Benchmarking? Do It While You Are Healthy!
Quick SummaryAn interview with Robert C conducted during his visit to Dubai, United Emirates in November 2005 and www.strategiy.com on Benchmarking and The Benchmarking Center Middle East
For eleven years, he served on the Executive Committee of the Council of Logistics Management and was President in 1993. He has over 30 years' experience in supply chain management. He has been recognized four times by Xerox for his leadership in benchmarking, and he is cited in The International Who's Who in Quality. He holds a Bachelor degree in civil engineering from Cornell University and a Masters degree in business administration from Cornell University - Johnson Graduate School of Management. He earned a Doctorate in logistics and operations research from the Pennsylvania State University. He has written many articles and to date has 3 books on the subject.
Q. Xerox was the first organization to benchmark. And you played a major role in that. What were the challenges you faced?
A. Back then, people had a hard time believing that they could learn from other organizations. Especially people in operations, because they were doing well - and they were recognized for doing well.
And now all of a sudden, somebody comes up to them and says that they are not doing good enough! They are not equal to somebody in an outstanding, world-class company.
And in manufacturing organizations such as Xerox where benchmarking started, there was one statistic that was especially meaningful and that was the ratio of support people to people on the line, the people who actually manufactured things. And it was something like 1.7 support people to 1 person on the line. And after they were through with some initial benchmarking, they found that other hi-tech copying companies had a ratio of 0.7 to 1, fewer support people to people on the line while Xerox had almost double that number. And that's how benchmarking got underway.
Q. What is benchmarking? How essential is it for a company to benchmark itself?
A. Benchmarking is essential. It is comparing yourself to others in a very structured way, others around you may be doing something well or better than you. They maybe recognized as world class and so it is essentially a very careful comparison of you to other world class organizations, with the ability for you to learn how their operations work, and then import and adapt it to your own use.
Q. I understand that there are different types of benchmarking, like processed benchmarking, collaborative benchmarking, and competitive benchmarking. What exactly are these?
A. That is not quite the way I like to describe it. If you'd say benchmarking is comparing yourself to others, then there are four types. One of them is internal benchmarking. Many organizations are very large, they have divisions, many points, many facilities, so they can compare among themselves. Oil companies can compare the drilling practices of 15 offshore oilrigs that they have. Banks like Deutsche Bank can compare itself to its 8 regional banks and Xerox can compare itself with its manufacturing plants.
The second one is competitive benchmarking which focuses on the industry. For example in the case of Xerox you could look at a particular function like warehouses in logistics. There are other companies out there who are storing products in warehouses, and are doing a better job than you, so here you are looking at companies whose processes are functionally best. For Xerox we found that a small catalogue company was doing something better than us. And when we compared ourselves to them, we found out that their productivity rate was 3 times higher than Xerox. They have some practices that we needed to consider.
The last one is a difficult one, and it is called generic benchmarking. Primarily, it refers to support activities like IT, HR, Finance. Here regardless of product or industry, you will find best practices in other companies if you look.
Lastly, processed/process benchmarking is the way you apply benchmarking and not the way you compare.
Q. What are the benefits of benchmarking? Can you give us an example of where successful benchmarking has helped a company achieve its goals?
A. Well, I would point to Xerox. There was a time when David Kearns, the CEO of Xerox thought that his company would go out of business because the competition was so intense. We can't say that the company was saved due to benchmarking but it was certainly a major contributor in its turnaround. In Xerox, benchmarking was deployed starting with manufacturing and then spread across the entire company and its units.
Q. There could be several reasons for a company to consider benchmarking. When, specifically would a benchmarking project be something worth pursuing?
A. Well, the primary thing is to think about benchmarking before you have your back to the wall. And that's a very difficult thing to do because the CEO has to be able to tell the organization, "If we don't do this, we're gonna hurt very badly. So, before we experience that pain, let's go through and understand how we compare to some of the best in the industry."
Q. The concept of benchmarking has not really taken off in the Middle East as compared to the rest of the world. What do you think is the reason?
A. First of all, it's awareness. Do decision makers in the region really know what benchmarking is all about? A lot of people give lip service to the fact that they know what benchmarking is. And I have found that when I go into an audience and I say, "You all know what benchmarking is all about right"? And they say, "Yes". And I say, "Ok. Write it down on a piece of paper for me." And then we'll go through an orientation. At the end of the orientation I say, "Now look at the piece of paper that you wrote on, and tell me if that is what you understand about benchmarking". Nine times out of ten they will say, "Wow, I never knew benchmarking was that".
And the other thing is that the label is wrong. Benchmarking has been around for quite a while, there are over a hundred books that have been written on benchmarking and using the term is correct. There is nothing wrong with it. But, I think we should be focussing more on the outcome of benchmarking. What do we want from it what are the best practices? When you say best practice, do you want your organization to be based on best practice that you find anywhere in the world? Best practice is the outcome of benchmarking. And I stress on the use of the term "best practice" and most of my presentations are labeled, "Best practice benchmarking". And it reinforces the emphasis on best practice.
Q. Some industry professionals say that the best benchmarking an organization can do is against its own records? Would you agree?
A. There's a lot of value in it. As a case in point, Texas Instruments has 13 silicon chip manufacturing plant throughout the world. And they were looking at building a 14th plant, a new one. And the price tag for a chip plant, in today's times runs into billions of dollars. After the TI Vice President benchmarked internally, it literally gave them enough savings that they did not have to build the 14th plant. So, internal benchmarking can be very important. It's also especially important for organizations that then have to go to the outside because they need to have a baseline. And the only credible baseline to make that comparison is you. So, I coach people, baseline yourself by doing internal benchmarking. Then, you're prepared to go. If you don't have a baseline, it's going to be difficult.
Q. Should benchmarking be made part of a TQM programme?
A. It depends on the culture and the history of the company. Benchmarking appears in 6-Sigma programmes, it appears in TQM programmes, it appears in companies that have a very well understood and utilized process improvement programme or project management programme. So, in my view it doesn't matter if it's embodied in something else, what's important to me is that, it is pursued.
In Xerox, it was slightly aligned to the quality management programme. That was all heavily part of the processed improvement activity. I don't think where it would appear is particularly important.
Q. What are the key actions involved in a successful benchmarking programme
A. You have to determine what to benchmark, that's baselining. You then have to put in some effort in research. And the third thing is, gathering information, information search. If it is well done, it can lead to some thoroughly quick benchmarking, it can compress the timeline. If those things are done well, you will have successful benchmarking. But the ability for you to know yourself first is probably the most important. I have people coming to me after they have done benchmarking and they say, "We are not satisfied. We don't think we got the benefits out of it". Normally, the problem here is that organizations do not prepare themselves well. They just did not know their own operations well enough. Organizations have to take interest in benchmarking in order for it to be successful. Be well prepared and you won't waste your time.
Q. What are some of the key industries that could benefit from benchmarking?
A. All industries have done some sort of benchmarking. Manufacturing or service organizations can really profit from benchmarking.
There are plenty of government agencies that have done really superior benchmarking. And not just only in the US, but also around the world like Australia, Singapore etc. Then, there are non-profit organizations like hospitals and other agencies. The coronary artery bypass surgery has been benchmarked, cornea replacement has been benchmarked. And lastly even education has benefited from benchmarking.
Q. Can you tell us something about The Benchmarking Center Middle East? Is there a need for such a center here in the region?
A. I am first of all very glad to say that the center invited me to join their advisory board - which I have gladly accepted. I can therefore talk on The Benchmarking Center Middle East's behalf.
Yes, there is a real need! So far the Middle East has been overlooking benchmarking to a great extend. There hasn't been much activity in terms of benchmarking yet. Multinationals aside, there isn't a particular company or organization that comes to my mind as a strong benchmarking endorser in the region.
We found that it was necessary - if not essential - to create the first benchmarking center in the region. Why do we need it? The region needs a home for all its benchmarking activities. There wasn't one before. The Benchmarking Center Middle East is being built to provide its members with one-stop services, solutions and of course education around the best practice benchmarking method. The center's contacts span all across the world to the industry and other Benchmarking Centers all around the world.
We find it particularly important to note that if companies want to benchmark, and they are looking for best practices or benchmarking partners - or need to jump-started the method, we are probably the most credible and trustworthy place to go to. We will help their projects succeed.
Q. Why has the Middle East never really picked up on the Benchmarking Method in your opinion? Are regional companies lacking global aspirations?
A. The most prominent reason why organizations haven't considered benchmarking yet is that most companies we are referring to are mainly, privately owned and they are serving their local market. But the Middle East is suddenly obtaining a global focus these days with rising oil prices, and for Middle Eastern companies to be taken seriously, and to be seen as companies who can compete in the global arena I think benchmarking will be essential.
Q. Do you see a lot of interest from government organizations interested in The Benchmarking Center Middle East?
A. We launched on the 13th of November 2005 with great success and we have had over 70 paid delegates in our opening seminar on Best Practice Benchmarking, which I addressed. Among them was the Dubai Municipality, who participated with over 20 delegates, which we feel is a great commitment to benchmarking. We are currently in discussions with them on project development, but we also have organizations like Emaar, Nakheel, Dubai Ports and Customs and Free Zone Corporation, sectors of the Kuwait and Oman Government, National Bank of Abu Dhabi, showing interest and wishing to learn a great deal more about what we do.
Q. What are the services that the benchmarking center will offer?
A. The Benchmarking Center Middle East is a membership based soon-to-be nonprofit organisation. We offer interested organisations and individuals a carefully crafted set of value-adding membership options ranging from Free Member, Student Member, Professional Member, Corp|Pro Member, Associate, to Associate|Sponsor.
For organizations planning to start a Benchmarking Project we can provide one-stop support to be successful, by utilizing our Benchmarking Tools, network, and benchmarking expertise.
We are also going to offer a wide array of best practice benchmarking related education and learning events. We are committed to transfer knowledge mainly in the areas of Benchmarking, Best Practices and Business Excellence - we also organise or support high-quality learning events with international experts in other areas.
Besides helping organizations preparing for EFQM, Dubai Quality Award or Sheikh Khalifa Award and organizing benchmarking projects The Benchmarking Center Middle East's main activity is - and probably remains - conducting benchmarking audits, sourcing of Best Practices, and implementation support of best practices through experts we source globally.
Q. What are your future plans for benchmarking in the Middle East?
A. The first step is to get a strong and lively membership base in place. We see it as our responsibility for benchmarking to become really popular in the region to create and facilitate a growing network of participating companies - and simply spread the word.
We will also seek strategic extension of our international network. We want to be linked to and collaborate with all best practice and benchmarking centers in the world.
Within 5 years we would love to see the region being one of the most active benchmarkers in the world.
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