Benchmarking and Best Practices
Best Practice Benchmarking - The Path To Excellence
Read in 14 min. Today benchmarking is an essential ingredient in strategic planning and operational improvement. Long-range strategies if not survival require organizations to continuously change and adapt to the known marketplace of today and the expected market of tomorrow to remain competitive and deliver on today's imperatives of more, better, faster, cheaper...
Robert C C.
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From its humble beginnings as the surveyor's standard reference mark for elevation and sometimes position (latitude and longitude), the notion of a benchmark and benchmarking have become almost obligatory for any organization wanting to improve its products, services, or processes to better serve customers and improve business results. In today's business application, the benchmark is that performance objective which incorporates the best practice, the epitome or standard of excellence; and benchmarking is the activity of learning, exchanging, and adapting best practices to your organization. Benchmarking is finding and implementing best practices.
The Japanese word dantotsu - striving to be the best of the best - captures the essence of benchmarking. Benchmarking is a positive, proactive process to change operations in a structured fashion to achieve superior performance. The purpose of benchmarking is to gain a competitive edge.
HISTORY, WORLDWIDE REACH
In a recent article, The (Toronto) Globe and Mail ("The Ins and Outs of Management Tools," Gordon Pitts) reported that benchmarking was the third most used management tool in 1996, having risen from sixth place in 1993. This confirms the continuing, expanding, and intensifying interest in this improvement approach around the world.
Benchmarking and the search for best practices have had a wave-like movement across the globe. It was picked up and embraced by Europe within years of its significant use in the USA. What has been astounding, however, is the intensity with which it has been pursued in the Asia/Pacific area. Likewise, there has been somewhat of a lag in application in the South and Central Americas and in Canada. But, more importantly, this trend shows that this business improvement approach can, in fact, be successfully applied everywhere. This should serve to motivate organizations, around the globe, to learn from each other and bring benchmarking, worldwide, up to an exemplary level of expertise and application.
There is now a continuing interest and high demand for case studies of successful benchmarking investigations. This demand is second only to the preliminary interest that organizations have in finding performance data. Once the organization understands what the benchmark data reveal about where they stand and the magnitude of the gap, there is intense follow-on interest in what best practices will close the gap. That information and insight is usually revealed in case studies as shown in Figure 1. There are 35 case studies among my three books. They are a rich source of quick learning.
CURRENT DRIVING INITIATIVES
Today benchmarking is an essential ingredient in strategic planning and operational improvement. Long-range strategies if not survival require organizations to continuously change and adapt to the known marketplace of today and the expected market of tomorrow to remain competitive and deliver on today's imperatives of more, better, faster, cheaper (Figure 2). To energize and motivate its people, an organization must:
● believe there is a need for change,
● determine what you want to change, and
● create a picture of how you want to look after the change.
Benchmarking achieves all three. By identifying gaps between your organization and the competition, it creates a need. By helping you understand how industry leaders do things, it helps you identify what you have to change. And by showing you what is possible and what other companies have done, it motivates individuals toward achievable goals and strategies which drive their efforts.
Management uses it to continuously improve how the organization operates, to increase productivity, to deliver outputs that satisfy customers and grow the business. This increased demand has come, in part, from success stories on how organizations have turned themselves around in times of competitive crisis and interest and awareness created by the many quality awards, but, increasingly, by the fundamental need to pursue business excellence in everything they do.
STRATEGIC NEED FOR BEST PRACTICE BENCHMARKING
There are many reasons why senior managers should actively consider benchmarking when searching for best practices to improve business performance. There are several basic obstacles organizations face. First, no one is best at everything they do. Second, there is a need to constantly search for good, promising, practical, and better, if not best, practices. Lastly, once found, the best practice knowledge needs to be captured, transferred, and adopted throughout the organization. These basics are why benchmarking exists to overcome these obstacles in a disciplined way.
However, there are other reasons why benchmarking is increasingly being pursued as the preferred method to improve performance. Among them are bringing rigor to the approach in setting goals, overcoming disbelief, assigning accountability, and speeding culture change. It is the careful pursuit of best practices, and understanding these key reasons why benchmarking improves business performance, that may be the only way to create a sustainable competitive advantage.
BEST PRACTICE EVOLUTION
If one looks over the last 15 years at the evolution of the art and science of best practice benchmarking, there appear to be distinct phases of increasing interest (Figure 3). These include the search for performance benchmarks, the interest in process proficiency, the understanding and mastery of best practices, and the development of best practice models. What lies beyond or can be extrapolated into the future is the 64-thousand-dollar question. But there are some emerging indicators.
Invariably, organizations want to start with data. Most requests therefore start with a need for performance benchmarks-data that will allow the organization to measure the gap between their performance and others, (Figure4.) The data may show a significant difference to those, say, in the top quartile and promote interest and action to understand why.
But the shortcomings of measures are well known. They tend to be financially dominated and historically based. They provide little in the way of prediction. They almost never tackle growth creation, innovation, and learning - key initiatives in today's information and intelligence-based economy and the source of new products, services, and markets.
Best practice performance measures should include customer, employee, asset (including intellectual capital), and financial results metrics in a balanced scorecard format. Measures would vertically align to business priorities and cascade to all levels of the organization - as well as horizontally link to processes. Designing performance measures is an organization imperative because it does drive the right behavior. And the desired behavior achieves business results.
When setting stretch goals, the organization needs to know the possibilities. What is the benchmark performance being achieved by others? Benchmarking helps establish attainable but stretch goals through a rigorous methodology to understand the performance of others. The establishment of stretch goals based on performance of exemplar organizations can energize an organization to achieve breakthrough results and accelerate change. "If they can, why can't we"? is the attitude.
The second phase gives recognition to the fact that results (performance measures) are the quantification of the outputs of specifically identified processes. The organization then develops interest in inventorying its processes, documenting them, and assigns ownership for improvement - becoming process proficient as shown in Figure 5.
Organizations need to know where they stand versus internal performance, industry performance, best in class and, ultimately, world class. Invariably, this drives them to self-assessment. Out of that comes the realization that certain key, core (and most often cross-functional) processes are either performing poorly or are, literally, unhealthy.
The deployment of responsibility and accountability for change is achieved by assigning owners to processes. Having a structure of named processes then ensures comprehensiveness in achieving performance improvement and productivity by assigning accountability and, thereby, providing a plan for covering all work processes. This is markedly more effective than the random search for productivity through reactively chasing problems. The redesign of those known, named, assigned processes can then be based on the best practices of others.
Best Practice Mastery
Data - benchmarks - will excite action, but only the understanding of best practices sustains action. Measurements do drive change, but measures are often overemphasized and processes overlooked!
Therefore the third, and most beneficial phase in terms of performance improvement, whether improved customer satisfaction, shortened cycle times for new product introductions, increased market share, or financial results, is the understanding of best practices, (Figure 6.) It is only through the incorporation of best practices in identified processes that business results are achieved. Best practice mastery is the understanding, sharing, and adoption when best practices are incorporated into and processes are changed to attain world-class performance.
Benchmarking also helps overcome disbelief. Actually seeing the comparable operation, perhaps in another industry, will prove that others do the same or similar function better. There is no more powerful motivator than to see the same process being operated differently, and more effectively, most likely outside one's own industry. This is an effective way to achieve change, since the organization speeds up change by avoiding reinventing existing practices and redesigning existing processes found elsewhere.
It is interesting that after 15 years of one of the most outstanding productivity movements, Singapore chose "Innovation and Quality" as their goal for further improvement in the new millenium, 2000 and beyond. It is even more astounding that the explanation for this banner was, "By mastering the best practices in the world, Singapore will continue to prosper; and Singaporeans will enjoy an even better quality of life."
Best practice understanding is, essentially, a learning experience. It helps an organization to focus and drive for consensus on what needs to be done and how to achieve it, not argue over what should be done. It can provide the stimulus for improvement by people at all levels through an externally focused, competitive assessment to achieve world-class performance with increased customer satisfaction. Very few people are willing to settle for second place, once they are aware of what needs to be done and know how to do it through a careful understanding of better practices.
Best Practice Models
Once an understanding of best practices has matured, models of the "best of the best" can be constructed to guide the organization into the future. These process reference models (Figure 7) provide a standard set of descriptions, characterizations, and basis for evaluation of complex functional processes. They allow for consistent communication among benchmarking partners when reconfiguring business entities to align with new markets and strategic imperatives. They are an invaluable tool for understanding and evaluating performance and to map potential software application products. With a standard process framework - metrics, definitions, and best practices - the models are key to understanding and managing the challenges facing complex businesses.
Lastly, benchmarking is a major contributor to achieving a culture change by sensitizing ingrown organizations to look outside. Where organizations have become insulated from the pace of change in other industries, benchmarking is a powerful approach to overcoming skepticism of their ability to achieve radical change. Seeing the better practices in actual operation elsewhere is the most convincing approach to silencing the disbelievers.
The bottom-line benefit of benchmarking is improved competitiveness and increased value in the eyes of customers. Effective use of benchmarking can develop and implement improvement actions that can help organizations achieve superior levels of customer service. This, in turn, will lead to increased market share, growth, and improved financial results.
There is no doubt that the same significant trends being pursued in other segments of the world will be embraced everywhere. Best practice benchmarking will be seen as a strategic need for organizations. It is a competitive strength when practiced, and can be a fatal weakness when overlooked. Best practice benchmarking is pursued to find and emulate best practices wherever they exist, worldwide, to close the gap, and attain superiority. Benchmarking and best practice mastery are synonymous.
Managing benchmarking and best practice sharing programs in an organization of any size will be an imperative. And there will be an opportunity to leverage the digital, network-connected, electronic environment to conduct best practice exchanges and share best practice knowledge. The intranet and website will be the most obvious and, eventually, ubiquitous mechanism to deliver this need. The corporate web-site (Figure 8) will become the central resource for delivering:
a) organization models to show the connection to best practices,
b) bulletin boards to provide a message inquiry posting service,
c) a reference library for professional assistance with literature searches,
d) best practice repositories to capture and archive best practices for sharing throughout the organization,
e) benchmarking guides and tutorials to make the benchmarking process available just-in-time, in bite-size pieces, for learning and application when needed,
f) chat rooms where current and emerging interests can be discussed, analyzed, and solutions found,
g) recent contact listings for best practice exchange - as opposed to visits, which imply travel and are probably not necessary or minimized in the electronic world,
h) a directory of other recommended websites deemed productive for assistance in any aspect of best practice capture, sharing, and adoption, and
i) a directory to the internal network of individuals responsible for benchmarking competency in their respective organizations.
Software-based benchmarking solution suites - from a process tutorial, to an electronic reference guide, to the wide array of software, collaborative groupware and digital job performance aids - will become accepted practice for conducting benchmarking electronically. And with the flattening of organizations resulting in lean resources, some best practice initiatives will be outsourced to third parties on a collaborative basis. These would include professional associations, consortia, benchmarking centers, and consultants with the requisite competencies.
Some of the potential capability of the electronic world can be documented (Figure 9); but the full potential will only be revealed, over time, in the approaches developed by creative and innovative individuals involved in advancing the art and science of best practice benchmarking.
This will include a wide range of communication technologies for seamless sharing, in real time, anywhere in the world collapsing time and distance and satisfying the increasing demand for shorter cycle times. Such things as electronic meetings and surveys, videoconferencing, virtual light-boarding, and document management will facilitate the preparation of and allow for best practice exchange without the necessity of expensive and time consuming travel. Intranets will foster people sharing and collaboration within an organization. And extranets - secure, dedicated networks outside an organization among partners - will allow disparate and distance-separated organizations to act as one in completing benchmarking investigations.
Collaborative groupware, the simplest being email and more likely Lotus Notes/Domino, and job performance aids such as process diagramming, lightning speed search engines, electronic surveys, and simulations, when coupled with knowledge-base repositories, will make best practice data and information accessible, searchable, and performance data and best practice information analyses possible from these archives.
Focus for the future is not only on becoming the most efficient operation, but also seeing how best practice knowledge can be embedded in products, services, and processes that serve customers to drive growth. Today the competition is between processes - processes that serve customers. The incorporation of best practice knowledge will be the fundamental way organizations achieve excellence. In a future state this will only be heightened through best practice sharing, innovation, and leveraging intellectual assets through organizational learning conducted electronically.
, Robert C. Benchmarking: The Search For Industry Best Practices That Lead to Superior Performance. Milwaukee, Wisconsin: ASQ Quality Press, 1989.
, Robert C. Business Process Benchmarking: Finding and Implementing Best Practices. Milwaukee, Wisconsin: ASQ Quality Press, 1995.
, Robert C. Global Cases in Benchmarking: Best Practices from Organizations Around the World. Milwaukee, Wisconsin: ASQ Quality Press, 1998.
, Robert C. "Beg, Borrow And Benchmark"- Business Week,
November 30, 1992, pp. 73&74.
, Robert C. and Colbert, Dan N. "The Xerox Quest For Supply Chain Excellence," Supply Chain Management Review, Spring 1997, pp. 82&91.
Ebersole, Phil. "Setting a mark to aim for", Democrat & Chronicle, March 12, 1996, pp. 4B and 8B.
Gutner, Toddi. "Better Your Business: Benchmark It," Business Week,
April 27, 1998, pp. ENT5&6.
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Benchmarking and Best PracticesAn interview with Robert C Camp conducted during his visit to Dubai, United Emirates in November 2005 and www.strategiy.com on Benchmarking and The Benchmarking Center Middle East
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