Benchmarking

Benchmarking is

Measuring your performance against that of the best-in-class companies, determining how the best-in-class achieve those performance levels, and using the information as a basis for your own companys targets, strategies, and implementation.

L.Pryor, Benchmarking: A Self Improvement Strategy, Journal of Business Strategy, Nov.Nov.-Dec. 1989.

BENCH MARKING CONCEPT

What is our performance level How do we do it? What are others performance level?

Creative Adaptations Break Through Performance

Types of Benchmarking

Comparison:
Internal Best in Firm Competitive Best in Industry World Class Best in World

Form:
Performance Benchmarking Process Benchmarking Strategic Benchmarking

Performance Benchmarking

Analysis of relative business performance among competitors Comparison is internal or industry

Pricing, quality, technical features, performance characteristics Usually through 3rd party intermediary

Resource commitment low

Global Purchasing Benchmarking Initiative Construction Industry Institute

Metrics Issue: Do metrics capture the whole story?

Process Benchmarking

Analysis of most effective practices on key work processes Comparison is usually World Class
Distribution, order entry, procurement. NASCAR pit crews

Resource commitment is high

Usually conducted by teams from process area

Metrics Issue: What are important metrics for process? (Intent)

Strategic Benchmarking

Analysis of alternative competitive strategies Comparison is World Class

Southwest Airlines, Dell Computers Usually conducted by benchmarking analyst

Resource commitment is moderate

Metrics Issue: Are metrics comparable?

The Benchmarking Process

Project selection Goal and scope Understanding current process - metrics Selection of partner or clearinghouse Data collection - metrics Assessment and recommendations Planning the change Implementation Recalibration update the metrics

Xeroxs 10- Step Process

1.

2.

3.

4.

Identify what is to be benchmarked Identify comparative organizations Determine datacollection method and collect data Determine current performance levels

Xeroxs 10- Step Process

5. Project future performance levels 6. Communicate benchmark findings and gain acceptance 7. Establish functional goals 8. Develop action plans 9. Implement specific actions and monitor progress 10. Recalibrate benchmarks

Benchmarking Pitfalls

Project not aligned with competitive strategy Outcome cannot be adequately measured Scope of project too large Omission secondary but important measures Failure to establish a baseline