Benchmarking - In Depth
by Torben Rick
The idea behind benchmarking is simple: the most effective way to implement change is by learning from the positive experiences of other organisations. Why re-invent the wheel? Why not look at what others have done that could increase your own productivity and quality? Benchmarking top companies in a similar line of business and with similar work processes can help a company identify the practices behind their success, and then adapt them to its own needs.
Benchmarking has evolved from a clear-cut measurement technique to a strategic management approach. These days, the emphasis is on adaptation and innovation, not on adoption and imitation. It is based more on a holistic development and learning process than on a restricted product and market view. Benchmarking is no longer a short-term and problem-oriented project, but a continuous process. In the past, the so called "benchmarks" - the actual measures of comparative performance, the "top-of-the-class" achievement or best practices - were the most important factors. Nowadays, there is a greater interest in the so-called "enablers", i.e. the actual processes and activities that bring about exceptional performance and allow maximal achievement. And benchmarking is no longer just an occasional project, but an integrated part of long-term business strategies.
Benchmarking is often associated with manufacturing companies, but it can be equally useful in non-manufacturing organizations and for processes other than production, distribution and the like. First Chicago, the largest bank in the US Midwest, is one example of a service organization learning to improve its human resources management. At First Chicago, the management identified ten areas important to the progress of the bank and decided to embark on a benchmarking project. In the initial planning phase the two factors of empowerment and autonomous teamwork were singled out as critical to the success of the bank. A project team was set up to survey the literature on the two topics. This was followed by intensive discussions within the team after which a list of critical benchmarking questions was drawn up, including measures of how empowerment and teams work in practice and what results can be gained. The team soon realized that there was little to be learned from within First Chicago or indeed the rest of the banking industry. So, the search for benchmarking partners was not directed towards banking competitors but towards partners that had the most to offer on these two topics.
The benchmarking targets selected consisted of 14 companies but only one bank. These partners were contacted individually to secure the co-operation essential to any benchmarking study. Data was collected from the partners through visits, meetings and telephone interviews. With the benchmarking questions as a guide, practices and performances were studies and documented. The final analysis was reported to the management in a formal document which included the role of management in matters of empowerment and teamwork. Other subjects raised by the report were the need for training and support, the keys to implementation, the importance of rewards and recognition, and the results and risks associated with various activities. A lot of lessons were learned and a lot of interesting methods were discovered. It is sometimes possible to find a best practice in one benchmarking partner, a practice that can be directly adopted by the organization. However, First Chicago studies were complex, so no single best practice for empowerment and team-building could be identified and implemented in the bank. Rather, First Chicago could draw on the experiences of several of its benchmarking partners to pick various ideas and techniques which could be adapted to the bank's own business objectives and corporate culture.
Good benchmarking typically employs a step-by-step approach with a benchmarking team to head the project. This team is responsible for planning the study, finding benchmarking partners, observing and documenting the partners' processes, identifying performance gaps and their root causes, and choosing the best practices that are then to be adapted and implemented in the organization. If you want to use benchmarking as a strategic approach, don't forget to:
Benchmarking has evolved from a clear-cut measurement technique to a strategic management approach. These days, the emphasis is on adaptation and innovation, not on adoption and imitation. It is based more on a holistic development and learning process than on a restricted product and market view. Benchmarking is no longer a short-term and problem-oriented project, but a continuous process. In the past, the so called "benchmarks" - the actual measures of comparative performance, the "top-of-the-class" achievement or best practices - were the most important factors. Nowadays, there is a greater interest in the so-called "enablers", i.e. the actual processes and activities that bring about exceptional performance and allow maximal achievement. And benchmarking is no longer just an occasional project, but an integrated part of long-term business strategies.
Benchmarking is often associated with manufacturing companies, but it can be equally useful in non-manufacturing organizations and for processes other than production, distribution and the like. First Chicago, the largest bank in the US Midwest, is one example of a service organization learning to improve its human resources management. At First Chicago, the management identified ten areas important to the progress of the bank and decided to embark on a benchmarking project. In the initial planning phase the two factors of empowerment and autonomous teamwork were singled out as critical to the success of the bank. A project team was set up to survey the literature on the two topics. This was followed by intensive discussions within the team after which a list of critical benchmarking questions was drawn up, including measures of how empowerment and teams work in practice and what results can be gained. The team soon realized that there was little to be learned from within First Chicago or indeed the rest of the banking industry. So, the search for benchmarking partners was not directed towards banking competitors but towards partners that had the most to offer on these two topics.
The benchmarking targets selected consisted of 14 companies but only one bank. These partners were contacted individually to secure the co-operation essential to any benchmarking study. Data was collected from the partners through visits, meetings and telephone interviews. With the benchmarking questions as a guide, practices and performances were studies and documented. The final analysis was reported to the management in a formal document which included the role of management in matters of empowerment and teamwork. Other subjects raised by the report were the need for training and support, the keys to implementation, the importance of rewards and recognition, and the results and risks associated with various activities. A lot of lessons were learned and a lot of interesting methods were discovered. It is sometimes possible to find a best practice in one benchmarking partner, a practice that can be directly adopted by the organization. However, First Chicago studies were complex, so no single best practice for empowerment and team-building could be identified and implemented in the bank. Rather, First Chicago could draw on the experiences of several of its benchmarking partners to pick various ideas and techniques which could be adapted to the bank's own business objectives and corporate culture.
Good benchmarking typically employs a step-by-step approach with a benchmarking team to head the project. This team is responsible for planning the study, finding benchmarking partners, observing and documenting the partners' processes, identifying performance gaps and their root causes, and choosing the best practices that are then to be adapted and implemented in the organization. If you want to use benchmarking as a strategic approach, don't forget to:
- establish a benchmarking programme that legitimizes benchmarking in the eyes of senior management and key shareholders, and links it closely to organizational missions and goals.
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support the benchmarking study by selecting powerful sponsors for the study, commissioning competent teams and providing training.
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sustain the process over time by showcasing successes and case histories, updating the status of the benchmarking operation in the organization, and recognizing and rewarding exemplary benchmarking efforts.
If you want to get the best out of Benchmarking, make sure you can say 'Yes' to the following questions:
- Do we know how to put products and processes side by side to match them fairly?
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Have we specified which aspects are to be compared?
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Are we sure that we are making comparisons at equivalent, appropriate levels?
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Do we know how and where to find the critical information we need?
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Can we distinguish what is special and essential in others and apply it to ourselves?
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Have we examined each best practice found to ensure it really applies to us?
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