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 Page 1 of 119

Ch
hapter 6:
6 The Voice
V off the M
Market

Chap
pter Outlin
ne

 Gaining Insight throuugh Benchmaarking

 Purposes of Benchmaarking
 Difficultiees in Monito
oring and Meeasuring Perrformance
 Commonlly Benchmarrked Perform mance Measuures
 Business Process Ben nchmarking
 Leading and
a Managin ng the Bench
hmarking Efffort
 Base Liniing and Re-eengineering
 Problems with Bench hmarking

Overrview

Chappter 5 focused on the voicce of the cusstomer. Chappter 6 focusees on the voiice of the
markket. The markket, or the marketplace,
m includes
i nott only the cuustomer, but also includees
the co
ompetitors, the
t customerrs of compettitors, potenttial competittors, and pottential
custo
omers.

A maajor topic of this chapter is benchmarrking. A bennchmark is aan organizatiion

recog
gnized for itss exemplary operational performanc e.

Figurre 6-1 presen ng forces thaat affect the sstrategic quaality plan. Benchmarkingg
nts the drivin
proviides a way to
o evaluate th
he success off the processs.

The goal
g of bench hmarking is to become best-in-class
b s. Benchmarkking is moree effective foor
firmss that have beeen pursuing g quality and
d process im
mprovement oover time. This is
certaiinly not a staarting point for
f quality im
mprovementt efforts.

Remeember that thhe use of datta and measuures can resuult in undesiired outcomees as
indiv
viduals attem
mpt to exploitt the measurrement systemm to reflect well on them
m. Baseliness

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and other
o measurres should bee implementted carefullyy with attentiion to the poossibility of
uninttended outco
omes.

The chapter
c outliines a numbeer of benchm
marking typees:

Disccussion Qu
uestions

1. Deescribe the concept

c of benchmarki
b ng. Providee an examplle of how a rrestaurant
that you
y are fam miliar with could
c use beenchmarkin ng to improvve its perforrmance.

Benchmarking is the process of finding a company thhat is very goood at a partticular

activiity, studying
g what it doees, and gatheering ideas foor improvingg your own ooperation in
this area.
a

The second
s part of
o this questiion providess your studennts the opporrtunity to appply a
perso onal experiennce to a textb
book concep pt. For examp
mple, a restauurant that I amm familiar
with has great foo od and a greeat atmospheere, but does a clumsy joob of seating people wheen
it is particularly
p busy.
b This pllace should find
f anotherr restaurant tthat does an excellent jobb
of seaating people when it is busy,
b study how
h they do it, and imprrove its own operations.

The text
t describees benchmark king types in
n table 6-1. P
Proper benchhmarking alllows the firm
m
to evaaluate the en
ntire corporaate process.

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2. What is a ben
nchmark firm m? Why is iti good pracctice for a b
benchmark firm to open
n
oors and allow others to view its op
its do perations an
nd tour its ffacilities?

On paage 131, the text tells uss:

… Deeming’s thou ught, “The worst
w thing for
fo a businesss is a weak ccompetitor.”
” Therefore,
streng
gthening thee competition n forces everryone to impprove in ordeer to maintain a
comppetitive edge.. As such, oppenness provvides an imppetus to continual improovement.

A bennchmark firm m is a firm thhat is recogn nized for thee effectiveness of some aaspects of itss
proceess. The textt identifies Toyota
T for prrocesses, Inteel for designn, Motorola ffor training,
Scanddinavian Airrlines for serrvice, and Ho onda for rappid product ddevelopmentt.

The text
t identifiees two reason ns for benchm mark firms tto open theirr doors. As tthe Deming
quotee above indiccates, openn
ness is a driviing force behhind ongoinng improvem ment. A
secon
nd reason is expressed on n page 131:

A maanager of a high-technolo
h ogy firm marketing a neew product oonce said, “WWe do not
mindd if the otherss come to seee how we prroduce our pproduct. Oncce they see w
what we can
do, th
hey will not want
w to comp pete againstt us.”

3. What are the pros and coons of becom

ming a bencchmark firmm? If you weere the
manaager of a hig
ghly successsful compan
ny, would yoou want oth
her companies
benchmarking against
a yourr firm? Whyy or why noot?

The text makes the point thaat being a beenchmark firrm encouragges continuinng
impro
ovement. Fig
gure 6-2 illu
ustrates this point:
p

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 Page 4 of 119

As a company ad dvances throu

ugh the steps of the bencchmark purppose continuuum, the leveel
of qu
uality improv
ves immenseely.

Howeever on pagee 139, the tex

xt also makees the point tthat:

To co
oncentrate to oo much on comparative
c e measures mmight focus mmanagers onn results andd
not caauses. This could
c result in the unforrtunate devellopment of nnumerical gooals that
ignorre the necesssity of improving the systtem of produuction.

4. In the contextt of benchm

marking, describe the diistinction beetween an in
nitiator firm
m
and a target firm
m.

On paage 132, the text definess the differen

nce clearly:

Theree are two paarties to each h benchmarkking relationnship: an inittiator firm aand a
targeet firm. The initiator
i firm
m is the firm that initiatess contact annd studies annother firm.
The target
t firm iss the firm tha
at is being sttudied (also called a bennchmarking ppartner).

5. Deescribe how benchmark king can be used by a fi

firm to exterrnally validate the valu
ue
of itss present bu
usiness practtices.

Benchmarking alllows the firm

m to comparre its processses against oother, successsful firms.
The various
v bencchmarking ty
ypes allow a firm to idenntify the areaa where theree are
weak
knesses and to
t concentratte on resolviing them.

Tablee 6-1 lists thee benchmark

king types an
nd the areas of business that they adddress.

6. Deescribe the concept

c of process
p bencchmarking. How does p
process ben
nchmarking
imprrove a comp pany’s overaall business performancce?

A proocess benchmmark allows the initiatorr firm to valiidate and impprove its corre business
proceesses. These processes might
m includee process floows, operatinng systems, aand process
techn
nologies. Theese processees are then vaalidated agaiinst the targeet firm.

7. Is the growing
g popularityy of the Inteernet a posittive develop
pment or a n
negative
devellopment forr the future of benchma arking? Pleease explain your answeer.

The Internet
I has vastly
v empowered comm munication. R Research thaat used to invvolve
creatiing companyy libraries orr spending days
d in publicc or school llibraries can now be

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 Page 5 of 119

perfo
ormed in a feew hours at a desktop com mputer. Mosst companies place an innordinate
amou unt of informmation on theeir corporatee websites. T
This informattion usually includes all
of thee financial in
nformation th
hat the corpo orate financiial statementts include. Inn addition,
search engines su uch as Googlle can allow a manager tto review alll of the curreent publishedd
informmation.

8. Co
ompare and d contrast prrocess bench
hmarking, p
product ben
nchmarkingg, and
strategic benchm
marking.

Process benchm marking com mpares processs between tthe initiator aand target firrms. These
proceesses might include
i proccess flows, op
perating sysstems, and prrocess technnologies.

Prod
duct benchm marking look ks at the product itself, nnot the proceess. This form
m of
bench
hmarking alllows the inittiating firm tot analyze thhe strengths aand weaknesses of the
produ
uct against thhe opposing product. Reeverse engineeering is a toool that is offten used to
dismaantle the targ
get firm’s prroduct and annalyze the ddetail differennces.

The focus
f of this type of bencchmarking is to identify the mix of sstrategies thaat makes
these firms succeessful compeetitors. Such benchmarkiing can be veery time-connsuming andd
costly
y.

Strattegic benchm marking cutts across bouundaries andd looks at thee entire firmm’s processess.
Strateegic benchmmarking can be
b non-indusstry specific . This allows the initiatoor to look at
the in
nter-relationsship between
n the variouss systems. Frrequently, thhe target firm
m has won
majorr awards succh as the Balldrige Awardd or the Demming Prize.

9. When benchm marking, whhat is the prrimary hazaard in comparing measures across
comppanies to ga
auge perform
mance differrences?

Diffeerent firms will

w have diffferent metho ods of doing business, annd different ggoals and
strateegies. This caan make the comparisonns invalid. Iff done incorrrectly, benchhmarking cann
be illegal. Insure that you aree conducting the benchmmark ethicallyy. Benchmarrking can bee
very expensive ass well.

10. How
H does a firm’s
f key business
b factors help diirect its ben
nchmarking program?

Diffeerent firms in
n different in
ndustries usee many differrent factors to evaluate ttheir
perfo
ormance. Tab ble 6-2 preseents some off these factorrs.

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 Page 6 of 19

The factors that are chosen for benchmarking must relate closely to the business’ identity.
The chapter emphasizes that care must be taken to identify the factors that are identifiable
to your business. The example is made on page 137 that “In a given firm, customer
satisfaction might be significantly related to market share. If this is the case, then a
company would be very interested in keeping score of its customer satisfaction.”

11. Provide several examples of the types of measures that are often gathered in
benchmarking studies. How does a firm determine which measures should be
included in its benchmarking program?

Table 6-2, shown above in question 10, shows the categories of measures that are often
gathered in benchmarking studies. Examples include financial ratios, productivity ratios,
customer-related results, operating results, human resource measures, quality measures,
and market share. The choice of measures for a firm depends upon the key business
factors of the particular firm.

12. Imagine yourself in the role of the CEO of a medium-sized auto parts company.
Briefly describe how you would set up a benchmarking program. Include in your
description an analysis of how you would determine “what” to benchmark and how
you would determine “whom” to benchmark against.

The chapter describes a procedure for benchmarking that Robert Camp established for
Xerox. The procedure is presented in ten steps, comprising five phases. Steps one and
two answer this question:

Step 1: Decide what to benchmark. There are innumerable areas for improvement
in every company. Obviously, not all of these can be tackled at once. Too many
simultaneous changes can result in a confused organization and actually can hurt
performance. Therefore, one must prioritize those processes that offer the greatest
potential for improvement. To do this, you must have identified your key processes and
charted those processes for future analysis.

Step 2: Identify whom to benchmark. This involves identifying those competitors in

your industry and those firms outside your industry that have outstanding results and
processes for study. Those companies that have developed best practices are prime
candidates for benchmarking.

13. Consider the following: “Despite its many advantages, benchmarking is not an
appropriate technique for all firms. Some firms are so unique that it is impossible
for them to find benchmark firms that experience the same challenges they do. As a
result, it is impractical for these firms to participate in benchmarking.” Do you
agree or disagree? Please explain your answer.

One of the greatest impediments to seeking a benchmarking relationship is the belief that
an initiating company or firm is so unique that it cannot learn from other firms because
they are different. However, employees entrenched in a process may have trouble

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 Page 7 of 19

envisioning another way to perform work. Therefore, process improvement may be based
on the same old ingrained philosophy of production for the particular firm. This can
easily lead to statements like “We’ve always done it that way.” Therefore, firms should
seek out to benchmark any company to see how its process is performed and take from
that analysis what will work in their own company.

14. Many scholars believe that business process benchmarking is the most
important type of benchmarking. Do you agree with this particular belief? Why or
why not?

Most students will agree with this statement. The example that is provided in the chapter
to support this position is as follows. Suppose that you do a comparison of your customer
service with that of the competitor. You find out that your competitor is using a standard
survey instrument to gauge customer satisfaction. You then administer the survey
yourself to your customers and find out that on a five-point scale, your company rates a
4.3 and your chief competitor rates a 4.7. Now what do you do with this information?
The fact that your score differs from your competitor tells you nothing about how the
competitor is achieving these higher scores. To understand how your competitor has
achieved these scores, business process benchmarking is necessary.

15. Describe the concept of 5w2h.

The 5w2h concept is taken from work done by Alan Robinson (see page 139). The
concept states that a business benchmark must answer seven questions, five of which start
with the letter “w”:
 Who
 What
 When
 Where
 Why

And two start with the letter “h”:

 How
 How Much

The advantage of the 5w2h method is that it provides a structure to the process, giving
the manager a solid point at which to start.

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 Page 8 of 19

16. What management activities can be undertaken to support a firm’s

benchmarking activities? Please make your answer as substantive as possible.

The chapter lists the following steps:

 Establishing, supporting, and sustaining the benchmarking program
 Developing a strategy statement that outlines the goals and strategies to be used to
complete the benchmarking process
 Setting expectations for performance relating to the benchmarking process
 Providing management awareness training
 Establishing a benchmarking competency center
 Developing guidelines for information sharing
 Overseeing the development of a visit protocol

17. What are some of the pluses and minuses of the benchmarking code of conduct?
Would you add any other points to the code? If so, what?

There are many pluses to the benchmarking code of conduct. The primary advantage is
that using a carefully crafted benchmarking code of conduct should help a firm maintain
smooth benchmarking practices and avoid legal problems.

However, when a firm gets involved in benchmarking, it makes a commitment to provide

the same information that it has requested. If the code is not followed, the firm can be
liable for a lawsuit.

18. Although benchmarking is a popular management technique, many firms are

not engaged in the benchmarking process. Why do you think that some firms avoid
benchmarking? Are any of the reasons valid? Why or why not?

 Benchmarking is expensive both in employee time and potential travel costs.

 Benchmarking is time consuming.
 Benchmarking may expose weaknesses in management procedures or style.
 Benchmarking exposes the firm to potential liability.

On the other hand,

 Benchmarking is an investment in continuing quality improvement.
 Benchmarking exposes your firm to concepts and ideas generated by companies
that have been designated best-of-the-best.
 Benchmarking provides a structured manner for growth.

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 Page 9 of 19

Case 6.1: Amgen Corporation: Using Benchmarking as a Means of

Coping with Rapid Growth

Discussion Questions

1. Why was benchmarking so important for Amgen at the point in the company's
history when benchmarking was initiated? Do you believe that benchmarking will
contribute to Amgen's long-term success?

Although Amgen was excelling in the development of pharmaceutical products, the

company needed help in some basic areas of management. Although the case does not
specifically say this, it gives the impression that Amgen "headed off" some potentially
serious management problems by admitting its weaknesses and shoring up those
weaknesses through benchmarking. If those weaknesses would have been allowed to
linger, it might have affected the company's ability to remain cutting-edge in the
development of pharmaceutical products.

2. Was it a good idea for Amgen to solicit the help of the American Productivity and
Quality Center? Do you think that Amgen would have been successful without the
APQC's involvement?

Most students will argue that it was a good idea for Amgen to solicit the help of the
American Productivity and Quality Center (APQC). The center provided Amgen
benchmarking training and helped the firm locate businesses to benchmark against.

It is pure speculation to guess whether Amgen would have been successful without
APQC's help. It would have been much harder for Amgen without APQC, particularly in
the area of selecting appropriate firms to benchmark against.

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 Page 10 of 19

Case 6.2: AT&T Teleholdings: Making Benchmarking A Part of the

Process Improvement Toolkit

Discussion Questions

1. Is AT&T Teleholding's Benchmarking Code of Conduct a good idea? What types

of ethical abuses could potentially occur in benchmarking if a firm did not follow a
strict code of conduct?

Most students will argue that AT&T Teleholding's Benchmarking Code of Conduct is a
good idea. As mentioned in the case, the code provides a measure of continuity across the
company's benchmarking efforts that are very helpful in developing a consistent set of
benchmarking behavior. The code also helps the company stay legal (and ethical) in its
benchmarking efforts.

A number of ethical abuses could potentially occur if a firm did not follow a strict
benchmarking code of conduct. For example, a firm could obtain confidential
information from a benchmarking partner, and then release that information to a third
party (without the benchmark partner's permission). That could ruin a good
benchmarking relationship. The possibility of this happening could be greatly reduced if
it were strictly prohibited in a written benchmarking code of conduct.

2. This case describes benchmarking as an important part of the company's "tools"

of quality. What other tools of quality does benchmarking complement?

AT&T Teleholding is clearly a learning organization. Benchmarking facilitates learning

by providing the employees of a firm the opportunity to be updated on leading
management practices. In addition, it is quite evident that the company is very quality-
minded. Benchmarking helps a firm remain quality-conscious by focusing it on constant
improvement.

3. Telecommunications is a fast-paced, rapidly changing industry. Do you believe

that benchmarking is particularly important in a fast-paced industry? Why or why
not?

Most students will argue that benchmarking is particularly important in fast-paced

industries. Firms in fast-paced industries simply don't have the time to learn through trial
and error in every area of their operations. As a result, benchmarking is a tool that firms
can use to achieve substantial process improvement quickly, by emulating the successful
practices of others.

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 Page 11 of 19

Suggested Answers to End of Chapter Problems

1. A company has gathered the following financial information for itself and
a competing firm. They wish to compare productivity for the two firms (all
numbers in 000s).
Firm A Firm B
Labor $ 30,000 $ 16,000
Plant & equipment 200,000 150,000
Energy 17,500 20,500
Materials 200,000 180,000
Sales 1,200,000 900,000

a. Compute partial and total factor productivity measures for Firms A and B.

Firm A Firm B
Labor 1,200,000/30,000 = 40 900,000/16000 = 56.25
Plant & equipment 1,200,000/200,000 = 6 900,000/150,000 = 6
Energy 1,200,000/17,500 = 68.57 900,000/20,500 = 43.90
Materials 1,200,000/200,000 = 6 900,000/180,000 = 5

Sales First, total Labor Plant & Equipment, Energy, and Materials
Thus 1,200,000/447500 = 2.68 900,000/366,500 = 2.46

b. What is the picture you get of the two firms?

If you focus on partial quality productivity measures, Firm B has better labor
productivity. The two firms have equal plant and equipment productivity. Firm A
uses energy and materials more productively. Firm A has better overall productivity
(using the Total Factor measure).

c. What would you suggest to the management of Firm B?

Be careful in your productivity enhancement efforts to ensure that improvements in

using energy and materials don’t result in worsening productivity in labor
productivity.

2. For the firms in problem 1, you have been asked to make a report to the
management of Firm A. What are some of the caveats relating to accounting
practices that you would include in the report? Which numbers should be
interpreted cautiously?

It is important to note that firms book different categories of costs differently. You
should make sure that, for example, Firms A and B account for material costs in a
consistent manner since that is a major component of costs of goods sold. If
management focuses more on overall productivity ratios, the comparisons are more
robust.

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 Page 12 of 19

3. For the data in problem 1, suppose that Firm B is a foreign firm. What
additional caveats would you place on interpretation of the data?

In this case, differences in exchange rates and generally accepted accounting

practices must be considered in any conclusions made from this data. Also, there
may be other costs of doing business that are not included in these tables.

4. A domestic company operating a subsidiary in an LDC (less-developed

country) has shown the following financial results:

Parent Subsidiary
(Domestic) (LDC)
Sales (units) 200,000 80,000
Labor (hours) 40,000 60,000
Materials (currency) 40,000 FC40,000
Equipment (hours) 120,000 10,000

a. Calculate partial labor and capital productivity numbers for the parent
and subsidiary. Interpret the results.

Parent Company Subsidiary

Partial Labor 200,000/40,000 = 5 80,000/60,000 = 1.33
(or 5.00 units per hour versus 1.33)

Capital Productivity 200,000/120,000 = 1.67 80,000/10,000 = 8

(or 1.6 units per unit of capital versus 8.0)

Analysis indicates a significant difference between the partial labor productivity of

the parent and subsidiary. This indicates that the parent company does a lot better in
its utilization of labor. However, the difference reverses with regard to capital
productivity.

b. Compute total labor productivity figures. Does your interpretation change?

Total Labor Productivity

Parent + Subsidiary (200,000 + 80,000)/(40,000 + 60,000) = 2.8
(or 2.8 units per hour)

If practices utilized by the parent company relative to labor productivity were

implemented into the subsidiary, overall total productivity would be improved.
Similarly, the parent company should adopt practice of the subsidiary relative to
capital utilization.

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 Page 13 of 19

c. If $1 = 10 FC units, calculate materials productivity figures. Explain your

finding.

Materials Productivity
Parent = 200,000/40,000 = 5 Subsidiary = (80)/4) = 20
(or 5 units per dollar versus 20 units per dollar)

The subsidiary far exceeds the parent company in utilization of materials.

5. Below are industry comparisons of the percent of sales spent on salaries

for marketing employees, manufacturing engineering employees, and supply
chain employees for several different industries. Rank these industries by the
amount spent in each of the areas and report your findings to management.
What can you infer from your findings about each of the industries?

Manufacturing Supply
Marketing Engineering Chain Sum
Aerospace 4.8 12.5 10 27.3
Automotive 8.5 5 6 19.5
Communications 11.6 11.8 20 43.4
Components 3 2.4 5.5 10.9
Computer 5 8 12.5 25.5
Electromechanical 6.3 6 10 22.3
Electronic
Subsystems 4.2 4.5 8 16.7
Heavy Mechanical 6 9 9 24
Instrumentation 7.5 4.8 6.1 18.4
Light Assembly 2.8 2.5 3.3 8.6
Medical 3.8 4 13.4 21.2
Cross-Industry 4.9 6 8.2 19.1

Marketing
This data is sorted
Light Assembly 2.8 by marketing.
Components 3
Medical 3.8
Electronic
Subsystems 4.2
Aerospace 4.8
Cross-Industry 4.9
Computer 5
Heavy Mechanical 6
Electromechanical 6.3
Instrumentation 7.5
Automotive 8.5
Communications 11.6

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Manufacturing Engineering

This data is sorted

by manufacturing
engineering
Components 2.4
Light Assembly 2.5
Medical 4
Electronic
Subsystems 4.5
Instrumentation 4.8
Automotive 5
Electromechanical 6
Cross-Industry 6
Computer 8
Heavy Mechanical 9
Communications 11.8
Aerospace 12.5

Supply Chain
This data is sorted
by supply chain
Light Assembly 3.3 expenditures.
Components 5.5
Automotive 6
Instrumentation 6.1
Electronic
Subsystems 8
Cross-Industry 8.2
Heavy Mechanical 9
Aerospace 10
Electromechanical 10
Computer 12.5
Medical 13.4
Communications 20

The below data is

sorted by the sum
of the percentages.
Manufacturing Supply
Marketing Engineering Chain Sum
Light Assembly 2.8 2.5 3.3 8.6
Components 3 2.4 5.5 10.9
Electronic 4.2 4.5 8 16.7

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Subsystems
Instrumentation 7.5 4.8 6.1 18.4
Cross-Industry 4.9 6 8.2 19.1
Automotive 8.5 5 6 19.5
Medical 3.8 4 13.4 21.2
Electromechanical 6.3 6 10 22.3
Heavy Mechanical 6 9 9 24
Computer 5 8 12.5 25.5
Aerospace 4.8 12.5 10 27.3
Communications 11.6 11.8 20 43.4

The above data shows rankings for each of the different companies and areas we are
evaluating. For this analysis, we consider a lower percentage of sales spent in a
particular area to be better. This is debatable, as it does not consider effectiveness of
the money spent. This is a limitation of this type of analysis. The final table gives
the relative total rankings. It appears that Light Assembly is the least labor intensive
as a percent of sales. Alternatively, Communications is the most labor intensive,
overall.

6. Using the data from Problem 5, suppose you are a computer company
who spends 9% on marketing staff, 6% on manufacturing engineering, and
8% on supply chain staff. Comparing your expenditures with the above
averages, what would you recommend to management? What more
information would you want?

It appears that you spend more on marketing as a percent of sales. You spend less
than the industry average on manufacturing engineering as a percent of sales and
much less on supply chain activities as a percent of sales. It appears that when you
sum these percentages, you are below the industry average in total expenditures on
salaries as a percent of sales. It is possible that the greatest savings can be had in
marketing. However, given your overall picture, you should use caution in
proceeding, as the expenditures in marketing may be creating supply chain savings.
Additional helpful information would be to understand the effectiveness of
expenditures and how the costs are booked for the different industries and firms.

7. Following is an announcement from a study for the Benchmarking

Network, Inc.

The Benchmarking Network and the Shared Service Benchmarking

Association announced they will be kicking off the fifth Annual Shared
Services Measures Benchmarking study. Now is the time to join and become
involved in setting the focus and direction of the study by attending the kickoff
meeting. The study will review Shared Services Measures including research
into:
Accounting
Finance and Treasury

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 Page 16 of 119

Human n Resourcess
mation Technology
Inform
Procurrement and Supply Cha ain
Legal
Regula atory
Auditinng
Corporrate commu unications/EExternal Afffairs
Facilitiies, Real Estate, Securiity
Enviroonment
Fleet, and
a
Other Shared Serv vice Measurres

Put yourself
y in the
t place of the Benchm
marking Nettwork reseaarchers. How w
woulld you desig
gn this study
y? What wo
ould you havve to consid
der in underrtaking
such a study?

This question is designed

d to get
g the studeents to think about how tto enter into a
bench hmarking stuudy. This is an actual case of a real oorganizationn. You wouldd have
to deccide which subjects
s you would wantt to participaate in the stuudy. Is this a
representative sammple? What is the objective of the bbenchmarkinng? What is tthe
bench hmarking prrocess that shhould be folllowed? How w will the sesssions be
faciliitated? Once the study is completed, how would the data be disseminatedd and
used.

8. Below are enrollmen

nt data from
m several Brritish univerrsities:

Compare the da
ata from theese schools and
a present them in a w
way that is u
useful

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 Page 17 of 119

for th
he administtrators from
m these schools.

Here is an exampple spreadsheeet by a stud

dent who foccused on aveerage rates off
grow
wth and wanteed to compaare the rates of
o growth w with the averaages. This is just
one example
e of a possible analysis. This is quite simpple.

Change in studdent numbers Supporting data

d Change in student
99/2000 to 200 98/99 to 99/
0/01 2000 2000/01

P Student FT%
%/Me PT%/Me FT%/ PT%//
FT T FT PT numbers aan an Mean Mean
n
F
T
Institutti N
on % % % % % £ o PT No Chaange Change Change Change

Abingdo b b 0 -7 Low
L b b b
n and
Witney
Collegee n//a n/a 0 3.5
Accring
gto -16 -1 7 -1 Avera
A 17.22 # 8896
n and ge #
Rossen nd
ale
Collegee 5. 33 0.25 2.33 0.50
Alton 2 34 11 10 Low
L 17 # 1522
Collegee # -0..67 -8.50 3.67 -5.00
Amersh ha -4 -6 5 21 Low
L 17.07 # 5064
m and #
Wycom mb
e
Collegee 1. 33 1.50 1.67 -10.50
0
Aylesbuur -14 11 -5 -2 Low
L 22.63 # 3117
y Colleg
ge # 4. 67 -2.75 -1.67 1.00
Barking
g -6 6 2 -68 High
H 17.05 # 8638
College
e # 2. 00 -1.50 0.67 34.00
0
Barnet -7 -2 5 -22 Avera
A 17 # 13189
College
e ge # 2. 33 0.50 1.67 11.00
0
Barnfield 3 7 7 24 Avera
A 17 # 15480
College
e ge # -1..00 -1.75 2.33 -12.00
0
Barnsle
ey -3 # -9 -24 Avera
A 17 # 6029
College
e ge # 1. 00 21.25 -3.00 12.00
0
Basildo
on -8 # -12 41 Avera
A 17 # 5695
College
e ge # 2. 67 10.75 -4.00 -20.50
0
Basings
st -4 2 -6 8 Low
L 17 # 7670
oke #
College
e
of
Technoolo
gy 1. 33 -0.50 -2.00 -4.00
Bedford
d -1 19 -3 -7 Avera
A 17.32 # 8524
College
e ge # 0. 33 -4.75 -1.00 3.50
Beverle
ey 17 6 31 4 Avera
A 17 8 3972
College
e ge 5
of 1
Furtherr
Educatio
n -5..67 -1.50 10.33 -2.00

ALF = Average
A Level of Fund
ding

FT = Fu
ull Time

PT = Pa
art Time

17.5241 # 7316.
Means -3.42 -4 2.54 -1.8 7 # 3

9. Suppose the Chanceellor from Bedford

B Colllege asks yoou to infer

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 Page 18 of 119

meanning from th
he data in Problem
P 8. Put
P togetherr a report foor the chanccellor
expla
aining how Bedford
B is performing
p relative to tthe other scchools.

Change in sttudent numbers

s Supportting data
99/2000 to 2000/01 98/99 to 99/2000 200 0/01

FT PT FT PT Student numbe
ers
Institution % % % % % £ FT No PT N
No

Bedfoord -1 19 -3 -7 Avverage 17.32 1855 852

24
Colleg
ge

Beverrley 17 6 31 4 Avverage 17 851 397

72
Colleg
ge of
Further
Educaation

Beverly College is the best-inn-class in terrms of havinng high grow

wth rates. Byy
focussing on comp parisons withh Beverly, Bedford
B can further studyy how Beverrly has
achieeved these grrowth rates. This is just one
o approachh that can bee taken.

10. Choose a company in n your locall area. Deveelop a list off five compaanies
amonng the best in
i class in th
heir industrry and the b
best of the bbest. Explainn how
you chose
c the beenchmarkin ng targets yoou chose. Id
dentify a listt of 20
benchmarking questions.
q What
W kind of data woul d you selectt? How wou uld you
conta
act the targeet firms?

Answwers will varry for this pro

oblem. We are
a just tryinng to give thee students soome
real experience
e in
n thinking thhrough these questions.

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 Page 19 of 19

11. Following are financial statements from American Ecology. Studying

these figures, what are some possible financial benchmarks this firms might
want to develop?
American Ecology Corporation
Consolidated Statements of Operations:
Proforma and Unaudited ($ in 000s except per share amounts)

2003 2004 2005

Revenues 38,960 41,522 49,972
Operating costs 23,545 23,219 33,571
Gross profits 15,415 18,303 16,401
Selling, general, and administrative 15,702 21,909 24,187
Expenses
Impairment loss on long-lived assets --- --- 7,451
Loss from operations (287) (3,606) (15,237)
Investment income (618) (1,203) (932)
Gain (or loss) before income taxes (72) (136) (55)
Other expense (414) (1,723) (1,326)
Gain (or loss) before income taxes 817 (544) (12,924)
Income tax expense (benefit) 55 132 (1,517)
Net income (or loss) 762 (676) (11,407)
Preferred stock dividends 417 760 465
Net income (or loss) available to common 345 (1,436) (11,872)
shareholders
Basic earnings per share 0.03 (0.17) (1.47)
actual dollars
Diluted earnings per share 0.03 (0.17) (1.47)
actual dollars

Students should consult a finance text and compute financial ratios for the three
periods. These will show that the firm has struggled recently.

12. Baseline the data from problem 11. Is the company's performance
improving or worsening?

Several indicators would suggest declining performance. Consider the following

decline in ratios:

Gross Profit /Revenue 2003 2004 2005

.396 .441 .328

Also consider the following trends: loss from operations, loss before taxes, net
income, and loss available to shareholders.

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