking team.
2. Establish scope of benchmarking study.
3. Document process.
4.
Determine processes, practices and methods that are potential
benchmarking topics.
5. Define topic areas for data collection.
Collecting information
1. Define measures and approach.
2. Identify potential benchmarking partners.
3. Determine preliminary data collection methods.
4. Begin data collection.
5. Refine data collection techniques.
6. Solicit participation of partners.
7. Collect information.
Analysing gaps
1. Aggregate data

2. Normalize performance.
3. Compare current performance with data.
4. Identify gaps and root causes.
5. Identify characteristics of best practice.
6. Identify process enablers.
Adapting improvements
1. Adaptability of enablers.
2. Communicate findings to stakeholders.
3. Set goals to close gaps.
4. Adapt enablers.
5. Develop implementation strategy.
6. Implement plan.
7. Monitor and report progress.
8. Recalibrate benchmark.
9. Identify new benchmarking opportunities.

3.3 Research Facilities

A Research Manager whose prime responsibility is to design,
develop and implement information systems, resources and
procedures, should be appointed. They provide an ondemand research service for benchmarking teams and
maintain a benchmarking library. Appointment of a librarian is
also desirable while developing a research facility will
include,

Monitoring financial, technical and business news about

your competitors.

Develop a system to record business measures and

make these measures easily retrievable.

Capture the measures from internal case histories such

as submissions for various quality awards.

Creating the organization and library to continue this

service on a long term basis.

Joining benchmarking club[s] and getting connected to a

benchmarking data-base.
3.4 Networking
This assists in the finding of benchmarking partners.
Collecting business cards and using benchmarking clubs
[see below] are two methods.

American Productivity and Quality Centre,

The Best practice Club IFS

3.5 Code of Conduct
Benchmarking relies on international co-operation,
Professionalism and the revelation of secrets by
organizations. A Code of Conduct to adhere to promotes
efficient, effective and ethical benchmarking. Such
documents are published by several organizations and are
usually based on the following principles,

Conduct must be within legal bounds.

Participation by exchange of information

Respecting confidentiality of information

Using information for its intended purpose only

Initiated contacts with designated individuals

Obtain permission before providing contacts

Being prepared for each benchmarking event

Following through with commitments to partners

Treat information from others as they approve

3.6 Training
Three phase of training are recommended,
Introductory overview for senior executives & staff
awareness sessions.
Main training sessions for benchmarkers, including
introductory workshop.
Continuing education often by internal workshops [nad
external conferences] to update practice and share
experiences.
Continued Man05.03